10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    .

COMMISSION FILE NUMBER: 0-24469

GENVEC, INC.

(Exact name of Registrant as specified in its charter)

DELAWARE	23-2705690
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

65 WEST WATKINS MILL ROAD, GAITHERSBURG, MD	20878
(Address of principal executive offices)	(Zip code)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: 240-632-0740

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

COMMON STOCK, PAR VALUE $0.001 PER SHARE

(Title of Class)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.oYes þNo

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. oYes þNo

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þYes oNo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by a check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” in Rule 12b-2 of the Securities Exchange Act of 1934. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12n-2 of the Securities Exchange Act of 1934. Yes o No þ

As of June 30, 2005, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant based on the closing sale price of such stock as reported by the Nasdaq National Market on such date was $83,490,458. For purposes of this calculation, shares of common stock held by directors, officers and stockholders whose ownership exceeds ten percent of the common stock outstanding at June 30, 2005 were excluded. Exclusion of such shares held by any person should not be construed to indicate that the person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the Registrant, or that the person is controlled by or under common control with the Registrant.

As of February 28, 2006 there were 63,675,282 shares of the Registrant’s common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS

PART NO.	ITEM NO.	DESCRIPTION	PAGE NO.
I	1	BUSINESS	2
	1A	RISK FACTORS	14
	1B	UNRESOLVED STAFF COMMENTS	24
	2	PROPERTIES	24
	3	LEGAL PROCEEDINGS	24
	4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	24
II	5	MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	26
	6	SELECTED FINANCIAL DATA	26
	7	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27
	7A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	33
	8	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	34
	9	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	34
	9A	CONTROLS AND PROCEDURES	34
	9B	OTHER INFORMATION	35
III	10	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	36
	11	EXECUTIVE COMPENSATION	38
	12	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	40
	13	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	42
	14	PRINCIPAL ACCOUNTANT FEES AND SERVICES	42
IV	15	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	44
		FINANCIAL STATEMENTS	F1 – F23

THIS REPORT INCLUDES FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (“EXCHANGE ACT”). FORWARD-LOOKING STATEMENTS ALSO MAY BE INCLUDED IN OTHER STATEMENTS THAT WE MAKE. ALL STATEMENTS THAT ARE NOT DESCRIPTIONS OF HISTORICAL FACTS ARE FORWARD-LOOKING STATEMENTS, BASED ON MANAGEMENT’S ESTIMATES, ASSUMPTIONS AND PROJECTIONS THAT ARE SUBJECT TO RISKS AND UNCERTAINTIES. THESE STATEMENTS CAN GENERALLY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS “BELIEVES,” “EXPECTS,” “INTENDS,” “MAY,” “WILL,” “SHOULD,” OR “ANTICIPATES” OR SIMILAR TERMINOLOGY. ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE AS OF THE DATE THEREOF, ACTUAL RESULTS, COULD DIFFER MATERIALLY FROM THOSE CURRENTLY ANTICIPATED DUE TO A NUMBER OF FACTORS, INCLUDING RISKS RELATING TO THE EARLY STAGE OF GENVEC’S PRODUCT CANDIDATES UNDER DEVELOPMENT; GENVEC’S ABILITY TO SECURE AND MAINTAIN RELATIONSHIPS WITH COLLABORATORS; UNCERTAINTIES WITH, AND UNEXPECTED RESULTS AND RELATED ANALYSES RELATING TO CLINICAL TRIALS OF GENVEC’S PRODUCT CANDIDATES, INCLUDING THE LENGTH OF TIME REQUIRED TO ENROLL SUITABLE PATIENT SUBJECTS AND OUR ABILITY TO SECURE CLINICAL TRIAL SITES; THE AMOUNT OF REVENUES ATTRIBUTABLE TO GENVEC’S VACCINE PROGRAM; THE TIMING AND CONTENT OF FUTURE U.S. FOOD AND DRUG ADMINISTRATION REGULATORY ACTIONS WITH RESPECT TO GENVEC, ITS PRODUCT CANDIDATES, OR ITS COLLABORATORS; DEPENDENCE ON THE EFFORTS OF THIRD PARTIES; COMPETITION FROM OTHER PHARMACEUTICAL OR BIOTECHNOLOGY COMPANIES; THE SCOPE AND VALIDITY OF PATENT PROTECTION FOR GENVEC’S PRODUCTS AND GENVEC’S ABILITY TO COMMERCIALIZE ITS PRODUCTS WITHOUT INFRINGING THE PATENT RIGHTS OF OTHERS; RISKS THAT GENVEC MAY LACK THE FINANCIAL RESOURCES AND ACCESS TO CAPITAL TO FUND ITS OPERATIONS, INCLUDING GENVEC’S ABILITY TO FULLY UTILIZE THE COMMITTED EQUITY FACILITY (CEFF) WITH KINGSBRIDGE CAPITAL LIMITED AS A SOURCE OF FUTURE FUNDING, WHETHER DUE TO THE MAXIMUM NUMBER OF 12,735,050 SHARES ISSUABLE UNDER THE CEFF CONSISTENT WITH NASDAQ NATIONAL MARKET LISTING REQUIREMENTS, GENVEC’S ABILITY TO SATISFY VARIOUS CONDITIONS TO DRAW DOWN UNDER THE CEFF, THE INVESTOR’S PERFORMANCE OF ITS OBLIGATIONS UNDER THE CEFF OR OTHERWISE; AND RISKS RELATING TO THE COMMERCIALIZATION, IF ANY, OF GENVEC’S PROPOSED PRODUCT CANDIDATES (SUCH AS MARKETING, MANUFACTURING, REGULATORY, PATENT, PRODUCT LIABILITY, SUPPLY AND OTHER RISKS). FURTHER INFORMATION ON THE FACTORS AND RISKS THAT COULD AFFECT GENVEC’S BUSINESS, FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS, ARE CONTAINED IN GENVEC’S FILINGS WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (SEC), WHICH ARE AVAILABLE AT WWW.SEC.GOV. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS PRESS RELEASE, AND GENVEC ASSUMES NO DUTY TO UPDATE FORWARD-LOOKING STATEMENTS.

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PART 1

ITEM 1. BUSINESS

OVERVIEW

GenVec is an emerging late stage biopharmaceutical company focused on the development and commercialization of TNFerade^™ for the treatment of cancer. The Company is conducting a Phase II/III trial for the use of TNFerade to treat locally advanced, unresectable pancreatic cancer. TNFerade is also in Phase II trials for rectal cancer and metastatic melanoma. The core technology used for TNFerade has broad application. It is currently being used in five funded collaborations, three for the development of preventative vaccines against infectious diseases, one for the treatment of severe coronary artery disease, and one for a second-generation oncology product. As a clinical stage biopharmaceutical company, our business and our ability to realize our corporate goals and execute our strategy are subject to numerous risks and uncertainties. Material risks and uncertainties relating to our business and our industry are described in Item 1A of this Form 10-K. The description of our business in this Form 10-K should be read in conjunction with the information in Item 1A.

TNFerade is a novel approach to treating cancer in combination with standard radiation and/or chemotherapy. It delivers the tumor necrosis factor-alpha (“TNF-alpha”) gene directly into tumors to stimulate the production of TNF-alpha, a potent anti-cancer protein.

• Pancreatic Cancer is currently the lead indication for TNFerade. Based on data from our Phase I and Phase II studies in locally advanced, unresectable pancreatic cancer, we are enrolling patients for a 330-patient randomized, controlled Phase II/III trial designed to assess safety and efficacy potential. For this trial, the primary endpoint is overall survival at 12 months. According to the American Cancer Society, approximately 32,000 new cases of pancreatic cancer will be diagnosed this year in the United States, and nearly all of these patients die of their disease.

• Rectal Cancer – TNFerade is being evaluated in a Phase II trial in rectal cancer to assess its ability to improve tumor responses in conjunction with standard chemoradiation. One objective of this study is to achieve better surgical outcomes in these patients, such as avoidance of colostomy. Approximately 40,000 new cases of rectal cancer will be diagnosed in the United States this year.

• Metastatic Melanoma – Based on our Phase I study, we have moved TNFerade into a proof-of-concept Phase II study in metastatic melanoma. In this study, patients will receive TNFerade in combination with radiation therapy. Approximately 60,000 new cases of melanoma will be diagnosed in the United States this year.

The key advantage of our core adenovector technology is that it can efficiently produce therapeutic proteins at the site of disease. In therapeutic applications, the adenovector carries a gene to the target tissue, where production of the therapeutic protein is stimulated. The adenovector is then eliminated by the body. This approach allows the therapeutic protein to be produced where it is needed and limits the unwanted exposure to normal tissues. This same technology can also be used to produce vaccines, where the adenovectors can be used to stimulate an immune response against infectious disease proteins.

Therapeutic Pipeline, in Addition to TNFerade

• BIOBYPASS^® promotes production of vascular endothelial growth factor (VEGF) protein to stimulate the growth of new blood vessels in areas of the heart lacking sufficient blood flow. GenVec is collaborating with the Cordis Corporation, a Johnson & Johnson company, to evaluate the effects of BIOBYPASS on exercise tolerance and heart function in a randomized, placebo-controlled Phase II trial in 129 patients with advanced heart disease. This study is being conducted at multiple sites in Europe and Israel.

• AdPEDF is being developed for patients with wet age-related macular degeneration (AMD), the leading cause of blindness in people over the age of 50. We have completed a dose-escalation Phase I clinical trial of AdPEDF in patients with severe AMD. Data from this trial demonstrated that AdPEDF was generally well tolerated and showed evidence of a halt in disease progression for six to twelve months after a single intravitreal injection of AdPEDF. In February 2005, we expanded the Phase I clinical testing of AdPEDF in AMD patients with less severe disease and on March 7, 2006, we announced the completion of enrollment of this 20-patient trial.

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Vaccines Program

In addition to our internal product development programs, we are working with multiple collaborators and customers to develop new applications for our technology, such as preventative vaccines to treat HIV, malaria and other infectious diseases.

• Global HIV Vaccine – In collaboration with the Vaccine Research Center (VRC) of the National Institute of Allergy and Infectious Diseases (NIAID), National Institutes of Health, we are providing adenovector-based vaccine candidates targeted against the major strains of HIV present in the world. The NIAID is now conducting multiple clinical trials involving this vaccine candidate, including an international 480-patient Phase II study. This $50 million multi-year collaboration is being conducted under a subcontract issued and managed by SAIC-Frederick, Inc. GenVec is currently manufacturing late-stage clinical supplies for a proof-of-concept efficacy trial (greater than 10,000 individuals) to be conducted and funded by NIAID and expected to commence in 2007.

• Malaria – In collaboration with the Naval Medical Research Center (NMRC) and the Malaria Vaccine Initiative, GenVec is generating vaccine candidates for the prevention of malaria. There are currently 300 million to 500 million cases of malaria in the world each year resulting in 1.5 to 3 million deaths, mostly among children. GenVec has produced clinical supplies of a vaccine candidate for Phase I testing of this vaccine candidate, to be conducted and funded by the NMRC.

• Foot and Mouth Disease – In a collaboration with the Agricultural Research Service of the United States Department of Agriculture funded by an inter-agency agreement with the Department of Homeland Security, GenVec is developing vaccine and anti-viral candidates for the prevention and containment of foot and mouth disease outbreaks in the United States. Initial testing showed that cattle challenged with foot and mouth disease did not develop symptoms.

• Seasonal and pandemic influenza – GenVec recently expanded its collaboration with the VRC to supply potential vaccine candidates for seasonal and pandemic flu.

Ongoing Clinical Studies

			# OF
PRODUCT			TARGETED
CANDIDATE	DISEASE INDICATION	DEVELOPMENT STAGE	PATIENTS
TNFerade	Pancreatic Cancer	Phase II/III - Randomized, Controlled	330
	Melanoma	Phase II – Proof of Concept	29
	Rectal Cancer	Phase II – Dose Escalation	10
BIOBYPASS	Coronary Artery Disease	Phase II – Randomized, Placebo Controlled	129
AdPEDF	Wet Age-Related Macular	Phase I – Dose Comparison, wet AMD	20
	Degeneration (AMD)	(patient enrollment complete,
		follow-up ongoing)

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TNFerade for cancer. In two separate Phase I trials (one in solid tumors and one in soft tissue sarcomas), TNFerade, in conjunction with standard radiation therapy, was shown to be generally well tolerated and a 25 percent or greater reduction in tumor size was observed in more than 70 percent of patients in 12 different tumor types, including pancreatic, melanoma, rectal, small cell lung, breast and sarcoma. The results from the Phase I trial in solid tumors were published in the February 15, 2004 issue of the Journal of Clinical Oncology. Positive results were also seen in a Phase I, 14-patient study in soft tissue sarcoma, with activity confirmed in very large tumors.

Pancreatic Cancer. Based on our Phase I results, we initiated a Phase II dose-escalation study in locally advanced, unresectable pancreatic cancer to determine the best therapeutic dose for use of TNFerade in combination with standard chemoradiation. The results from this 50-patient study indicated a dose-dependent improvement in tumor response, rates of surgical resection, time to disease progression, and survival. The maximum tolerated dose (MTD) was determined to be 4x10¹¹ particle units. Thereafter, a randomized, controlled 74-patient Phase II study was initiated. In consultation with the FDA, this Phase II study has recently been amended to become a Phase II/III 330-patient trial to support potential registration of TNFerade for this indication. The Phase II/III study is now ongoing in multiple sites in the United States and abroad.

Rectal Cancer. The ongoing Phase II rectal cancer study was initiated in collaboration with the National Cancer Institute. In order to accelerate patient accrual, we anticipate initiating multiple additional clinical sites in the U.S. this year.

Melanoma. The Phase II multi-site US-based study in metastatic melanoma was prompted by three of three Phase I patients with metastatic melanoma showing complete responses, and disease-free survival in two of those patients greater than three years. TNF-alpha is a potent immune stimulator, and preclinical data presented at the 96th Annual Meeting of the American Association for Cancer Research (AACR), April 16-20, 2005 showed that TNFerade could slow metastases in an animal model of malignant melanoma. These results support the potential effectiveness of TNFerade when used in combination with radiation to treat patients with refractory metastatic melanoma.

Esophageal Cancer. Encouraging results were presented at the American Society of Clinical Oncology Gastroenterological Cancer Symposium on January 27, 2006, on extended follow-up in our Phase II study of TNFerade in patients with locally advanced esophageal cancer. The patients treated with TNFerade and chemoradiation had a 12-month survival of 88%, which compares favorably with the approximately 50% 12-month survival seen in a variety of published studies. During the dose-escalation portion of this Phase II study, the TNFerade program was placed on clinical hold by the FDA when a patient died as a result of blood clot in the lungs. GenVec provided extensive data on our clinical experience with TNFerade in all programs to the FDA. In February 2005, we received approval from the FDA to proceed with our Phase II pancreatic trial. In May 2005, the clinical hold on the TNFerade IND was lifted.

BIOBYPASS for severe heart disease. BIOBYPASS is designed for the treatment of coronary artery disease. As a result of blocked arteries in the heart, patients with severe coronary artery disease typically experience severe, often immobilizing pain from minimum physical activity such as walking. This pain is known as hypoxic pain because it results from a lack of oxygen to the tissues. BIOBYPASS is intended to restore blood flow to areas of the heart with insufficient blood flow through the formation of new blood vessels, a process known as angiogenesis. BIOBYPASS produces the therapeutic protein, vascular endothelial growth factor (VEGF₁₂₁) that stimulates the growth of new blood vessels in heart tissue and restores blood flow to areas of the heart with poor blood flow. Our approach of directly injecting BIOBYPASS into the heart wall through a minimally invasive catheter approach enables the sustained, controlled production of the VEGF₁₂₁ protein in the area of the heart with poor blood flow.

In May 2002, we completed a randomized, controlled Phase II study of 67 patients with severe coronary artery disease and no treatment options (the “REVASC study”). In November 2002, we presented positive results from the REVASC study at the American Heart Association annual meeting showing that these “no option” patients benefited when they received BIOBYPASS administered by a surgical procedure. Patients treated with BIOBYPASS showed a greater ability to exercise, less chest pain, less need for medication for angina pain and an improved quality of life compared to patients receiving the current standard of care. There were no drug-related serious adverse events or dose limiting toxicities. Also in 2002, we completed a Phase I clinical study designed to demonstrate the feasibility of using an injection catheter to deliver BIOBYPASS directly to the heart muscle. This study is of importance since we anticipate that the commercialized version of BIOBYPASS will be delivered by a non-surgical injection catheter such as that used in our feasibility study. Results of this study were presented at the American College of Cardiology meeting in March 2003 demonstrating the safety and feasibility of using an injection catheter to deliver BIOBYPASS.

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In January 2004, the Company entered into a research collaboration with the Cordis Cardiology Division of Cordis Corporation, a Johnson & Johnson company, to study the clinical benefit of BIOBYPASS in a procedure involving guided delivery of this angiogenic agent directly into targeted regions of the heart in patients with severe coronary artery disease using the Cordis NOGASTAR^® Mapping Catheter and MYOSTAR™ Injection Catheter. The purpose of this collaboration is to evaluate the effects of BIOBYPASS on exercise tolerance and heart function in a randomized, placebo-controlled Phase II trial in 129 patients with advanced heart disease. This NOVA (NOGA Delivery of VEGF in Angina) study is being conducted at multiple sites in Europe and Israel. GenVec and Cordis will collaborate on regulatory matters and share in the clinical trial costs. GenVec will supply BIOBYPASS and Cordis will provide the injection catheters and training to the interventional cardiologists conducting the trial. GenVec retains commercial rights to BIOBYPASS and Cordis retains commercial rights to its NOGASTAR mapping catheters and MYOSTAR™ injection catheters.

AdPEDF for treatment of vision loss. AdPEDF is designed for the treatment of wet age-related macular degeneration (AMD). AMD is a progressive eye disease characterized by the growth of abnormal blood vessels in the center portion of the retina (the macula), the area of the eye that makes central vision and visual acuity possible. GenVec believes that therapy with AdPEDF holds the promise to stabilize or improve patient vision. According to the Macular Degeneration Network and others, there are approximately 200,000 new cases of wet age-related macular degeneration diagnosed each year in the United States and more than 500,000 cases diagnosed worldwide, and it is a leading cause of blindness in individuals over the age of 50. AdPEDF uses GenVec’s proprietary adenovector to deliver the pigment epithelium – derived factor (PEDF) gene that results in the production of the PEDF protein in the treated eye. PEDF is naturally produced in the eye and serves two important functions. PEDF is the eye’s key natural regulator of normal blood vessel growth. It also is a neuro-protective agent of the photoreceptors (the vision–sensing cells of the eye responsible for sight). PEDF’s key differentiation from other therapies is its potential to protect the retina from damage caused by fragile, leaky, abnormal blood vessels.

During 2004, we completed the dose-escalating portion of a Phase I multi-center clinical trial of AdPEDF in 28 patients with wet age-related macular degeneration. In this study, which was conducted in patients with very advanced wet AMD, AdPEDF was generally well tolerated at all dose levels and patients showed evidence of a halt in disease progression six to twelve months after a single intravitreous injection of AdPEDF. The results from this Phase I study were published in the February 2006 issue of Human Gene Therapy. In February 2005, we initiated the second part of the ongoing Phase I clinical trial of AdPEDF in 20 patients with less advanced AMD at 9 clinical sites throughout the U.S. This multi-center Phase I study will compare two doses of AdPEDF (already tested) to evaluate the drug’s safety, tolerability, and effects on vision as well as to establish the dose level(s) for possible Phase II clinical testing. In animal studies AdPEDF has been demonstrated to rapidly elevate the intraocular PEDF protein levels in the eye, inhibit the growth of unwanted blood vessels in the eye and cause selective regression of established abnormal blood vessels, and protect the retina from further damage. Enrollment of this trial was completed in the first quarter of 2006.

OUR STRATEGY

Our primary objective is to develop and commercialize products that are safe and effective for major medical needs. We intend to pursue this objective through the following strategies:

Develop and commercialize our lead product candidate, TNFerade, for the treatment of cancer. We have chosen locally advanced pancreatic cancer as the lead indication for TNFerade because we believe that current therapy for this cancer is poor and our current data suggest that TNFerade, when used in combination with standard therapy, may lead to improved survival. We have initiated and subsequently expanded the 74-patient, randomized controlled portion of the Phase II trial of TNFerade to a 330-patient Phase II/III trial. We believe that TNFerade offers a feasible path to commercialization because:

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• The product development process for cancer drugs, particularly those drugs treating cancers where the current therapy is poor, can typically be accomplished in a relatively cost-effective manner and short time period;

• Improved survival has been used as a basis for approval in pancreatic cancer; and

• Pancreatic cancer is an attractive commercial opportunity.

We have also expanded the clinical development of indications for TNFerade to include melanoma and rectal cancer. We have initiated Phase II trials for both indications to offer potentially improved treatment options for these patients, further validate our TNFerade cancer-treatment platform and increase the commercial potential of TNFerade through additional indications.

We are currently seeking relationships to lead TNFerade registration and commercialization efforts in Europe and Asia and to help fund clinical development in North America. We will seek to retain significant commercial rights to TNFerade in North America.

Develop and commercialize our other product candidates through corporate alliances. We intend to form strategic alliances with other companies to develop and commercialize BIOBYPASS for patients with severe heart disease and PEDF for patients with wet age-related macular degeneration. In January 2004, we entered into an agreement with Cordis Corporation, a Johnson & Johnson company, to conduct a randomized, double-blind, placebo-controlled Phase II trial to study the clinical benefit of BIOBYPASS in a procedure involving guided delivery of the angiogenic agent directly into targeted regions of the heart in patients with severe coronary artery disease using the Cordis NOGASTAR Mapping Catheter and MYOSTAR Injection Catheter. Strategic alliances will allow us to further the development of our product portfolio while we focus our internal efforts on the development of our lead product candidate, TNFerade.

Expand our product candidate pipeline and enhance our technology base. We will continue to seek to enhance our gene delivery capabilities through internal research, external collaborations and acquisitions. We have received funding for research and development collaborations to develop preventative vaccine candidates against HIV, malaria and other infectious diseases, an anti-viral to prevent foot and mouth disease, and a second-generation TNFerade product candidate. We expect improvements in our core technology to enhance our drug discovery efforts and lead to additional product candidates. We intend to further strengthen our technologies relating to process development, formulation and manufacturing through these relationships.

PARTNERSHIPS AND COLLABORATIVE RELATIONSHIPS

GenVec has used corporate partnerships and collaborations to advance its technology and product development in the past. We will continue to evaluate potential relationships as a means to reduce time to market, expand market potential, and reduce risk. We have received funding to advance the clinical development of our product candidates, to develop vaccines against HIV, malaria and other infectious diseases and to develop a second-generation TNFerade product candidate. These funded collaborations help to offset our development costs and enhance our ability to discover, evaluate, develop and seek to commercialize multiple product candidates.

Cordis Corporation. In January 2004, the Company entered into a research collaboration with the Cordis Cardiology Division of Cordis Corporation, a Johnson & Johnson company, to study the clinical benefit of BIOBYPASS in a procedure involving guided delivery of the angiogenic agent directly into targeted regions of the heart in patients with severe coronary artery disease using the Cordis NOGASTAR Mapping Catheter and MYOSTAR Injection Catheter. See “Our Product Candidates - - BIOBYPASS for Severe Heart Disease”.

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Fuso Pharmaceuticals Industries, Ltd. In January 2004, we announced a new, three-year $4.5 million funded research agreement with Fuso Pharmaceuticals (“FUSO”). This follows the successful conclusion of a former collaboration, which ran from 1997 to 2003. We established the new collaboration to identify a targeted cancer therapy product candidate designed to treat not only a primary tumor, but also cancer that has spread, or metastasized, to distant sites in the body. The intended targeted cancer therapy is expected to incorporate the gene for TNF- alpha. Under the terms of the agreement, we have worldwide rights, excluding Japan, to develop and commercialize product candidates arising from the collaboration. Fuso has development and commercialization rights in Japan, and an option to commercialize in Korea and Taiwan. In addition to the research funding, the agreement includes development milestone payments and royalties on commercial sales by Fuso of any products arising from the collaboration. Each party will be responsible for development and commercialization costs in their respective territories.

We also are working with selected U.S. government institutions to develop new applications, such as vaccines, for our proprietary platform technology. These collaborations include:

National Institute of Allergy and Infectious Diseases (NIAID) of the National Institutes of Health (NIH). In December 2001, the Vaccine Research Center (VRC) of the National Institute of Allergy and Infectious Diseases of the National Institutes of Health selected the Company to collaborate in the development of a worldwide preventative AIDS vaccine candidate. This collaboration was expanded to include the development of a SARS vaccine candidate (April 2003) and an influenza vaccine candidate (February 2006). The Company has a cost-plus subcontract, managed for the VRC through SAIC-Frederick, Inc., with an estimated total contract value of approximately $50 million. Under the subcontract, the Company is responsible for constructing and producing adenovector-based vaccine candidates utilizing its proprietary cell line and second-generation adenovector technology. The program encompasses a base year and six option years. Revenue recognized under this program amounted to $18.8 million in 2005, $7.4 million in 2004 and $7.2 million in 2003. The fourth option covering the year 2006 has been exercised and work is continuing under the contract.

U.S. Naval Medical Research Center. On January 8, 2003, we signed a two-year, $1.9 million contract with the U.S. Naval Medical Research Center (NMRC) allowing them to use our proprietary adenovector technology for the development of vaccines against malaria and dengue virus. Under this contract, we were responsible for constructing and producing adenovector-based vaccine candidates using our proprietary cell line and second-generation adenovector technology. On January 10, 2005, we signed a one-year, $1.6 million fixed price contract for the production of malaria vaccines under cGMP standards. The NMRC will test the vaccine candidates in preclinical, or animal, models to assess safety and effectiveness. In conjunction with the preclinical evaluation of the vaccine, we will provide regulatory support to NMRC with regard to an anticipated IND filing with the FDA. Clinical trials in humans could commence following successful preclinical testing results and would be funded by the NMRC.

Malaria Vaccine Initiative. In March 2004, we signed a two-year, $2.6 million contract for the development, production and evaluation of vaccines against malaria. Under the contract, the Company will be responsible for constructing adenovector-based vaccine candidates using is proprietary cell line and second-generation adenovector technology. The Company has a separate agreement for work to be performed under a Collaborative Research and Development Agreement (CRADA) with the Navy Medical Research Center (NMRC). Under the CRADA, NMRC will provide the Company with optimized malaria genes to be used in the development of the adenovector –based vaccines as well as provide preclinical evaluation of the vaccine candidates.

U.S. Department of Agriculture (USDA). On March 1, 2006, we announced a $1.7 million cooperative agreement for the development, production and evaluation of vaccines against foot-and-mouth disease (FMD). Under the agreement, the Company will be responsible for constructing adenovector-based vaccine candidates using its proprietary cell line and second-generation adenovector technology. As part of the cooperative efforts, the Agriculture Research Services, a branch of the USDA, will provide the Company with optimized FMD genes to be used in the development of the adenovector-based vaccines as well as provide evaluation of the vaccine candidates.

Sponsored Research. We also sponsor research at leading academic institutions to enhance our ability to discover, evaluate and develop new product candidates. Our academic collaborations currently include agreements with the University of Chicago (TNFerade), the Johns Hopkins University (AdPEDF), and the University of Kansas (Preclinical Hearing Loss and Balance Disorder Program).

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DRUG DISCOVERY AND DEVELOPMENT PLATFORM

We have focused on developing technology to effectively and selectively deliver genes to cause the production of proteins at the location needed to treat the disease. Using our technology, we believe we can:

• Rapidly put genes into vectors to evaluate gene function and usefulness in therapy;

• Deliver our product candidates to specific organs or cell types to avoid systemic exposure;

• Achieve efficient gene delivery to and protein expressions in target cells;

• Control the amount and duration of production of therapeutic proteins to allow flexibility in treating different diseases; and

• Scale our manufacturing processed to be suitable for commercial production.

In constructing our product candidates, we combine a gene with a vector. We derive our vectors from a naturally occurring virus, called an adenovirus. In humans, adenoviruses reproduce in certain tissues, spread and can cause a form of the common cold. We design our vectors so that they cannot reproduce themselves or cause a cold. We do this to limit toxicity, including unwanted effects on target cells and the surrounding tissue, and to reduce immune responses to our vectors. We have multiple versions of vectors to suit different application in therapeutic and vaccine products.

When administered to tissues, our vectors enter target cells and produce the protein encoded by the inserted gene. In addition to their use in therapeutic and vaccine product candidates, these vectors can be used for functional genomics purposes to help determine the function of a specific gene and its potential use as a therapy. Adenovectors can be re-engineered to alter their performance characteristics, including their ability to deliver genes to the targeted tissue. We believe that adenoviruses are an excellent starting point for generating vectors because they efficiently deliver genes, can be readily modified, and have the following safety characteristics:

• Adenoviruses do not integrate into the DNA of the target cell, thereby minimizing the potential for mutations that can occur with other vector systems;

• Adenoviruses are naturally eliminated from cells and tissues; and

• Vectors derived from adenoviruses have been generally well tolerated in clinical testing when administered locally. Thousands of patients have been treated, with very few serious adverse events related to the vector.

TECHNOLOGY FOR LOCAL DELIVERY AND EXPRESSION OF GENES

Use of delivery devices. To achieve local production of proteins, we administer our product candidates directly to the site of disease using standard medical devices, such as injection catheters or syringes. Direct administration of our products into diseased tissue allows us to increase effectiveness by achieving high concentrations of the protein at disease sites while improving safety by avoiding exposure throughout the body. For example, we have used percutaneous injection to administer TNFerade directly to tumors and injection catheters to administer BIOBYPASS directly into diseased areas of the heart.

Delivering genes to cells. We believe that we are a leader in understanding and modifying the molecular interactions that specify how vectors derived from adenoviruses bind to cells. Adenoviruses enter cells by binding to receptors on the surface of the cell.

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We believe that we have a broad and advanced intellectual property position in creating adenovectors with new binding sites to deliver therapeutic genes to specified cells.

• DART Vectors. We have developed Directed And Restricted Tropism, or DART, vectors that enable us to create product candidates that deliver genes only to specific cells. In order to achieve selective delivery to target cells, we remove the ability of the vector to bind to the cell surface receptors. We then insert new binding sites into the vector that bind to specific receptors found on the surfaces of target cells. We have a broad proprietary position covering DART vectors. This technology is being used in our collaboration with FUSO Pharmaceuticals Industries, Ltd.

• UTV Technology. Our proprietary Universal Transduction Vector, or UTV, technology allows us to create product candidates that deliver genes to essentially all cell types, including those types that do not contain the adenovirus receptor on their surface. We have engineered our vectors to contain a new binding site that allows binding to all cells that we have tested to date.

We currently use both UTV technology and DART vectors in our drug discovery process and we may incorporate these technologies into our next generation product candidates.

Control of gene expression. Our technology also allows us to control the location, duration and rate of therapeutic gene expression. We control gene expression by inserting a sequence of DNA, called a promoter, into our vectors adjacent to the therapeutic gene. For some diseases, long-term expression of the therapeutic gene is required to achieve a clinical benefit. In TNFerade, we intend to achieve local production of the TNF-alpha protein in cancerous tissue undergoing radiation treatment and chemotherapy by inserting a specific promoter that will increase protein production after radiation or chemotherapy, enhancing protein concentration in the cancer tissue receiving treatment. We have broad proprietary technology for the use of chemoradiation-induced gene expression in TNFerade.

TECHNOLOGY FOR PRODUCTION, PURIFICATION, QUALITY ASSESSMENT AND FORMULATION

We believe our proprietary production technology and know-how facilitates the production, purification, quality assessment and formulation of our product candidates. The structure of our vectors and the procedures for their production and purification enable us to minimize the presence of contaminants. We believe our proprietary positions in these areas provide a competitive advantage. We expect to use substantially similar methods to produce, purify, assay and formulate many of our adenovector products. This allows us to accelerate product development in a cost effective manner. We have developed production and quality assessment technology suitable for late-stage clinical testing. We currently use third-party manufacturers for production of our product candidates for clinical purposes.

• Production and Scale Up. We produce our adenovectors using cell lines grown under standardized and controlled conditions. We have developed specialized cell lines for production of our vectors. We have designed our production processes to be scalable for commercial production and to reduce the potential for contamination.

• Purification. We have proprietary methods for the purification of our vectors that we believe are scalable to commercial levels as well as suitable for small-scale use in discovery and testing of new product candidates.

• Quality Assessment. We have established proprietary methods to assess and confirm the quality and purity of vectors for research purposes and clinical testing. We use advanced techniques to determine the physical characteristics of our product candidates as a means to establish product consistency and purity. We have an issued U.S. patent covering this technology. We believe these methods are also suitable for quality assessment of commercial production.

• Formulation. We have developed a novel product formulation that improves the stability of our vectors and is covered by issued U.S. patents. Our formulation allows products to be conveniently stored, shipped and used. For research purposes, our formulation enhances the ease and reproducibility of testing.

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LICENSES FOR THERAPEUTIC GENES

To create our product candidates, we combine our vectors with genes intended to produce proteins with therapeutic potential. We have secured licenses to many genes for this purpose. We often seek to obtain exclusivity, consistent with our business needs, when securing such licenses. In return for the rights we receive under our gene licenses, we typically are required to pay royalties based on any commercial sales of the applicable product during a specified time period, as well as provide additional compensation, including up-front license fees and product development-related milestone payments. Our gene licenses for our lead product candidates include:

SOURCE	GENE	NATURE OF LICENSE
Asahi Chemical Industry Co., Ltd	TNF – alpha	United States, non-exclusive, for gene therapy applications
Scios, Inc.	VEGF121	Worldwide, exclusive for gene therapy applications
Public Health Service (“PHS”)	PEDF	Worldwide, exclusive for ocular and cancer gene therapy and protein applications
Northwestern University	PEDF	Worldwide, exclusive for ocular gene therapy applications

Any of our licenses may be terminated by the licensor if we are in breach of a term or condition of the license agreement, or if we become insolvent. In addition, some of our licenses require us to achieve specific milestones.

PATENTS, LICENSES AND PROPRIETARY RIGHTS

We generally seek patent protection for our technology and product candidates in the United States and abroad. We have submitted patent applications that are pending in the United States and other countries. The patent position of biotechnology firms generally is highly uncertain and involves complex legal and factual questions. Our success will depend, in part, on whether we can:

• obtain patents to protect our own products;

• obtain licenses to use the technologies of third parties, which may be protected by patents;

• protect our trade secrets and know-how; and

• operate without infringing the intellectual property and proprietary rights of others.

Patent rights; licenses. Our licensors and we have patents and continue to seek patent protection for technologies that relate to our product candidates, as well as technologies that may prove useful for future product candidates. As of February 28, 2006, we held or had licenses to 358 issued, allowed or pending patents worldwide, of which 103 are issued or allowed in the U.S. These patents and patent applications pertain to genes that encode therapeutic proteins, expression control elements that regulate the production of the therapeutic proteins by such genes, vectors into which we incorporate such genes and expression control elements to create our product candidates, cell lines used to manufacture our product candidates, targeting technology for adding specificity to our product candidates, methods of constructing, producing (including purification, quality control and assay techniques), storing, and shipping our product candidates, methods of administering our product candidates, and methods of treating disease using our product candidates.

TNFerade. We have issued patents and pending patent applications pertaining to such adenovectors, the expression control elements used in TNFerade to cause production of the TNF-alpha protein by the TNF-alpha gene, and methods of using TNFerade for treating disease. In particular, we have an exclusive license to an issued U.S. patent, expiring in 2020, covering the TNFerade vector product, which adds to the Company’s broad intellectual property position around its lead oncology program and core adenovector technology. We also have an exclusive license to issued U.S. patents expiring between 2010 and 2015 pertaining to radiation-induced gene expression and a radiation-inducible promoter enabling controlled production of therapeutic proteins from gene therapy products, including TNFerade. We have a nonexclusive license under an issued U.S. patent, expiring in late 2006, relating to the TNF-alpha gene, which we inserted into a second-generation adenovector to create TNFerade. We are aware, however, of issued patents and pending patent applications of third parties pertaining to the delivery of adenovectors and the treatment of cancer and tumors. It could be alleged that TNFerade conflicts with the issued patents as well as patents that may issue on these patent applications.

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BIOBYPASS. We have an exclusive license, under a patent expiring in 2010, for all gene therapy products using the VEGF₁₂₁ gene. In addition, we have an exclusive license to an issued patent, expiring in 2017, and a pending patent application pertaining to the delivery of angiogenic substances, such as BIOBYPASS. However, third parties have patents and pending patent applications for other forms of the VEGF gene, and these third parties or their licensees may develop products using these forms of the gene. Third parties also may have pending patent applications for adenovectors, including possibly the adenovector used in BIOBYPASS. We are aware of issued patents and pending patent applications of third parties relating to special cell lines required for the production of particular adenovectors, including a cell line we use in the production of BIOBYPASS, as well as issued patents and pending patent applications relating to the delivery, including through the use of adenovectors, of therapeutic substances to the heart and other tissues, similar to BIOBYPASS. It could be alleged that BIOBYPASS conflicts with such existing or future patents.

AdPEDF product candidates. We have exclusive rights from PHS, under patents expiring in 2015 and thereafter and pending patent applications, to develop and commercialize the PEDF gene and PEDF protein for ocular and cancer applications. We have issued patents and pending patent applications pertaining to particular adenovectors and methods of their use, including adenovectors and related methods that may be utilized in conjunction with our AdPEDF product program. However, we are aware of issued patents and pending patent applications of third parties relating to various facets of gene therapy to the eye. It could be alleged that our AdPEDF product candidates conflict with such existing or future patents.

UTV technology and DART vectors. We have issued patents, expiring in 2014 and thereafter, and pending patent applications covering our UTV technology that allows for the delivery of genes in adenovectors to essentially all cell types, as well as our DART vectors, which are designed for the purpose of creating product candidates that deliver genes in adenovectors only to selected cells. We are aware, however, of issued patents and pending patent applications of third parties relating to such vectors. It could be alleged that our UTV and DART vectors conflict with such existing or future patents.

Production, purification, quality assessment and formulation technology. We have issued patents, expiring in 2017 and thereafter, and pending patent applications pertaining to the production, purification, quality assessment and formulation of our product candidates. In particular, we have issued patents covering the process for manufacturing our product candidates, the purification of our product candidates applicable to both research and commercial scales, methods of assessing and confirming the quality and purity of our product candidates for clinical testing and commercialization and product formulations that improve the stability of product candidates and allow our product candidates to be conveniently stored, shipped and used. We are aware, however, of issued patents and pending patent applications of third parties relating to these and other aspects of production, purification, quality assessment and formulation technology. It could be alleged that our production, purification, quality assessment and formulation technology conflicts with such existing or future patents.

We anticipate that our current and future licensors and we will continue to seek to improve existing technologies and to develop new technologies and, when possible, secure patent protection for such improvements and new technologies.

Trade secrets. To a more limited extent, we rely on trade secret protection and confidentiality agreements to protect our interests. It is our policy to require our employees, consultants, contractors, manufacturers, collaborators and other advisors to execute confidentiality agreements upon the commencement of employment, consulting or collaborative relationships with us. We also require signed confidentiality agreements from any entity that is to receive confidential data. With respect to employees, consultants and contractors, the agreements generally provide that all inventions made by the individual while rendering services to us shall be assigned to us as our property.

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COMPETITION

Competition in the discovery and development of new methods for treating disease is intense. We face, and will continue to face intense competition from pharmaceutical and biotechnology companies, as well as academic and research institutions and government agencies, both in the United States and abroad. We face significant competition from organizations that are pursuing the same or similar technologies used by us in our drug discovery efforts and from organizations that are developing pharmaceuticals that are competitive with our potential products. Many of our competitors, either alone or together with their collaborative partners, have substantially greater financial resources and larger research and development staffs than we do. In addition, many of these organizations, either alone or together with their collaborators, have significantly greater experience than we do in developing products, undertaking preclinical testing and clinical trials, obtaining FDA and other regulatory approvals of products and manufacturing and marketing products. Additional mergers and acquisitions in the pharmaceutical industry may result in even more resources being concentrated with our competitors. These companies, as well as academic institutions, governmental agencies and private research organizations, also compete with us in recruiting and retaining highly qualified scientific personnel and consultants. Our ability to compete successfully with other companies in the pharmaceutical and biotechnology field will also depend to a considerable degree on the continuing availability of capital to us.

Future competition will likely come from existing competitors, including competitors with rights to proprietary forms of the genes or proteins expressed by the genes that we currently use in our product development programs and competitors with rights to gene delivery technologies, as well as other companies seeking to develop new treatments. We are aware of new product development efforts, which may compete with BIOBYPASS, being pursued by, among others, Corautus Genetics, Inc., Genzyme, Genentech, Novartis, Schering AG, Anges MG and Eli Lilly using a gene transfer approach similar to us. Competitors or their collaborators may identify important new drug discovery, genes or gene delivery technologies before us, or develop gene-based therapies that are more effective than those developed by our corporate collaborators or us or obtain regulatory approvals of their drugs more rapidly than us. We expect that competition in this field will intensify.

We are aware of products under development or manufactured by competitors that are used for the prevention or treatment of diseases we have targeted for product development. Various companies are developing biopharmaceutical products that potentially compete with our product candidates. These include, but are not limited to, Introgen Therapeutics, Inc. and Schering-Plough Corporation, which are developing adenoviral vectors to treat cancer. In addition, Alcon Laboratories, Inc., Allergan, Genentech, Inc., Genaera, Novartis Pharmaceuticals and Regeneron Pharmaceuticals, Inc. are developing inhibitors of blood vessel growth to treat macular degeneration. These product candidates are in the later stage of clinical development. Eyetech Pharmaceuticals, Inc. received FDA approval in 2005 for a new drug to treat age-related macular degeneration.

We believe that our competitive success will be based on the efficacy and safety of our products, our ability to create and maintain scientifically advanced technology, attract and retain skilled scientific and management personnel, obtain patents or other protection for our products and technology, obtain regulatory approvals and manufacture and successfully market our products either independently or through outside parties. We will rely on corporate collaborators for support of some product candidates and enabling technologies and intend to rely on corporate collaborators for the development, manufacturing and marketing of some future product candidates. Generally, our strategic alliance agreements do not preclude the corporate collaborator from pursuing development efforts utilizing approaches distinct from that, which is the subject of the alliance. Our product candidates, therefore, may be subject to competition with a potential product under development by a corporate collaborator.

MANUFACTURING AND SUPPLY

We are developing our capability to use third party manufacturers for cGMP production of our product candidates for late stage clinical trials. We have a research and development facility in Gaithersburg, MD and have established laboratories and staff to support the non-cGMP production and process development of more advanced manufacturing processes and product characterization methods for our product candidates. We believe that much of the production and assay technology that has been developed for BIOBYPASS under a previous corporate collaboration, and more recently under our HIV vaccine contract with NIH, is suitable for our other product development programs.

We intend to continue developing our own product development and manufacturing capability while utilizing third-party contractors where we lack sufficient internal capability. Any plans to expand our internal manufacturing capabilities at our Gaithersburg, Maryland facility, including the facilities necessary to manufacture, test, and package an adequate supply of finished products in order to meet our long-term clinical needs, will require significant resources and will be subject to ongoing government approval and oversight.

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We currently have only one supplier for certain of our manufacturing components, including components necessary for TNFerade and BIOBYPASS. Currently, we procure raw materials, known as resins, for our product purification and testing methods from a limited number of suppliers. We also procure nutrients used to support the growth of our cells from Invitrogen. We have plans in place to develop multiple suppliers for all critical supplies before the time we would put any of our product candidates into commercial production.

MARKETING AND SALES

We continue to explore opportunities for corporate alliances and partners to help develop and ultimately commercialize and market our product candidates. Our strategy is to enter into collaborative arrangements with pharmaceutical and other companies for some or all aspects of development, manufacturing, marketing and sales of our products that will require broad marketing capabilities and overseas marketing. These collaborators are generally expected to be responsible for funding or reimbursing all or a portion of the development costs, including the costs of clinical testing necessary to obtain regulatory clearances and for commercial scale manufacturing, in exchange for rights to market specific products in particular geographic territories.

GOVERNMENT REGULATION

Regulation of pharmaceutical products. The development, production and marketing of any pharmaceutical products developed by us or our collaborators will be subject to regulation by United States and non-U.S. governmental authorities. In the United States, new drugs are subject to extensive regulation under the Federal Food, Drug, and Cosmetic Act, and biological products are subject to regulation both under provisions of that Act and under the Public Health Service Act. The FDA assesses the safety and efficacy of products and regulates, among other things, the testing, manufacture, labeling, storage, record keeping, and advertising and promotion. The process of obtaining FDA approval for a new product is costly and time-consuming.

The steps required by the FDA before our proposed investigational products may be marketed in the United States include:

• performance of preclinical (animal and laboratory) tests;

• submission to the FDA of an IND which must become effective before human clinical trials may commence;

• performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the investigational product in the intended target population;

• performance of a consistent and reproducible manufacturing process intended for commercial use;

• submission to the FDA of a License Application; and

• FDA approval of the Biologics License Application, or BLA before any commercial sale or shipment of the biologic.

In addition to obtaining FDA approval for each product, each domestic manufacturing establishment must be registered with the FDA, is subject to FDA inspection and must comply with cGMP regulations. To supply products for use either in the United States or outside the U.S., including clinical trials, U.S. and non-U.S. manufacturing establishments, including third-party facilities, must comply with cGMP regulations and are subject to periodic inspection by the corresponding regulatory agencies in their home country under reciprocal agreements with the FDA and/or by the FDA.

Preclinical studies may take several years to complete and there is no guarantee that the FDA will permit an IND based on those studies to become effective and the product to advance to clinical testing. Clinical trials may take two to five years to complete and are typically conducted in three sequential phases, which often overlap. After the completion of the required phases, if the data indicate that the drug or biologic product is safe and effective, a License Application is filed with the FDA to approve the marketing and commercial shipment of the drug. This process takes substantial time and effort and the FDA may not accept the License Application for filing, and, even if filed, the FDA might not grant approval. FDA approval of a License Application may take up to two years and may take longer if substantial questions about the filing arise.

In addition to regulatory approvals that must be obtained in the United States, an investigational product is also subject to regulatory approval in other countries in which it is intended to be marketed. No such product can be marketed in a country until the regulatory authorities of that country have approved an appropriate license application. FDA approval does not assure approval by other regulatory authorities. In addition, in many countries the government is involved in the pricing of the product. In such cases, the pricing review period often begins after market approval is granted.

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Other regulations. Our business is also subject to regulation under various state and federal environmental laws, including the Occupational Safety and Health Act, the Resource Conservation and Recovery Act and the Toxic Substances Control Act. These and other laws govern our use, handling and disposal of various biological, chemical and radioactive substances used in and wastes generated by our operations. We are not aware of any costs or liabilities in connection with any environmental laws that will have a material adverse effect on our business or financial condition.

EMPLOYEES

As of February 28, 2006, we had 109 full-time employees, 21 of whom hold M.D. or Ph.D. degrees and 33 of whom hold other advanced degrees. Of our total workforce, 83 are engaged primarily in research and development activities and 26 are engaged primarily in business development, finance, marketing and administration functions. None of our employees is represented by a labor union or covered by a collective bargaining agreement, and we consider our employee relations to be good.

Principal Executive Offices

We were incorporated in Delaware in 1992. Our principal executive offices are located at 65 West Watkins Mill Road, Gaithersburg, Maryland 20878 and our telephone number at that location is (240) 632 0740.

Available Information

For more information about us, visit our web site at www.genvec.com. Our electronic filings with the U.S. Securities and Exchange Commission (including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports) are available free of charge through our web site as soon as reasonably practicable after we electronically file with or furnish them to the U.S. Securities and Exchange Commission. Our website also includes copies or links to published studies and posters of presentations that contain additional information about clinical trials of our product candidates.

ITEM 1A. RISK FACTORS

This Form 10-K contains forward-looking information based on our current expectations. Because our actual results may differ materially from any forward-looking statements made by GenVec, this section includes a discussion of important factors that could affect our actual future results, including, but not limited to, our product development programs, contract revenues, expenses, net loss and earnings per share.

RISKS RELATED TO OUR BUSINESS

We have a history of losses and anticipate future losses.

We have incurred net losses in each year since our inception in December 1992, including a net loss of $14.0 million for the year ended December 31, 2005. As of December 31, 2005, we had an accumulated deficit of approximately $150.0 million. We are unsure if or when we will become profitable. The size of our net losses will depend, in part, on the growth rate of our revenues and the level of our expenses.

We derive substantially all of our revenues from payments from collaborations with corporations and government entities, and will continue to do so for the foreseeable future. We expect that it will be several years, if ever, before we will recognize revenue from product candidate sales or royalties. A large portion of our expenses is fixed, including expenses related to facilities, equipment and personnel. In addition, we expect to spend significant amounts to fund research and development and to enhance our core technologies. We also expect to incur substantial costs to manufacture our product candidates. As a result, we expect that our operating expenses will increase significantly over the next several years and, consequently, we will need to generate significant additional revenue to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a consistent basis.

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We will have no product revenues in the near term and may need to raise additional capital to operate our business.

We are focused on clinical product development. Until, and unless, we receive approval from the FDA and other regulatory authorities for our product candidates, we cannot sell these products and will not have product revenues. We will require substantial funds to conduct research and development activities, preclinical studies, clinical trials and other activities prior to the commercialization of any potential products. We anticipate that such funds will be obtained from external sources and intend to seek additional equity, debt or lease financing or collaborative agreements with corporate, governmental or academic collaborators to fund future operations. Our actual capital requirements will depend on many factors. If we experience unanticipated cash requirements, we may need to seek additional sources of funding, which may not be available on favorable terms, if at all. Such additional funding may only be available on terms that may cause dilution to common stockholders, have liquidation preferences and/or pre-emptive rights. In the past, we have secured funding on terms that included pre-emptive rights. For example, pursuant to an Investor Rights Agreement between GenVec and HealthCare Ventures V, L.P. dated December 21, 2001, HealthCare Ventures V and VI have the right to purchase shares of GenVec common that we may propose to sell in the future to prevent dilution of their interest in the company. If we do not succeed in raising additional funds on acceptable terms, we may be unable to complete planned preclinical studies and clinical trials or obtain approval of our product candidates from the FDA and other regulatory authorities. In addition, we could be forced to discontinue product development, reduce or forego sales and marketing efforts and attractive business opportunities or discontinue operations.

Our ability to develop, obtain regulatory approval of and commercialize our potential products depends, in part, on collaborations with other companies. If we are unable to find collaborators, we may not be able to develop, test and commercialize our products.

To date, we only have entered into collaborative agreements with a limited number of companies, and some of those are no longer in effect. The success of our business strategy depends, in part, on our ability to enter into and sustain collaborations with other companies for the development and commercialization of our product candidates. Unless we are able to enter into and sustain collaboration agreements, we will need to raise additional funds for the development, testing, and commercialization of our product candidates. If collaborations or other funding is not available, we may have to delay or curtail the development and commercialization of certain product candidates.

We have experienced, and may continue to experience, delays in conducting our clinical trials.

Clinical trials for the product candidates we are developing may be delayed by many factors, including that potential appropriate patients for studies are limited in number and may be difficult to recruit. Following the release of our TNFerade clinical trails from clinical hold in 2005, we have experienced delays in enrolling patients into our TNFerade clinical trials and may have additional delays as we seek to expand enrollment. Our ability to enroll appropriate patients for any of our clinical trials also may be adversely affected by trials being conducted by our competitors for similar disease indications. The failure of any clinical trials to meet applicable regulatory standards or the standards of the relevant reviewing bodies could cause such trials to be delayed or terminated, which could further delay the development of any of our product candidates. Any such delays increase our product development costs, with the possibility that we could run out of funding. Delays in one clinical trial also can adversely affect our ability to launch clinical trials for similar or different indications. Consequently, if such delays are significant they could negatively affect our financial results and the commercial prospects for our products.

We cannot be sure that our collaborators will perform as expected, and collaborations might produce conflicts that could delay or prevent the development or commercialization of our potential product candidates and negatively impact our business and financial condition.

We cannot control the resources that any collaborator may devote to our products. Our present or future collaborators may not perform their obligations as expected. These collaborators may breach or terminate their agreements with us or otherwise fail to conduct their collaborative activities successfully and in a timely manner. In addition, our collaborators may elect not to develop products arising out of our collaborative arrangements or to devote sufficient resources to the development, regulatory approval, manufacture, marketing or sale of these products. If any of these events occur, we may not be able to develop our technologies or commercialize our products.

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An important part of our strategy involves conducting multiple product development programs. We may pursue opportunities in fields that conflict with those of our collaborators. In addition, disagreements with our collaborators could develop over rights to our intellectual property. The resolution of such conflicts and disagreements may require us to relinquish rights to our intellectual property that we believe we are entitled to. In addition, any disagreement or conflict with our collaborators could reduce our ability to obtain future collaboration agreements and negatively impact our relationship with existing collaborators. Such a conflict or disagreement could also lead to delays in collaborative research, development, regulatory approval or commercialization of various products or could require or result in litigation or arbitration, which would be time consuming and expensive and could have a significant negative impact on our business, financial condition and results of operations.

Our collaboration agreements may prohibit us from conducting research in areas that may compete with our collaboration products, while our collaborators may not be limited to the same extent. This could negatively affect our ability to develop products and, ultimately, prevent us from achieving a continuing source of revenues.

We anticipate that some of our corporate or academic collaborators will be conducting multiple product development efforts within each disease area that is the subject of its collaboration with us. We generally have agreed not to conduct independently, or with any third party, certain research that is competitive with the research conducted under our collaborations. Therefore, our collaborations may have the effect of limiting the areas of research that we may pursue, either alone or with others. Some of our collaborators, however, may develop, either alone or with others, products in related fields that are competitive with the products or potential products that are the subject of their collaborations with us. In addition, competing products, either developed by the collaborators or to which the collaborators have rights, may result in their withdrawing support for our product candidates.

Generally under our academic collaborations, we retain the right to exclusively license any technologies developed using funding we provided. If we elect to not license a particular technology, the academic collaborator is typically free to use the technology for any purpose, including the development and commercialization of products that might compete with our products.

We are an early stage company deploying unproven technologies, and we may never be able to develop, get regulatory approval of, or market any of our product candidates.

Gene-based products are new and rapidly evolving medical approaches, which have not been shown to be effective on a widespread basis. Biotechnology and pharmaceutical companies have successfully developed and commercialized only a limited number of gene-based products to date. In addition, no gene therapy product has received regulatory approval in the United States. To date, none of our product candidates has been approved for sale in the United States or elsewhere. We may be unable to develop products or delivery systems that:

• prove to be safe and effective;

• meet applicable regulatory standards;

• are capable of being manufactured at reasonable costs;

• do not infringe the intellectual property rights of third parties;

• are superior to products offered by third parties; or

• can be marketed successfully.

Gene-based products may be susceptible to various risks, including undesirable and unintended side effects from genes or the delivery systems, unintended immune responses, inadequate therapeutic efficacy or other characteristics that may prevent or limit their approval or commercial use. Successful products require significant development and investment, including a lengthy and uncertain period of testing to show their safety and effectiveness before their regulatory approval or commercialization. We have not proven our ability to develop, obtain regulatory approval of or commercialize gene-based medicines or cell transplantation products. We may be unable to successfully select those genes or cells with the most potential for commercial development.

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If we fail to adequately show the safety and efficacy of our product candidates, we will not be able to obtain FDA approval of our product candidates.

We face the risk of failure involved in developing therapies based on new technologies. While certain of our product candidates are in clinical trials, there are others for which we have not yet initiated clinical trials. For those product candidates not yet in clinical trials, we will need to conduct significant additional research and animal testing, referred to as preclinical testing, before any of these product candidates can advance to clinical trials. In addition, we will need to conduct further clinical testing of those product candidates currently in clinical trials. It may take us many years to complete preclinical testing or trials, and failure could occur at any stage of testing. Acceptable results in early testing or trials might not be repeated later. Not all products in preclinical testing or early stage clinical trials will become approved products. Before we can file applications with the FDA for product approval, we must show that a particular product candidate is safe and effective. Even with respect to those product candidates currently in clinical trials, we must demonstrate the safety and efficacy of those product candidates before we can secure FDA approval. Our failure to adequately show the safety and effectiveness of our product candidates would prevent FDA approval of our products. Our product development costs will increase if we experience delays in testing or regulatory approvals or if we need to perform more or larger clinical trials than planned. If the delays are significant, they could negatively affect our financial results and the commercial prospects for our product candidates.

Because we or our collaborators must obtain regulatory approval to market our products in the United States and in non-U.S. jurisdictions, we cannot predict whether or when we will be permitted to commercialize our products; failure to comply with applicable regulations can also harm our business and operations.

• The pharmaceutical industry is subject to stringent regulation by a wide range of authorities. We cannot predict whether we or our collaborators will obtain regulatory approval for any product we develop. No one can market a pharmaceutical product in the United States until it has completed rigorous preclinical testing and clinical trials of the product and an extensive regulatory approval process implemented by the FDA. To date, the FDA has not approved a gene therapy product for sale in the United States. Satisfaction of regulatory requirements typically takes many years, is dependent upon the type, complexity and novelty of the product and requires the expenditure of substantial resources. Of particular significance are the requirements covering research and development, testing, manufacturing, quality control, labeling and promotion of drugs for human use. Before commencing clinical trials, we must submit to the FDA and receive approval from the FDA of an Investigational New Drug application (“IND”). Clinical trials are subject to oversight by Institutional Review Boards and the FDA. Clinical trials are also subject to:

• informed consent;

• good clinical practices (GCP);

• continuing FDA oversight;

• potentially large numbers of test subjects; and

• potential suspension by us, our collaborators or the FDA at any time if it is believed that the subjects participating in these trials are being exposed to unacceptable health risks or if the FDA finds deficiencies in the Investigational New Drug application or the conduct of these trials.

We may encounter delays or rejections in the regulatory approval process because of additional government regulation from future legislation or administrative action or changes in FDA policy during the period of product development, clinical trials and FDA regulatory review. Failure to comply with applicable FDA or other applicable regulatory requirements may result in criminal prosecution, civil penalties, recall or seizure of products, total or partial suspension of production or injunction, as well as other regulatory action against our product candidates or us. If regulatory approval of a product is granted, this approval will be limited to those disease indications for which the product has shown through clinical trials to be safe and effective. The FDA also strictly regulates promotion and labeling after approval. Outside the United States, our ability to market a product is contingent upon receiving clearances from the appropriate regulatory authorities. This non-U.S. regulatory approval process includes risks similar to those associated with FDA clearance described above.

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If we or our collaborators are unable to manufacture our products in sufficient quantities or are unable to obtain regulatory approvals for a manufacturing facility for our products, we may experience delays, and be unable to meet demand, and may lose potential revenues.

Completion of our clinical trials and commercialization of our product candidates require access to, or development of, facilities to manufacture a sufficient supply of our product candidates. We have limited experience manufacturing any of our gene-based products in the volumes that will be necessary to support large-scale clinical trials or commercial sales. We do not yet know the extent to which we will be able to develop our Gaithersburg manufacturing facilities and processes to the manufacture of gene therapy product candidates. Efforts to establish capabilities, if pursued, may not meet initial expectations as to scheduling, reproducibility, yield, purity, cost, potency or quality.

If we or our collaborators are unable to manufacture our product candidates in clinical quantities or, when necessary, commercial quantities, then we will need to rely on third parties to manufacture compounds for clinical and commercial purposes. These third-party manufacturers must receive FDA approval before they can produce clinical material or commercial products. Our products may be in competition with other products for access to these facilities and may be subject to delays in manufacture if third parties give other products greater priority. In addition, we may not be able to enter into any necessary third-party manufacturing arrangements on acceptable terms, or on a timely basis. There are very few contract manufacturers who currently have the capability to produce our proposed products, and the inability of any of these contract manufacturers to deliver our required quantities of product candidates on a timely basis and at commercially reasonable prices would negatively affect our operations.

Before we or our collaborators can begin commercial manufacturing of any of our product candidates, we or our collaborators must obtain regulatory approval of the manufacturing facility and process. Manufacturing of our proposed products must comply with the FDA’s current Good Manufacturing Practices requirements, commonly known as cGMP, and non-U.S. regulatory requirements. The cGMP requirements govern quality control and documentation policies and procedures. In complying with cGMP and non-U.S. regulatory requirements, we will be obligated to expend time, money and effort in production, record keeping and quality control to assure that the product meets applicable specifications and other requirements. We or our collaborators must also pass a pre-approval inspection before FDA approval. If we or our collaborators fail to comply with these requirements, our product candidates would not be approved. If we or our collaborators fail to comply with these requirements after approval, we would be subject to possible regulatory action and may be limited in the jurisdictions in which we are permitted to sell our products. The FDA and non-U.S. regulatory authorities also have the authority to perform unannounced periodic inspections of our manufacturing facility to ensure compliance with cGMP and non-U.S. regulatory requirements.

If successful large-scale manufacturing of gene-based medicines is not possible, we may be unable to manufacture enough of our product candidates to achieve regulatory approval or market our products.

Very few companies have shown successful large-scale manufacturing of gene-based medicines, and there are significant uncertainties and risks associated with the scale up of our manufacturing processes to commercial levels. There are a limited number of contract manufacturers qualified to perform large-scale manufacturing of gene-based medicines. We may be unable to manufacture commercial-scale quantities of gene-base medicines, or receive appropriate government approvals, on a timely basis or at all. Failure to successfully manufacture or obtain appropriate government approvals on a timely basis or at all would prevent us from achieving our business objectives.

We may experience difficulties or delays in product manufacturing, which are beyond our control and could harm our business, because we rely on third-party manufacturers.

We currently expect to produce our product candidates through third-party manufacturers. Problems with any manufacturing processes could result in product defects, which could require us to delay shipment of products or recall products previously shipped. In addition, any prolonged interruption in the operations of our or a third party’s manufacturing facilities could result in the cancellation of shipments. A number of factors could cause interruptions, including equipment malfunctions or process failures, or damage to a facility due to natural disasters or otherwise. Because our manufacturing processes are or are expected to be highly complex and subject to a lengthy FDA approval process, alternative qualified production capacity may not be available on a timely basis or at all.

Difficulties or delays in our manufacturing could increase our costs and damage our reputation. The manufacture of pharmaceutical products can be an expensive, time-consuming, and complex process. Manufacturers often encounter difficulties in scaling-up production of new products, including problems involving the transfer of manufacturing technology, production yields, quality control and assurance, and shortages of personnel. Delays in scale-up to commercial quantities could result in additional expense and delays in our clinical trials, regulatory submissions and commercialization.

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We rely on a limited number of suppliers for some of our manufacturing materials. Any problems experienced by any of these suppliers could negatively affect our operations.

We rely on third-party suppliers and vendors for some of the materials used in the manufacture of our product candidates. Some of these materials are available from only one supplier or vendor. For supply of early clinical trial materials, we rely on one supplier, Invitrogen Corporation, for its cell culture medium and Cambrex for custom buffers. The cell culture medium is used to grow the cells within which our product candidates are produced. For supply of late-stage clinical trial materials, we currently are planning to use purification resins from the Applied Biosystems Group of Applera Corporation and the BioSepra S.A. Process Division of Pall Corporation. We do not currently have supply agreements with any of these suppliers. Any significant problem experienced by one of our suppliers could result in a delay or interruption in the supply of materials to us until such supplier resolves the problem or an alternative source of supply is located. We have limited experience with alternative sources of raw materials. Any delay or interruption would likely lead to a delay or interruption of manufacturing operations, which could negatively affect our operations.

We have limited marketing capabilities, and if we are unable to enter into collaborations with marketing partners or develop our own sales and marketing capability, we may not be successful in commercializing our products.

We currently have limited sales, marketing and distribution capabilities. As a result, we will depend on collaborations with third parties that have established distribution systems and direct sales forces. To the extent that we enter into co-promotion or other licensing arrangements, our revenues will depend upon the efforts of third parties, over which we may have little or no control. If we are unable to reach and maintain agreements with one or more pharmaceutical companies or collaborators, we may be required to market our products directly. In any case we may elect to establish our own specialized sales force and marketing organization to market our products to physicians. In order to do this, we would have to develop a marketing and sales force with technical expertise and with supporting distribution capability. Developing a marketing and sales force is expensive and time consuming and could delay a product launch. We cannot be certain that we will be able to attract and retain qualified sales personnel or otherwise develop this capability.

We face substantial competition from other companies and research institutions that are developing products to treat the same diseases that our product candidate’s target, and we may not be able to compete successfully.

We compete with pharmaceutical and biotechnology companies that are pursuing other forms of treatment for the diseases that our product candidates target. We may also face competition from companies that may develop competing technology internally or acquire it from universities and other research institutions. As these companies develop their technologies, they may develop proprietary positions, which may prevent or limit our product commercialization efforts.

Some of our competitors are established companies with greater financial and other resources than we have. We expect that competition in our business will intensify. Our competitors may succeed in:

• identifying important genes or delivery mechanisms before us;

• developing products or product candidates earlier than we do;

• forming collaborations before we do, or precluding us from forming collaborations with others;

• obtaining approvals from the FDA or other regulatory agencies for such products more rapidly than we do;

• developing and validating manufacturing processes more rapidly than we do;

• obtaining patent protection to other intellectual property rights that would limit or preclude our ability to use our technologies or develop products; or

• developing products that are safer or more effective than those we develop or propose to develop.

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While we seek to expand our technological capabilities to remain competitive, research and development by others may render our technology or product candidates obsolete or noncompetitive or result in treatments or cures superior to any therapy developed by us.

RISKS RELATED TO OUR INDUSTRY

If we are unable to adequately protect our intellectual property rights, our competitors may be able to take advantage of our research and development efforts to compete with us.

Our commercial success will depend in part on obtaining patent protection for our products and other technologies and successfully defending these patents against third party challenges. Our patent position, like that of other biotechnology firms, is highly uncertain and involves complex legal and factual questions. The biotechnology patent situation in the United States and other countries is uncertain and is currently undergoing review and revision. Changes in, or different interpretations of, patent laws in the United States and other countries might allow others to use our discoveries or to develop and commercialize our products without any compensation to us.

Our ability to develop and protect a proprietary position based on biotechnological innovations and technologies involving genes and gene therapy, delivery systems, production, formulations and the like, is particularly uncertain. The U.S. Patent and Trademark Office, as well as the patent offices in other countries, have often required that patent applications concerning biotechnology-related inventions be limited or narrowed substantially. Our disclosures in our patent applications may not be sufficient to meet the statutory requirements for patentability in all cases. In addition, other companies or institutions possess issued patents and have filed and will file patent applications that cover or attempt to cover genes, vectors, cell lines, and methods of making and using gene therapy products that are the same as or similar to the subject matter of our patent applications. For example, while we have pending patent applications pertaining to particular adenovectors that cannot reproduce themselves, and adenovectors modified to alter cell binding characteristics, we are aware of issued patents and pending patent applications of other companies and institutions relating to the same subject matter. Patents and patent applications of third parties may have priority over our issued patents and our pending or yet to be filed patent applications. Proceedings before the U.S. Patent and Trademark Office and other patent offices to determine who properly lays claim to inventions are costly and time consuming, and we may not win in any such proceedings.

The issued patents we already have or may obtain in the future may not provide commercially meaningful protection against competitors. Other companies or institutions may challenge our or our collaborators’ patents in the United States and other countries. In the event a company, institution or researcher infringes upon our or our collaborators’ patent rights, enforcing these rights may be difficult and can be expensive and time consuming, with no guarantee that our or our collaborators’ patent rights will be upheld. Others may be able to design around these patents or develop unique products providing effects similar to our products. In addition, our competitors may legally challenge our patents and they may be held to be invalid. In addition, various components used in developing gene therapy products, such as particular genes, vectors, promoters, cell lines and construction methods, used by others and us, are available to the public. As a result, we are unable to obtain patent protection with respect to such components, and third parties can freely use such components. Third parties may develop products using such components that compete with our potential products. Also, with respect to some of our patentable inventions, we or our collaborators have decided not to pursue patent protection outside the United States. Accordingly, our competitors could develop, and receive non-U.S. patent protection for, gene therapies or technologies for which we or our collaborators have or are seeking U.S. patent protection. Our competitors may be free to use these gene therapies or technologies outside the United States in the absence of patent protection.

Where we believe patent protection is not appropriate we rely to a limited extent on trade secrets to protect our technology. However, trade secrets are difficult to protect. While we have entered into confidentiality agreements with employees and collaborators, we may not be able to prevent the disclosure or use of our trade secrets. In addition, other companies or institutions may independently develop substantially equivalent information and techniques.

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If our potential products conflict with intellectual property rights of competitors, universities or others, then we may be prevented from developing those product candidates.

Other companies and institutions have issued patents and have filed and will file patent applications that may issue into patents that cover or attempt to cover genes, vectors, cell lines and methods of making and using gene and gene-based therapy products used in or similar to our product candidates and technologies. For example, we are aware of issued patents and pending patent applications relating to the delivery, including through the use of adenovectors, of medically beneficial substances to the heart and other tissues. It could be alleged that our BIOBYPASS angiogen conflicts with these patents. We also are aware of other issued patents and pending patent applications that relate to various aspects of our other product candidates and systems, including TNFerade, and it could be alleged that our product candidates conflict with these patents. We have not conducted freedom to use patent searches on all aspects of our product candidates or potential product candidates, and we may be unaware of relevant patents and patent applications of third parties. In addition, those freedom to use patent searches that have been conducted may not have identified all relevant issued patents or all relevant pending patent applications that could issue into patents, particularly in view of the characterizations of the subject matter of issued patents and pending patent applications, as well as the fact that pending patent applications can be maintained in secrecy for a period of time and, in some circumstances, until issuance as patents.

An issued patent gives rise to a rebuttable presumption of validity under U.S. law and the laws of some other countries. The holder of a patent to which we or our collaborators do not hold a license could bring legal actions against our collaborators or us for damages or to stop us or our collaborators from using the affected technology, which could limit or preclude our ability to develop and commercialize our product candidates. If any of our potential products are found to infringe a patent of a competitor or third party, we or our collaborators may be required to pay damages and to either obtain a license in order to continue to develop and commercialize the potential products or, at the discretion of the competitor or third party, to stop development and commercialization of the potential products. Since we have concentrated our resources on developing only a limited number of products, the inability to market one of our products would disproportionately affect us as opposed to a competing company with many products in development.

We believe that there will be significant litigation in our industry regarding intellectual property rights. Many of our competitors have expended and are continuing to expend significant amounts of time, money and management resources on intellectual property litigation. If we become involved in litigation, it could consume a substantial portion of our resources and could adversely affect our business, financial condition and results of operations, even if we ultimately are successful in such litigation, in view of our limited resources.

If our right to use intellectual property we license from others is affected, our ability to develop and commercialize our product candidates may be harmed.

We rely, in part, on licenses to use some technologies that are material to our business. For example, to create our product candidates, we combine our vectors with genes intended to produce proteins. For our current product candidates, we have secured licenses to use the VEGF₁₂₁, TNF — alpha, and PEDF genes. We do not own the patents or patent applications that underlie these licenses. For these genes, we do not control the enforcement of the patents. We rely upon our licensors to properly prosecute and file those patent applications and to prevent infringement of those patents.

While many of the licenses under which we have rights provide us with exclusive rights in specified fields, the scope of our rights under these and other licenses may be subject to dispute by our licensors or third parties. In addition, our rights to use these technologies and practice the inventions claimed in the licensed patents and patent applications are subject to our licensors abiding by the terms of those licenses and not terminating them. Any of our licenses may be terminated by the licensor if we are in breach of a term or condition of the license agreement, or in certain other circumstances. In addition, some of our licenses require us to achieve specific milestones.

Our product candidates and potential product candidates will require several components that may each be the subject of a license agreement. The cumulative license fees and royalties for these components may make the commercialization of these product candidates uneconomical.

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Adverse events in the field of gene therapy may negatively affect regulatory approval or public perception of our products or product candidates.

In September 1999, a patient undergoing gene therapy using an adenoviral vector to deliver a therapeutic gene died as a result of an adverse reaction to the treatment. This death was widely publicized. Other patient deaths have occurred in other gene-based clinical trials. These deaths and the resulting publicity surrounding them, as well as any other serious adverse events in the field of gene therapy that may occur in the future, may result in greater governmental regulation of our product candidates and potential regulatory delays relating to the testing or approval of our product candidates. As a result of the incident in September 1999, the United States Senate held a series of hearings to determine whether additional legislation was required to protect patients who participate in clinical trials. Possibly as a consequence of these hearings, a specific division within the FDA for gene and cell therapy was established. Furthermore, extended patient follow-up for gene therapy product candidates has been recommended. Additionally, the National Institutes of Health and its advisory bodies routinely review the field of gene therapy and issue reports on the adverse events reported by investigators. The NIH has approved a proposal to establish a Gene Transfer Safety Assessment Board to review serious adverse event reports, annual reports and other safety information in order to assess toxicity and safety and report these findings at NIH Recombinant DNA Advisory Committee (RAC) meetings. Additional scrutiny cannot be ruled out. Any increased scrutiny could delay or increase the costs of our product development efforts or clinical trials.

The commercial success of our product candidates will depend in part on public acceptance of the use of gene therapies for the prevention or treatment of human disease. Public attitudes may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or the medical community. Negative public reaction to gene therapy could result in greater government regulation and stricter clinical trial oversight and commercial product labeling requirements of gene therapy products and could cause a decrease in the demand for any products we may develop.

Our product candidates involve new technologies and therapeutic approaches in the field of gene therapy, which is a new and evolving field. As discussed above, no gene therapy product has received regulatory approval in the United States, and adverse events in this field may negatively affect public perception of our product candidates. Even if our product candidates attain regulatory approval, our success will depend upon the medical community, patients and third party payors accepting gene therapy products in general, and our product candidates in particular, as medically useful, cost-effective and safe. In particular, our success will depend upon physicians specializing in the treatment of those diseases that our product candidates target prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments that they are already familiar with and for which greater clinical data may be available. Even if the clinical safety and efficacy of our product candidates is established, physicians may elect not to recommend our products for a variety of reasons, including the reimbursement policies of government and third-party payors. Further, third-party payors, such as health insurance plans, may be reluctant to authorize and pay for new forms of treatment that they may deem expensive and less-proven that existing treatments. Even if gene therapy products, and our product candidates in particular, are accepted by the medical community and third-party payors, the public in general, or patients in particular, may be uncomfortable with new therapies, including our product candidates, and it could take substantial time for them to accept gene therapy products as a viable treatment alternative, if ever. If gene therapy and our product candidates do not gain widespread acceptance, we may be unable to generate significant revenues, if any, which would adversely affect our results of operations. In addition, even if our product candidates achieve market acceptance, we may not be able to maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our product candidates or render them obsolete.

We may be sued for product liability, which could damage our reputation and expose us to unanticipated costs.

We, alone or with our collaborators, may be held liable if any product we or our collaborators develop, or any product, which is made with the use or incorporation of any of our technologies, causes injury or is found otherwise unsuitable during product testing, manufacturing, marketing or sale. Regardless of the merit or eventual outcome, product liability claims may result in:

• withdrawal of product candidates from our clinical trials;

• withdrawal of our products from the market; if they have been approved;

• damage to our reputation;

• costs of litigation;

• substantial monetary awards to plaintiffs; and

• decreased demand for our products or product candidates.

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Although we currently have and intend to maintain product liability insurance, this insurance may become prohibitively expensive, or may not fully cover our potential liabilities. Inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of products developed by us or in collaboration with others. Currently, we have a total of $5 million liability coverage under a clinical trials and professional liability insurance policy. If we are sued for any injury caused by our products, our liability could exceed our total resources.

We use hazardous chemicals and radioactive and biological materials in our business; any liability or disputes relating to improper handling, storage or disposal of these materials could be time consuming and costly.

Our research and development processes involve the use of hazardous materials, including chemicals and radioactive and biological materials, and also produce hazardous waste products. Hazardous chemicals used in our processes include, but are not limited to, flammable solvents such as methanol and ethanol, toxic chemicals such as ethidium bromide and formaldehyde, and corrosive chemicals such as acetic acid and sodium hydroxide. We also use several radioactive compounds, including phosphorous-32, carbon-14, sulfur-35, phosphorous-33, iodine-125, hydrogen-3, and chromium-51.

The hazardous biological material used in our research and development activities include human and animal cell lines and viruses, such as adenoviruses, and animals infected with human viruses. Some of the biological material may be novel, including viruses with novel properties. We cannot eliminate the risk of accidental contamination or discharge or injury from these materials. Federal, state, and local laws and regulations govern the use, manufacture, storage, handling and disposal of these materials. We could be subject to civil damages in the event of an improper or unauthorized release of, or exposure of individuals to, these hazardous materials. In addition, claimants may sue us for injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed our total assets. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development or production efforts.

Although we have general liability insurance, these polices contain exclusions from insurance against claims arising from pollution from chemical or radioactive materials. Our collaborators are working with these types of hazardous materials in connection with our collaborations. In the event of a lawsuit or investigation, we could be held responsible for any injury we or our collaborators cause to persons or property by exposure to, or release of, any hazardous materials. However, we believe that we are currently in compliance with all applicable environmental and occupational health and safety regulations.

If reforms in the health care industry make reimbursement for our potential products less likely, the market for our potential products will be reduced, and we will lose potential sources of revenue.

Our success may depend, in part, on the extent to which reimbursement for the costs of therapeutic products and related treatments will be available from third-party payors such as government health administration authorities, private health insurers, managed care programs, and other organizations. Over the past decade, the cost of health care has risen significantly, and there have been numerous proposals by legislators, regulators, and third-party health care payors to curb these costs. Some of these proposals have involved limitations on the amount of reimbursement for certain products. Similar federal or state health care legislation may be adopted in the future and any products that we or our collaborators seek to commercialize may not be considered cost-effective. Adequate third-party insurance coverage may not be available for us to establish and maintain price levels that are sufficient for realization of an appropriate return on our investment in product development. Moreover, the existence or threat of cost control measures could cause our corporate collaborators to be less willing or able to pursue research and development programs related to our product candidates.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We currently lease 42,900 square feet for our corporate offices and research and development laboratories located at 65 West Watkins Mill Road in Gaithersburg, Maryland. The lease expires on November 1, 2009. We have options to extend the term of this lease for an additional fourteen years. We have additional space within our Gaithersburg, Maryland facilities that can be utilized to accommodate future growth. We currently believe that the Gaithersburg facility is sufficient to meet our present needs as well as possible growth over the next several years.

We also lease 25,000 square feet for research and development laboratories and manufacturing space located in Charlestown, Massachusetts. In conjunction with the sale of our myoblast cell therapy assets in December 2005, we subleased approximately 11,000 square feet of our Charlestown facility through September 2006. The Charlestown lease expires on October 3, 2006. We do not plan to exercise our option to extend the lease at this time.

ITEM 3. LEGAL PROCEEDINGS

We are not currently a party to any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

There were no matters submitted by the Company during the quarter ended December 31, 2005 to a vote of security holders, through the solicitation of proxies or otherwise.

EXECUTIVE OFFICERS OF THE REGISTRANT

NAME	AGE		PRESENT POSITION WITH THE REGISTRANT
Paul H. Fischer, Ph.D.		56	President and Chief Executive Officer
Jeffrey W. Church		49	Chief Financial Officer, Treasurer and Corporate Secretary
Thomas A. Davis, M.D.		42	Chief Medical Officer
C. Richter King, Ph.D.		51	Sr. Vice President, Research

The Board of Directors appoints all executive officers annually. There is no family relationship between or among any of the executive officers or directors.

Paul H. Fischer, Ph.D., serves as our President and Chief Executive Officer and as a director of the Company. Dr. Fischer has served as President and Chief Executive Officer and as a director of the Company since 1996. Prior to joining GenVec, he was Executive Vice President of Research and Development with Oncologix, Inc. (now Antigenics, Inc.), a biotechnology company. Dr. Fischer’s previous experience includes Manager, Cancer Research at Pfizer, Inc., a pharmaceutical company. Dr. Fischer performed post-doctoral research in Pharmacology at Yale University School of Medicine. He was an Assistant Professor of Pharmacology at the University of Missouri School of Medicine and an Associate Professor of Human Oncology at the University of Wisconsin, prior to joining Pfizer. Dr. Fischer received his B.S. in Biology from the University of Denver and his Ph.D. in Pharmacology from the University of California at San Francisco.

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Jeffrey W. Church joined the Company in August 1998 and serves as Chief Financial Officer, Treasurer and Corporate Secretary. Prior to joining the Company, he served from September 1997 to August 1998 as Executive Vice President and Chief Financial Officer of Biospherics, Inc., a telecommunications and biotechnology company. Before that Mr. Church was employed with Meridian Medical Technologies, Inc., a medical device/drug delivery company. In addition to his CFO duties at Meridian, Mr. Church was also responsible for one of the company’s three operating units. Previously, Mr. Church spent seven years with PricewaterhouseCoopers as Audit Manager. Mr. Church received his B.S. in Accounting from the University of Maryland.

Thomas A. Davis, M.D., serves as Chief Medical Officer. Dr. Davis joined GenVec in July 2005 with extensive experience in cancer drug development, having managed clinical development at the National Cancer Institute and at Medarex, Inc. At the Cancer Therapy Evaluation Program of the National Cancer Institute in Rockville, Maryland, he directed the government sponsored clinical evaluation of a broad assortment of therapeutic monoclonal antibodies as well as directing clinical development within adult hemotologic malignancies and blood and bone marrow transplantation. He also has served as head of Clinical Science at Medarex, Inc., specializing in the development of novel therapeutic human antibodies. He completed fellowship training at Stanford University, where he participated in all phases of clinical development of assorted anti-CD20 antibodies and tumor specific idiotype vaccines for the treatment of B-cell lymphomas. He received his education and training in medicine at Johns Hopkins University and Georgetown University, where he also served as chief resident in Internal Medicine.

C. Richter King, Ph.D., serves as our Senior Vice President of Research. From May 1998 to December 2004, Dr. King served as our Vice President of New Product Research, an area that he still oversees. Prior to joining GenVec in 1998, Dr. King conducted extensive research into the amplification of the erbB-2 gene, which is associated with common human cancers. Pursuing erbB-2 as a potential target for anticancer therapy, Dr. King directed an experienced research group at the Georgetown University Medical School’s Lombardi Cancer Research Center in Washington, DC, where he served as Associate Professor with the University’s Department of Biochemistry. Previously, Dr. King was the Director of Drug Discovery for Oncologix (now Antigenics, Inc.). Dr. King holds a Ph.D. in Biochemistry from the Johns Hopkins University in Baltimore, MD.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Since our initial public offering of common stock on December 12, 2000, our common stock has been traded in the over-the-counter market and is included for quotation on the Nasdaq National Market under the symbol GNVC.

Set forth below is the range of high and low closing sale prices for our common stock as reported on the Nasdaq National Market for the two most recent years:

	HIGH		LOW
First Quarter 2005	$	2.38	$	1.60
Second Quarter 2005	$	2.01	$	1.69
Third Quarter 2005	$	3.00	$	1.81
Fourth Quarter 2005	$	2.08	$	1.52
First Quarter 2004	$	4.23	$	3.03
Second Quarter 2004	$	4.04	$	2.82
Third Quarter 2004	$	3.06	$	2.10
Fourth Quarter 2004	$	2.66	$	1.20

As of February 28, 2006, there were approximately 191 stockholders of record of our common stock, one of which is Cede & Co., a nominee for Depository Trust Company (or “DTC”). All of the shares of common stock held by brokerage firms, banks and other financial institutions as nominees for beneficial owners are deposited into participant accounts at DTC, and are therefore considered to be held of record by Cede & Co. as one stockholder.

We have not paid any cash dividends since our inception and we do not anticipate paying any cash dividends in the foreseeable future. We did not repurchase any of our equity securities during the last fiscal year.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth our selected financial data for each of the years in the five-year period ended December 31, 2005. The information below should be read in conjunction with our financial statements and notes thereto included elsewhere in this report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report on Form 10-K. The historical results are not necessarily indicative of results to be expected for future periods.

	DECEMBER 31,
	2005			2004			2003			2002			2001
SUMMARY STATEMENTS OF OPERATIONS:
(in thousands, except per share data)
Revenue	$	26,554		$	11,853		$	10,520		$	8,414		$	4,417
Operating expenses:
Research and development		30,802			23,087			23,457			24,352			16,309
General and administrative		8,333			7,884			8,405			9,635			8,609
Loss on disposal of assets		1,895			2			—			8			140
Total operating expenses		41,030			30,973			31,862			33,995			25,058
Operating loss		(14,476	)		(19,120	)		(21,342	)		(25,581	)		(20,641	)
Other income (loss), net		484			226			81			(17	)		1,545
Net loss	$	(13,992	)	$	(18,894	)	$	(21,261	)	$	(25,598	)	$	(19,096	)
Basic and diluted net loss per share	$	(0.24	)	$	(0.35	)	$	(0.65	)	$	(1.17	)	$	(1.05	)
Shares used in computing basic and diluted net loss per share		57,823			54,331			32,963			21,816			18,124

	AS OF DECEMBER 31,
	2005			2004			2003			2002			2001
SUMMARY BALANCE SHEET DATA:
(in thousands)
Cash, cash equivalents and short-term investments	$	31,999		$	30,763		$	26,523		$	17,652		$	19,930
Working capital		30,477			26,021			20,636			12,471			17,017
Long-term investments		—			2,302			13,438			2,708			21,988
Total assets		41,901			44,071			52,684			31,085			51,366
Long-term debt, less current portion		2,351			3,264			4,539			5,921			5,088
Accumulated deficit		(149,346	)		(135,594	)		(116,700	)		(95,439	)		(69,841	)
Total stockholders’ equity		31,422			30,481			37,026			15,629			40,128

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Financial Statements and Notes thereto appearing elsewhere in this report. See “Business — Risks and Uncertainties” regarding certain factors known to GenVec that could cause reported financial information not to be necessarily indicative of future results, including discussions of the risks related to the development, regulatory approval, proprietary protection of our product candidates, and their market success relative to alternative products.

CRITICAL ACCOUNTING POLICIES AND THE USE OF ESTIMATES

The discussion and analysis of GenVec’s financial condition and results of operations are based upon GenVec’s financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an on-going basis, GenVec evaluates its estimates using authoritative pronouncements, historical experience and other assumptions as the basis for making estimates. Actual results could differ from those estimates. Significant accounting policies are more fully described in Note 2 to GenVec’s financial statements included in this annual report on Form 10-K.

GenVec believes the following accounting policies to be critical because they require significant estimates or judgment on the part of management:

Revenue Recognition. Research and development (R & D) revenue, from cost-reimbursement and cost-plus agreements, are recognized as earned based on the performance requirements of the contract. Reimbursable costs under such contracts are subject to audit and retroactive adjustment. Contract revenues and accounts receivable reported in the financial statements are recorded at the amount expected to be received. Contract revenues are adjusted to actual upon final audit and retroactive adjustment. Non-refundable R & D fees for which no further performance obligations exist are recognized when collection is assured. Contract and upfront license payments where GenVec has continued involvement through a research or development collaboration are recognized ratably over the contract period. Revenue associated with performance milestones are recognized based on achievement of the milestones as defined in the respective agreements.

In accordance with Staff Accounting Bulletin 104, GenVec has deferred recognition of up-front contract or license payments received under its collaboration and license agreements and has amortized the related unearned revenues over the terms of the collaboration agreements, generally ranging from two to four years. GenVec’s results of operations included $2.3 million, $435,000 and $98,000 during the years ended December 31, 2005, 2004 and 2003, of amortization of these upfront contract and license fees which were received in prior years. Amortized revenues for the year ended December 31, 2005 included $1.1 million from unearned upfront contract and license fees related to the Terumo agreement, including $667,000 of accelerated amortization due to the assignment of the Terumo agreement as part of the Company’s sale of its myoblast cell therapy assets in December 2005. As of December 31, 2005 and 2004, GenVec had residual unearned revenue of $1.2 million and $2.0 million, respectively.

Clinical Trial Expenses and Research and Development Activities: The Company accrues estimated costs for clinical and pre-clinical studies based on estimates of work performed and completion of certain milestones. The Company believes that this method best aligns the expenses it records with the efforts it expends. The Company monitors the progress of the trials and their related activities to the extent possible, and adjusts, the accruals accordingly. Adjustments to accruals are charged to expense in the period in which the facts that give rise to the adjustment become known; all adjustments to-date have been inconsequential.

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The expenditures that will be necessary to execute GenVec’s business plan are subject to numerous uncertainties, which may adversely affect its liquidity and capital resources. Completion of clinical trials may take several years or more, but the length of time generally varies substantially according to the type, complexity, novelty and intended use of a product candidate. GenVec estimates that clinical trials of the type GenVec generally conducts are typically completed over the following timelines:

	Estimated
	Completion
Clinical Phase	Date
Phase I	1 - 3 years
Phase II	1 - 4 years
Phase III	2 - 5 years

The duration and the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during the clinical trial protocol, including, among others, the following:

• the number of patients that ultimately participate in the trial;

• the duration of patient follow-up that seems appropriate in view of the results;

• the number of clinical sites included in the trials; and

• the length of time required to enroll suitable patient subjects.

GenVec tests potential product candidates in numerous pre-clinical studies to identify indications for which they may be product candidates. GenVec may conduct multiple clinical trials to cover a variety of indications for each product candidate. As GenVec obtains results from trials, GenVec may elect to discontinue clinical trials for certain product candidates or for certain indications in order to focus its resources on more promising product candidates or indications.

An element of GenVec’s business strategy is to pursue the research and development of a range of product candidates for a variety of indications. This is intended to allow GenVec to diversify the risks associated with its research and development expenditures. As a result, GenVec believes its future capital requirements and its future financial success are not substantially dependent on any one product candidate. To the extent GenVec is unable to maintain a broad range of product candidates, GenVec’s dependence on the success of one or a few product candidates would increase.

GenVec’s product candidates also have not yet received FDA regulatory approval, which is required before GenVec can market them as therapeutic products. In order to proceed to subsequent clinical trial stages and to ultimately achieve regulatory approval, the FDA must conclude that GenVec’s clinical data establish safety and efficacy. Historically, the results from pre-clinical testing and early clinical trials have often not been predictive of results obtained in later clinical trials. A number of new drugs and biologies have shown promising results in early clinical trials, but subsequently failed to establish sufficient safety and efficacy data to obtain necessary regulatory approvals.

Furthermore, GenVec’s business strategy includes the option of entering into collaborative arrangements with third parties to complete the development and commercialization of GenVec’s product candidates. In the event that third parties take over the clinical trial process for one or more of GenVec’s product candidates, the estimated completion date would largely be under the control of that third party rather than GenVec. GenVec cannot forecast with any degree of certainty which proprietary products or indications, if any, will be subject to future collaborative arrangements, in whole or in part, and how such arrangements would affect GenVec’s development plan or capital requirements. GenVec’s programs may also benefit from subsidies, grants or government or agency-sponsored studies that could reduce GenVec’s development costs.

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As a result of the uncertainties discussed above, among others, GenVec is unable to estimate the duration and completion costs of its research and development projects or when, if ever, and to what extent it will receive cash inflows from the commercialization and sale of a product. GenVec’s inability to complete its research and development projects in a timely manner or its failure to enter into collaborative agreements, when appropriate, could significantly increase its capital requirements and could adversely impact its liquidity. These uncertainties could force GenVec to seek additional, external sources of financing from time to time in order to continue with its business strategy. GenVec’s inability to raise additional capital, or to do so on terms reasonably acceptable to it, would jeopardize the future success of its business.

TNFerade, GenVec’s lead cancer product candidate is currently being clinically studied in Phase II trials for the treatment of locally advanced pancreatic cancer, metastatic melanoma cancer and rectal cancer. GenVec has incurred approximately $42.1 million of expenses on the development of this product candidate since the commencement of this program in 1999, including an allocation of corporate general and administrative expenses. These costs include research, development, clinical trials and clinical supply costs, including an allocation of corporate general and administrative expenses. GenVec expects to continue to expend substantial additional amounts for the clinical development of TNFerade.

BIOBYPASS is currently being studied in a randomized, placebo-controlled Phase II trial with targeted enrollment of 129 patients with advanced heart disease in collaboration with the Cordis Corporation, a Johnson & Johnson company, to evaluate the effects of BIOBYPASS on exercise tolerance and heart function when administered with the Cordis injection catheter system. Since commencement of the research and development program of BIOBYPASS in 1996, through December 31, 2005, GenVec has incurred approximately $49.1 million in research, development and clinical costs, including an allocation of corporate general and administrative expenses. From July 1997 until July 2002, the development of BIOBYPASS was subject to a Research, Development and Collaboration Agreement with The Warner Lambert Company, a subsidiary of Pfizer, Inc., under which GenVec received approximately $62.6 million in non-refundable research and development funding, milestone payments, equity purchases and license fees. GenVec intends to seek strategic alliances with other organizations to continue the clinical development of BIOBYPASS. In January 2004, the Company entered into a research collaboration with Cordis Corporation, a Johnson & Johnson company, to conduct a randomized, double blind, placebo controlled study using BIOBYPASS in a procedure involving guided delivery of the angiogenic agent directly into targeted regions of the heart in patients with severe coronary artery disease using the Cordis NOGASTAR Mapping Catheter and MYOSTAR Injection Catheter. Clinical benefit will be assessed in a multi-center study, which is being conducted in Europe and is expected to enroll up to 129 patients with severe coronary artery disease. GenVec and Cordis will collaborate on regulatory matters and share in the clinical trial costs. GenVec will supply all clinical material and Cordis will provide the NOGASTAR and MYOSTAR mapping and injection catheters and training to the interventional cardiologists conducting the trial. GenVec retains commercial rights to BIOBYPASS and Cordis retains all commercial rights to the NOGASTAR mapping catheters and MYOSTAR injection catheters. GenVec anticipates that it will share the risks and costs of development by partnering this program, which it expects may require granting commercialization rights to collaborators.

PEDF has completed an initial Phase I trial for the treatment of advanced, wet age-related macular degeneration, a leading cause of blindness in individuals over the age of 50. GenVec is presently conducting a Phase I study to evaluate PEDF in patients with less severe macular degeneration. Patient enrollment of this trial has completed in the first quarter of 2006. Since commencement of the program in 2000 through December 31, 2005, GenVec has incurred approximately $20.8 million in research, development and clinical costs, including an allocation of corporate general and administrative expenses. GenVec intends to seek strategic alliances with other organizations to continue the clinical development of PEDF. GenVec anticipates that it will share the risks and costs of development by partnering this program, which it expects may require granting commercialization rights to its collaborators.

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GenVec is also developing therapeutic vaccines for the treatment of life-threatening viruses. GenVec is currently collaborating with the U.S. Government and PATH’s Malaria Vaccine Initiative (MVI) for the development of preventative vaccines for HIV, SARS, malaria and dengue virus. Each of these vaccine candidates will be evaluated in clinical trials sponsored by the respective organizations. During 2005, we also expanded collaborative efforts to develop a vaccine for foot-and-mouth disease funded by the U.S. Government. Research and development activities performed by GenVec are subject to statements of work and approved budgets under fixed price or cost-plus fixed fee contracts. Since commencement of these vaccine development programs in 2002 through December 31, 2005, GenVec has incurred approximately $46.0 million in research and development costs, including an allocation of corporate general and administrative expenses, most of which has been funded by the various sponsors under cost-reimbursement agreements.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued a revision of Statement of Financial Accounting Standards (or “FAS”) No. 123, “Accounting for Stock-Based Compensation.” The revision is referred to as “FAS 123R — Share-Based Payment” (or “FAS 123R”), which supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” (or “APB 25”) and will require companies to recognize compensation expense, using a fair-value based method, for costs related to share-based payments including stock options and stock issued under our employee stock plans. We intend to adopt FAS 123R using the modified prospective basis on January 1, 2006. Our adoption of FAS 123R is expected to result in compensation expense that will reduce net income per share by approximately $0.02 per share for 2006. However, our estimate of future stock-based compensation expense is affected by our stock price, the number of stock-based awards our board of directors may grant in 2006, as well as a number of complex and subjective valuation assumptions and the related tax effect. These valuation assumptions include, but are not limited to, the volatility of our stock price and employee stock option exercise behaviors.

See Note 2 in our Notes to Financial Statements for information regarding other recent accounting pronouncements.

OVERVIEW

We are an emerging late stage biopharmaceutical company focused on the development and commercialization of innovative gene-based therapies to treat cancer, heart disease and vision loss, and vaccines to prevent infectious diseases. We combine our patented gene transfer technologies with proprietary therapeutic genes to create product candidates, such as TNFerade for cancer, BIOBYPASS for heart disease and PEDF for eye disease. Using the same, gene transfer technology, we are also collaborating with the U.S. Government and PATH’s Malaria Vaccine Initiative (MVI) for the development of vaccine candidates for HIV, malaria and other infectious diseases. We announced a new collaboration with the U.S. Department of Agriculture for the development of a vaccine for foot-and-mouth disease.

We will seek collaborative partners to advance the clinical development of TNFerade for the treatment of cancer, BIOBYPASS for the treatment of heart disease and PEDF for the prevention of blindness. If GenVec enters into collaborative licensing and/or funded research arrangements, operating expenses would increase commensurate with the increased revenues from such arrangements.

To date, none of our proprietary or collaborative programs has resulted in a commercial product; therefore, we have not received any revenues or royalties from the sale of products. We have funded its operations primarily through public and private placements of equity securities, payments received under collaborative programs with public and private entities and debt financings.

We have incurred operating losses each year since inception and, as of December 31, 2005, had an accumulated deficit of approximately $150.0 million. Our losses have resulted principally from costs incurred in research and development and from general and administrative activities. Research and development expenses consist primarily of salaries and related personnel costs, sponsored research costs, patent costs, technology access fees, clinical trial costs, and other expenses related to our product development and research programs. General and administrative expenses consist primarily of salaries and related expenses for executive, finance and other administrative personnel, facility costs, professional fees and other corporate expenses including business development, insurance and general legal activities.

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RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2005 AND 2004

REVENUE

Revenue. Revenue increased 124 percent to $26.6 million in 2005 from $11.9 million in 2004 primarily as a result of an increase of $13.5 million in research activities under our funded vaccine programs with the National Institute of Health (NIH), U.S. Naval Medical Research Center (NMRC), U.S. Department of Agriculture (USDA) and the Malaria Vaccine Initiative (MVI). Revenue from our HIV vaccine development contract with NIH increased $11.4 million. This increase is due to the initiation of the one-time production of clinical grade HIV vaccine supplies for a Phase II proof-of-concept trial (“POCET trial”) to be conducted by NIH and expected to commence in the first half of 2007. Revenues in 2005 also include $667,000 in amortized revenues due to the accelerated recognition of deferred income resulting from the completion of all significant performance obligations under the Terumo License and Development Agreement. Revenues in 2006 are expected to decline to approximately $20 million as production of HIV vaccine supplies is completed and the Company transitions production to the manufacture of additional late-stage clinical material for the expanded Phase II/III pancreatic trial during the second half of 2006.

OPERATING EXPENSES

Research and development. Research and development expenses increased from $23.1 million in 2004 to $30.8 million in 2005. The increase is primarily due to expanded preparations to enable production of clinical-grade HIV vaccine stocks for the expected Phase II POCET trial noted above; the POCET trial will be conducted as part of our funded collaborative vaccine development program with The Vaccine Research Center at the National Institute of Allergy and Infectious Diseases of the National Institute of Health under our subcontract managed by SAIC-Frederick, Inc. Research and development efforts for our proprietary gene-based therapeutic product candidates were focused on the continued clinical testing of TNFerade, BIOBYPASS and PEDF. Offsetting these costs were lower levels of research and development expenditures resulting from the closure of our myoblast cell therapy operation in the fourth quarter 2005 in conjunction with the sale of these assets.

General and administrative. General and administrative expenses increased 6 percent to $8.3 million in 2005 from $7.9 million in 2004. The approximate $400,000 change is primarily a result of increases in a variety of expenditures including consulting, legal, facility and audit fees.

Loss on disposal of assets. The loss on disposal of assets primarily resulted from the $1.8 million non-cash write-off of intangible assets in conjunction with the Company’s sale of its myoblast cell therapy assets in December 2005.

OTHER INCOME (LOSS)

Other income (loss) increased from $226,000 in other income in 2004 to $484,000 in other income in 2005. Other interest income increased from $612,000 in 2004 to $908,000 in 2005. This increase was due in part to higher interest rates as well as increased investment balances resulting from the $14.0 million net proceeds realized from our September 26, 2005 equity financing. Interest expense increased from $386,000 in 2004 to $426,000 in 2005 due to a $240,000 non-cash market value adjustment of our interest rate swap agreement partially offset by lower interest charges due to debt repayments of $1.2 million during 2005.

YEARS ENDED DECEMBER 31, 2004 AND 2003

REVENUE

Revenue. Revenue increased 13 percent to $11.9 million in 2004 from $10.5 million in 2003 primarily from an increase of $1.2 million in research activities under our funded vaccine programs with the National Institute of Health (NIH) and the Malaria Vaccine Initiative (MVI) and a $641,000 increase in NIH funded research grants, which help support further development of our core technologies. These increases were partially offset by a temporary decline of approximately $800,000 under our funded vaccine development program with the Navy Medical Research Center.

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OPERATING EXPENSES

Research and development. Research and development expenses decreased slightly from $23.5 million in 2003 to $23.1 million in 2004. Research and development expenditures were focused on internal product development efforts around the continuing clinical development of TNFerade and PEDF and the Company’s funded vaccine programs with The Vaccine Research Center at the National Institute of Allergy and Infectious Diseases of the National Institute of Health and PATH’s Malaria Vaccine Initiative. Offsetting these costs were lower levels of expenditures related to the BIOBYPASS Phase II trials for coronary artery disease and decreased activities conducted under our funded vaccine development program with the Navy Medical Research Center.

General and administrative. General and administrative expenses decreased 6 percent to $7.9 million in 2004 from $8.4 million in 2003. This reflects a $1.2 million decrease in severance cost incurred in April 2003 as part of our workforce reduction/cost control program, partially offset by increases during 2004 in fees related to intellectual property, recruiting and compliance with new regulations promulgated under the Sarbanes-Oxley Act of 2002.

OTHER INCOME (EXPENSE)

Other income (expense), consisting primarily of interest income and investment gains or losses offset by interest expense, increased from $81,000 in other income in 2003 to $226,000 in other income in 2004. This increase was primarily due to a $222,000 increase in interest income generated, in part, from the $11.7 million net proceeds of our equity financing completed April 16, 2004 and a $100,000 decrease in interest expense stemming from debt repayments of $1.5 million; these 2004 factors were partially offset by a $178,000 gain on sale of a security reported in 2003.

LIQUIDITY AND CAPITAL RESOURCES

To date, we have been engaged primarily in research and development activities. As a result we have experienced and expect to continue to incur operating losses for the foreseeable future until one or more of our product candidates is commercialized. As of December 31, 2005, we held $32.0 million in cash and investments as compared to approximately $33.1 million at December 31, 2004. Net cash used in operating activities was $13.5 million in 2005 compared with $16.1 million used in 2004. Net cash provided by financing activities was $13.2 million in 2005, primarily reflecting proceeds of $14.0 million from issuance of stock and $464,000 from purchases under stock incentive programs offset by debt repayments of $1.2 million. Net cash provided by investing activities was approximately $1.8 million in 2005, which consisted principally of the net proceeds of the maturity of investment securities offset by the purchase of property and equipment. As of December 31, 2005, our working capital was approximately $30.5 million compared to $26.0 million at December 31, 2004. This increase primarily reflects a $2.5 million increase in accounts receivable due to higher monthly billings under our expanded vaccine development programs; all payments due related to these receivables have been collected.

Historically, we have contracted with various academic institutions and research organizations to perform research and development activities and with clinical sites for the treatment of patients under clinical protocols. Such contracts expire at various dates and have differing renewal and expiration clauses. We utilize different financing instruments, such as debt and capital and/or operating leases, to finance various equipment and facility needs. Our financing commitments are summarized in the following table:

	Payments Due by Period (000’s)
			Less than
Contractual Obligations	Total		1 year		1-3 years		4-5 years		After 5 years
Debt	$	3,264	$	913	$	2,351	$	—	$	—
Operating leases		3,698		1,454		1,567		677		—
Total contractual obligations	$	6,962	$	2,367	$	3,918	$	677	$	—

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We expect our revenue for the next several years to consist primarily of payments under government grants and contracts and, to a lesser extent, corporate collaborations and interest income. We intend to focus our resources on our lead product candidate, TNFerade, for the treatment of cancer. We have a collaboration with Cordis Corporation to conduct further clinical studies of our cardiovascular product candidate, BIOBYPASS, under which Cordis is responsible for providing injection catheters, training the interventional cardiologist conducting the trial and sharing the clinical trial costs. With respect to our other product candidates, including PEDF, we will seek to form strategic alliances under which we will share the risks and costs of development. We also will continue to look for funded research collaborations to help offset future anticipated losses from operations. Some of these arrangements may require us to relinquish rights to certain of our existing or future technologies, product candidates or products that we would otherwise seek to develop or commercialize on our own, or to license the rights to our technologies, product candidates or products on terms that are not favorable to us.

We expect that significant additional financing will be required as we move our product candidates through clinical development, including the recent decision to advance TNFerade into a Phase II/III trial for pancreatic cancer. On March 15, 2006, we entered into a Committed Equity Financing Facility (CEFF) with Kingsbridge Capital Ltd., under which Kingsbridge has committed to purchase, at our option, up to a total of $30.0 million of the Company’s common stock over a three-year period. Due to the pricing formula, however, the actual amount of additional financing available to us under the CEFF may be substantially less than the committed amount. Net proceeds from sale of common stock under the CEFF will help defray some of the incremental costs associated with expanded clinical testing of TNFerade in locally advanced pancreatic cancer. As part of the arrangement, the Company issued a warrant to Kingsbridge to purchase 520,000 shares of the Company’s common stock at a price equal to 125% of the average closing bid prices during the five (5) days preceding the issuance date of the warrant.

We believe that our existing cash reserves, anticipated cash flow from current collaborations and funds from the CEFF will be sufficient to support our operations for approximately 2 years. Without new collaborations, government grants or contracts, or additional equity financing, we would use approximately $20 — $22 million in cash over the next twelve months, including approximately $1.5 million for capital expenditures and $2.4 million in contractual obligations reflected in the table above.

We expect that, in addition to the CEFF described above, significant additional capital will be required which we may seek through further public or private equity offerings, debt financing, additional strategic alliance and licensing arrangements or some combination of these financing alternatives. If we are successful in raising additional funds through the issuance of equity securities, investors likely will experience dilution, or the equity securities may have rights, preferences or privileges senior to those of the holders of our common stock. If we raise funds through the issuance of debt securities, those securities would have rights, preferences and privileges senior to those of our common stock. In addition, if we lack adequate funding, we may be required to delay, reduce the scope of, or eliminate one or more of our research and development or clinical programs.

As of December 31, 2005, our net operating loss carry forwards were approximately $198.5 million. If not utilized, our loss carry forwards will expire at various dates through 2025. Utilization of our net operating losses to offset future taxable income, if any, may be substantially limited due to “change of ownership” provisions in the Internal Revenue Code of 1986. We have not yet determined the extent to which limitations may have been triggered as a result of past or future financings. This annual limitation may result in the expiration of certain net operating losses before their use.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The primary objective of our investment activities is to preserve our capital until it is required to fund operations while at the same time maximizing the income we receive from our investments without significantly increasing risk. As of December 31, 2005, we had cash and cash equivalents and short-term investments of $32.0 million as follows:

Cash and cash equivalents	$	6.8	million
Short-term investments	$	25.2	million

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Our exposure to market risk is confined to our cash and cash equivalents, which consist of commercial paper having maturities of less than one year, and our investment portfolio. We maintain an investment portfolio of investment grade government agency notes and corporate bonds. The securities in our investment portfolio are not leveraged, are classified as available-for-sale and are, due to their predominantly short-term nature, subject to minimal interest rate risk. We currently do not hedge interest rate exposure on our investment portfolio. As of December 31, 2005, securities totaling $25.2 million mature in 2006. While we do not believe that an increase in market rates of interest would have any significant negative impact on the realizable value of our investment portfolio, changes in interest rates affect the investment income we earn on our investments and, therefore, impact our cash flow and results of operations. We are headquartered in the United States where we conduct our pre-clinical research activities. Clinical trials are currently conducted in the United States and, to a lesser extent, Europe and Israel. We are evaluating clinical sites in other locations outside of the United States. All revenues to date have been received in U.S. dollars. Accordingly, we have not had any material exposure to foreign currency rate fluctuations.

At December 31, 2005, we had an outstanding industrial revenue bond payable of $2.6 million. This bond bears interest at a variable rate based on LIBOR. During 2000, we entered into an interest rate swap agreement that effectively fixed the interest rate over the life of the bond at 6.68 percent plus a remarketing fee. As of December 31, 2005, the fair value of the interest rate swap, excluding accrued interest, was a liability of $99,000. We also have outstanding loans totaling $684,000 at fixed interest rates ranging from 5.0 percent to 12.1 percent. Principal and interest on these loans is due and payable monthly. Accordingly, we had fixed interest rates on all of our debt as of December 31, 2005. An increase or decrease in interest rates would impact amounts due to us or payable under our swap agreement. However, we do not expect a change in interest rates will have any significant impact on our operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The response to this item is submitted in a separate section of this report. See Index to Financial Statements on Page F below for a list of the financial statements being filed herein.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Based on their evaluation as of December 31, 2005, our Chief Executive Officer and Chief Financial Officer, have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were sufficiently effective to ensure that the information required to be disclosed by us in this Annual Report on Form 10-K was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and instructions for Form 10-K.

Other Information

There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2005 that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

Our management, including our Chief Executive Office and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitation in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within GenVec have been detected.

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Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2005. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Our management has concluded that, as of December 31, 2005, our internal control over financial reporting is effective based on these criteria. Our independent registered public accounting firm, KPMG LLP, have issued an audit report on our assessment of our internal control over financial reporting, which is included herein.

ITEM 9B. OTHER INFORMATION

On March 15, 2006, GenVec, Inc. (“GenVec”) and Kingsbridge Capital Limited (“Kingsbridge”) entered into a Common Stock Purchase Agreement (the “Purchase Agreement”). Pursuant to the Purchase Agreement, Kingsbridge has committed, at GenVec’s option, to purchase up to $30 million of GenVec’s common stock, par value $0.001 per share (the “Common Stock”) within a three-year period. Due to the pricing formula, however, the actual amount of additional financing available to GenVec pursuant to the Purchase Agreement may be substantially less than the committed amount. As part of the arrangement, the Company issued a warrant to Kingsbridge to purchase 520,000 shares of Common Stock (the “Warrant”) at an exercise price equal to 125% of the average closing bid price during the five (5) days preceding the issuance date of the Warrant. The Warrant becomes exercisable on September 15, 2006 and will remain exercisable until March 15, 2011.

The transaction was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Regulation D promulgated thereunder, as a transaction not involving a public offering, and in reliance on similar exemptions under applicable state laws.

As part of the transaction, pursuant to a Registration Rights Agreement dated March 15, 2006 between GenVec and Kingsbridge, GenVec agreed to register for resale under the Securities Act all of the shares of Common Stock issuable under the Purchase Agreement, as well as shares of Common Stock issuable upon exercise of the Warrant.

The foregoing description of the Purchase Agreement , the Registration Rights Agreement and the Warrant is qualified in its entirety by reference to the terms of those documents, which are filed herewith as Exhibits 10.28, 4.4 and 4.5, respectively.

For information regarding Dr. Davis’ Salary Continuation Agreement, see Item 11.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following sets forth the names and ages, as of February 28, 2006, of the members of the Board of Directors, their respective positions and offices with the Company, the period during which each has served as a director of the Company and their principal occupations or employment during the past five years.

Information concerning our Executive Officers is set for the in Part I of the Form 10-K.

Directors with Terms Expiring in 2006

Thomas H. Fraser, Ph.D., age 57, has served as a director of GenVec since August 2003. Dr. Fraser has served as the Chairman of the Board of Directors since joining the Board. Dr. Fraser served as Diacrin’s President and Chief Executive Officer and as a director from 1990 to August 2003. Dr. Fraser was previously Executive Vice President, Corporate Development, for Repligen Corporation, a biopharmaceutical company. Dr. Fraser was the founding Vice President for Research and Development at Repligen in 1981 and served as Executive Vice President from 1982 through 1990 as well as Chief Technical Officer from 1982 through 1988. Prior to joining Repligen, Dr. Fraser headed the recombinant DNA research group in Pharmaceutical Research and Development at The Upjohn Company, a pharmaceutical company. Dr. Fraser received his Ph.D. in Biochemistry from the Massachusetts Institute of Technology and was a Damon Runyon-Walter Winchell Cancer Fund Postdoctoral Fellow at The University of Colorado.

Paul H. Fischer, Ph.D., age 56, has served as President and Chief Executive Officer and as a director of GenVec since 1996. Prior to joining GenVec, he was Executive Vice President of Research and Development with Oncologix, Inc. (now Antigenics, Inc.), a biotechnology company. Previous experience included Manager, Cancer Research at Pfizer, Inc., a pharmaceutical company. Dr. Fischer received his B.S. in Biology from the University of Denver, his Ph.D. in Pharmacology from the University of California at San Francisco and performed post-doctoral research in Pharmacology at Yale University School of Medicine and was an associate Professor of Human Oncology at the University of Wisconsin.

Wayne T. Hockmeyer, Ph.D., age 61, has served as a director of GenVec since December 2000. Dr. Hockmeyer is a member of the Nominating and Corporate Governance Committee and is the Chairman of the Compensation Committee. Dr. Hockmeyer founded MedImmune, Inc. in April 1988 as President and Chief Executive Officer and was elected as a director of MedImmune in May 1988. Dr. Hockmeyer became Chairman of the Board of Directors of MedImmune in May 1993. He relinquished his position as Chief Executive Officer in October 2000 and now serves as the Chairman of the Board of Directors and President of MedImmune Ventures, Inc. Dr. Hockmeyer earned his bachelor’s degree from Purdue University and his Ph.D. from the University of Florida in 1972. Dr. Hockmeyer was recognized in 1998 by the University of Florida as a Distinguished Alumunus and in 2002, Dr. Hockmeyer was awarded a Doctor of Science honoris causa from Purdue University. Dr. Hockmeyer is a member of the Maryland Economic Development Commission and the Maryland Governor’s Workforce Investment Board (GWIB). He is also a member of the Board of Directors of Advancis Pharmaceutical Corp., Vanda Pharmaceuticals, Idenix Pharmaceuticals, Inc., and TolerRx, Inc. and serves on the boards of several educational and philanthropic organizations.

Directors with Terms Expiring in 2007

Zola P. Horovitz, Ph.D., age 71, has served as a director of GenVec since August 2003. Dr. Horovitz is a member of the Nominating and Corporate Governance Committee and is the Chairman of the Audit Committee. Dr. Horovitz served as a director of Diacrin from 1994 to August 2003. Dr. Horovitz was Vice President, Business Development and Planning at Bristol-Myers Squibb Pharmaceutical Group from 1991 until 1994 and was Vice President, Licensing from 1989 to 1991. Prior to 1989, Dr. Horovitz spent 30 years as a member of the Squibb Institute for Medical Research. Dr. Horovitz is also a director of Avigen, Inc., BioCryst Pharmaceuticals, Genaera Pharmaceuticals, Nitromed, DoV Pharmaceuticals, Immunicon and Palatin Technologies. Dr. Horovitz received his Ph.D. from the University of Pittsburgh.

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William N. Kelley, M.D., age 66, has served as a director of GenVec since June 2002. Dr. Kelley is a member of the Audit Committee and is the Chairman of the Nominating and Corporate Governance Committee. Dr. Kelley brings a long history of involvement in experimental models of gene therapy to the Board. Dr. Kelley and his colleagues at the University of Michigan were the first to propose in vivo gene therapy as it is recognized today and the first to directly administer a human gene in vivo and obtain expression in an experimental animal model. In the fall of 1989, Dr. Kelley became Executive Vice President of the University of Pennsylvania with responsibilities as Chief Executive Officer for the Medical Center, Dean of the School of Medicine, and the Robert G. Dunlop Professor of Medicine and Biochemistry and Biophysics. In the national leadership arena, Dr. Kelley has served as President of the American Society for Clinical Investigation, President of the American College of Rheumatology, Chair of the American Board of Internal Medicine and Chair of the Residency Review Committee for Internal Medicine. Dr. Kelley also serves as a director of Merck & Company; Beckman Coulter; Advanced Bio-Surfaces, Inc., and Polymedix, Inc.

Harold R. Werner, age 57, has served as a director of GenVec since January 2002. Mr. Werner is a member of the Compensation Committee. Mr. Werner is a co-founder of HealthCare Ventures, a venture capital fund specializing in health care. Prior to the formation of HealthCare Ventures in 1985, Mr. Werner was Director of New Ventures for Johnson & Johnson Development Corporation. Before joining Johnson & Johnson in 1980, he was Senior Vice President of Robert S. First, Inc. Mr. Werner has served as a director for over thirty public and private companies in the health care field and has specialized in the formation of new high-science companies. Mr. Werner was elected to GenVec’s Board pursuant to the Investor Rights Agreement between GenVec and HealthCare Ventures in connection with HealthCare Ventures’ investment in GenVec in December 2001. In connection with its investment, HealthCare Ventures was granted the right to designate one individual to fill a vacancy created on the Board pursuant to the Investor Rights Agreement. Mr. Werner holds BS and MS degrees in engineering from Princeton University and an MBA from The Harvard Business School.

Directors with Terms Expiring in 2008

Barbara H. Franklin, age 65, has served as a director of GenVec since October 2002. Ms. Franklin is a member of the Audit Committee. Since January 1995, Ms. Franklin has served as the President and Chief Executive Officer of Barbara Franklin Enterprises, a private international consulting and investment firm in Washington D.C. Between January 1993 and January 1995, she was a lecturer and served as a director of various corporations and organizations. Previously, Ms. Franklin served as the 29^th U.S. Secretary of Commerce. Ms. Franklin founded Franklin Associates, an internationally recognized consulting firm, and served as its President from 1984 through 1992. She was Senior Fellow of the Wharton School (1979 — 1988), one of the original Commissioners of the U.S. Consumer Product Safety Commission (1973 — 1979) and a staff assistant to the President, creating the first White House effort to recruit women for high level government jobs (1971 - 1973). Earlier she held executive positions at Citibank and the Singer Company. Ms. Franklin currently is a director of Aetna Inc.; The Dow Chemical Company; MedImmune, Inc.; and the Washington Mutual Investors Fund. She has been a director of the NASDAQ Stock Market, Inc., and the American Institute of CPA’s and has been awarded the John J. McCloy Award for contributions to audit excellence. She currently serves as a director of the National Association of Corporate Directors (NACD), a trustee of the Financial Accounting Foundation, and a member of the Public Company Accounting Oversight Board (PCAOB) Advisory Council. She has been chosen as Director of the Year by the NACD in 2000 and as Outstanding Director by Board Alert in 2003. Ms. Franklin graduated from the Pennsylvania State University and received an MBA from Harvard Business School.

Stelios Papadopoulos, Ph.D., age 57, has served as a director of GenVec since August 2003. Dr. Papadopoulos served as a director of Diacrin from 1991 to August 2003. Dr. Papadopoulos is a Vice Chairman in the investment banking division at Cowen & Co., LLC focusing on the biotechnology and pharmaceutical sectors. Prior to joining Cowen in February 2000, he spent 13 years as an investment banker at PaineWebber, where he was most recently Chairman of PaineWebber Development Corp., a PaineWebber subsidiary. Prior to becoming an investment banker he spent two years as a biotechnology analyst, first at Donaldson, Lufkin & Jenrette and subsequently at Drexel Burnham Lambert. Before coming to Wall Street in 1985, Dr. Papadopoulos was on the faculty of the Department of Cell Biology at New York University Medical Center. He continues his affiliation with NYU Medical Center as an Adjunct Associate Professor of Cell Biology. Dr. Papadopoulos holds a Ph.D. in biophysics and an MBA in finance, both from New York University. He is co-founder and Chairman of the Board of Exelixis, Inc., He is also co-founder and member of the Board of Anadys Pharmaceuticals, Inc., a director of SGX Pharmaceuticals, Inc., and is a director of several private companies in the biotechnology sector.

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Joshua Ruch, age 56, has served as a director of GenVec since August 2003. Mr. Ruch is a member of the Compensation Committee. Mr. Ruch served as a director of Diacrin from March 1998 to August 2003. Mr. Ruch is the Chairman and Chief Executive Officer of Rho Capital Partners, Inc., an investment and venture capital management company, which he co-founded in 1981. Prior to founding Rho, Mr. Ruch was employed in investment banking at Salomon Brothers. Mr. Ruch received a B.S. degree in electrical engineering from the Israel Institute of Technology (Technion) and an MBA from the Harvard Business School. Mr. Ruch is also a director of a number of private companies.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 (the “1934 Act”) requires the Company’s executive officers, directors and persons who beneficially own more than 10% of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Such executive officers, directors and greater than 10% beneficial owners are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports filed by such reporting persons.

Except as set forth below, and based solely on the Company’s review of copies of such reports furnished to the Company and written representations that no other reports were required during fiscal 2005, the Company believes that all Section 16(a) filing requirements applicable to the Company’s executive officers, directors, and greater than 10% beneficial owners were complied with.

Thomas A. Davis, GenVec’s Chief Medical Officer, did not timely report an open market purchase of 5,000 shares of GenVec common stock on November 22, 2005. Dr. Davis subsequently filed the Form 4 with the SEC on January 5, 2006.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth a summary of all compensation paid or accrued by the Company to the Chief Executive Officer and to the next four most highly compensated executive officers whose annual compensation exceeded $100,000 for 2005 for services rendered to the Company during the years ended December 31, 2005, 2004 and 2003.

Summary Compensation Table

							Long-Term
							Compensation
			Annual Compensation				Awards
							Securities
							Underlying		All Other
			Salary		Bonus		Options/SARS		Compensation
Name and Principal Position	Year		($)		($)		(#)		(1)
Paul H. Fischer, Ph.D.		2005	$	331,755	$	25,000		200,000	$	7,000
Chief Executive Officer, President		2004	$	320,072	$	64,014		150,000	$	8,000
and Director		2003	$	320,072	$	128,030		—	$	3,500
Jeffrey W. Church,		2005	$	236,151	$	29,519		75,000	$	5,904
CFO, Treasurer and Corporate		2004	$	229,273	$	28,659		40,000	$	5,732
Secretary		2003	$	221,520	$	55,380		—	$	3,003
Thomas A. Davis, M.D. (2)		2005	$	130,769	$	282,329		300,000		—
Chief Medical Officer		2004		—		—		—		—
		2003		—		—		—		—
C. Richter King, Ph.D.		2005	$	207,987	$	25,998		75,000	$	5,200
Senior Vice President,		2004	$	199,031	$	37,318		35,000	$	4,976
Research		2003	$	192,299	$	48,075		—	$	3,000

(1)	Represents the Company’s contribution to GenVec’s 401-K Defined Contribution Plan.
(2)	Dr. Davis joined the Company on July 26, 2005 with an annual salary of $300,000. Dr. Davis’ bonus represents the amount paid to him upon commencement of employment as well as the amount paid as an annual 2005 bonus of $15,000.

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Option Grants in Last Fiscal Year

The following table sets forth grants of stock options made during the year ended December 31, 2005, to each of the individuals listed in the Summary Compensation Table.

										Potential Realizable
	Number of		% of Total							Value at Assumed
	Securities		Options							Annual Rates of Stock
	Underlying		Granted to			Exercise				Appreciation for the
	Options Granted		Employees			Price per		Expiration		Option Term (2)
Name	(1)		in 2005			Share		Date		5%		10%
Paul H. Fischer, Ph.D.		200,000		12.2	%	$	1.88		1/19/2015	$	236,464	$	599,247
Jeffrey W. Church		75,000		4.6	%	$	1.88		1/19/2015	$	88,674	$	224,718
Thomas A. Davis, M.D.		300,000		18.4	%	$	1.98		7/25/2015	$	373,563	$	946,683
C. Richter King, Ph.D.		75,000		4.6	%	$	1.88		1/19/2015	$	88,674	$	224,718

(1)

One-eighth of each option grant vests six months after the date of grant and the remainder vests monthly on a pro-rata basis over the following 42 months. The options were granted under the GenVec 2002 Stock Incentive Plan.

(2)

In accordance with the rules and regulations of the Securities and Exchange Commission, such gains are based on assumed rates of annual compound stock appreciation of 5% and 10% from the date on which the options were granted over the full term of the options. The rates do not represent GenVec’s estimate or projection of future GenVec common stock prices, and no assurance can be given that these rates of annual compound stock appreciation will occur.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

					Number of Securities
	Shares				Underlying Unexercised				Value of Unexercised
	Acquired				Options at				In-The-Money Options at
	on		Value		December 31, 2005				December 31, 2005
Name	Exercise		Realized		Exercisable		Unexercisable		Exercisable		Unexercisable
Paul H. Fischer, Ph.D.		65,592	$	98,339		532,427		391,044		—		—
Jeffrey W. Church		—		—		174,790		42,710		—		—
Thomas A. Davis, M.D.		—		—		—		300,000		—		—
C. Richter King, Ph.D.		—		—		170,622		36,877		—		—

Compensation of Directors

During 2005, each non-employee director received $2,000 per Board meeting attended, $1,000 per committee meeting attended and $3,000 per quarter as a retainer. The Company’s Chairman of the Board received $4,000 per Board meeting attended, $1,000 per committee meeting attended and $6,000 per quarter as a retainer. Directors were reimbursed for some expenses in connection with attendance at Board and committee meetings.

Under the 2002 Stock Incentive Plan, non-employee directors receive: (i) grants of options to purchase 20,000 shares of Common Stock which are exercisable ratably over a four-year period upon the effective date such non-employee director joins the Board and (ii) annual automatic grants of 15,000 options, 50% of which will be exercisable six months after the date of grant and 50% of which will be exercisable 12 months after the date of grant, except for the Chairman of the Board, who receives an annual automatic grant of 22,500 options instead of 15,000 options. The options granted to the Chairman become exercisable in the same proportion as the options granted to the other non-employee directors. Director options have an exercise price equal to the fair market value of GenVec common stock on the date of the grant and a ten-year term.

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Upon completion of the Diacrin merger in August 2003, GenVec entered into a consulting agreement with Dr. Thomas Fraser, Chairman of the Board of Directors. Under the terms of the consulting agreement, Dr. Fraser will devote approximately 20% of his working time to the business and affairs of GenVec (including time spent in his capacity as a Director of GenVec). Dr. Fraser received $32,500 under the terms of the consulting agreement in 2005.

Mr. Werner has declined to accept options for service on the Board.

Employment Contracts and Termination of Employment and Change-in-Control Arrangements

The Company does not currently have employment agreements with its executive officers. Certain executive officers are party to a Salary Continuation Agreement and/or Change in Control Agreement. The material terms of these agreements are described below.

The terms of Dr. Fischer’s Salary Continuation Agreement provide that if Dr. Fischer’s employment is terminated without cause and other than by reason of death or disability, the Company will continue to pay Dr. Fischer’s salary and provide him with life insurance and health insurance for a period of 24 months from the date of his termination. In addition, the Company is required to pay Dr. Fischer an additional payment equal to the pro rata amount of his bonus for the last completed year of employment based on the number of months worked in the year of termination. Dr. Fischer’s Change in Control Agreement provides that if he is terminated or resigns for good cause in connection with a change in control of the Company, he is entitled to (i) a severance payment based on 24 months salary and bonus, (ii) an additional pro rata payment based on his highest annual salary in the past year and his highest bonus amount in the past three years, (iii) any bonus applicable to the preceding fiscal year, if not yet paid, and (iv) continuation of life and health insurance benefits for a period of 24 months. The Company is also obligated to provide a one-time payment to cover certain FICA and Medicare withholding taxes and excise taxes imposed under Section 4999 of the Internal Revenue Code of 1986, as amended due on such benefits. The Salary Continuation Agreement contains obligations on Dr. Fischer’s part regarding non-disparagement and non-competition, and both agreements provide for his nondisclosure of proprietary information. If Dr. Fischer should die while entitled to any payments or benefits under either agreement, such payments and benefits are payable to Dr. Fischer’s heirs or estate. To the extent Dr. Fischer becomes entitled to benefits under the Change of Control Agreement, the salary continuation agreement is superseded and he will not receive any benefit under such agreement.

The terms of the Company’s Salary Continuation Agreements with Mr. Church, Dr. Davis and Dr. King are identical to the terms of the Salary Continuation Agreement the Company entered into with Dr. Fischer, as described above, except that under their agreements Mr. Church, Dr. Davis and Dr. King are entitled to salary and insurance benefits for 12 months instead of 24 months.

The Company has also entered into a Change in Control Agreement with Mr. Church. The terms of this agreement are identical to the terms of the Change in Control Agreement that the Company entered into with Dr. Fischer, as described above, except that under his agreement Mr. Church’s severance payment is based on, and he is entitled to continuation of health and life insurance benefits for, 18 months instead of 24 months.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information as of February 28, 2006, regarding the beneficial ownership of the Company’s Common Stock by (i) those persons known to the Company to be the beneficial owners of more than 5% of the outstanding shares of Common Stock, (ii) each of the individuals listed in the “Summary Compensation Table” below, (iii) each director of the Company, and (iv) all current directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC for computing the number of shares of Common Stock beneficially owned by a person and the percentage ownership of that person. Shares of Common Stock subject to options currently exercisable or exercisable within 60 days after February 28, 2006 are considered outstanding for the purpose of computing the percentage ownership of the person holding such options, but are not considered outstanding when computing the percentage ownership of each other person. Except as indicated in the footnotes to this table, each stockholder named in the table below has sole voting and investment power for the shares shown as beneficially owned by them. Percentage of ownership is based on 63,675,282 shares of Common Stock outstanding on February 28, 2006.

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	Number of		Percentage of
Name of Beneficial Owner	Shares Owned		Class Owned
HealthCare Ventures LLC (1)		10,436,462		16.4	%
Wellington Management Company, LLP		3,357,800		5.3	%
Thomas H. Fraser, Ph.D. (3)		1,193,456		1.9	%
Barbara Hackman Franklin (3)		62,500		*
Wayne T. Hockmeyer, Ph.D. (3)		105,000		*
William N. Kelley, M.D. (3)		77,500		*
Zola P. Horovitz, Ph.D. (3)		114,723		*
Stelios Papadopoulos, Ph.D. (3)		412,918		*
Joshua Ruch (2) (3)		2,797,837		4.4	%
Harold R. Werner (1) (3)		10,436,462		16.4	%
Paul H. Fischer, Ph.D. (3)		824,479		1.3	%
Jeffrey W. Church (3)		221,935		*
Thomas A. Davis, M.D. (3)		61,249		*
C. Richter King, Ph.D. (3)		213,539		*
All directors and executive officers as a group (12 persons)		16,522,099		25.9	%

*	Represents ownership that does not exceed 1% of the outstanding shares of the Company’s Common Stock.
(1)	Healthcare Ventures LLC is an affiliate of and Harold R. Werner is a general partner of Healthcare Partners II, L.P. (“HCP II”), Healthcare Partners III, L.P. (“HCP III”), Healthcare Partners IV, L.P. (“HCP IV”), Healthcare Partners V, L.P. (“HCP V”), and Healthcare Partners VI, L.P. (“HCP VI”), the general partner of Healthcare Ventures II, L.P. (“HCV II”), Healthcare Ventures III, L.P. (“HCV III”), Healthcare Ventures IV, L.P. (“HCV IV”), Healthcare Ventures V, L.P. (“HCV V”) and Healthcare Ventures VI, L.P. (“HCV VI”), respectively. Mr. Werner, together with James H. Cavanaugh, John W. Littlechild, Christopher K Mirabelli, Gus Lawlor, Eric Aguiar, and William W. Crouse, the other general partners of HCP II, HCP III, HCP IV, HCP V and HCP VI (collectively, the “HC Entities”) share voting and investment control with respect to shares owned by HCV II, HCV III, HCV IV, HCV V and HCV VI, respectively. Mr. Werner does not own any shares of GenVec’s capital stock in his individual capacity. The address of Healthcare Ventures II, III, IV, V and VI, L.P. is 44 Nassau Street, Princeton, New Jersey 08542. This information is based on a Schedule 13D filed with the SEC on August 23, 2003.
(2)	Rho Capital Partners, Inc. (“Rho”), of which Joshua Ruch is Chairman and Chief Executive Officer, may be deemed the beneficial owner of the shares owned by Rho Management Trust II pursuant to an investment advisory agreement that confers voting and investment control over such shares on Rho.
	Pursuant to a Loan Modification Agreement, dated November 28, 2003 with Nautilis Trust, an affiliate of Rho, Rho Investment Partners “H”, L.P., became eligible to purchase an additional 1,639,929 shares of GenVec’s common stock, in consideration for the cancellation of a previously contracted debt. Rho and its affiliate do not have investment control and do not have voting control over any of such 1,639,929 shares until the satisfaction of the conditions specified in the Loan Modification Agreement. Neither Rho nor its affiliate has the right to acquire investment or voting control over any such shares within the next 60 days.
	The address for Rho Management Trust II is c/o Rho Capital Partners, 152 West 57th Street, 23rd Floor, New York, NY 10019. This information is based on a Schedule 13D filed with the SEC on September 2, 2003 and Amendment No. 1 thereto filed with the SEC on December 5, 2003.
(3)	Includes shares of Common Stock issuable upon exercise of options that are exercisable within 60 days of February 28, 2006 in the following amounts: Thomas H. Fraser, 381,200 shares; Barbara Hackman Franklin, 57,500 shares; Wayne T. Hockmeyer, 75,500 shares; William N. Kelley, 72,500 shares; Zola P. Horovitz, 97,138 shares; Stelios Papadopoulos, 107,078 shares; Joshua Ruch, 107,078 shares; Paul H. Fischer, 565,342 shares; Jeffrey W. Church, 220,935 shares; Thomas A. Davis, 56,249 shares; C. Richter King, 213,539 shares; and directors and officers as a group (12 people) 1,954,059 shares.

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Equity Compensation Plan Information

The following table discloses certain information about the options issued and available for issuance under all outstanding Company option plans as of December 31, 2005:

	(a)		(b)		(c)
					Number of
					securities
					remaining
					available for
	Number of				future issuance
	securities to be		Weighted-		under equity
	issued upon		average exercise		compensation
	exercise of		price of		plans (excluding
	outstanding		outstanding		securities
	options, warrants		options, warrants		reflected in
Plan category	and rights		and rights		column (a)
Equity compensation plans approved by security holders		5,132,051	$	2.99		2,563,920
Equity compensation plans not approved by security holders		—		—		—
Total		5,132,051	$	2.99		2,563,920

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On September 26, 2005, the Company sold 7,600,000 shares of common stock to various investors at $2.00 per share under the shelf registration. Proceeds, net of offering costs, from this sale totaled $13,990,000. SG Cowen & Co., LLC (“SG Cowen”) was engaged as the placement agent for this transaction. Stelios Papadopoulos, Ph.D., is a Vice Chairman in the investment banking division of SG Cowen and is a member of GenVec’s board of directors.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Principal Accountant Fees and Services

     The following is a summary of the fees billed to GenVec by KPMG LLP for professional services rendered for the years ended December 31, 2005 and 2004:

Fee Category	2005		2004
Audit Fees	$	374,000	$	380,600
Audit-Related Fees		—		—
Tax Fees		12,100		13,750
All Other Fees		—		—
Total	$	386,100	$	394,350

Audit Fees

     These fees consist of fees for professional services rendered for the audit of GenVec’s financial statements, review of the interim financial statements included in quarterly reports, and services in connection with statutory and regulatory filings.

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Audit-Related Fees

     These fees comprise assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “Audit Fees” above. GenVec did not incur such fees during 2005 and 2004.

Tax Fees

     These fees comprise tax compliance and tax preparation assistance for state and federal filings, consultations concerning tax related matters and other tax compliance projects. Less than 5% of these fees comprise consulting fees, as it is GenVec’s intent to minimize consulting services in this category.

All Other Fees

All other fees consist of fees not included in any other category. GenVec did not incur such fees during 2004 and 2005.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	(1	)	Financial Statements — See index to Financial Statements on page F below for a list of the financial statements being filed herein.
	(2	)	Financial Statement Schedules — All financial statement schedules are omitted because they are not applicable, not required under the instructions or all the information required is set forth in the financial statements or notes thereto.
	(3	)	Exhibits – The Exhibits listed in the accompanying Index to Exhibits are filed or incorporated by reference as part of this report.

EXHIBIT
NUMBER	DESCRIPTION
3.1	Amended & Restated Certificate of Incorporation of GenVec, Inc. (8)
3.1(a)	Certificate of Designation of the Series A Junior Participating Preferred Stock. (8)
3.2	Amended & Restated Bylaws of GenVec, Inc. (13)
4.1	Rights Agreement dated as of September 7, 2001 between the Registrant and American Stock Transfer & Trust Company, the form of Certificate of Designation of Series A Junior Participating Preferred Stock attached as Exhibit A thereto, the form of Rights Certificate attached as Exhibit B thereto, and the form of Summary of Rights attached as Exhibit C thereto. (4)
4.2	Stock Purchase Agreement dated as of December 21, 2001, by and among HealthCare Ventures V. L.P., HealthCare Ventures VI, L.P., and the Registrant. (5)
4.3	Investor Rights Agreement, dated as of December 21, 2001, by and among HealthCare Ventures V. L.P., HealthCare Ventures VI, L.P., and the Registrant. (5)
4.4	Registration Rights Agreement, dated as of March 15, 2006 by and between Kingsbridge Capital Limited and the Registrant (filed herewith).
4.5	Form of Warrant, dated as of March 15, 2006 by and between Kingsbridge Capital Limited and the Registrant (filed herewith).
10.1	Form of Indemnification Agreement for Directors and Officers. (1)
10.2	2002 Stock Incentive Plan.* (14)
10.3	Amended and Restated 1993 Stock Incentive Plan and forms of agreements thereunder.* (2)
10.4	2000 Employee Stock Purchase Plan, and form of agreement thereunder.* (1)
10.5	Amended and Restated 2000 Director Option Plan.* (7)
10.6	License Agreement dated May 31, 1996 between Scios, Inc. and the Registrant. (1)
10.7	New Collaboration Agreement dated January 1, 2003 between Fuso Pharmaceutical Industries, Ltd. and the Registrant. + (8)
10.8	New Commercialization Agreement dated January 1, 2003 between Fuso Pharmaceutical Industries Ltd. and the Registrant.+ (8)
10.9	License Agreement dated February 1, 1998 between Asahi Chemical Industry Co., Ltd. and the Registrant (12)
10.10	Terms of Employment Arrangement between the Registrant and Thomas A. Davis (15)
10.12	Amendment to Common Stock Warrant Agreement dated March 18, 2002 between the Registrant and Cornell Research Foundation, Inc. (8)
10.13	Lease Agreement dated May 4, 1999 between MOR BENNINGTON LLP and the Registrant. (1)
10.14	Amended and Restated Registration Rights Agreement dated December 2, 1998 between the Registrant and certain stockholders. (1)
10.15	Patent License Agreement dated January 8, 2000 between the Registrant and the Public Health Service, as amended, and amendment number 1 hereto dated March 9, 2000. (12)
10.16	Patent License Agreement dated December 20, 2000 between the Registrant and Northwestern University. (3)
10.17	Salary Continuation Agreement between the Registrant and Paul H. Fischer dated October 15, 2002. *(8)
10.18	Change in Control Agreement between the Registrant and Paul H. Fischer dated October 15, 2002. *(8)
10.19	Salary Continuation Agreement between the Registrant and Jeffrey W. Church dated October 15, 2002. *(8)
10.20	Change in Control Agreement between the Registrant and Jeffrey W. Church dated October 15, 2002. *(8)

44

EXHIBIT
NUMBER	DESCRIPTION
10.21	Form of Salary Continuation Agreement between the Registrant and other executive officers and senior staff dated October 15, 2002. *(8)
10.22	Form of Indemnification and Advancement of Expenses Agreement dated December 10, 2003. (12)
10.23	Agreement with the Vaccine Research Center at the National Institute of Allergy and Infectious Diseases of the National Institutes of Health for the production of adenoviral vector-based HIV vaccine candidates dated December 31, 2001, and amendment 1 thereto dated January 25, 2002.+ (7)
10.24	Sublease dated January 24, 1991 by and among Diacrin and Building 79 Associated Limited Partnership and Building 96 Associates Limited Partnership. (10)
10.25	Amendment to Sublease dated April 30, 2002. (11)
10.26	Research Collaboration Agreement between Cordis Corporation and the Company dated as of December 22, 2003.+ (12)
10.27	Summary of GenVec, Inc. 2006 Annual Bonus Plan * (filed herewith).
10.28	Common Stock Purchase Agreement, dated as of March 15, 2006 by and between Kingsbridge Capital Limited and the Registrant (filed herewith)
23.1	Consent of Independent Registered Public Accounting Firm (filed herewith).
24.1	Power of Attorney (filed herewith).
31.1	Rule 13a-14(a) Certification by Chief Executive Officer (filed herewith).
31.2	Rule 13a-14(a) Certification by Chief Financial Officer (filed herewith).
32.1	Rule 13a-14(b) Certification by Chief Executive Officer pursuant to 18 United States Code Section 1350 (filed herewith).
32.2	Rule 13a-14(b) Certification by Chief Financial Officer pursuant to 18 United States Code Section 1350 (filed herewith).

*	Compensatory plan, contract or arrangement.
+	Certain portions of this exhibit have been omitted based upon a request for confidential treatment. The omitted portions have been filed with the Commission pursuant to our application for confidential treatment.
(1)	Incorporated by reference to our Registration Statement on Form S-1 (File No. 333-47408) declared effective by the Securities and Exchange Commission on December 12, 2000.
(2)	Incorporated by reference from our Registration Statement on Form S-8 (File No. 333-55590) filed with the Securities and Exchange Commission on February 14, 2001.
(3)	Incorporated by reference from our Annual Report on Form 10-K (File No: 0-24469) filed with the Securities and Exchange Commission on March 30, 2001.
(4)	Incorporated by reference from our Registration Statement on Form 8-A (File No: 0-24469) filed with the Securities and Exchange Commission on September 26, 2001.
(5)	Incorporated by reference from our Form 8-K (File No: 0-24469) filed with the Securities and Exchange Commission on January 3, 2002.
(6)	Incorporated by reference from our Quarterly Report on Form 10-Q (File No: 0-24469) filed with the Securities and Exchange Commission on August 14, 2002.
(7)	Incorporated by reference from our Annual Report on Form 10-K (File No. 0-24469) filed with the Securities and Exchange Commission on March 28, 2002.
(8)	Incorporated by reference from our Annual Report on Form 10-K (File No. 0-24469) filed with the Securities and Exchange Commission on March 31, 2003.
(9)	Incorporated by reference from our Registration Statement on form S-4 (File No. 333-105320) filed with the Securities and Exchange Commission on May 16, 2003.
(10)	Incorporated by reference from Diacrin, Inc. Form 10-K, as amended. (File No. 0-20139) filed on April 29, 1992.
(11)	Incorporated by reference from Diacrin, Inc. Form 10-K (File No. 0-20139) filed on March 26, 2003.
(12)	Incorporated by reference from our Annual Report on Form 10-K (File No. 0-24469) filed with the Securities and Exchange Commission on March 15, 2004.
(13)	Incorporated by reference from our Quarterly Report on Form 10-Q (File No. 0-24469) filed with the Securities and Exchange Commission on November 10, 2003.
(14)	Incorporated by reference from our Quarterly Report on Form 10-Q (File No. 0-24469) filed with the Securities and Exchange Commission on August 8, 2005.
(15)	Incorporated by reference from our Form 8-K (File No. 0-24469) filed with the Securities and Exchange Commission on July 27, 2005.

45

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	GENVEC, INC.
By:	/s/ PAUL H. FISCHER Paul H. Fischer, Ph.D
	President, Chief Executive Officer and Director
Date:	March 15, 2006

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.

	TITLE	DATE
/s/ PAUL H. FISCHER, PH.D.	President, Chief Executive Officer	March 15, 2006
Paul H. Fischer, Ph.D.	and Director
	(Principal Executive Officer)
/s/ JEFFREY W. CHURCH	Chief Financial Officer,	March 15, 2006
Jeffrey W. Church	Treasurer & Secretary
	(Principal Financial and
	Accounting Officer)
*	Director	March 15, 2006
Barbara Hackman Franklin
*	Director	March 15, 2006
Thomas Fraser, Ph.D.
*	Director	March 15, 2006
Wayne T. Hockmeyer, Ph.D.
*	Director	March 15, 2006
Zola Horovitz, Ph.D.
*	Director	March 15, 2006
William N. Kelley, M.D.
*	Director	March 15, 2006
Stelios Papadopoulos, Ph.D.
*	Director	March 15, 2006
Joshua Ruch
*	Director	March 15, 2006
Harold R. Werner

By:	* /s/ PAUL H. FISCHER, PH.D. Paul H. Fischer, Ph.D.
	Attorney-in-Fact

46

GENVEC, INC.
INDEX TO FINANCIAL STATEMENTS

	PAGE NO.
Reports of Independent Registered Public Accounting Firm	F-1 to F-2
Statements of Operations—Years Ended December 31, 2005, 2004 and 2003	F-3
Balance Sheets as of December 31, 2005 and 2004	F-4
Statements of Cash Flows—Years Ended December 31, 2005, 2004 and 2003	F-5
Statements of Stockholders’ Equity and Comprehensive Loss —Years
Ended December 31, 2005, 2004 and 2003	F-6
Notes to Financial Statements	F-7 to F-23

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
GenVec, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A of this Form 10-K, that GenVec, Inc. (the Company) maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). GenVec’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that GenVec, Inc. maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, GenVec, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheets of GenVec, Inc. as of December 31, 2005 and 2004, and the related statements of operations, stockholders’ equity and comprehensive loss, and cash flows for each of the years in the three-year period ended December 31, 2005, and our report dated March 15, 2006 expressed an unqualified opinion on those financial statements.

/s/ KPMG LLP

McLean, Virginia
March 15, 2006

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
GenVec, Inc.:

We have audited the accompanying balance sheets of GenVec, Inc. (the Company) as of December 31, 2005 and 2004, and the related statements of operations, stockholders’ equity and comprehensive loss, and cash flows for each of the years in the three-year period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of GenVec, Inc. as of December 31, 2005 and 2004, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of GenVec, Inc.’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 15, 2006 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

/s/ KPMG LLP

McLean, Virginia
March 15, 2006

F-2

GENVEC, INC.
STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)
Years ended December 31,	2005			2004			2003
Revenue from strategic alliances and research contracts (Note 8)	$	26,554		$	11,853		$	10,520
Operating expenses:
Research and development		30,802			23,087			23,457
General and administrative		8,333			7,884			8,405
Loss on disposal of assets (Note 3 and 6)		1,895			2			—
Total operating expenses		41,030			30,973			31,862
Operating loss		(14,476	)		(19,120	)		(21,342	)
Other income (loss):
Interest income		908			612			389
Interest expense		(426	)		(386	)		(486	)
Investment gain		2			—			178
Total other income, net		484			226			81
Net loss	$	(13,992	)	$	(18,894	)	$	(21,261	)
Basic and diluted net loss per share	$	(0.24	)	$	(0.35	)	$	(0.65	)
Shares used in computation of basic and diluted net loss per share		57,823			54,331			32,963

The accompanying Notes to Financial Statements are an integral part of these statements.

F-3

GENVEC, INC.
BALANCE SHEETS

(in thousands)
As of December 31,	2005			2004
ASSETS
Current assets:
Cash and cash equivalents	$	6,830		$	5,366
Short-term investments (Note 4)		25,169			25,397
Accounts receivable		4,049			1,544
Prepaid expenses and other		1,409			1,821
Bond sinking fund (Note 7)		296			276
Total current assets		37,753			34,404
Property and equipment, net (Notes 5 and 7)		4,147			5,418
Long-term investments (Note 4)		—			2,302
Other assets		1			65
Intangible assets (Note 3 and 6)		—			1,882
Total assets	$	41,901		$	44,071
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt (Note 7)	$	913		$	1,227
Accounts payable		1,180			1,622
Accrued clinical trial expenses		457			1,364
Accrued other expenses		3,544			2,128
Unearned revenue		1,182			2,042
Total current liabilities		7,276			8,383
Long-term debt, less current portion (Note 7)		2,351			3,264
Other liabilities		852			1,943
Total liabilities		10,479			13,590
Commitments (Notes 7 and 9)
Stockholders’ equity (Notes 8 and 10):
Preferred stock, $0.001 par value, 5,000,000 shares authorized in 2005 and 2004; none are issued and outstanding in 2005 and 2004		—			—
Common stock, $0.001 par value, 100,000 shares authorized in 2005 and 2004; 63,675 and 55,588 shares issued and outstanding in 2005 and 2004		64			56
Additional paid-in capital		181,110			166,656
Deferred compensation (Note 10)		(121	)		(382	)
Accumulated other comprehensive loss (Notes 4 and 12)		(45	)		(255	)
Accumulated deficit		(149,586	)		(135,594	)
Total stockholders’ equity		31,422			30,481
Total liabilities and stockholders’ equity	$	41,901		$	44,071

The accompanying Notes to Financial Statements are an integral part of these statements.

F-4

GENVEC, INC.
STATEMENTS OF CASH FLOWS

(in thousands)
Years ended December 31,	2005			2004			2003
Cash flows from operating activities:
Net loss	$	(13,992	)	$	(18,894	)	$	(21,261	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,060			1,813			2,608
Stock option and warrant compensation (Note 10)		261			229			1,176
Loss on disposal of assets (Note 3 and 6)		1,895			2			—
(Gain) on investments		(2	)		—			(178	)
Loss on interest rate swap		240			—			—
Change in accounts receivable		(2,505	)		278			(898	)
Change in accounts payable and accrued expenses		67			(193	)		(1,696	)
Change in unearned revenue		(1,634	)		25			746
Change in other assets and liabilities, net		102			676			(125	)
Net cash used in operating activities		(13,508	)		(16,064	)		(19,628	)
Cash flows from investing activities:
Purchases of equipment		(398	)		(242	)		(568	)
Cash acquired in acquisition, net of transaction costs of $2,445 (Note 3)		—			—			4,828
Purchases of investment securities		(31,570	)		(27,573	)		(19,174	)
Proceeds from sale and maturity of investment securities		33,725			33,394			33,181
Net cash provided by investing activities		1,757			5,579			18,267
Cash flows from financing activities:
Proceeds from issuance of common stock, net (Note 10)		14,462			12,099			3,450
Proceeds from debt borrowings		—			29			—
Payments of long-term debt obligations (Note 7)		(1,247	)		(1,494	)		(1,469	)
Net cash provided by financing activities		13,215			10,634			1,981
Net change in cash and cash equivalents		1,464			149			620
Beginning balance of cash and cash equivalents		5,366			5,217			4,597
Ending balance of cash and cash equivalents	$	6,830		$	5,366		$	5,217
Supplemental disclosure of cash flow information:
Cash paid for interest	$	265		$	335		$	388
Supplemental disclosure of non-cash investing activities:
Property and equipment financed by capital leases		—		$	29		$	50

The accompanying Notes to Financial Statements are an integral part of these statements.

F-5

GENVEC, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE LOSS

(in thousands)
												Accumulated
						Additional						Other Comp-
Years ended December 31,	Common Stock					Paid-in			Deferred			rehensive			Accumulated
2005, 2004 and 2003	Shares Amount					Capital			Compensation			Income (Loss)			Deficit			Total
Balance, December 31, 2002		21,979		$	22	$	112,975		$	(1,590	)	$	(339	)	$	(95,439	)	$	15,629
Comprehensive loss:
Net loss		—			—		—			—			—			(21,261	)		(21,261	)
Unrealized change in investments, net		—			—		—			—			(105	)		—			(105	)
Unrealized change in cash flow derivative, net		—			—		—			—			169			—			169
Total comprehensive loss																		$	(21,197	)
Common stock issued under Shelf registration, net		757			1		1,848			—			—			—			1,849
Common stock issued in connection with acquisition		27,665			27		38,504			(563	)		—			—			37,968
Common stock issued under stock incentive plans		949			1		1,600			—			—			—			1,601
Deferred compensation charge resulting from stock options		—			—		(366	)		1,542			—			—			1,176
Balance, December 31, 2003		51,350		$	51	$	154,561		$	(611	)	$	(275	)	$	(116,700	)	$	37,026
Comprehensive loss:
Net loss		—			—		—			—			—			(18,894	)		(18,894	)
Unrealized change in investments, net		—			—		—			—			(137	)		—			(137	)
Unrealized change in cash flow derivative, net		—			—		—			—			157			—			157
Total comprehensive loss																		$	(18,874	)
Common stock issued under Shelf registration, net		4,000			4		11,693			—			—			—			11,697
Common stock held in treasury cancelled		(70	)		—		—			—			—			—			—
Common stock issued under stock incentive plans		308			1		402			—			—			—			403
Deferred compensation charge resulting from stock options		—			—		—			229			—			—			229
Balance, December 31, 2004		55,588		$	56	$	166,656		$	(382	)	$	(255	)	$	(135,594	)	$	30,481
Comprehensive loss:
Net loss		—			—		—			—			—			(13,992	)		(13,992	)
Unrealized change in investments, net		—			—		—			—			(30	)		—			(30	)
Adjustment for change in non-qualifying hedge, net		—			—		—			—			240			—			240
Total comprehensive loss																			(13,782	)
Common stock issued under Shelf registration, net		7,600			8		13,990			—			—			—			13,998
Common stock issued under Stock incentive plans		487			—		464			—			—			—			464
Deferred compensation charge resulting from stock options		—			—		—			261			—			—			261
Balance, December 31, 2005		63,675		$	64	$	181,110		$	(121	)	$	(45	)	$	(149,586	)	$	31,422

The accompanying Notes to Financial Statements are an integral part of these statements.

F-6

NOTES TO FINANCIAL STATEMENTS

(1) ORGANIZATION AND BUSINESS DESCRIPTION

GenVec is an emerging late stage biopharmaceutical company developing innovative gene-based therapeutics to treat cancer, heart disease and vision loss and vaccines to prevent infectious disease. The Company is focused on the development and commercialization of our lead product candidate, TNFerade, for the treatment of cancer. The Company’s advanced product candidates are:

• TNFeradeÔ, which is currently in a Phase II/III trial for the treatment of locally advanced pancreatic cancer and Phase II trials for the treatment of rectal and melanoma cancer;

• BIOBYPASS^Ò, which is currently in a randomized, placebo-controlled Phase II trial for the treatment of severe coronary artery disease. The Company previously completed a randomized, controlled Phase II study of 67 patients with severe coronary artery disease using a cardiac surgical procedure; and

• PEDF, which has completed enrollment in a Phase Ib trial for the treatment of wet age-related macular degeneration, a leading cause of blindness in individuals over the age of 50.

The medical use of many proteins has historically been limited by the inability to maintain sufficient concentrations of the protein at the site of the disease for a period of time long enough to provide a benefit, while minimizing side effects caused by the protein’s presence in other, non-target tissues. GenVec’s gene-based therapeutic product candidates are based on proprietary technology that uses an adenovector to deliver genes that produce proteins at the site of disease.

The Company’s gene-based product candidates have been generally well tolerated in multiple clinical trials. The Company believe results to date support the broad applicability and commercial potential of our product development programs and is working with our collaborators and customers to develop second generation vectors and new applications for our technology, such as preventative vaccines to treat HIV, malaria and other infectious diseases.

The Company is subject to various risks common to companies within the biotechnology industry. These include, but are not limited to, development by competitors of new technological innovations; dependence on key personnel; dependence on a limited number of products; risks inherent in the research and development of biotechnology products; protection of proprietary technology; acceptance of the Company’s products by the country’s regulatory agencies in which the Company may choose to sell its products, as well as the end customer; health care cost containment initiatives; and product liability and compliance with government regulations, including the U.S. Food and Drug Administration.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) CASH AND CASH EQUIVALENTS

Cash equivalents consist of highly liquid investments with original maturities of three months or less.

(b) INVESTMENTS

The Company’s investments consist primarily of bonds, government agency notes and commercial paper. These investments are classified as available-for-sale securities, which are carried at fair value, with the unrealized holding gains and losses reported as a separate component of other comprehensive income until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific identification basis.

A decline in the market value of any available-for-sale security below cost that is deemed to be other than temporary results in a reduction in carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the effective interest method. Dividend and interest income are recognized when earned.

F-7

(c) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the Company’s financial instruments, as reflected in the accompanying balance sheets, approximate fair value. Financial instruments consist of cash and cash equivalents, short-term investments, long-term investments, bond sinking fund, accounts receivable, accounts payable, and long-term debt. The Company has an interest rate swap agreement to manage interest rate exposure. The swap agreement has been deemed to be ineffective due to the different pricing frequencies of the swap agreement and related debt instrument; as such, changes in fair value of the swap agreement are included in interest expense.

(d) PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Property and equipment is depreciated using the straight-line method over the estimated useful lives of assets, generally three to five years for equipment and seven years for furniture and fixtures. Leased property meeting certain criteria is capitalized at the lower of the present value of the future minimum lease payments or fair value at the inception of the lease. Amortization of capitalized leased assets is computed on the straight-line method over the term of the lease. Repair and maintenance costs are expensed as incurred.

(e) REVENUE RECOGNITION

The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”). Under SAB 104, we recognize revenues when a contract is executed, the contract price is fixed and determinable, delivery of the service or products has occurred, and collectibility of the contract price is considered probable. Upfront non-refundable fees are deferred and subsequently recognized over the period in which we complete performance obligations when such fees are received in conjunction with an agreement that includes such performance obligations. Revenue associated with performance milestones is recognized based on achievement of the milestones as defined in the respective agreements. Non-refundable research and development fees for which no future performance obligations exist are recognized when collection is assured. Research and development revenue from cost-reimbursement and cost-plus fixed fee agreements is recognized as earned based on the performance requirements of the contract. Revisions in revenues, costs and billing factors (e.g. indirect rate estimates) are accounted for in the period of change. Reimbursable costs under such contracts are subject to audit and retroactive adjustment. Contract revenues and accounts receivable reported in the financial statements are recorded at the amount expected to be received. Contract revenues are adjusted to actual upon final audit and retroactive adjustment.

(f) RESEARCH AND DEVELOPMENT

Research and development costs are charged to operations as incurred. Such costs include internal research and development expenditures (such as salaries and benefits, raw materials and supplies) and contracted services (such as sponsored research, consulting and testing services) of proprietary research and development activities and similar expenses associated with collaborative research agreements.

(g) CLINICAL TRIAL EXPENSES

The Company accrues estimated costs for clinical and pre-clinical studies based on estimates of work performed and completion of certain milestones. The Company believes that this method best aligns the expenses it records with the efforts it expends. The Company monitors the progress of the trials and their related activities to the extent possible, and adjusts, the accruals accordingly. Adjustments to accruals are charged to expense in the period in which the facts that give rise to the adjustment become known.

(h) INCOME TAXES

Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

F-8

(i) NET LOSS PER SHARE

Basic and diluted net loss per share has been computed using the weighted average number of shares of common stock outstanding during the period.

If the Company had net income, diluted earnings per share would be presented based on the shares used in the computation of basic net loss per share as well as potential common shares related to outstanding options and warrants. Total outstanding options in the amount of 57,000 were excluded from the computation of diluted earnings per shares as of December 31, 2005.

(j) COMPREHENSIVE LOSS

Comprehensive loss consists of net loss and unrealized holding gains and losses from available-for-sale securities.

(k) INTEREST RATE SWAP

The Company has an interest rate swap agreement to manage interest rate exposure. Amounts to be paid or received under this agreement are included in interest expense. The swap agreement has been deemed to be ineffective, as such, changes in the fair value of the swap agreement are included in interest expense.

(l) TECHNOLOGICAL LICENSE AND INTELLECTUAL PROPERTY

Technological license and intellectual property costs consist of payments associated with license agreements and legal costs associated with the acquisition and development of intellectual property. Costs associated with the acquisition, development and/or maintenance of intellectual property are expensed when incurred.

(m) STOCK OPTION PLANS AND EMPLOYEE STOCK PURCHASE PLAN

The Company accounts for stock-based compensation awards to employees in accordance with the provisions of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and related interpretations, and complies with the disclosure provisions of SFAS Nos. 123 and 148, Accounting for Stock-Based Compensation. Under APB 25, compensation expense is based on the difference, if any, on the date of grant, between the quoted market price of the Company’s stock and the exercise price. All stock-based awards to non-employees are accounted for at their fair value in accordance with the provisions of SFAS No. 123.

Option grants to employees have been issued only at fair market value prices as of the date of grant during the periods presented herein, and the Company’s policy does not recognize compensation costs for options of this type. The pro forma costs of these options granted have been calculated using the Black-Scholes option pricing model and assuming the following for each of the three years ended December 31, 2005, 2004 and 2003: expected volatility of 75 percent, 75 percent and 102.81 percent; risk free interest rate of 3.70 percent, 2.51 percent and 2.54 percent; expected lives of four years and no dividend yield. The pro forma amounts may not be representative of the effects on pro forma net earnings for future years. The weighted-average grant date fair market value of options issued was $1.10 per share in 2005, $1.64 per share in 2004 and $1.24 per share in 2003. The following table illustrates the effect on net loss and net loss per share if the fair value based method had been applied to all outstanding and unvested awards in each year (in thousands, except per share data):

	2005			2004			2003
Net loss – as reported	$	(13,992	)	$	(18,894	)	$	(21,261	)
Deduct: Incremental stock-based employee compensation expense determined under fair value method for all awards		(757	)		(713	)		(484	)
Net loss – pro forma	$	(14,749	)	$	(19,607	)	$	(21,745	)
Basic and diluted loss per share – as reported	$	(0.24	)	$	(0.35	)	$	(0.65	)
Basic and diluted loss per share – pro forma	$	(0.26	)	$	(0.36	)	$	(0.66	)

F-9

The Company has a stock purchase plan that is considered to be non-compensatory under Financial Interpretation Number 44, Accounting for Certain Transaction Involving Stock Compensation; however, for disclosure purposes this plan is considered to be compensatory.

(n) USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America may require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The Company’s significant accounting estimates involve recognition of revenue from research and development agreements, accrual of clinical trial costs and valuation of intangible assets.

(o) RECENT ACCOUNTING PRONOUNCEMENTS

In May 2005, the FASB issued FASB Statement No. 154, Accounting Changes and Error Corrections. Statement 154 establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to a newly adopted accounting principle. This statement will be effective for the Company for all accounting changes and any error corrections occurring after January 1, 2006.

In March 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, which requires conditional asset retirement obligations to be recognized if a legal obligation exists to perform asset retirement activities and a reasonable estimate of the fair value of the obligation can be made. FIN 47 also provides guidance as to when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. The Company does not have any asset retirement obligations within the scope of this Statement.

In December 2004, the FASB issued a revision of Statement of Financial Accounting Standards (or “FAS”) No. 123, “Accounting for Stock-Based Compensation.” The revision is referred to as “FAS 123R — Share-Based Payment” (or “FAS 123R”), which supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” (or “APB 25”) and will require companies to recognize compensation expense, using a fair-value based method, for costs related to share-based payments including stock options and stock issued under our employee stock purchase plans. We intend to adopt FAS 123R using the modified prospective basis on January 1, 2006. Our adoption of FAS 123R is expected to result in compensation expense that will increase diluted net loss per share by an estimated $0.02 per share for 2006 with respect to unvested options outstanding as of December 31, 2005. However, our actual stock-based compensation expense for 2006 will be affected by changes in our stock price, the number of additional stock-based awards our board of directors may grant in 2006, as well as a number of complex and subjective valuation assumptions and the related tax effect. These valuation assumptions include, but are not limited to, the volatility of our stock price and employee stock option exercise behaviors.

In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. For any VIEs that must be consolidated under FIN 46R, the assets, liabilities and noncontrolling interests of the VIE initially would be measured at their carrying amounts with any difference between the net amount added to the balance sheet and any previously recognized interest being recognized as the cumulative effect of an accounting change. If determining the carrying amounts is not practicable, fair value at the date FIN 46R first applies may be used to measure the assets, liabilities and noncontrolling interest of the VIE. The Company does not have any financial interest within the scope of this Statement.

In May 2003, FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, was issued. This Statement establishes standards for the classification, measurement and disclosure of certain financial instruments with characteristics of both liabilities and equity. The Company does not have any financial instruments that are within the scope of this Statement.

F-10

(3) BUSINESS ACQUISITION AND DISPOSITION

(a) ACQUISITION

On August 21, 2003, the Company and Diacrin consummated the business combination that was jointly announced in April 2003 under which GenVec acquired Diacrin through an exchange of stock. Under the terms of the agreement, each share of Diacrin Common Stock was exchanged for 1.5292 shares of GenVec Common Stock in a transaction intended to qualify as a tax-free reorganization. Based on GenVec’s average closing per share price of $1.28 for a five-day period around April 15, 2003 (the date the transaction was announced), the transaction was valued at approximately $38.5 million. At the time of closing, GenVec’s existing shareholders owned approximately 45.4 percent and Diacrin’s original shareholders owned approximately 54.6 percent of the combined company. The difference between the cash and cash equivalents acquired in the acquisition of $7.3 million and the transaction costs incurred of $2.4 million is presented in the Statements of Cash Flows as cash provided by investing activities. The Company is the acquirer and the transaction was accounted for under the purchase method pursuant to SFAS No. 141, “Business Combinations”. Accordingly, results of operations of Diacrin have been included in these financial statements from August 21, 2003.

The aggregate purchase price of $38.5 million includes 27,665,392 shares of common stock issued in the exchange, valued at $35.4 million and 1,937,197 common stock options valued at $3.1 million. The value of the stock options was computed using the Black-Scholes valuation model based on the closing price on the date of the transaction. Of the $3.1 million computed value, $563,000 represents the intrinsic value of unvested in-the-money options as of the date of the transaction and has been recorded as deferred compensation, to be amortized over the remaining vesting period of the options.

The acquisition costs are summarized as follows (in thousands):

Value of GenVec common stock issued	$	35,412
Value of Stock Options issued		3,120
Less amount allocated to deferred compensation		(563	)
Transaction costs incurred by GenVec*		2,445
Acquisition costs	$	40,414

*  Exclusive of $16 of registration fees charged directly against additional paid-in capital. All transaction costs were paid as of December 31, 2003.

The fair value of the assets acquired and liabilities assumed at the date of acquisition are summarized as follows (in thousands):

Cash and cash equivalents	$	7,273
Short-term investments		30,839
Other current assets		530
Long-term investments		2,681
Property and equipment, net		67
Intangible assets		1,981
Total assets acquired		43,371
Current liabilities		1,393
Unearned revenue		1,564
Total liabilities		2,957
Net assets acquired	$	40,414

The excess of the acquisition costs over the fair value of the net assets acquired has been recorded as intangible assets. Management has identified such assets as pertaining to the patents related to the myoblast cell therapy program. The amortization is not deductible for tax purposes because of the tax-free nature of the business combination.

F-11

(b) DISPOSITION

On December 28, 2005, the Company completed the sale of its myoblast cell therapy assets to Mytogen, Inc. (“Mytogen”). In conjunction with the sale of these assets, the Company discontinued its cell transplantation therapy operations in Charlestown, Massachusetts and subleased a portion of the facility to Mytogen. Under the terms of the asset purchase agreement, GenVec will receive royalties on the sales of future myoblast-related products and a portion of specified milestone payments, licensing revenues and/or proceeds from the sale or transfer of key Mytogen assets, if any, that occur through December 2007. Royalty payments made to Company under this agreement will be recognized when received. In connection with the sale of the myoblast-related assets and the termination of our cell therapy operations in Charlestown, Massachusetts, the Company incurred cash charges of approximately $75,000 in staff termination costs, accrued $460,000 for continuing lease obligations for the Charlestown facility (net of expected sublease income) and recorded non-cash write-offs of $93,000 of fixed assets and leasehold improvements and $1.8 million of intangible assets.

(4) INVESTMENTS

The amortized cost, gross unrealized holding gains and fair value of available-for-sale securities by major security type at December 31, 2005 and 2004, are as follows (in thousands):

	2005
			Gross
			Unrealized
	Amortized		Holding			Fair
	Cost		Gains/(Loss)			Value
Government and agency notes	$	2,254	$	(2	)	$	2,252
Corporate bonds		22,960		(43	)		22,917
	$	25,214	$	(45	)	$	25,169

	2004
			Gross
			Unrealized
	Amortized		Holding			Fair
	Cost		Gains/(Loss)			Value
Government agency notes	$	6,522	$	24		$	6,546
Corporate bonds		21,200		(47	)		21,153
	$	27,722	$	(23	)	$	27,699

Maturities of securities classified as available-for-sale had fair values as follows at December 31 (in thousands):

	2005		2004
Due within one year	$	25,169	$	25,397
Due after one year through four years		—		2,302
	$	25,169	$	27,699

(5) PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31 (in thousands):

	2005			2004
Equipment	$	8,625		$	9,712
Leasehold improvements		6,474			6,566
Furniture and fixtures		414			519
		15,513			16,797
Less accumulated depreciation and amortization		(11,366	)		(11,379	)
	$	4,147		$	5,418

Depreciation and amortization expense related to property and equipment were $1,558,000, $1,813,000, and $1,927,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

F-12

(6) INTANGIBLE ASSETS

Beginning January 2004, intangible assets arising from the Company’s merger with Diacrin were being amortized through December 2024 on a straight-line basis. The carrying value of the intangible assets was supported by the discounted value of milestone payments due under the Terumo License and Development Agreement, which was acquired as part of the merger. As of December 31, 2004, the carrying value of the intangible assets (net of amortization) was $1.9 million. On December 28, 2005, the Company completed the sale of the Company’s myoblast assets, which included the assignment of the Terumo License and Development Agreement, to Mytogen, Inc. As a result of the assignment, the Company has recorded a non-cash write-off of the intangible assets (net of amortization) in the amount of $1.8 million.

(7) LONG-TERM DEBT

Long-term debt consists of the following at December 31 (in thousands):

	2005			2004
Industrial revenue bond	$	2,580		$	3,130
Notes payable:
Term loan from landlord		440			531
Equipment financing		211			765
Economic development loan		33			48
Other		—			17
		3,264			4,491
Less current maturities		(913	)		(1,227	)
	$	2,351		$	3,264

Aggregate maturities of long-term debt are as follows (in thousands):

2006	$	913
2007		754
2008		790
2009		807
2010		—
Thereafter		—
	$	3,264

(a) INDUSTRIAL REVENUE BOND

In June 1999, in connection with the lease of its Gaithersburg facility, the Company borrowed $5,000,000 under an Industrial Revenue Bond with the State of Maryland to fund leasehold improvements and additional equipment needs of the Company. The Bond is secured by a first priority lien on all equipment and fixtures financed, a $2,500,000 letter of credit facility guaranteed by the Maryland Industrial Development Finance Authority, and a $2,500,000 guarantee from The Warner-Lambert Company. The annual fee for the letter of credit is one percent of the outstanding balance, which totaled $27,000, $42,000 and $48,000 for the years ended December 31, 2005, 2004, and 2003, respectively. Warner-Lambert’s guarantee will remain in place as long as the outstanding principal balance on the Bond is greater than $2,500,000 and will be reduced in value dollar for dollar as the principal balance decreases below $2,500,000.

The Bond bears interest at a variable rate based on weekly market conditions and matures on June 1, 2009. The weighted-average interest rates during 2005, 2004 and 2003 were 1.72 percent, 1.62 percent and 1.12 percent, respectively. The Bond is subject to mandatory sinking fund redemption. The Company began making sinking fund payments in July 2000; the balance of the sinking fund at December 31, 2005 and 2004 was $296,000 and $276,000, respectively.

F-13

In October 2000, the Company entered into an interest rate swap agreement to reduce its exposure to adverse fluctuations in interest rates related to the Company’s outstanding bond payable. The Company does not utilize financial instruments for trading or other speculative purposes. The interest rate swap agreement entitles the Company, on a monthly basis, to receive a LIBOR-based floating rate of interest and pay a fixed rate of interest of 6.68 percent. The interest rate swap has a total notional amount of $3,645,000 and extends through the life of the outstanding bond.

The Company has determined the interest rate swap to be ineffective, as such, changes in the fair value of the swap agreement are included in interest expense. The fair value of the swap agreement was a liability of $99,000 and $239,000 at December 31, 2005 and 2004, respectively.

(b) TERM LOAN

In connection with the lease of the office and laboratory facility, the landlord loaned $858,000 for the construction of leasehold improvements in the form of a term loan. This loan is payable in monthly installments of $11,900, including interest at a fixed rate of 10.5 percent over the remaining term of the building lease.

(c) EQUIPMENT FINANCING

On December 27, 2002 the Company secured $939,000 in financing for certain assets purchased by the Company at an interest rate of 10.0 percent. The note is payable in monthly installments of $26,100 through December 2005 followed by monthly installments of $14,000 through December 2006. The equipment financed by the note secures the loan.

On April 3, 2002 the Company secured $1,564,000 in financing for certain assets purchased by the Company. The financing consists of two notes: one note for $1,054,000 at an interest rate of 9.54 percent, payable in monthly installments of $33,600 through April 2005; the second note for $507,000 at an interest rate of 9.99 percent, payable in monthly installments of $12,800 through April 2006. The equipment financed by the notes secures the loan.

(d) ECONOMIC DEVELOPMENT LOAN

On September 29, 1999, the Company entered into an economic development fund agreement with Montgomery County, Maryland (the County) and received $125,000 for the purpose of relocation and expansion related expenses. The $125,000 received was considered a loan, which accrued interest on the principal balance at 5 percent per year until we were required to commence payment as described below.

Quarterly payments of principal and interest were originally scheduled to commence on January 15, 2002. Subsequent loan payments were to be deferred or forgiven by the County if the Company achieved certain incentive provisions outlined in the loan agreement related to the hiring of new employees within the Company. As of December 31, 2003, the Company achieved certain incentive provisions related to increasing its workforce resulting in the following: On February 2004, the Department of Economic Development of Montgomery County, Maryland, converted $68,408 of the $125,000 conditional loan into a grant. Repayment of the remaining $56,592, plus accrued interest of $6,251, occurs in quarterly installments of $4,360, which commenced in April 2004 and continues through January 2008. The interest rate is fixed at 5 percent.

(8) STRATEGIC ALLIANCES AND RESEARCH CONTRACTS

The Company has established collaborations and research contracts with pharmaceutical and biotechnology companies and governmental agencies to enhance its ability to discover, evaluate, develop and commercialize multiple product opportunities. Revenue is summarized as follows (in thousands):

	2005		2004		2003
Vaccine Research Center	$	18,791	$	7,373	$	7,230
PATH/Malaria Vaccine Initiative		1,496		979		—
US Naval Medical Research Center		1,599		493		1,361
FUSO Pharmaceuticals Industries, Ltd.		1,595		1,616		1,724
Terumo Corporation		1,067		396		98
Cordis Corporation		470		245		—
Other strategic alliances and research grants		1,536		751		107
	$	26,554	$	11,853	$	10,520

F-14

GenVec’s results of operations included $2.3 million, $435,000 and $98,000 during the years ended December 31, 2005, 2004 and 2003, of amortization of these upfront contract and license fees which were received in prior years. Amortized revenues for the year ended December 31, 2005 included $1.1 million from unearned upfront contract and license fees related to the Terumo agreement, including $667,000 of accelerated amortization due to the completion of our significant performance obligations under the Terumo agreement.

(a) VACCINE RESEARCH CENTER

In December 2001, the Vaccine Research Center (VRC) at the National Institute of Allergy and Infectious Diseases of the National Institutes of Health selected the Company to collaborate in the development of a worldwide preventative AIDS vaccine candidate. This collaboration was expanded to include the development of a SARS vaccine candidate (April 2003) and an influenza vaccine candidate (February 2006). The Company has a cost-plus fixed fee sub-contract, managed for the VRC through SAIC-Frederick, Inc., which became effective January 25, 2002. Under the sub-contract, the Company is responsible for constructing and producing adenovector-based vaccine candidates utilizing its proprietary cell line and second-generation adenovector technology. The program encompasses a base year and six option years. The fourth option year covering 2006 has been exercised and work is continuing under the contract.

(b) PATH/MALARIA VACCINE INITIATIVE (MVI)

In March 2004, the Company signed a two-year, $2,581,000 contract for the development, production and evaluation of vaccines against malaria. Under the contract, the Company is responsible for constructing adenovector-based vaccine candidates using its proprietary cell line and second-generation adenovector technology. The contract includes $547,000 for work to be performed under a separate Collaborative Research and Development Agreement (CRADA) with the Navy Medical Research Center (NMRC). Under the CRADA, NMRC will provide the Company with optimized malaria genes to be used in the development of the adenovector vaccines as well as provide preclinical evaluation of the vaccine candidates.

(c) US NAVAL MEDICAL RESEARCH CENTER (NMRC)

In January 2003, the Company signed a two-year, $1,900,000 fixed price contract to aid in the development of vaccines against malaria and dengue fever. Under the contract, the Company is responsible for constructing and producing adenovector-based vaccine candidates using its proprietary cell line and second-generation adenovector technology.

In January 2005, the Company signed a one-year, $1,582,000 fixed price contract for the production of vaccines against malaria. Under the contract, the Company will be responsible for producing, testing and releasing malaria vaccines under current Good Manufacturing Practices (cGMP) standards for preclinical evaluation by NMRC. In conjunction with the preclinical evaluation of the vaccine candidates, the Company will provide regulatory support to NMRC with regard to an anticipated Investigational New Drug (IND) filing with the FDA.

(d) FUSO PHARMACEUTICALS INDUSTRIES, LTD. (Fuso)

In September 1997, the Company established collaboration with Fuso to conduct research and to identify, evaluate and develop gene therapy products for the treatment of cancer. Under the terms of the contract, the Company received $750,000 annually for five years, subject to Fuso’s right to terminate the collaboration upon 90 days prior written notice. The annual payments are non-refundable. As part of the collaboration, the Company granted Fuso an exclusive, royalty-bearing license to develop and commercialize products developed under the collaboration for the treatment of cancer in Japan and, at Fuso’s option, Korea and Taiwan. Fuso will be responsible for the development and commercialization of any products in its territory. The Company will receive additional payments for the achievement by Fuso of specific product development and regulatory milestones, with the earliest of such payments not expected in the near term. The Company will also receive royalties on the sale of any such products commercialized by Fuso. The Company has retained all rights to develop and commercialize these products for the treatment of cancer in the rest of the world, and generally for all other uses worldwide, subject to certain restrictions. In connection with establishment of the collaboration, Fuso purchased $1,000,000 of the Company’s capital stock consisting of 75,329 shares of the Company’s Class E convertible preferred stock for $13.28 per share. All preferred shares were converted into common shares in December 2000 in connection with the Company’s initial public offering at a rate of 1.5 common shares to each preferred share.

F-15

In September 2002, the parties amended the collaboration agreement to increase the level of funding to $1,500,000 per year, effective April 1, 2002, and extended the agreement through December 31, 2003.

Effective January 1, 2004, the Company and Fuso established a new three-year, $4,500,000 research collaboration to identify a targeted cancer therapy product candidate designed to treat not only the primary tumor but also cancer that has spread, or metastasized to distant sites in the body.

As of December 31, 2005 and 2004, unearned revenue related to this collaboration was $0 and $42,000, respectively.

(e) TERUMO CORPORATION (Terumo)

In September 2002, Diacrin entered into a development and license agreement with Terumo Corporation, of which the Company has become a party as a result of the acquisition consummated on August 21, 2003. Under the terms of the agreement, the Company licensed to Terumo its human muscle cell transplantation technology for cardiac disease in Japan. Terumo would fund all development costs in Japan while the Company continued to independently develop its cardiac repair technology for commercialization in the U.S. and elsewhere. On October 1, 2002, the Company received an upfront non-refundable license fee of $2.0 million. The agreement also includes payments by Terumo to the Company for development milestones and a royalty on product sales. The Company recorded the upfront license fee as unearned revenue to be amortized through November 2007.

For the year-to-date period ended November 30, 2005, the Company recognized $367,000 of unearned revenue. On December 28, 2005, the Company completed the sale of its myoblast assets to Mytogen, Inc., which included the assignment of the development and license agreement with Terumo. As a result of the assignment, the Company accelerated amortization of the remaining balance of unearned revenue and recorded additional revenue of $667,000.

(f) CORDIS CORPORATION (Cordis)

In January 2004, the Company entered into a research collaboration with the Cordis Cardiology Division of Cordis Corporation, a Johnson & Johnson company, to study the clinical benefit of BIOBYPASS in a procedure involving guided delivery of the angiogenic agent directly into targeted regions of the heart in patients with severe coronary artery disease using the Cordis NOGASTAR^® Mapping Catheter and MYOSTAR™ Injection Catheter.

The purpose of this collaboration is to conduct a randomized, double blind, placebo controlled study of the Company’s cardiovascular product candidate, BIOBYPASS. Clinical benefit will be assessed in the multi-center study, which will be conducted in Europe and Israel and is expected to enroll up to 129 patients with severe heart disease. GenVec and Cordis will collaborate on regulatory matters and share in the clinical trial costs. GenVec will supply all clinical material and Cordis will provide the NOGASTAR^® and MYOSTAR^® mapping and injection catheters and training to the interventional cardiologists conducting the trial. GenVec retains all commercial rights to BIOBYPASS and Cordis retains all commercial rights to the NOGASTAR mapping catheters and MYOSTAR injection catheters. The Company recorded a $1.0 million receivable and $1.0 million of unearned revenue as of December 31, 2003; the receivable was satisfied in January 2004 with the receipt of a $1.0 million payment from Cordis. Revenues are recognized as earned based on performance under the contract. In 2005, the Company recognized $470,000 in revenues earned under the collaboration.

(g) OTHER STRATEGIC ALLIANCES AND RESEARCH GRANTS

Revenues include $498,000 earned in 2005 under a $1.7 million extension of our foot-and-mouth vaccine development agreement with the U.S. Department of Agriculture.

F-16

(9) COMMITMENTS

(a) LEASE AGREEMENTS

The Company has non-cancelable operating leases for its Gaithersburg, MD and Charlestown, MA facilities. The Gaithersburg office and laboratory lease expires in October 2009. The agreement includes a provision for a 3 percent annual increase in base rent. The lease contains renewal options for up to fourteen years and requires the Company to pay all executory costs such as maintenance and insurance. As part of the lease, the landlord’s initial contribution of $1,300,000 in incentives is considered a reduction of rental expense that is recognized on a straight-line basis over the term of the lease. The Charlestown lease expires on October 3, 2006. Rent expense under all operating leases was approximately $1,934,000, $1,492,000 and $967,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

Future minimum lease payments under all non-cancelable operating leases are as follows (in thousands):

2006	$1,454
2007	775
2008	792
2009	677
2010	—
Thereafter	—
	$3,698

At December 31, 2005 and 2004, the Company had a straight-line lease liability of $745,000 and $885,000, respectively.

(b) LICENSE AGREEMENTS

In 2000, the Company entered into agreements with Public Health Service (PHS) for exclusive rights to develop and commercialize the PEDF gene for gene therapy applications in the eye. In October 2004, the Company entered into an agreement with PHS that superseded the 2000 license agreement, extending the Company’s rights to include the development and commercialization of the PEDF gene and protein for diagnostic and therapeutic applications in the eye. In December 2004, the Company entered into an agreement with PHS further expanding the Company’s rights to include the use of the PEDF gene and protein for the diagnosis, treatment and/or prevention of cancer (except cancers of the eye as covered under the October 2004 license agreement). In exchange for these licenses, the Company has committed to pay product royalties based on net sales of licensed products, net of a minimum royalty payable annually for the duration of the agreements. The Company has also committed to pay a one-time, $50,000 license fee under each of the two agreements upon the earlier of the achievement of certain commercialization milestones or stipulated anniversaries of the commencement date of the agreements.

In February 1998, the Company entered into a non-exclusive license agreement with Asahi Chemical Industry Company Limited (Asahi) for rights to gene therapy applications in the United States to its proprietary form of the TNF-alpha gene. In exchange for this license, the Company paid a $200,000 non-refundable fee to Asahi and has committed to additional payments upon the achievement of specified clinical milestones, as well as product royalties based on net sales of a licensed product. In September 2002 the Company paid $50,000 upon commencement of Phase II clinical trials involving the TNF-alpha gene.

In May 1996, the Company entered into an exclusive, worldwide license agreement with Scios, inc. (Scios) for rights to gene therapy applications of its proprietary form of the VEGF gene. Johnson & Johnson acquired Scios in April 2003. Scios will share in certain profits the Company realizes from the research, development and commercialization of products incorporating the VEGF gene. The Company has agreed to provide a minimum royalty on revenues generated from the development of these products, which is creditable against the profits to be shared. In connection with the license agreement, Scios purchased 96,852 shares of the Company’s Class D convertible preferred stock at a price of $10.33 per share. All preferred shares were converted into common shares in December 2000 in connection with the Company’s initial public offering at a rate of 1.5 common shares to each preferred share. In addition, the Company granted Scios a warrant to purchase 317,796 shares of the Company’s common stock, which vested upon the earlier of the achievement of specified product development milestone events or certain dates. All Scios warrants expired as of December 11, 2005.

F-17

The Company’s license agreements often include event based milestone payments, the timing of which is dependent upon a number of factors including final approvals by regulatory agencies and the continued enforceability of patent claims.

(c) RESEARCH AND DEVELOPMENT AND CLINICAL AGREEMENTS

The Company has agreed to provide grants for certain research projects under agreements with several universities and research organizations. Under the terms of these agreements, the Company has received rights to the resulting technology. Total grants paid by the Company were approximately $261,000, $483,000, and $1,000,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

As discussed in Note 2, the Company has agreements with clinical sites for the treatment of patients under clinical protocols. Total clinical costs were $3,154,000, $2,482,000 and $2,285,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

Additionally, certain agreements disclosed above require the Company to pay royalties upon commercial sales, if any, of specified products. The Company generally bases the royalties on a percentage of net sales or other product fees earned. Royalties will become due when sales are generated.

(10) STOCKHOLDERS’ EQUITY

(a) CAPITAL STOCK

In December 2002, the Company filed with the Securities and Exchange Commission a $25,000,000 shelf registration statement on Form S-3.

• On January 22, 2003 the Company sold 756,800 shares of common stock to an existing shareholder at $2.50 per share under the shelf registration. Proceeds, net of offering costs, from this sale totaled $1,849,000.

• On April 16, 2004, the Company sold 4,000,000 shares of common stock to various investors at $3.15 per share under the shelf registration. Proceeds, net of offering costs, from this sale totaled $11,787,000. Stonegate Securities was engaged as the sole placement agent for this transaction.

In April 2005, the Company filed with the Securities and Exchange Commission a $35,000,000 shelf registration statement on Form S-3, replacing our prior $25,000,000 shelf registration statement.

• On September 26, 2005, the Company sold 7,600,000 shares of common stock to various investors at $2.00 per share under the shelf registration. Proceeds, net of offering costs, from this sale totaled $13,990,000. SG Cowen & Co., LLC (“SG Cowen”) was engaged as the sole placement agent for this transaction. Stelios Papadopoulos, Ph.D., is a Vice Chairman in the investment banking division of SG Cowen and is a member of GenVec’s board of directors.

As of December 31, 2005, $19.8 million of unissued securities are registered under the shelf registration statement on Form S-3 filed in April 2005.

In September 2001, the Board of Directors of the Company declared a dividend which was issued on September 28, 2001 of one preferred stock purchase right (a “Right”) for each share of common stock outstanding. The Rights initially trade with, and are inseparable from the common stock. The Rights will become exercisable only if a person or group acquires beneficial ownership of 20 percent or more of the outstanding common stock of GenVec (an “Acquiring Person”), or announces the intention to commence a tender or exchange offer the consummation of which would result in that person or group becoming an Acquiring Person. Each Right allows its holder, other than the Acquiring Person, to purchase from the Company one one-hundredth of a share of Series A junior participating preferred stock (the “Preferred Share”), at a purchase price of $50.00, subject to adjustment. This portion of a Preferred Share gives the stockholder approximately the same dividend, voting, and liquidation rights as would one share of common stock. The Rights expire on September 7, 2011, unless redeemed earlier by the Company at a price of $0.01 per Right at any time before the Rights become exercisable.

F-18

In addition to the Common Stock reflected on the Company’s balance sheets, the following items are reflected in the capital accounts as of December 31, 2005 and 2004:

• 4,400,000 shares of $0.001 par value preferred stock have been authorized; none are issued or outstanding.

• 600,000 shares of $0.001 par value Series A junior participating preferred stock have been authorized in connection with the preferred stock purchase rights referred to above; none are issued or outstanding.

(b) STOCK OPTION GRANTS

At the Company’s Annual Meeting of Stockholders, held on June 6, 2002, the stockholders approved the adoption of the 2002 Stock Incentive Plan (“the Plan”), which replaced the 2000 Director Option Plan and the 1993 Stock Incentive Plan (collectively, “prior plans”). The Plan, which is administered by the Compensation Committee of the Board (“The Committee”), authorized for issuance 1,000,000 shares plus any shares available under the prior plans at their termination date.

• On August 21, 2003, in connection with the Diacrin acquisition, the stockholders approved an increase in the number of common shares to be issued under the Plan by an additional 1,000,000.

• At the Company’s Annual Meeting of Stockholders, held on June 15, 2005, the stockholders approved an increase in the number of common stock shares to be issued under the Plan by an additional 1,680,000.

Employees, non-employee directors and consultants are eligible to receive stock option grants or restricted stock under the Plan. Under the Plan, options are granted at not less than existing market prices and expire 10 years from the date of grant. The Committee has broad powers to determine eligibility and terms of all awards. Grants to employees generally vest ratably over a four-year period; grants to consultants generally vest over the terms of their contractual agreements; and grants to non-employee directors generally vest over 12 months.

Changes in stock options were as follows:

				Average
	Number of Shares			Exercise
(in thousands, except per share data)	Under Option			Price
Outstanding at December 31, 2002		4,640		$	3.18
Assumed from acquisition		1,937			2.84
Granted		209			2.73
Exercised		(914	)		1.69
Cancelled		(1,624	)		3.63
Outstanding at December 31, 2003		4,248			3.15
Granted		1,105			3.03
Exercised		(289	)		1.19
Cancelled		(279	)		3.64
Outstanding at December 31, 2004		4,785		$	3.20
Granted		1,633			1.91
Exercised		(342	)		0.96
Cancelled		(1,035	)		3.05
Outstanding at December 31, 2005		5,041		$	2.97

As of December 31, 2005 options covering 3,402,086 shares were exercisable at $0.70 to $9.63 per share (average $3.36 per share) and options covering 2,563,920 shares remain available to be granted.

F-19

Options outstanding at December 31, 2005 are summarized below:

	Outstanding						Exercisable
			Average		Average				Average
	Shares		Exercise		Remaining		Shares		Exercise
Exercise Price	(thousands)		Price		Life		(thousands)		Price
$0.00 – $1.00		57	$	0.72	5.7 years			34	$	0.73
$1.01 – $3.00		2,514		2.08		7.1		1,214		2.26
$3.01 – $4.00		1,572		3.28		5.9		1,256		3.29
$4.01 – $5.00		646		4.39		3.3		646		4.39
$5.01 – $10.00		252		6.73		2.4		252		6.73
		5,041	$	2.97	6.0 years			3,402	$	3.36

For options granted to consultants, the Company recorded $0, $0 and $65,000 of gross deferred compensation for each of the three years ended December 31, 2005, and the amortization related to this and prior years deferred compensation amounted to $0, $0 and $191,000.

As a result of the merger with Diacrin in August 2003, the Company recorded deferred compensation of $563,000 for the difference between the exercise price of outstanding unvested Diacrin options and the fair value of the Company’s common stock at the date of the acquisition. The deferred compensation is being amortized over the remaining vesting period of the related options. Net amortization for 2005, 2004 and 2003 related to this and prior years deferred compensation amounted to $261,000, $229,000 and $1,542,000, respectively. The $121,000 balance as of December 31, 2005 will be fully amortized by the end of 2007. This deferred compensation is subject to reduction for any employee who terminates employment prior to the expiration of such employee’s option vesting period.

(c) EMPLOYEE STOCK PURCHASE PLAN

In December 2000, the Company adopted the 2000 Employee Stock Purchase Plan, referred to as the “Purchase Plan”. The Company reserved a total of 350,000 shares of common stock for issuance under the Purchase Plan, plus annual increases on the first day of each fiscal year beginning 2001 equal to the lesser of 350,000 shares; 2 percent of the outstanding shares as of such date; or a lesser amount determined by the Board of Directors.

Substantially all employees are eligible to participate. Participants may purchase common stock through payroll deductions of up to 15 percent of the participant’s compensation. The maximum number of shares a participant may purchase during a six-month offering period is 6,250 shares.

The price of stock purchased under the purchase plan is 85 percent of the lower of the fair market value of the common stock at the beginning of the offering period or the end of the offering period. Employees purchased 145,212 shares, 66,124 shares and 34,939 shares during 2005, 2004 and 2003 at a weighted average purchase price of $1.39, $1.75 and $1.74. The Purchase Plan will terminate on October 18, 2010, unless sooner terminated by the Board of Directors.

(d) WARRANTS

Warrants to purchase common stock were granted to organizations and institutions in conjunction with certain licensing and funding activities. The warrants vested according to a combination of time and events as prescribed in the agreements. Outstanding and vested warrants are summarized below (in thousands, except per share amounts):

	2005				2004				2003
Exercise Price	Outstanding		Vested		Outstanding		Vested		Outstanding		Vested
$3.60		66		66		66		66		66		66
$3.93		25		25		31		31		56		56
$8.85		—		—		318		318		318		318
		91		91		415		415		440		440

F-20

(11) INCOME TAXES

A reconciliation of tax credits computed at the statutory federal tax rate on loss from operations before income taxes to the actual income tax expense is as follows (in thousands):

	2005			2004			2003
Tax provision computed at the statutory rate	$	(4,676	)	$	(6,424	)	$	(7,229	)
State income taxes, net of federal income tax provision		(962	)		(751	)		( 982	)
Book expenses not deductible for tax purposes		7			8			8
Research and experimentation tax credit		(1,146	)		(787	)		(460	)
Nondeductible compensation expense		94			89			381
Change in valuation allowance for deferred tax assets		6,683			7,865			8,282
Income tax expense	$	—		$	—		$	—

The valuation allowance for deferred tax assets increased approximately $6.7 million, $7.9 million and $8.3 million for the years ended December 31, 2005, 2004 and 2003.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in this assessment. Based upon the Company’s historical operating performance and the reported cumulative net losses to date, the Company presently does not have sufficient objective evidence to support the recovery of its deferred tax assets. Accordingly, the Company has provided a full valuation allowance against its deferred tax assets. Recording this valuation in no way affects the Company’s ability to utilize this asset.

Deferred income taxes reflect the net effects of net operating loss carryforwards and the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows (in thousands):

	2005			2004			2003
Net operating loss carryforwards	$	76,689		$	71,682		$	64,695
Capital loss carryforwards		328			328			—
Research and experimentation tax credit		10,425			9,279			8,492
Deferred rent		178			—			—
Unearned revenue		—			485			465
Property and equipment, principally due to differences in depreciation		(507	)		(655	)		(727	)
Deferred compensation expense		747			785			873
Intangible asset		—			(727	)		(765	)
Other		151			139			426
Total deferred tax assets		88,011			81,316			73,459
Valuation allowance		(88,011	)		(81,316	)		(73,459	)
Net deferred tax assets	$	—		$	—		$	—

At December 31, 2005, the Company has net operating loss carryforwards of approximately $198.5 million for federal income tax purposes of which $59.4 million expire at various dates through 2013, and $139.1 million expire at various dates through 2025. The Company has research and experimentation tax credit carryforwards of $10.4 million at December 31, 2005, of which $1.7 million expire through 2013 and $8.7 million expire through 2025. The Company also has capital loss carryforwards of $0.8 million which will expire 2008.

F-21

The Company’s NOL and tax credit carryforwards may be significantly limited under Section 382 of the Internal Revenue Code (IRC). NOL and tax credit carryforwards are limited under Section 382 when there is a significant “ownership change” as defined in the IRC. During 2005 and in prior years, the Company may have experienced such ownership changes. Diacrin might have also experienced ownership changes in prior years and/or as a result of its merger with the Company.

The limitation imposed by Section 382 would place an annual limitation on the amount of NOL and tax credit carryforwards that can be utilized. When the Company completes the necessary studies, the amount of NOL carryforwards available may be reduced significantly. However, since the valuation allowance fully reserves for all available carryforwards, the effect of the reduction would be offset by a reduction in the valuation allowance. Thus, the resolution of this matter would have no effect on the reported assets, liabilities, revenues and expenses for the periods presented.

(12) OTHER COMPREHENSIVE INCOME (LOSS)

The purpose of reporting comprehensive income (loss) is to report a measure of all changes in equity, other than transactions with stockholders. Total comprehensive income (loss) is included in the Statements of Stockholders’ Equity. The components of accumulated other comprehensive income (loss) are as follows (in thousands):

				Unrealized			Accumulated
	Unrealized			Gain (Loss)			Other
	Gain (Loss)			on Derivative			Comprehensive
	on Securities			Instruments			Income (Loss)
Balance, December 31, 2002	$	227		$	(566	)	$	(339	)
Unrealized gain from available-for-sale securities		73			—			73
Loss in operations		(178	)		—			(178	)
Unrealized loss on cash flow derivative		—			(45	)		(45	)
Interest expense realized in operations		—			214			214
Balance, December 31, 2003	$	122		$	(397	)	$	(275	)
Unrealized loss from available-for-sale securities		(137	)		—			(137	)
Loss in operations		—			—			—
Unrealized loss on cash flow derivative		—			(25	)		(25	)
Interest expense realized in operations		—			182			182
Balance, December 31, 2004	$	(15	)	$	(240	)	$	(255	)
Unrealized loss from available-for-sale securities		(30	)		240			210
Balance, December 31, 2005	$	(45	)	$	—		$	(45	)

Other comprehensive income (loss) does not reflect the effect of income taxes because the Company had no income tax provision during the three years ended December 31, 2005.

(13) QUARTERLY RESULTS (UNAUDITED)

The Company’s unaudited quarterly information is as follows (in thousands, except per share data):

2005	Q1			Q2			Q3			Q4
Revenue	$	4,549		$	7,348		$	6,897		$	7,760
Net loss	$	(3,458	)	$	(2,956	)	$	(3,249	)	$	(4,329	)
Basic and Diluted Loss Per Share	$	(0.06	)	$	(0.05	)	$	(0.06	)	$	(0.07	)

2004	Q1			Q2			Q3			Q4
Revenue	$	2,741		$	3,151		$	2,932		$	3,029
Net loss	$	(5,650	)	$	(4,776	)	$	(4,789	)	$	(3,679	)
Basic and Diluted Loss Per Share	$	(0.11	)	$	(0.09	)	$	(0.09	)	$	(0.07	)

The loss per share was calculated for each three-month period on a stand-alone basis. As a result, the sum of the loss per share for the four quarters does not equal the loss per share for the respective twelve-month period.

F-22

(14) SUBSEQUENT EVENT (UNAUDITED)

On March 15, 2006, the Company entered into a Committed Equity Financing Facility (CEFF) with Kingsbridge Capital Ltd., under which Kingsbridge has committed to purchase up to $30.0 million of the Company’s common stock within a three-year period, subject to certain conditions and limitations. As part of the arrangement, the Company issued a warrant to Kingsbridge to purchase 520,000 shares of the Company’s common stock at a price equal to 125% of the average closing bid prices during the five (5) days preceding the issuance date of the warrant. The warrant is exercisable beginning six months after the date of grant and for a period of five years thereafter.

Under the CEFF, the Company may require Kingsbridge to purchase shares of common stock at prices between 88% and 92% of the volume weighted average price (VWAP) on each trading day during an 8-day pricing period. The value of the maximum number of shares the Company may issue in any pricing period is equal to the lesser of 1.75% of the Company’s market capitalization immediately prior to the commencement of the pricing period, or $5.0 million. The minimum VWAP for determining the purchase price at which the Company’s stock may be sold in any pricing period is the greater of $1.25, or 75% of the closing price of the Company’s common stock on the day prior to the commencement of the pricing period. The CEFF also requires the Company to file a resale registration statement with respect to the resale of shares issued pursuant to the CEFF and underlying the warrant, to use commercially reasonable efforts to have the registration statement declared effective by the SEC, and to maintain its effectiveness. The Company is obligated to sell a minimum of $2.0 million of common stock available under the CEFF within a two-year period.

F-23

EX-4.4

Exhibit 4.4

REGISTRATION RIGHTS AGREEMENT

     This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of March 15, 2006, is by and between GENVEC, INC. (the “Company”) and KINGSBRIDGE CAPITAL LIMITED, an entity organized and existing under the laws of the British Virgin Islands, with registered address Palm Grove House, 2nd Floor, Road Town, Tortola, British Virgin Islands (the “Investor”).

     WHEREAS, the Company and the Investor have entered into that certain Common Stock Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”), pursuant to which the Company may issue, from time to time, to the Investor up to $30 million worth of shares of Common Stock as provided for therein;

     WHEREAS, pursuant to the terms of, and in partial consideration for the Investor entering into, the Purchase Agreement, the Company has issued to the Investor a warrant, exercisable from time to time within five (5) years following the six-month anniversary of the date of issuance (the “Warrant”) for the purchase of an aggregate of up to 520,000 shares of Common Stock at a price specified in such Warrant;

     WHEREAS, pursuant to the terms of, and in partial consideration for, the Investor’s agreement to enter into the Purchase Agreement, the Company has agreed to provide the Investor with certain registration rights with respect to the Registrable Securities (as defined in the Purchase Agreement) as set forth herein;

     NOW, THEREFORE, in consideration of the premises, the representations, warranties, covenants and agreements contained herein, in the Warrant, and in the Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, intending to be legally bound hereby, the parties hereto agree as follows (capitalized terms used herein and not defined herein shall have the respective meanings ascribed to them in the Purchase Agreement):

ARTICLE I
REGISTRATION RIGHTS

     Section 1.1. Registration Statement.

     (a) Filing of the Registration Statement. Upon the terms and subject to the conditions set forth in this Agreement, the Company shall file with the Commission within sixty (60) calendar days after the Closing Date a registration statement on Form S-3 under the Securities Act or such other form as deemed appropriate by counsel to the Company for the registration for the resale by the Investor of the Registrable Securities (the “Registration Statement”).

     (b) Effectiveness of the Registration Statement. The Company shall use commercially reasonable efforts (i) to have the Registration Statement declared effective by the Commission as soon as reasonably practicable, but in any event no later than one hundred twenty (120) calendar days after the Closing Date and (ii) to ensure that the Registration Statement remains in effect throughout the term of this Agreement as set forth in Section 4.2, subject to the terms and conditions of this Agreement.

     (c) Regulatory Disapproval. The contemplated effective date for the Registration Statement as described in Section 1.1(b) shall be extended without default or liquidated damages hereunder or under the Purchase Agreement in the event that the Company’s failure to obtain the effectiveness of the Registration Statement on a timely basis results solely from the Commission’s disapproval of the structure of the transactions contemplated by the Purchase Agreement. In such event, the parties agree to cooperate with one another in good faith to arrive at a resolution acceptable to the Commission.

     (d) Failure to Maintain Effectiveness of Registration Statement. In the event the Company fails to maintain the effectiveness of the Registration Statement (or the Prospectus) throughout the period set forth in Section 4.2, other than temporary suspensions as set forth in Section 1.1(e) and the Investor holds any Registrable Securities at any time during the period of such ineffectiveness (an “Ineffective Period”), the Company shall pay to the Investor in immediately available funds into an account designated by the Investor an amount equal to the product of (x) the total number of Registrable Securities issued to the Investor under the Purchase Agreement and owned by the Investor at any time during such Ineffective Period and (y) the result, if greater than zero, obtained by subtracting the VWAP on the Trading Day immediately following the last day of such Ineffective Period from the VWAP on the Trading Day immediately preceding the day on which any such Ineffective Period began; provided, however, that the foregoing payments shall not apply in respect of Registrable Securities that are otherwise freely tradable by the Investor.

     (e) Deferral or Suspension During a Blackout Period. Notwithstanding the provisions of Section 1.1(d), if in the good faith judgment of the Company, following consultation with legal counsel, it would be detrimental to the Company or its stockholders for the Registration Statement to be filed or for resales of Registrable Securities to be made pursuant to the Registration Statement due to (i) the existence of a material development or potential material development involving the Company that the Company would be obligated to disclose in the Registration Statement, which disclosure would be premature or otherwise inadvisable at such time or would have a Material Adverse Effect on the Company or its stockholders, or (ii) a filing of a Company-initiated registration of any class of its equity securities, which, in the good faith judgment of the Company, would adversely effect or require premature disclosure of the filing of such Company-initiated registration (notice thereof, a “Blackout Notice”), the Company shall have the right to (A) immediately defer such filing for a period of not more than sixty (60) days beyond the date by which such Registration Statement was otherwise required hereunder to be filed or (B) suspend use of such Registration Statement for a period of not more than thirty (30) days (any such deferral or suspension period, a “Blackout Period”). The Investor acknowledges that it would be seriously detrimental to the Company and its stockholders for such Registration Statement to be filed (or remain in effect) during a Blackout Period and therefore essential to defer such filing (or suspend the use thereof) during such Blackout Period and agrees to cease any disposition of the Registrable Securities during such Blackout Period. The Company may not utilize any of its rights under this Section 1.1(e) to defer the filing of a Registration Statement (or suspend its effectiveness) more than six (6) times in any twelve (12) month period. In the event that, within fifteen (15) Trading Days following any Settlement Date, the Company gives a Blackout Notice to the Investor and the VWAP on the Trading Day immediately preceding such Blackout Period (“Old VWAP”) is greater than the VWAP on the first Trading Day following such Blackout Period that the Investor may sell its Registrable Securities pursuant to an effective Registration Statement (“New VWAP”), then the Company shall pay to the Investor, by wire transfer of immediately available funds to an account designated by the Investor, the “Blackout Amount.” For the purposes of this Agreement, Blackout Amount means a percentage equal to: (1) seventy-five percent (75%) if such Blackout Notice is delivered prior to the fifth (5^th) Trading Day following such Settlement Date; (2) fifty percent (50%) if such Blackout Notice is delivered on or after the fifth (5^th) Trading Day following such Settlement Date, but prior to the tenth (10^th) Trading Day following such Settlement Date; (3) twenty-five percent (25%) if such Blackout Notice is delivered on or after the tenth (10^th) Trading Day following such Settlement Date, but prior to the fifteenth (15^th) Trading Day following such Settlement Date; and (4) zero percent (0%) thereafter of: the product of (i) the number of Registrable Securities purchased by the Investor pursuant to the most recent Draw Down and actually held by the Investor immediately prior to the Blackout Period and (ii) the result, if greater than zero, obtained by subtracting the New VWAP from the Old VWAP. For any Blackout Period in respect of which a Blackout Amount becomes due and payable, rather than paying the Blackout Amount, the Company may at is sole discretion, issue to the Investor shares of Common Stock with an aggregate

2

market value determined as of the first Trading Day following such Blackout Period equal to the Blackout Amount (“Blackout Shares”).

     (f) Liquidated Damages. The Company and the Investor hereto acknowledge and agree that the amounts payable under Sections 1.1(d) and 1.1(e) and the Blackout Shares deliverable under Section 1.1(e) above shall constitute liquidated damages and not penalties. The parties further acknowledge that (i) the amount of loss or damages likely to be incurred by the Investor is incapable or is difficult to precisely estimate, (ii) the amounts specified in such subsections bear a reasonable proportion and are not plainly or grossly disproportionate to the probable loss likely to be incurred in connection with any failure by the Company to obtain or maintain the effectiveness of the Registration Statement, (iii) one of the reasons for the Company and the Investor reaching an agreement as to such amounts was the uncertainty and cost of litigation regarding the question of actual damages, and (iv) the Company and the Investor are sophisticated business parties and have been represented by sophisticated and able legal and financial counsel and negotiated this Agreement at arm’s length.

     (g) Additional Registration Statements. In the event and to the extent that the Registration Statement fails to register a sufficient amount of Common Stock necessary for the Company to issue and sell to the Investor and the Investor to purchase from the Company all of the Registrable Securities to be issued, sold and purchased under the Purchase Agreement and the Warrant, the Company shall, upon a timetable mutually agreeable to both the Company and the Investor, prepare and file with the Commission an additional registration statement or statements in order to effectuate the purpose of this Agreement, the Purchase Agreement, and the Warrant.

ARTICLE II
REGISTRATION PROCEDURES

     Section 2.1. Filings; Information. The Company shall effect the registration with respect to the sale of the Registrable Securities by the Investor in accordance with the intended methods of disposition thereof. Without limiting the foregoing, the Company in each such case will do the following as expeditiously as possible, but in no event later than the deadline, if any, prescribed therefor in this Agreement:

     (a) Subject to Section 1.1(e), the Company shall (i) prepare and file with the Commission the Registration Statement; (ii) use commercially reasonable efforts to cause such filed Registration Statement to become and to remain effective (pursuant to Rule 415 under the Securities Act or otherwise); (iii) prepare and file with the Commission such amendments and supplements to the Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for the time period prescribed by Section 4.2 and in order to effectuate the purpose of this Agreement, the Purchase Agreement, and the Warrant; and (iv) comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during such period in accordance with the intended methods of disposition by the Investor set forth in such Registration Statement; provided, however, that the Investor shall be responsible for the delivery of the Prospectus to the Persons to whom the Investor sells the Shares and the Warrant Shares, and the Investor agrees to dispose of Registrable Securities in compliance with the plan of distribution described in the Registration Statement and otherwise in compliance with applicable federal and state securities laws.

     (b) Three (3) Trading Days prior to filing the Registration Statement or Prospectus, or any amendment or supplement thereto (excluding amendments deemed to result from the filing of documents incorporated by reference therein), the Company shall deliver to the Investor and to counsel representing the Investor, in accordance with the notice provisions of Section 4.8, copies of the Registration Statement,

3

Prospectus and/or any amendments or supplements thereto as proposed to be filed, together with exhibits thereto, which documents will be subject to review by the Investor and such counsel, and thereafter deliver to the Investor and such counsel, in accordance with the notice provisions of Section 4.8, such number of copies of the Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto), the Prospectus (including each preliminary prospectus) and such other documents or information as the Investor or counsel may reasonably request in order to facilitate the disposition of the Registrable Securities, provided, however, that to the extent reasonably practicable, such delivery may be accomplished via electronic means.

     (c) After the filing of the Registration Statement, the Company shall promptly notify the Investor of any stop order issued or threatened by the Commission in connection therewith and take all commercially reasonable actions required to prevent the entry of such stop order or to remove it if entered.

     (d) The Company shall use commercially reasonable efforts to (i) register or qualify the Registrable Securities under such other securities or blue sky laws of each jurisdiction in the United States as the Investor may reasonably (in light of its intended plan of distribution) request, and (ii) cause the Registrable Securities to be registered with or approved by such other governmental agencies or authorities in the United States as may be necessary by virtue of the business and operations of the Company and do any and all other customary acts and things that may be reasonably necessary or advisable to enable the Investor to consummate the disposition of the Registrable Securities; provided, however, that the Company will not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 2.1(e), subject itself to taxation in any such jurisdiction, consent or subject itself to general service of process in any such jurisdiction, change any existing business practices, benefit plans or outstanding securities or amend or otherwise modify the Charter or Bylaws.

     (e) The Company shall make available to the Investor (and will deliver to Investor’s counsel), (A) subject to restrictions imposed by the United States federal government or any agency or instrumentality thereof, copies of all public correspondence between the Commission and the Company concerning the Registration Statement and will also make available for inspection by the Investor and any attorney, accountant or other professional retained by the Investor (collectively, the “Inspectors”), (B) upon reasonable advance notice during normal business hours all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “Records”) as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers and employees to supply all information reasonably requested by any Inspectors in connection with the Registration Statement; provided, however, that any such Inspectors must agree in writing for the benefit of the Company not to use or disclose any such Records except as provided in this Section 2.1(f). Records that the Company determines, in good faith, to be confidential and that it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless the disclosure or release of such Records is requested or required pursuant to oral questions, interrogatories, requests for information or documents or a subpoena or other order from a court of competent jurisdiction or other judicial or governmental process; provided, however, that prior to any disclosure or release pursuant to the immediately preceding clause, the Inspectors shall provide the Company with prompt notice of any such request or requirement so that the Company may seek an appropriate protective order or waive such Inspectors’ obligation not to disclose such Records; and, provided, further, that if failing the entry of a protective order or the waiver by the Company permitting the disclosure or release of such Records, the Inspectors, upon advice of counsel, are compelled to disclose such Records, the Inspectors may disclose that portion of the Records that counsel has advised the Inspectors that the Inspectors are compelled to disclose; provided, however, that upon any such required disclosure, such Inspector shall use his or her best efforts to obtain reasonable assurances that confidential treatment will be afforded such information. The Investor agrees that

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information obtained by it solely as a result of such inspections (not including any information obtained from a third party who, insofar as is known to the Investor after reasonable inquiry, is not prohibited from providing such information by a contractual, legal or fiduciary obligation to the Company) shall be deemed confidential and shall not be used for any purposes other than as indicated above or by it as the basis for any market transactions in the securities of the Company or its affiliates unless and until such information is made generally available to the public. The Investor further agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential.

     (f) The Company shall otherwise comply with all applicable rules and regulations of the Commission, including, without limitation, compliance with applicable reporting requirements under the Exchange Act.

     (g) The Company shall appoint a transfer agent and registrar for all of the Registrable Securities covered by such Registration Statement not later than the effective date of such Registration Statement.

     (h) The Investor shall cooperate with the Company, as reasonably requested by the Company, in connection with the preparation and filing of any Registration Statement hereunder. The Company may require the Investor to promptly furnish in writing to the Company such information as may be required in connection with such registration including, without limitation, all such information as may be requested by the Commission or the NASD or any state securities commission and all such information regarding the Investor, the Registrable Securities held by the Investor and the intended method of disposition of the Registrable Securities. The Investor agrees to provide such information requested in connection with such registration within five (5) Business days after receiving such written request and the Company shall not be responsible for any delays in obtaining or maintaining the effectiveness of the Registration Statement caused by the Investor’s failure to timely provide such information.

     (i) Upon receipt of a Blackout Notice from the Company, the Investor shall immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until (i) the Company advises the Investor that the Blackout Period has terminated and (ii) the Investor receives copies of a supplemented or amended prospectus, if necessary. If so directed by the Company, the Investor will deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in the Investor’s possession (other than a limited number of file copies) of the prospectus covering such Registrable Securities that is current at the time of receipt of such notice.

     Section 2.2. Registration Expenses. The Company shall pay all registration expenses incurred in connection with the Registration Statement (the “Registration Expenses”), including, without limitation: (i) all registration, filing, securities exchange listing and fees required by the National Association of Securities Dealers, (ii) all registration, filing, qualification and other fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) all word processing, duplicating, printing, messenger and delivery expenses, (iv) the Company’s internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) the fees and expenses incurred by the Company in connection with the listing of the Registrable Securities, (vi) reasonable fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company (including the expenses of any special audits or comfort letters or costs associated with the delivery by independent

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certified public accountants of such special audit(s) or comfort letter(s), (vii) the fees and expenses of any special experts retained by the Company in connection with such registration and amendments and supplements to the Registration Statement and Prospectus, and (viii) premiums and other costs of the Company for policies of insurance against liabilities arising out of any public offering of the Registrable Securities being registered. Any fees and disbursements of underwriters, broker-dealers or investment bankers, including without limitation underwriting fees, discounts, transfer taxes or commissions, and any other fees or expenses (including legal fees and expenses) if any, attributable to the sale of Registrable Securities, shall be payable by each holder of Registrable Securities pro rata on the basis of the number of Registrable Securities of each such holder that are included in a registration under this Agreement.

ARTICLE III
INDEMNIFICATION

     Section 3.1. Indemnification. The Company agrees to indemnify and hold harmless the Investor, its partners, affiliates, officers, directors, employees and duly authorized agents, and each Person or entity, if any, who controls the Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, together with the partners, affiliates, officers, directors, employees and duly authorized agents of such controlling Person or entity (collectively, the “Controlling Persons”), from and against any loss, claim, damage, liability, costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements and costs and expenses of investigating and defending any such claim) (collectively, “Damages”), joint or several, and any action or proceeding in respect thereof to which the Investor, its partners, affiliates, officers, directors, employees and duly authorized agents, and any Controlling Person, may become subject under the Securities Act or otherwise, as incurred, insofar as such Damages (or actions or proceedings in respect thereof) arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, or in any preliminary prospectus, final prospectus, summary prospectus, amendment or supplement relating to the Registrable Securities or arises out of, or are based upon, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein under the circumstances not misleading, and shall reimburse the Investor, its partners, affiliates, officers, directors, employees and duly authorized agents, and each such Controlling Person, for any legal and other expenses reasonably incurred by the Investor, its partners, affiliates, officers, directors, employees and duly authorized agents, or any such Controlling Person, as incurred, in investigating or defending or preparing to defend against any such Damages or actions or proceedings; provided, however, that the Company shall not be liable to the extent that any such Damages arise out of the Investor’s (or any other indemnified Person’s) failure to send or give a copy of the final prospectus or supplement (as then amended or supplemented) to the persons asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such person if such statement or omission was corrected in such final prospectus or supplement; provided, further, that the Company shall not be liable to the extent that any such Damages arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, or any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Investor or any other person who participates as an underwriter in the offering or sale of such securities, in either case, specifically stating that it is for use in the preparation thereof. In connection with any Registration Statement with respect to which the Investor is participating, such Investor will indemnify and hold harmless, to the same extent and in the same manner as set forth in the preceding paragraph, the Company, each of its partners, affiliates, officers, directors, employees and duly authorized agents of such controlling Person (each a “Company Indemnified Person”) against any Damages to which any Company Indemnified Person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Damages arise out of or are based upon (a) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, or in any

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preliminary prospectus, final prospectus, summary prospectus, amendment or supplement relating to the Registrable Securities or arise out of, or are based upon, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein under the circumstances not misleading to the extent that such violation occurs in reliance upon and in conformity with written information furnished to the Company by the Investor or on behalf of the Investor expressly for use in connection with such Registration Statement or (b) any failure by the Investor to comply with prospectus delivery requirements of the Securities Act, the Exchange Act or any other law or legal requirement applicable to sales under the Registration Statement

     Section 3.2. Conduct of Indemnification Proceedings. All claims for indemnification under Section 3.1 shall be asserted and resolved in accordance with the provisions of Section 9.02 of the Purchase Agreement.

     Section 3.3. Additional Indemnification. Indemnification similar to that specified in the preceding paragraphs of this Article 3 (with appropriate modifications) shall be given by the Company with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the Securities Act. The provisions of this Article III shall be in addition to any other rights to indemnification, contribution or other remedies which an Indemnified Party or a Company Indemnified Person may have pursuant to law, equity, contract or otherwise.

     To the extent that any indemnification provided for herein is prohibited or limited by law, the indemnifying party will make the maximum contribution with respect to any amounts for which it would otherwise be liable under this Article III to the fullest extent permitted by law. However, (a) no contribution will be made under circumstances where maker of such contribution would not have been required to indemnify the indemnified party under the fault standards set forth in this Article III, (b) if the Investor is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) the Investor will not be entitled to contribution from any Person who is not guilty of such fraudulent misrepresentation, and (c) contribution (together with any indemnification obligations under this Agreement) by the Investor will be limited in amount to the proceeds received by the Investor from sales of Registrable Securities.

ARTICLE IV
MISCELLANEOUS

     Section 4.1. No Outstanding Registration Rights. Except as otherwise disclosed in accordance with the Purchase Agreement or in the Commission Documents, the Company represents and warrants to the Investor that there is not in effect on the date hereof any agreement by the Company pursuant to which any holders of securities of the Company have a right to cause the Company to register or qualify such securities under the Securities Act or any securities or blue sky laws of any jurisdiction.

     Section 4.2. Term. The registration rights provided to the holders of Registrable Securities hereunder, and the Company’s obligation to keep the Registration Statement effective, shall terminate at the earlier of (i) such time that is two years following the termination of the Purchase Agreement, (ii) such time as all Registrable Securities have been issued and have ceased to be Registrable Securities, or (iii) upon the consummation of an “Excluded Merger or Sale” as defined in the Warrant. Notwithstanding the foregoing, paragraph (d) of Section 1.1, Article III, Section 4.7, Section 4.8, Section 4.9, Section 4.10 and Section 4.13 shall survive the termination of this Agreement.

     Section 4.3. Rule 144. The Company will, at its expense, promptly take such action as holders of Registrable Securities may reasonably request to enable such holders of Registrable Securities

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to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act (“Rule 144”), as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. If at any time the Company is not required to file such reports, it will, at its expense, forthwith upon the written request of any holder of Registrable Securities, make available adequate current public information with respect to the Company within the meaning of paragraph (c)(2) of Rule 144 or such other information as necessary to permit sales pursuant to Rule 144. Upon the request of the Investor, the Company will deliver to the Investor a written statement, signed by the Company’s principal financial officer, as to whether it has complied with such requirements.

     Section 4.4. Certificate. The Company will, at its expense, forthwith upon the request of any holder of Registrable Securities, deliver to such holder a certificate, signed by the Company’s principal financial officer, stating (a) the Company’s name, address and telephone number (including area code), (b) the Company’s Internal Revenue Service identification number, (c) the Company’s Commission file number, (d) the number of shares of each class of Stock outstanding as shown by the most recent report or statement published by the Company, and (e) whether the Company has filed the reports required to be filed under the Exchange Act for a period of at least ninety (90) days prior to the date of such certificate and in addition has filed the most recent annual report required to be filed thereunder.

     Section 4.5. Amendment And Modification. Any provision of this Agreement may be waived, provided that such waiver is set forth in a writing executed by both parties to this Agreement. The provisions of this Agreement, including the provisions of this sentence, may be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may be given, only with the written consent of the Investor and the Company. No course of dealing between or among any Person having any interest in this Agreement will be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any person under or by reason of this Agreement.

     Section 4.6. Successors and Assigns; Entire Agreement. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. The Company may assign this Agreement at any time in connection with a sale or acquisition of the Company, whether by merger, consolidation, sale of all or substantially all of the Company’s assets, or similar transaction, without the consent of the Investor, provided that the successor or acquiring Person or entity agrees in writing to assume all of the Company’s rights and obligations under this Agreement. The Investor may assign its rights and obligations under this Agreement only to (i) an affiliate that meets all applicable requirements of federal and state securities laws, or (ii) with the prior written consent of the Company, and any purported assignment by the Investor other than as set forth above shall be null and void. This Agreement, together with the Purchase Agreement and the Warrant sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them.

     Section 4.7. Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that such severability shall be ineffective if it materially changes the economic benefit of this Agreement to any party hereto.

     Section 4.8. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be given in accordance with Section 10.04 of the Purchase Agreement.

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     Section 4.9. Governing Law; Dispute Resolution. This Agreement shall be construed under the laws of the State of New York.

     Section 4.10. Headings. The headings in this Agreement are for convenience of reference only and shall not constitute a part of this Agreement, nor shall they affect their meaning, construction or effect.

     Section 4.11. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original instrument and all of which together shall constitute one and the same instrument.

     Section 4.12. Further Assurances. Each party shall cooperate and take such action as may be reasonably requested by another party in order to carry out the provisions and purposes of this Agreement and the transactions contemplated hereby.

     Section 4.13. Absence of Presumption. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted.

[Remainder of this page intentionally left blank]

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above.

KINGSBRIDGE CAPITAL LIMITED
By:	/s/ Adam Gurney
	Adam Gurney
	Chief Executive Officer
	Palm Grove House
	2nd Floor
	Road Town, Tortola
	British Virgin Islands
GENVEC, INC.
By:	/s/ Paul H. Fischer
	Paul H. Fischer, Ph.D.
	President and Chief Executive Officer

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EX-4.5

Exhibit 4.5

WARRANT

THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.

MARCH 15, 2006

     Warrant to Purchase up to 520,000 shares of Common Stock of GenVec, Inc. (the “Company”).

     In consideration for Kingsbridge Capital Limited, an entity organized and existing under the laws of the British Virgin Islands, with registered address Palm Grove House, 2nd Floor, Road Town, Tortola, British Virgin Islands (the “Investor”) agreeing to enter into that certain Common Stock Purchase Agreement, dated as of the date hereof, between the Investor and the Company (the “Agreement”), the Company hereby agrees that the Investor or any other Warrant Holder (as defined below) is entitled, on the terms and conditions set forth below, to purchase from the Company at any time during the Exercise Period (as defined below) up to 520,000 fully paid and nonassessable shares of common stock, par value $.001 per share, of the Company (the “Common Stock”) at the Exercise Price (hereinafter defined), as the same may be adjusted from time to time pursuant to Section 6 hereof. The resale of the shares of Common Stock or other securities issuable upon exercise or exchange of this Warrant is subject to the provisions of the Registration Rights Agreement (as defined in the Agreement).

     Section 1. Definitions.

     “Affiliate” shall mean any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by, or is under direct or indirect common control with any other Person. For the purposes of this definition, “control,” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the term “controls” and “controlled” have meanings correlative to the foregoing.

     “Closing Price” as of any particular day shall mean the closing price per share of the Company’s Common Stock as reported by Bloomberg L.P. on such day.

     “Exercise Period” shall mean that period beginning six months after the date of this Warrant and continuing until (i) the expiration of the five-year period thereafter, or (ii) a Funding Default, subject in each case to earlier termination in accordance with Section 6 hereof.

     “Exercise Price” as of the date hereof shall mean two dollars and sixty-seven cents ($2.67), representing 125% of the average Closing Price of the Common Stock during the five (5) Trading Days immediately preceding the date of this Warrant.

     “Funding Default” shall mean a failure by the Investor to accept a Draw Down Notice made by the Company and to acquire and pay for the Shares in accordance therewith within three (3) Trading Days

following the delivery of such Shares to the Investor, provided such Draw Down Notice was made in accordance with the terms and conditions of the Agreement (including the satisfaction or waiver of the conditions to the obligation of the Investor to accept a Draw Down set forth in Article VII of the Agreement), provided further, that such failure was reasonably within the control of the Investor.

     “Per Share Warrant Value” shall mean the difference resulting from subtracting the Exercise Price from the Closing Price on the Trading Day immediately preceding the Exercise Date.

     “Person” shall mean an individual, a corporation, a partnership, a limited liability company, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

     “Principal Market” shall mean the Nasdaq National Market, the Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock.

     “SEC” shall mean the United States Securities and Exchange Commission.

     “Trading Day” shall mean any day other than a Saturday or a Sunday on which the Principal Market is open for trading in equity securities.

     “Warrant Holder” shall mean the Investor or any permitted assignee or permitted transferee of all or any portion of this Warrant.

     “Warrant Shares” shall mean those shares of Common Stock received upon exercise of this Warrant.

     Section 2. Exercise.

     (a) Method of Exercise. This Warrant may be exercised in whole or in part (but not as to a fractional share of Common Stock), at any time and from time to time during the Exercise Period, by the Warrant Holder by (i) surrender of this Warrant, with the form of exercise attached hereto as Exhibit A completed and duly executed by the Warrant Holder (the “Exercise Notice”), to the Company at the address set forth in Section 10.04 of the Agreement, accompanied by payment of the Exercise Price multiplied by the number of shares of Common Stock for which this Warrant is being exercised (the “Aggregate Exercise Price”) or (ii) telecopying an executed and completed Exercise Notice to the Company and delivering to the Company within five (5) business days thereafter the original Exercise Notice, this Warrant and the Aggregate Exercise Price. Each date on which an Exercise Notice is received by the Company in accordance with clause (i) and each date on which the Exercise Notice is telecopied to the Company in accordance with clause (ii) above shall be deemed an “Exercise Date.”

     (b) Payment of Aggregate Exercise Price. Subject to paragraph (c) below, payment of the Aggregate Exercise Price shall be made by wire transfer of immediately available funds to an account designated by the Company. If the amount of the payment received by the Company is less than the Aggregate Exercise Price, the Warrant Holder will be notified of the deficiency and shall make payment in that amount within three (3) Trading Days. In the event the payment exceeds the Aggregate Exercise Price, the Company will refund the excess to the Warrant Holder within five (5) Trading Days of receipt.

     (c) Cashless Exercise. In the event that the Warrant Shares to be received by the Warrant Holder upon exercise of the Warrant may not be resold pursuant to an effective registration statement or an exemption to the registration requirements of the Securities Act of 1933, as amended, and applicable state

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laws, the Warrant Holder may, as an alternative to payment of the Aggregate Exercise Price upon exercise in accordance with paragraph (b) above, elect to effect a cashless exercise by so indicating on the Exercise Notice and including a calculation of the number of shares of Common Stock to be issued upon such exercise in accordance with the terms hereof (a “Cashless Exercise”). If a registration statement on Form S-1 under the Securities Act of 1933, as amended, or such other form as deemed appropriate by counsel to the Company for the registration for the resale by the Warrant Holder of (x) the shares of Common Stock of the Company that may be purchased under the Agreement, (y) the Warrant Shares, or (z) any securities issued or issuable with respect to any of the foregoing by way of exchange, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise, has been declared effective by the SEC and remains effective, the Company may permit or require the Warrant Holder to elect to effect a Cashless Exercise. In the event of a Cashless Exercise, the Warrant Holder shall receive that number of shares of Common Stock determined by (i) multiplying the number of Warrant Shares for which this Warrant is being exercised by the Per Share Warrant Value and (ii) dividing the product by the Closing Price on the Trading Day immediately preceding the Exercise Date, rounded to the nearest whole share. The Company shall cancel the total number of Warrant Shares equal to the excess of the number of the Warrant Shares for which this Warrant is being exercised over the number of Warrant Shares to be received by the Warrant Holder pursuant to such Cashless Exercise.

     (d) Replacement Warrant. In the event that the Warrant is not exercised in full, the number of Warrant Shares shall be reduced by the number of such Warrant Shares for which this Warrant is exercised, and the Company, at its expense, shall forthwith issue and deliver to or upon the order of the Warrant Holder a new Warrant of like tenor in the name of the Warrant Holder, reflecting such adjusted number of Warrant Shares.

     Section 3. Ten Percent Limitation. The Warrant Holder may not exercise this Warrant such that the number of Warrant Shares to be received pursuant to such exercise aggregated with all other shares of Common Stock then owned by the Warrant Holder beneficially or deemed beneficially owned by the Warrant Holder would result in the Warrant Holder owning more than 9.9% of all of such Common Stock as would be outstanding on such Exercise Date, as determined in accordance with Section 13(d) of the Exchange Act of 1934 and the rules and regulations promulgated thereunder.

     Section 4. Delivery of Warrant Shares.

     (a) Subject to the terms and conditions of this Warrant, as soon as practicable after the exercise of this Warrant in full or in part, and in any event within ten (10) Trading Days thereafter, the Company at its expense (including, without limitation, the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Warrant Holder, or as the Warrant Holder may lawfully direct, a certificate or certificates for, or make deposit with the Depositary Trust Company via book-entry of, the number of validly issued, fully paid and non-assessable Warrant Shares to which the Warrant Holder shall be entitled on such exercise, together with any other stock or other securities or property (including cash, where applicable) to which the Warrant Holder is entitled upon such exercise in accordance with the provisions hereof.

     (b) This Warrant may not be exercised as to fractional shares of Common Stock. In the event that the exercise of this Warrant, in full or in part, would result in the issuance of any fractional share of Common Stock, then in such event the Warrant Holder shall receive the number of shares rounded to the nearest whole share.

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     Section 5. Representations, Warranties and Covenants of the Company.

     (a) The Warrant Shares, when issued in accordance with the terms hereof, will be duly authorized and, when paid for or issued in accordance with the terms hereof, shall be validly issued, fully paid and non-assessable.

     (b) The Company shall take all commercially reasonable action and proceedings as may be required and permitted by applicable law, rule and regulation for the legal and valid issuance of this Warrant and the Warrant Shares to the Warrant Holder.

     (c) The Company has authorized and reserved for issuance to the Warrant Holder the requisite number of shares of Common Stock to be issued pursuant to this Warrant. The Company shall at all times reserve and keep available, solely for issuance and delivery as Warrant Shares hereunder, such shares of Common Stock as shall from time to time be issuable as Warrant Shares.

     (d) From the date hereof through the last date on which this Warrant is exercisable, the Company shall take all steps commercially reasonable to ensure that the Common Stock remains listed or quoted on the Principal Market.

     Section 6. Adjustment of the Exercise Price. The Exercise Price and, accordingly, the number of Warrant Shares issuable upon exercise of the Warrant, shall be subject to adjustment from time to time upon the happening of certain events as follows:

     (a) Reclassification, Consolidation, Merger, Mandatory Share Exchange, Sale or Transfer.

          (i) Upon occurrence of any of the events specified in subsection (a)(ii) below (the “Adjustment Events”) while this Warrant is unexpired and not exercised in full, the Warrant Holder may in its sole discretion require the Company, or any successor or purchasing corporation, as the case may be, without payment of any additional consideration therefor, to execute and deliver to the Warrant Holder a new Warrant providing that the Warrant Holder shall have the right to exercise such new Warrant (upon terms not less favorable to the Warrant Holder than those then applicable to this Warrant) and to receive upon such exercise, in lieu of each share of Common Stock theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money or property receivable upon such Adjustment Event by the holder of one share of Common Stock issuable upon exercise of this Warrant had this Warrant been exercised immediately prior to such Adjustment Event. Such new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 6.

          (ii) The Adjustment Events shall be (1) any reclassification or change of Common Stock (other than a change in par value, as a result of a subdivision or combination of Common Stock or in connection with an Excluded Merger or Sale), (2) any consolidation, merger or mandatory share exchange of the Company with or into another corporation (other than a merger or mandatory share exchange with another corporation in which the Company is a continuing corporation and which does not result in any reclassification or change other than a change in par value or as a result of a subdivision or combination of Common Stock), other than (each of the following referred to as an “Excluded Merger or Sale”) a transaction involving (A) sale of all or substantially all of the assets of the Company, (B) any merger, consolidation or similar transaction where the consideration payable to the shareholders of the Company by the acquiring Person consists substantially entirely of cash, or where the acquiring Person does not agree to assume the obligations of the Company under outstanding warrants (including this Warrant). In the event of an Excluded Merger or Sale, if the surviving, successor or purchasing Person does not agree to assume the obligations under this Warrant, then the Company shall deliver a notice to

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the Warrant Holder at least 10 days before the consummation of such Excluded Merger or Sale, the Warrant Holder may exercise this Warrant at any time before the consummation of such Excluded Merger or Sale (and such exercise may be made contingent upon the consummation of such Excluded Merger or Sale), and any portion of this Warrant that has not been exercised before consummation of such Excluded Merger or Sale shall terminate and expire, and shall no longer be outstanding.

     (b) Subdivision or Combination of Shares. If the Company, at any time while this Warrant is unexpired and not exercised in full, shall subdivide its Common Stock, the Exercise Price shall be proportionately reduced as of the effective date of such subdivision, or, if the Company shall take a record of holders of its Common Stock for the purpose of so subdividing, as of such record date, whichever is earlier. If the Company, at any time while this Warrant is unexpired and not exercised in full, shall combine its Common Stock, the Exercise Price shall be proportionately increased as of the effective date of such combination, or, if the Company shall take a record of holders of its Common Stock for the purpose of so combining, as of such record date, whichever is earlier.

     (c) Stock Dividends. If the Company, at any time while this Warrant is unexpired and not exercised in full, shall pay a dividend or other distribution in shares of Common Stock to all holders of Common Stock, then the Exercise Price shall be adjusted, as of the date the Company shall take a record of the holders of its Common Stock for the purpose of receiving such dividend or other distribution (or if no such record is taken, as at the date of such payment or other distribution), to that price determined by multiplying the Exercise Price in effect immediately prior to such payment or other distribution by a fraction: (i) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (ii) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution. The provisions of this subsection (c) shall not apply under any of the circumstances for which an adjustment is provided in subsections (a) or (b).

     (d) Liquidating Dividends, Etc. If the Company, at any time while this Warrant is unexpired and not exercised in full, makes a distribution of its assets or evidences of indebtedness to the holders of its Common Stock as a dividend in liquidation or by way of return of capital or other than as a dividend payable out of earnings or surplus legally available for dividends under applicable law or any distribution to such holders made in respect of the sale of all or substantially all of the Company’s assets (other than under the circumstances provided for in the foregoing subsections (a) through (c)), then the Warrant Holder shall be entitled to receive upon exercise of this Warrant in addition to the Warrant Shares receivable in connection therewith, and without payment of any consideration other than the Exercise Price, the kind and amount of such distribution per share of Common Stock multiplied by the number of Warrant Shares that, on the record date for such distribution, are issuable upon such exercise of the Warrant (with no further adjustment being made following any event which causes a subsequent adjustment in the number of Warrant Shares issuable), and an appropriate provision therefor shall be made a part of any such distribution. The value of a distribution that is paid in other than cash shall be determined in good faith by the Board of Directors of the Company. Notwithstanding the foregoing, in the event of a proposed dividend in liquidation or distribution to the shareholders made in respect of the sale of all or substantially all of the Company’s assets, the Company shall deliver a notice to the Warrant Holder at least 10 days before the consummation of such event, the Warrant Holder may exercise this Warrant at any time before the consummation of such event (and such exercise may be made contingent upon the consummation of such event), and any portion of this Warrant that has not been exercised before consummation of such event shall terminate and expire, and shall no longer be outstanding.

     Section 7. Notice of Adjustments. Whenever the Exercise Price or number of Warrant Shares shall be adjusted pursuant to Section 6 hereof, the Company shall promptly prepare a certificate signed by its Chief Executive Officer or Chief Financial Officer setting forth in reasonable detail the event requiring

5

the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Company’s Board of Directors made any determination hereunder), and the Exercise Price and number of Warrant Shares purchasable at that Exercise Price after giving effect to such adjustment, and shall promptly cause copies of such certificate to be sent by overnight courier to the Warrant Holder.

     Section 8. No Impairment. The Company will not, by amendment of its Amended and Restated Articles of Incorporation or By-Laws or through any reorganization, transfer of assets, consolidation, merger, dissolution or issue or sale of securities, 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 the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Warrant Holder against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any Warrant Shares above the amount payable therefor on such exercise, and (b) will take all such action as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares on the exercise of this Warrant.

     Section 9. Rights As Stockholder. Except as set forth in Section 6 above, prior to exercise of this Warrant, the Warrant Holder shall not be entitled to any rights as a stockholder of the Company with respect to the Warrant Shares, including (without limitation) the right to vote such shares, receive dividends or other distributions thereon or be notified of stockholder meetings. However, in the event of any taking by the Company 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) or other distribution, any right to 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, the Company shall mail to the Warrant Holder, at least ten (10) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

     Section 10. Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of the Warrant and, in the case of any such loss, theft or destruction of the Warrant, upon delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of such Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

     Section 11. Choice of Law. This Warrant shall be construed under the laws of the State of New York.

     Section 12. Entire Agreement; Amendments. Except for any written instrument concurrent or subsequent to the date hereof executed by the Company and the Investor, this Warrant and the Agreement contain the entire understanding of the parties with respect to the matters covered hereby and thereby. No provision of this Warrant may be waived or amended other than by a written instrument signed by the party against whom enforcement of any such amendment or waiver is sought.

     Section 13. Restricted Securities.

     (a) Registration or Exemption Required. This Warrant has been issued in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, in reliance upon the provisions of Section 4(2) thereof. This Warrant and the Warrant Shares issuable upon exercise of this

6

Warrant may not be resold except pursuant to an effective registration statement or an exemption to the registration requirements of the Securities Act of 1933 and applicable state laws.

     (b) Legend. Any replacement Warrants issued pursuant to Section 2 and Section 10 hereof and, unless a registration statement has been declared effective by the SEC in accordance with the Securities Act of 1933, as amended, with respect thereto, any Warrant Shares issued upon exercise hereof, shall bear the following legend:

“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.”

     (c) No Other Legend or Stock Transfer Restrictions. No legend other than the one specified in Section 13(b) has been or shall be placed on the share certificates representing the Warrant Shares and no instructions or “stop transfer orders” (so called “stock transfer restrictions”) or other restrictions have been or shall be given to the Company’s transfer agent with respect thereto other than as expressly set forth in this Section 13.

     (d) Assignment. Assuming the conditions of Section 13(a) above regarding registration or exemption have been satisfied, the Warrant Holder may sell, transfer, assign, pledge or otherwise dispose of this Warrant (each of the foregoing, a “Transfer”), in whole or in part, but only to an Affiliate of the Warrant Holder. The Warrant Holder shall deliver a written notice to Company, substantially in the form of the Assignment attached hereto as Exhibit B, indicating the person or persons to whom the Warrant shall be Transferred and the respective number of warrants to be Transferred to each assignee. The Company shall effect the Transfer within ten (10) days, and shall deliver to the Transferee(s) designated by the Warrant Holder a Warrant or Warrants of like tenor and terms for the appropriate number of shares. In connection with and as a condition of any such proposed Transfer, the Company may request (i) the Warrant Holder to provide an opinion of counsel to the Warrant Holder in form and substance reasonably satisfactory to the Company to the effect that the proposed Transfer complies with all applicable federal and state securities laws and (ii) any such Transferee to provide customery representations and warranties attendant to the acquisition of unregistered securities, including, without limitation, the Transferee’s investment intent and status as an “accredited investor” within the meaning of Regulation D.

     (e) Investor’s Compliance. Nothing in this Section 13 shall affect in any way the Investor’s obligations under any agreement to comply with all applicable securities laws upon resale of the Common Stock.

     Section 14. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be given in accordance with Section 10.04 of the Purchase Agreement.

7

     Section 15. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

     Section 16. Company Call Right.

     (a) If a Funding Default occurs, the Company shall have the right to demand the surrender of this Warrant or any remaining portion thereof, Shares and/or cash from the Investor as follows (the “Call Right”):

          (i) If the Investor has not previously exercised this Warrant in full, then the Company shall have a right to demand the surrender of this Warrant, or remaining portion thereof, from the Investor without compensation, and the Investor shall promptly surrender this Warrant, or remaining portion thereof. Following such demand for surrender, this Warrant shall automatically be deemed to have been canceled and shall have no further force or effect.

          (ii) If, prior to receiving a Call Right Notice, the Investor has previously exercised this Warrant with respect to some or all of the Warrant Shares, and the Investor has not previously sold such Warrant Shares, then Company shall have a right to purchase from the Investor that number of shares of Common Stock equal to the number of shares of Common Stock issued in connection with the exercise(s) of the Warrant, at a repurchase price per share equal to the price per share paid by the Investor in connection with such exercise(s). For greater certainty, (a) if Warrant Shares were exercised for cash, the purchase price per share under the Call Right shall be equal to the Exercise Price, (b) if Warrant Shares were exercised on a cashless exercise basis, the purchase price per share for such Warrant Shares under the Call Right shall be zero, and (c) if such Warrant Shares were exercised on both a cash and cashless exercise basis, the purchase price per share under the Call Right shall be equal to the total amount of cash paid in connection with such cash exercise(s) divided by the total number of shares of Common Stock issued in connection with all exercises of the Warrant (whether on a cash or cashless basis).

          (iii) If, prior to receiving a Call Right Notice, the Investor has previously exercised this Warrant with respect to some or all of the Warrant Shares, and the Investor subsequently sold such Warrant Shares, then the Investor shall remit to the Company the excess, if any, of (x) the proceeds received by Investor through the sale of such Warrant Shares, over (y) the aggregate Exercise Price for such Warrant Shares. In the event that the Investor obtained such Warrant Shares through a Cashless Exercise, then the Investor shall instead remit to the Company all proceeds received by the Investor through the sale of such Warrant Shares. For the avoidance of doubt, in the event that the Investor has sold some or all of the Warrant Shares prior to receiving a Call Right Notice, then the right set forth in this paragraph (iii) shall constitute the sole Call Right of the Company with respect to such Warrant Shares which have been sold.

     (b) Company may exercise the Call Right by delivering a notice (the “Call Right Notice”) to the Investor within thirty (30) days after the occurrence of a Funding Default. On the tenth (10th) business day following delivery of the Call Right Notice to the Investor, the Company shall tender the purchase price, if any, and the Investor shall tender shares of Common Stock, if any, to be sold to the Company pursuant to the Call Right Notice, immediately following which the Company and the Investor shall consummate such purchase and sale. The Call Right shall survive both the assignment of the

8

Warrant by the Investor and the disposition of the Warrant Shares by the Investor following exercise of the Warrant.

     Section 17. Absence of Presumption. This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted.

[Remainder of this page intentionally left blank]

9

     IN WITNESS WHEREOF, this Warrant was duly executed by the undersigned, thereunto duly authorized, as of the date first set forth above.

GENVEC, INC.
By:	/s/ Paul H. Fischer
	Paul H. Fischer, Ph.D. President and Chief Executive Officer

10

EXHIBIT A TO THE WARRANT

EXERCISE FORM

GENVEC, INC.

     The undersigned hereby irrevocably exercises the right to purchase                                         shares of Common Stock of GenVec, Inc., a Delaware corporation, evidenced by the attached Warrant, and (CIRCLE EITHER (i) or (ii)) (i) tenders herewith payment of the Aggregate Exercise Price with respect to such shares in full, in the amount of $                    , in cash, by certified or official bank check or by wire transfer for the account of the Company or (ii) elects, pursuant to Section 2(c) of the Warrant, to convert such Warrant into shares of Common Stock of GenVec, Inc. on a cashless exercise basis, all in accordance with the conditions and provisions of said Warrant.

     The undersigned requests that stock certificates for such Warrant Shares be issued, and a Warrant representing any unexercised portion hereof be issued, pursuant to this Warrant, in the name of the registered Warrant Holder and delivered to the undersigned at the address set forth below.

Dated:

Signature of Registered Holder

Name of Registered Holder (Print)

Address

EXHIBIT B TO THE WARRANT

ASSIGNMENT

     (To be executed by the registered Warrant Holder desiring to transfer the Warrant)

     FOR VALUED RECEIVED, the undersigned Warrant Holder of the attached Warrant hereby sells, assigns and transfers unto the persons below named the right to purchase                     shares of Common Stock of GenVec, Inc. (the “Company”) evidenced by the attached Warrant and does hereby irrevocably constitute and appoint                                          attorney to transfer the said Warrant on the books of the Company, with full power of substitution in the premises.

Dated:

Signature

Fill in for new Registration of Warrant:

Name

Address

Please print name and address of assignee

(including zip code number)

EX-10.27

EXHIBIT 10.27

DESCRIPTION OF GENVEC, INC. 2006 ANNUAL BONUS PLAN

2006 annual bonuses will be determined by the achievement of both individual goals and corporate goals, each of which will be given 50% weight in determining the annual bonus. Based upon individual performance and accomplishments, the Compensation Committee will award discretionary bonuses that fall within ranges established by the Compensation Committee. Such ranges are based on target bonus figures, by position, from public companies of similar employee size and industry type. Individual goals are established for each employee subsequently evaluated in each individual’s performance review. Corporate goals for 2006 relate to financing activities, progress in product development programs, the establishment of new strategic alliances, and other business development initiatives. Certain of these goals carry a higher weighting than others. The bonus for the President and Chief Executive Officer is determined primarily by satisfaction of the corporate goals.

EX-10.28

Exhibit 10.28

COMMON STOCK PURCHASE AGREEMENT

by and between

KINGSBRIDGE CAPITAL LIMITED

and

GENVEC, INC.

dated as of March 15, 2006

TABLE OF CONTENTS

	Page
ARTICLE I            DEFINITIONS		2
Section 1.01. “Blackout Amount”		2
Section 1.02. “Blackout Shares”		2
Section 1.03. “Bylaws”		2
Section 1.04. “Certificate”		2
Section 1.05. “Closing Date”		2
Section 1.06. “Commission”		2
Section 1.07. “Commission Documents”		2
Section 1.08. “Commitment Period”		2
Section 1.09. “Common Stock”		2
Section 1.10. “Condition Satisfaction Date”		2
Section 1.11. “Damages”		2
Section 1.12. “Draw Down”		2
Section 1.13. “Draw Down Amount”		2
Section 1.14. “Draw Down Discount Price”		2
Section 1.15. “Draw Down Notice”		3
Section 1.16. “Draw Down Pricing Period”		3
Section 1.17. “DTC”		3
Section 1.18. “Effective Date”		3
Section 1.19. “Exchange Act”		3
Section 1.20. “Excluded Merger or Sale”		3
Section 1.21. “Knowledge”		3
Section 1.22. “LIBOR”		3
Section 1.23. “Make Whole Amount”		3
Section 1.24. “Market Capitalization”		3
Section 1.25. “Material Adverse Effect”		3
Section 1.26. “Maximum Commitment Amount”		3
Section 1.27. “Maximum Draw Down Amount”		4
Section 1.28. “NASD”		4
Section 1.29. “Permitted Transaction”		4
Section 1.30. “Person”		4
Section 1.31. “Principal Market”		4
Section 1.32. “Prohibited Transaction”		4

i

TABLE OF CONTENTS
(Continued)

	Page
Section 1.33. “Prospectus”		4
Section 1.34. “Registrable Securities”		4
Section 1.35. “Registration Rights Agreement”		4
Section 1.36. “Registration Statement”		4
Section 1.37. “Regulation D”		4
Section 1.38. “Section 4(2)”		5
Section 1.39. “Securities Act”		5
Section 1.41. “Shares”		5
Section 1.42. “Trading Day”		5
Section 1.43. “VWAP”		5
Section 1.44. “Warrant”		5
Section 1.45. “Warrant Shares”		5
ARTICLE II PURCHASE AND SALE OF COMMON STOCK		5
Section 2.01. Purchase and Sale of Stock		5
Section 2.02. Closing		5
Section 2.03. Registration Statement and Prospectus		5
Section 2.04. Warrant		5
Section 2.05. Blackout Shares		6
ARTICLE III DRAW DOWN TERMS		6
Section 3.01. Draw Down Notice		6
Section 3.02. Number of Shares		6
Section 3.03. Limitation on Draw Downs		6
Section 3.04. Trading Cushion		6
Section 3.05. Settlement		6
Section 3.06. Delivery of Shares; Payment of Draw Down Amount		7
Section 3.07. Failure to Deliver Shares		7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY		8
Section 4.01. Organization, Good Standing and Power		8
Section 4.02. Authorization; Enforcement		8
Section 4.03. Capitalization		8
Section 4.04. Issuance of Shares		9
Section 4.05. No Conflicts		9
Section 4.06. Commission Documents, Financial Statements		10

ii

TABLE OF CONTENTS
(Continued)

	Page
Section 4.07. No Material Adverse Change		10
Section 4.08. No Undisclosed Liabilities		10
Section 4.09. No Undisclosed Events or Circumstances		11
Section 4.10. Actions Pending		11
Section 4.11. Compliance with Law		11
Section 4.12. Certain Fees		11
Section 4.13. Disclosure		11
Section 4.14. Material Non-Public Information		11
Section 4.15. Exemption from Registration; Valid Issuances		12
Section 4.16. No General Solicitation or Advertising in Regard to this Transaction		12
Section 4.17. No Integrated Offering		12
Section 4.18. Acknowledgment Regarding Investor’s Purchase of Shares		12
ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR		12
Section 5.01. Organization and Standing of the Investor		13
Section 5.02. Authorization and Power		13
Section 5.03. No Conflicts		13
Section 5.04. Financial Capability		13
Section 5.05. Information		14
Section 5.06. Selling Restrictions		14
Section 5.07. Statutory Underwriter Status		14
Section 5.08. Not an Affiliate		14
Section 5.09. Prospectus Delivery		14
ARTICLE VI COVENANTS OF THE COMPANY		14
Section 6.01. Securities		15
Section 6.02. Reservation of Common Stock		15
Section 6.03. Registration and Listing		15
Section 6.04. Registration Statement		15
Section 6.05. Compliance with Laws		15
Section 6.06. Other Financing		15
Section 6.07. Prohibited Transactions		16
Section 6.08. Corporate Existence		16
Section 6.09. Non-Disclosure of Non-Public Information		16

iii

TABLE OF CONTENTS
(Continued)

	Page
Section 6.10. Notice of Certain Events Affecting Registration; Suspension of Right to Request a Draw Down		17
Section 6.11. Amendments to the Registration Statement		17
Section 6.12. Prospectus Delivery		17
ARTICLE VII CONDITIONS TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN		17
Section 7.01. Accuracy of the Company’s Representations and Warranties		18
Section 7.02. Performance by the Company		18
Section 7.03. Compliance with Law		18
Section 7.04. Effective Registration Statement		18
Section 7.05. No Knowledge		18
Section 7.06. No Suspension		18
Section 7.07. No Injunction		18
Section 7.08. No Proceedings or Litigation		18
Section 7.09. Sufficient Shares Registered for Resale		18
Section 7.10. Warrant		19
Section 7.11. Opinion of Counsel		19
Section 7.12. Accuracy of Investor’s Representation and Warranties		19
Section 7.13. No Material Adverse Change		19
Section 7.14. Payment of Fees		19
ARTICLE VIII TERMINATION		19
Section 8.01. Term		19
Section 8.02. Other Termination		19
Section 8.03. Effect of Termination		20
Section 9.01. Indemnification		20
Section 9.02. Notification of Claims for Indemnification		21
ARTICLE X MISCELLANEOUS		23
Section 10.01. Fees and Expenses		23
Section 10.02. Reporting Entity for the Common Stock		23
Section 10.03. Brokerage		23
Section 10.04. Notices		23
Section 10.05. Assignment		24
Section 10.06. Amendment; No Waiver		25

iv

TABLE OF CONTENTS
(Continued)

	Page
Section 10.07. Entire Agreement		25
Section 10.08. Severability		25
Section 10.09. Title and Subtitles		25
Section 10.10. Counterparts		25
Section 10.11. Choice of Law		25
Section 10.12. Specific Enforcement, Consent to Jurisdiction		25
Section 10.13. Survival		26
Section 10.15. Further Assurances		26
Section 10.16. Absence of Presumption		26

v

COMMON STOCK PURCHASE AGREEMENT

by and between

KINGSBRIDGE CAPITAL LIMITED

and

GENVEC, INC.

dated as of March 15, 2006

     This COMMON STOCK PURCHASE AGREEMENT (this “Agreement”)is entered into as of the 15th day of March, 2006, by and between KINGSBRIDGE CAPITAL LIMITED, an entity organized and existing under the laws of the British Virgin Islands, with registered address Palm Grove House, 2nd Floor, Road Town, Tortola, British Virgin Islands (the “Investor”) and GENVEC, INC., a corporation organized and existing under the laws of the State of Delaware (the “Company”).

     WHEREAS, the parties desire that, upon the terms and subject to the conditions and limitations set forth herein, the Company may issue and sell to the Investor, from time to time as provided herein, and the Investor shall purchase from the Company, up to $30 million worth of shares of Common Stock (as defined below); and

     WHEREAS, such investments will be made in reliance upon the provisions of Section 4(2) (“Section 4(2)”) and Regulation D (“Regulation D”) of the United States Securities Act of 1933, as amended and the rules and regulations promulgated thereunder (the “Securities Act”), and/or upon such other exemption from the registration requirements of the Securities Act as may be available with respect to any or all of the investments in Common Stock to be made hereunder; and

     WHEREAS, the parties hereto are concurrently entering into a Registration Rights Agreement in the form of Exhibit A hereto (the “Registration Rights Agreement”) pursuant to which the Company shall register the Common Stock issued and sold to the Investor under this Agreement and under the Warrant (as defined below), upon the terms and subject to the conditions set forth therein; and

     WHEREAS, in consideration for the Investor’s execution and delivery of, and its performance of its obligations under, this Agreement, the Company is concurrently issuing to the Investor a Warrant in the form of Exhibit B hereto (the “Warrant”) pursuant to which the Investor may purchase from the Company up to 520,000 shares of Common Stock, upon the terms and subject to the conditions set forth therein;

     NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

     Section 1.01. “Blackout Amount” shall have the meaning assigned to such term in the Registration Rights Agreement.

     Section 1.02. “Blackout Shares” shall have the meaning assigned to such term in the Registration Rights Agreement.

     Section 1.03. “Bylaws” shall have the meaning assigned to such term in Section 4.03 hereof.

     Section 1.04. “Certificate” shall have the meaning assigned to such term in Section 4.03 hereof.

     Section 1.05. “Closing Date” means the date on which this Agreement is executed and delivered by the Company and the Investor.

     Section 1.06. “Commission” means the United States Securities Exchange Commission.

     Section 1.07. “Commission Documents” shall have the meaning assigned to such term in Section 4.06 hereof.

     Section 1.08. “Commitment Period” means the period commencing on the Effective Date and expiring on the earliest to occur of (i) the date on which the Investor shall have purchased Shares pursuant to this Agreement for an aggregate purchase price equal to the Maximum Commitment Amount, (ii) the date this Agreement is terminated pursuant to Article VIII hereof, and (iii) the date occurring thirty-six (36) months from the Effective Date.

     Section 1.09. “Common Stock” means the common stock of the Company, par value $.001 per share.

     Section 1.10. “Condition Satisfaction Date” shall have the meaning assigned to such term in Article VII hereof.

     Section 1.11. “Damages” means any loss, claim, damage, liability, costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses and costs and reasonable expenses of expert witnesses and investigation).

     Section 1.12. “Draw Down” shall have the meaning assigned to such term in Section 3.01 hereof.

     Section 1.13. “Draw Down Amount” means the actual amount of a Draw Down paid to the Company.

     Section 1.14. “Draw Down Discount Price” means (i) 88% of the VWAP on any Trading Day during a Draw Down Pricing Period when the VWAP equals or exceeds $1.25 but is less than or equal to $3.00, (ii) 90% of the VWAP on any Trading Day during the Draw Down

2

Pricing Period when VWAP exceeds $3.00 but is less than or equal to $8.50, or (ii) 92% of the VWAP on any Trading Day during the Draw Down Pricing Period when VWAP exceeds $8.50.

     Section 1.15. “Draw Down Notice” shall have the meaning assigned to such term in Section 3.01 hereof.

     Section 1.16. “Draw Down Pricing Period” shall mean, with respect to each Draw Down, a period of eight (8) consecutive Trading Days beginning on the first Trading Day specified in a Draw Down Notice.

     Section 1.17. “DTC” shall mean the Depository Trust Company, or any successor thereto.

     Section 1.18. “Effective Date” means the first Trading Day immediately following the date on which the Registration Statement is declared effective by the Commission.

     Section 1.19. “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

     Section 1.20. “Excluded Merger or Sale” shall have the meaning assigned to such term in the Warrant.

     Section 1.21. “Knowledge” means the actual knowledge of the Chief Executive Officer or Chief Financial Officer of the Company.

     Section 1.22. “LIBOR” means the offered rate for twelve-month U.S. dollar deposits that appears on Moneyline Telerate Page 3750 (or such other page as may replace such Moneyline Telerate Page 3750 for the purpose of displaying comparable rates), as of 11:00 a.m. (London time) two (2) business days prior to the beginning of the relevant period.

     Section 1.23. “Make Whole Amount” shall have the meaning specified in Section 3.8.

     Section 1.24. “Market Capitalization” means, as of any Trading Day, the product of (i) the closing sale price of the Company’s Common Stock as reported by Bloomberg L.P. using the AQR function and (ii) the number of outstanding shares of Common Stock of the Company as reported by Bloomberg L.P. using the DES function.

     Section 1.25. “Material Adverse Effect” means any effect on the business, operations, properties or financial condition of the Company and its consolidated subsidiaries that is material and adverse to the Company and such subsidiaries, taken as a whole, and/or any condition, circumstance, or situation that would prohibit or otherwise interfere with the ability of the Company to perform any of its obligations under this Agreement, the Registration Rights Agreement or the Warrant in any material respect; provided, that none of the following shall constitute a “Material Adverse Effect”: (i) the effects of conditions or events that are generally applicable to the capital, financial, banking or currency markets, (ii) any changes or effects resulting from the announcement or consummation of the transactions contemplated by this Agreement, including, without limitation, any changes or effects associated with any particular Draw Down, and (iii) changes in the market price of the Common Stock.

     Section 1.26. “Maximum Commitment Amount” means the lesser of (i) $30 million in aggregate Draw Down Amounts or (ii) 12,735,050 shares of Common Stock (as adjusted for

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stock splits, stock combinations, stock dividends and recapitalizations that occur on or after the date of this Agreement).

     Section 1.27. “Maximum Draw Down Amount” means the lesser of (i) 1.75% of the Company’s Market Capitalization at the time of the Draw Down, or (ii) $5 million.

     Section 1.28. “NASD” means the National Association of Securities Dealers, Inc.

     Section 1.29. “Permitted Transaction” shall have the meaning assigned to such term in Section 6.06 hereof.

     Section 1.30. “Person” means any individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including any government or political subdivision or an agency or instrumentality thereof.

     Section 1.31. “Principal Market” means the Nasdaq National Market, the Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock.

     Section 1.32. “Prohibited Transaction” shall have the meaning assigned to such term in Section 6.07 hereof.

     Section 1.33. “Prospectus” as used in this Agreement means the prospectus in the form included in the Registration Statement, as supplemented from time to time pursuant to Rule 424(b) of the Securities Act.

     Section 1.34. “Registrable Securities” means (i) the Shares, (ii) the Warrant Shares, and (iii) any securities issued or issuable with respect to any of the foregoing by way of exchange, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (w) the Registration Statement has been declared effective by the SEC and such Registrable Securities have been disposed of pursuant to the Registration Statement, (x) such Registrable Securities have been sold under circumstances under which all of the applicable conditions of Rule 144 (or any similar provision then in force) under the Securities Act (“Rule 144”) are met, (y) such time as such Registrable Securities have been otherwise transferred to holders who may trade such shares without restriction under the Securities Act, and the Company has delivered a new certificate or other evidence of ownership for such securities not bearing a restrictive legend or (z) in the opinion of counsel to the Company such Registrable Securities may be sold without registration and without any time, volume or manner limitations pursuant to Rule 144(k) (or any similar provision then in effect) under the Securities Act.

     Section 1.35. “Registration Rights Agreement” shall have the meaning set forth in the recitals of this Agreement.

     Section 1.36. “Registration Statement” shall have the meaning assigned to such term in the Registration Rights Agreement.

     Section 1.37. “Regulation D” shall have the meaning set forth in the recitals of this Agreement.

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     Section 1.38. “Section 4(2)” shall have the meaning set forth in the recitals of this Agreement.

     Section 1.39. “Securities Act” shall have the meaning set forth in the recitals of this Agreement.

     Section 1.40. “Settlement Date” shall have the meaning assigned to such term in Section 3.05 hereof.

     Section 1.41. “Shares” means the shares of Common Stock of the Company that are and/or may be purchased hereunder.

     Section 1.42. “Trading Day” means any day other than a Saturday or a Sunday on which the Principal Market is open for trading in equity securities.

     Section 1.43. “VWAP” means the volume weighted average price (the aggregate sales price of all trades of Common Stock during each Trading Day divided by the total number of shares of Common Stock traded during such Trading Day) of the Common Stock during any Trading Day as reported by Bloomberg, L.P. using the AQR function.

     Section 1.44. “Warrant” shall have the meaning set forth in the recitals of this Agreement.

     Section 1.45. “Warrant Shares” means the shares of Common Stock issuable to the Investor upon exercise of the Warrant.

ARTICLE II

PURCHASE AND SALE OF COMMON STOCK

     Section 2.01. Purchase and Sale of Stock. Upon the terms and subject to the conditions set forth in this Agreement, the Company shall to the extent it elects to make Draw Downs in accordance with Article III hereof, issue and sell to the Investor and the Investor shall purchase from the Company Common Stock for an aggregate (in Draw Down Amounts) of up to the Maximum Commitment Amount, consisting of purchases based on Draw Downs in accordance with Article III hereof.

     Section 2.02. Closing. In consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Company agrees to issue and sell to the Investor, and the Investor agrees to purchase from the Company, that number of the Shares to be issued in connection with each Draw Down. The execution and delivery of this Agreement (the “Closing”) shall take place on March 15, 2006 (the “Closing Date”). Each party shall deliver at or prior to the Closing all documents, instruments and writings required to be delivered at the Closing by such party pursuant to this Agreement.

     Section 2.03. Registration Statement and Prospectus. The Company shall prepare and file with the Commission the Registration Statement (including the Prospectus) in accordance with the provisions of the Securities Act and the Registration Rights Agreement.

     Section 2.04. Warrant. On the Closing Date, the Company shall issue and deliver the Warrant to the Investor.

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     Section 2.05. Blackout Shares. The Company shall deliver any Blackout Amount or issue and deliver any Blackout Shares to the Investor in accordance with Section 1(e) of the Registration Rights Agreement.

ARTICLE III

DRAW DOWN TERMS

     Subject to the satisfaction of the conditions hereinafter set forth in this Agreement, the parties agree as follows:

     Section 3.01. Draw Down Notice. The Company, may, in its sole discretion, issue a Draw Down Notice (defined below) specifying the dollar amount of Shares it elects to sell to the Investor (each such election a “Draw Down”) up to a Draw Down Amount equal to the Maximum Draw Down Amount during the Commitment Period, which Draw Down the Investor will be obligated to accept. The Company shall inform the Investor in writing via e-mail to the addresses set forth in Section 10.04 and via facsimile transmission to the number set forth in Section 10.04, with a copy to the Investor’s counsel, as to such Draw Down Amount before commencement of trading on the first Trading Day of the related Draw Down Pricing Period (the “Draw Down Notice”). In addition to the Draw Down Amount, each Draw Down Notice shall designate the first Trading Day of the Draw Down Pricing Period. In no event shall any Draw Down Amount exceed the Maximum Draw Down Amount. Each Draw Down Notice shall be accompanied by a certificate, signed by the Chief Executive Officer or Chief Financial Officer dated, as of the date of such Draw Down Notice, in the form of Exhibit C hereof.

     Section 3.02. Number of Shares. Subject to Section 3.06(b), the number of Shares to be issued in connection with each Draw Down shall be equal to the sum of the number of shares issuable on each Trading Day of the Draw Down Pricing Period. The number of Shares issuable on a Trading Day during a Draw Down Pricing Period shall be equal to the quotient of one eighth (1/8^th) of the Draw Down Amount divided by the Draw Down Discount Price for such Trading Day.

     Section 3.03. Limitation on Draw Downs. Only one Draw Down shall be permitted for each Draw Down Pricing Period.

     Section 3.04. Trading Cushion. Unless the parties agree in writing otherwise, there shall be a minimum of three (3) Trading Days between the expiration of any Draw Down Pricing Period and the beginning of the next succeeding Draw Down Pricing Period.

     Section 3.05. Settlement. The number of Shares purchased by the Investor in any Draw Down shall be determined and settled on two separate dates. Shares purchased by the Investor during the first four Trading Days of any Draw Down Pricing Period shall be determined and settled no later than the sixth Trading Day of such Draw Down Pricing Period. Shares purchased by the Investor during the second four Trading Days of any Draw Down Pricing Period shall be determined and settled no later than the second Trading Day after the last Trading Day of such Draw Down Pricing Period. Each date on which settlement of the purchase and sale of Shares occurs hereunder being referred to as a “Settlement Date.” The Investor shall provide the Company with delivery instructions for the Shares to be issued at each Settlement Date at least two Trading Days in advance of such Settlement Date. The number of Shares actually issued shall be rounded to the nearest whole number of Shares.

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     Section 3.06. Delivery of Shares; Payment of Draw Down Amount.

     (a) On each Settlement Date, the Company shall deliver the Shares purchased by the Investor to the Investor or its designees exclusively via book-entry through the DTC to an account designated by the Investor, and upon receipt of the Shares, the Investor shall cause payment therefor to be made to the Company’s designated account by wire transfer of immediately available funds, if the Shares are received by the Investor no later than 12:00 p.m. (Eastern Time), or next day available funds, if the Shares are received thereafter. Upon the written request of the Company, the Investor will cause its banker to confirm to the Company that the Investor has provided irrevocable instructions to cause payment for the Shares to be made as set forth above, upon confirmation by such banker that the Shares have been delivered through the DTC in unrestricted form.

     (b) For each Trading Day during a Draw Down Pricing Period that the VWAP is less than the greater of (i) 75% of the Closing Price of the Company’s Common Stock on the Trading Day immediately preceding the commencement of such Draw Down Pricing Period, or (ii) $1.25, such Trading Day shall not be used in calculating the number of Shares to be issued in connection with such Draw Down, and the Draw Down Amount in respect of such Draw Down Pricing Period shall be reduced by one eighth (1/8^th) of the initial Draw Down Amount specified in the Draw Down Notice. If trading in the Company’s Common Stock is suspended for any reason for more than three (3) consecutive or non-consecutive hours during any Trading Day during a Draw Down Pricing Period, such Trading Day shall not be used in calculating the number of Shares to be issued in connection with such Draw Down, and the Draw Down Amount in respect of such Draw Down Pricing Period shall be reduced by one eighth (1/8th) of the initial Draw Down Amount specified in the Draw Down Notice.

     Section 3.07. Failure to Deliver Shares. If on any Settlement Date, the Company fails to take all actions within its reasonable control to cause the delivery of the Shares purchased by the Investor, and such failure is not cured within two (2) Trading Days following such Settlement Date, the Company shall pay to the Investor on demand in cash by wire transfer of immediately available funds to an account designated by the Investor the “Make Whole Amount;” provided, however, that in the event that the Company is prevented from delivering Shares in respect of any such Settlement Date in a timely manner by any fact or circumstance that is reasonably within the control of, or directly attributable to, the Investor, then such two (2) Trading Day period shall be automatically extended until such time as such fact or circumstance is cured. As used herein, the Make Whole Amount shall be an amount equal to the sum of (i) the Draw Down Amount actually paid by the Investor in respect of such Shares plus (ii) an amount equal to the actual loss suffered by the Investor in respect of sales to subsequent purchasers, pursuant to transactions entered into before the Settlement Date, of the Shares that were required to be delivered by the Company, which shall be based upon documentation reasonably satisfactory to the Company demonstrating the difference (if greater than zero) between (A) the price per share paid by the Investor to purchase such number of shares of Common Stock necessary for the Investor to meet its share delivery obligations to such subsequent purchasers minus (B) the average Draw Down Discount Price during the applicable Draw Down Pricing Period. In the event that the Make Whole Amount is not paid within two (2) Trading Days following a demand therefor from the Investor, the Make Whole Amount shall accrue interest compounded daily at a rate of LIBOR plus 300 basis points, per annum up to and including the date on which the Make Whole Amount is actually paid. Notwithstanding anything to the contrary set forth in this Agreement, in the event that the Company pays the Make Whole Amount (plus interest, if applicable) in respect of any Settlement Date in accordance with this Section 3.07, such payment shall be the Investor’s sole

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remedy in respect of the Company’s failure to deliver Shares in respect of such Settlement Date, and the Company shall not be obligated to deliver such Shares.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company hereby makes the following representations and warranties to the Investor:

     Section 4.01. Organization, Good Standing and Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Except as set forth in the Commission Documents (as defined below), the Company does not own more than fifty percent (50%) of the outstanding capital stock of or control any other business entity, other than any wholly-owned subsidiary that is not “significant” within the meaning of Regulation S-X promulgated by the Commission. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, other than those in which the failure so to qualify or be in good standing would not have a Material Adverse Effect.

     Section 4.02. Authorization; Enforcement. (i) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, the Registration Rights Agreement and the Warrant and to issue the Shares, the Warrant, the Warrant Shares and any Blackout Shares (except to the extent that the number of Blackout Shares required to be issued exceeds the number of authorized shares of Common Stock under the Certificate); (ii) the execution and delivery of this Agreement and the Registration Rights Agreement, and the execution, issuance and delivery of the Warrant, by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors or stockholders is required (other than as contemplated by Section 6.05); and (iii) each of this Agreement and the Registration Rights Agreement has been duly executed and delivered, and the Warrant has been duly executed, issued and delivered, by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, securities, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies, or indemnification or by other equitable principles of general application.

     Section 4.03. Capitalization. The authorized capital stock of the Company and the shares thereof issued and outstanding as of December 31, 2005 are set forth on a schedule (the “Disclosure Schedule”) previously delivered to the Investor. All of the outstanding shares of the Common Stock have been duly and validly authorized and issued, and are fully paid and non-assessable. Except as set forth in this Agreement or as previously disclosed on the Disclosure Schedule, as of December 31, 2005, no shares of Common Stock were entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, call or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for or giving any right to subscribe for, any shares of capital stock of the Company. Except as set forth in this Agreement, the Commission Documents, or as previously disclosed to the Investor in the Disclosure Schedule, as of December 31, 2005, there were no contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of the capital stock of the Company or options,

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securities or rights convertible into or exchangeable for or giving any right to subscribe for any shares of capital stock of the Company. Except as described in the Commission Documents or as previously disclosed to the Investor in the Disclosure Schedule, as of the date hereof the Company is not a party to any agreement granting registration rights to any Person with respect to any of its equity or debt securities. Except as set forth in the Commission Documents or as previously disclosed to the Investor in writing, as of the date hereof the Company is not a party to, and it has no Knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of the Company. The offer and sale of all capital stock, convertible securities, rights, warrants, or options of the Company issued during the twenty-four month period immediately prior to the Closing complied with all applicable federal and state securities laws, and no stockholder has a right of rescission or damages with respect thereto that could reasonably be expected to have a Material Adverse Effect. The Company has furnished or made available to the Investor true and correct copies of the Company’s Certificate of Incorporation, as amended and in effect on the date hereof (the “Certificate”), and the Company’s Bylaws, as amended and in effect on the date hereof (the “Bylaws”).

     Section 4.04. Issuance of Shares. The Shares, the Warrant and the Warrant Shares have been, and any Blackout Shares will be, duly authorized by all necessary corporate action (except to the extent that the number of Blackout Shares required to be issued exceeds the number of authorized shares of Common Stock under the Certificate) and, when issued and paid for in accordance with the terms of this Agreement, the Registration Rights Agreement and the Warrant, the Shares and the Warrant Shares shall be validly issued and outstanding, fully paid and non-assessable, and the Investor shall be entitled to all rights accorded to a holder of shares of Common Stock.

     Section 4.05. No Conflicts. The execution, delivery and performance of this Agreement, the Registration Rights Agreement, the Warrant and any other document or instrument contemplated hereby or thereby, by the Company and the consummation by the Company of the transactions contemplated hereby and thereby do not: (i) violate any provision of the Certificate or Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party, (iii) create or impose a lien, charge or encumbrance on any property of the Company under any agreement or any commitment to which the Company is a party or by which the Company is bound or by which any of its respective properties or assets are bound, (iv) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, writ, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries are bound or affected, or (v) require any consent of any third-party that has not been obtained pursuant to any material contract to which the Company is subject or to which any of its assets, operations or management may be subject. The Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement, the Registration Rights Agreement or the Warrant, or issue and sell the Shares, the Warrant Shares or the Blackout Shares (except to the extent that the number of Blackout Shares required to be issued exceeds the number of authorized shares of Common Stock under the Certificate) in accordance with the terms hereof and thereof (other than any filings that may be required to be made by the Company with the Commission, the NASD/Nasdaq or state securities commissions subsequent to the Closing, and, any registration statement (including any amendment or supplement thereto) which may be filed

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pursuant hereto); provided that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of the Investor herein.

     Section 4.06. Commission Documents, Financial Statements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and since December 31, 2003 the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements of the Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the foregoing, including filings incorporated by reference therein, being referred to herein as the “Commission Documents”). Except as previously disclosed to the Investor in writing, since December 31, 2003 the Company has maintained all requirements for the continued listing or quotation of its Common Stock, and such Common Stock is currently listed or quoted on the Nasdaq National Market. The Company has made available to the Investor true and complete copies of the Commission Documents filed with the Commission since December 31, 2003 and prior to the Closing Date. The Company has not provided to the Investor any information which, according to applicable law, rule or regulation, should have been disclosed publicly by the Company but which has not been so disclosed, other than with respect to the transactions contemplated by this Agreement. As of its date, the Company’s Form 10-K for the year ended December 31, 2005 complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder applicable to such document, and, as of its date, after giving effect to the information disclosed and incorporated by reference therein, such Form 10-K did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the Commission Documents filed with the Commission since December 31, 2003 complied as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the financial position of the Company and its subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

     Section 4.07. No Material Adverse Change. Except as disclosed in the Commission Documents, since December 31, 2005 no event or series of events has or have occurred that would, individually or in the aggregate, have a Material Adverse Effect on the Company.

     Section 4.08. No Undisclosed Liabilities. Neither the Company nor any of its subsidiaries has any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) that would be required to be disclosed on a balance sheet of the Company or any subsidiary (including the notes thereto) in conformity with GAAP and are not disclosed in the Commission Documents, other than those incurred in the ordinary course of the Company’s or its subsidiaries respective businesses since December 31, 2005 and which, individually or in the aggregate, do not or would not have a Material Adverse Effect on the Company.

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     Section 4.09. No Undisclosed Events or Circumstances. No event or circumstance has occurred or exists with respect to the Company or its subsidiaries or their respective businesses, properties, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed and which, individually or in the aggregate, would have a Material Adverse Effect on the Company.

     Section 4.10. Actions Pending. There is no action, suit, claim, investigation or proceeding pending or, to the Knowledge of the Company, threatened against the Company or any subsidiary which questions the validity of this Agreement or the transactions contemplated hereby or any action taken or to be taken pursuant hereto or thereto. Except as set forth in the Commission Documents or in the Disclosure Schedule, there is no action, suit, claim, investigation or proceeding pending or, to the Knowledge of the Company, threatened, against or involving the Company, any subsidiary or any of their respective properties or assets that could be reasonably expected to have a Material Adverse Effect on the Company. Except as set forth in the Commission Documents or as previously disclosed to the Investor in writing, no judgment, order, writ, injunction or decree or award has been issued by or, to the Knowledge of the Company, requested of any court, arbitrator or governmental agency which could be reasonably expected to result in a Material Adverse Effect.

     Section 4.11. Compliance with Law. The businesses of the Company and its subsidiaries have been and are presently being conducted in accordance with all applicable federal, state and local governmental laws, rules, regulations and ordinances, except as set forth in the Commission Documents or such that would not reasonably be expected to cause a Material Adverse Effect. Except as set forth in the Commission Documents, the Company and each of its subsidiaries have all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted by it, except for such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, the failure to possess which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

     Section 4.12. Certain Fees. Except as expressly set forth in this Agreement, no brokers, finders or financial advisory fees or commissions will be payable by the Company or any of its subsidiaries in respect of the transactions contemplated by this Agreement.

     Section 4.13. Disclosure. To the Company’s Knowledge, neither this Agreement nor any other documents, certificates or instruments furnished to the Investor by or on behalf of the Company or any subsidiary in connection with the transactions contemplated by this Agreement, the Registration Rights Agreement or the Warrant contain any untrue statement of a material fact or, taken as a whole together with the Registration Statement as and when declared effective by the Commission (along with any documents from time to time incorporated by reference therein, or any amendments to the Registration Statement or to such documents), omit to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.

     Section 4.14. Material Non-Public Information. Except for this Agreement and the transactions contemplated hereby, neither the Company nor its agents have disclosed to the Investor, any material non-public information that, according to applicable law, rule or regulation, should have been disclosed publicly by the Company prior to the date hereof but which has not been so disclosed.

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     Section 4.15. Exemption from Registration; Valid Issuances. The issuance and sale of the Shares, the Warrant, the Warrant Shares and any Blackout Shares in accordance with the terms and on the bases of the representations and warranties set forth in this Agreement, may and shall be properly issued pursuant to Section 4(2), Regulation D and/or any other applicable federal and state securities laws. Neither the sales of the Shares, the Warrant, the Warrant Shares or any Blackout Shares pursuant to, nor the Company’s performance of its obligations under, this Agreement, the Registration Rights Agreement, or the Warrant shall (i) result in the creation or imposition of any liens, charges, claims or other encumbrances upon the Shares, the Warrant Shares, any Blackout Shares or any of the assets of the Company, or (ii) except as previously disclosed to the Investor in writing, entitle the holders of any outstanding shares of capital stock of the Company to preemptive or other rights to subscribe to or acquire the shares of Common Stock or other securities of the Company. The Shares, the Warrant Shares and any Blackout Shares shall not subject the Investor to personal liability to the Company, its officers, directors, employees or stockholders by reason of the ownership thereof; provided, however, that at the request of and with the express agreement of the Investor, the Shares and, under certain circumstances, the Warrant Shares, will be delivered to the Investor via book entry through DTC and shall not be bear legends noting restrictions as to resale of such shares under federal and state securities laws, nor shall such shares be subject to stop transfer instructions.

     Section 4.16. No General Solicitation or Advertising in Regard to this Transaction. Neither the Company nor any of its affiliates or any person acting on its or their behalf (i) has conducted any general solicitation (as that term is used in Rule 502(c) of Regulation D) or general advertising with respect to any of the Shares, the Warrant, the Warrant Shares or any Blackout Shares or (ii) has made any offers or sales of any security or solicited any offers to buy any security under any circumstances that would require registration of the Shares under the Securities Act.

     Section 4.17. No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, other than pursuant to this Agreement and employee benefit plans, under circumstances that would require registration under the Securities Act of shares of the Common Stock issuable hereunder with any other offers or sales of securities of the Company.

     Section 4.18. Acknowledgment Regarding Investor’s Purchase of Shares. The Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm’s length Investor with respect to this Agreement and the transactions contemplated hereunder. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereunder and any advice given by the Investor or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereunder is merely incidental to the Investor’s purchase of the Shares.

ARTICLE V

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR

     The Investor hereby makes the following representations, warranties and covenants to the Company:

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     Section 5.01. Organization and Standing of the Investor. The Investor is a company duly organized, validly existing and in good standing under the laws of the British Virgin Islands.

     Section 5.02. Authorization and Power. The Investor has the requisite power and authority to enter into and perform its obligations under this Agreement, the Warrant and the Registration Rights Agreement and to purchase the Shares, the Warrant and the Warrant Shares in accordance with the terms hereof and thereof. The execution, delivery and performance of this Agreement and the Registration Rights Agreement by Investor and the consummation by it of the transactions contemplated hereby or thereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Investor, its Board of Directors or stockholders is required. Each of this Agreement and the Registration Rights Agreement has been duly executed and delivered by the Investor and constitutes a valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, securities, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership, or similar laws relating to, or affecting generally the enforcement of creditor’s rights and remedies or indemnification or by other equitable principles of general application.

     Section 5.03. No Conflicts. The execution, delivery and performance of this Agreement, the Registration Rights Agreement, the Warrant and any other document or instrument contemplated hereby, by the Investor and the consummation of the transactions contemplated thereby do not (i) violate any provision of the Investor’s charter documents or bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Investor is a party, (iii) create or impose a lien, charge or encumbrance on any property of the Investor under any agreement or any commitment to which the Investor is a party or by which the Investor is bound or by which any of its respective properties or assets are bound, (iv) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, writ, judgment or decree (including federal and state securities laws and regulations) applicable to the Investor or by which any property or asset of the Investor are bound or affected, or (v) require the consent of any third-party that has not been obtained pursuant to any material contract to which Investor is subject or to which any of its assets, operations or management may be subject. The Investor is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or to purchase the Shares or the Warrant in accordance with the terms hereof, provided that, for purposes of the representation made in this sentence, the Investor is assuming and relying upon the accuracy of the relevant representations and agreements of the Company herein.

     Section 5.04. Financial Capability. The Investor has the financial capability to perform all of its obligations under this Agreement, including the capability to purchase the Shares, the Warrant and the Warrant Shares in accordance with the terms hereof. The Investor has such knowledge and experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in Common Stock and the Warrant. The Investor is an “accredited investor” as defined in Regulation D. The Investor is a “sophisticated investor” as described in Rule 506(b)(2)(ii) of Regulation D. The Investor acknowledges that an investment in the Common Stock and the Warrant is speculative and involves a high degree of risk.

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     Section 5.05. Information. The Investor and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Shares, the Warrant and the Warrant Shares which have been requested by the Investor. The Investor has reviewed or received copies of the Commission Documents. The Investor and its advisors, if any, have been afforded the opportunity to ask questions of the Company. The Investor has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Shares, the Warrant and the Warrant Shares. The Investor understands that it (and not the Company) shall be responsible for its own tax liabilities that may arise as a result of this investment or the transactions contemplated by this Agreement.

     Section 5.06. Selling Restrictions.

     (a) The Investor has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with the Investor, engaged in any transactions in the Company’s securities (including, without limitation, any “short sale”, as such term is defined in Rule 200 of Regulation SHO promulgated by the Commission under the Exchange Act involving Common Stock) since the time that the Investor was first contacted by the Company, or any Person acting on behalf of the Company, regarding the transactions contemplated hereby.

     (b) The Investor covenants that during the Commitment Period, neither the Investor nor any of its affiliates nor any entity managed or controlled by the Investor will ever enter into or execute any “short sale” of any shares of Common Stock.

     Section 5.07. Statutory Underwriter Status. The Investor acknowledges that, pursuant to the Commission’s current interpretations of the Securities Act, the Investor will be disclosed as an “underwriter” within the meaning of the Securities Act in the Registration Statement (and amendments thereto) and in any Prospectus contained therein to the extent required by applicable law. The Company acknowledges that the Investor does not necessarily agree with such characterization.

     Section 5.08. Not an Affiliate. The Investor is not an officer, director or “affiliate” (as defined in Rule 405 of the Securities Act) of the Company.

     Section 5.09. Prospectus Delivery. The Investor agrees that it will comply with the prospectus delivery requirements of the Securities Act, if any, as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement and the Investor shall have delivered a current prospectus in connection with such sale or shall have confirmed that a current prospectus is deemed to be delivered in connection with such sale, or relied on an exemption therefrom. The Investor, acknowledges that the delivery of the Shares or Warrant Shares through DTC is predicated upon the Company’s reliance that the Investor will sell any Shares or Warrant Shares pursuant to either (i) the registration requirements of the Securities Act, or (ii) an exemption therefrom.

ARTICLE VI

COVENANTS OF THE COMPANY

     The Company covenants with the Investor as follows, which covenants are for the benefit of the Investor and its permitted assignees (as defined herein)

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     Section 6.01. Securities. The Company shall notify the Commission and the Principal Market, if and as applicable, in accordance with their rules and regulations, of the transactions contemplated by this Agreement, and shall use commercially reasonable efforts to take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Shares, the Warrant Shares and the Blackout Shares, if any, to the Investor.

     Section 6.02. Reservation of Common Stock. As of the date hereof, the Company has available and the Company shall reserve and keep available at all times, free of preemptive rights and other similar contractual rights of stockholders, shares of Common Stock for the purpose of enabling the Company to satisfy any obligation to issue the Shares in connection with all Draw Downs contemplated hereunder and the Warrant Shares. The number of shares so reserved from time to time, as theretofore increased or reduced as hereinafter provided, may be reduced by the number of shares actually delivered hereunder.

     Section 6.03. Registration and Listing. During the Commitment Period, the Company shall use commercially reasonable efforts: (i) to take all action necessary to cause its Common Stock to continue to be registered under Section 12(b) or 12(g) of the Exchange Act, (ii) to comply in all respects with its reporting and filing obligations under the Exchange Act, (iii) to prevent the termination or suspension of such registration, or the termination or suspension of its reporting and filing obligations under the Exchange Act or Securities Act (except as expressly permitted herein). The Company shall use commercially reasonable efforts to maintain the listing and trading of its Common Stock and the listing of the Shares purchased by Investor hereunder on the Principal Market (including, without limitation, maintaining sufficient net tangible assets) and will comply in all material respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the NASD and the Principal Market.

     Section 6.04. Registration Statement. Without the prior written consent of the Investor, the Registration Statement shall be used solely in connection with the transactions between the Company and the Investor contemplated hereby.

     Section 6.05. Compliance with Laws.

     (a) The Company shall comply, and cause each subsidiary to comply, with all applicable laws, rules, regulations and orders, noncompliance with which could reasonably be expected to have a Material Adverse Effect.

     (b) Without the consent of its stockholders in accordance with NASD rules, the Company will not be obligated to issue, and the Investor will not be obligated to purchase, any Shares or Blackout Shares which would result in the issuance under this Agreement, the Warrant and the Registration Rights Agreement of Shares and Blackout Shares (collectively) representing more than the applicable percentage under the rules of the NASD, including, without limitation, NASD Rule 4350(i) that would require stockholder approval of the issuance thereof.

     Section 6.06. Other Financing.

     (a) Nothing in this Agreement shall be construed to restrict the right of the Company to offer, sell and/or issue securities of any kind whatsoever, provided such transaction is not a Prohibited Transaction (as defined below) (any such transaction that is not a Prohibited Transaction is referred to in this Agreement as a “Permitted Transaction”). Without limiting the generality of the preceding sentence, the Company may, without the prior written consent of the

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Investor, (i) establish stock option or award plans or agreements (for directors, employees, consultants and/or advisors), and issue securities thereunder, and amend such plans or agreements, including increasing the number of shares available thereunder, (ii) issue equity securities to finance, or otherwise in connection with, the acquisition of one or more other companies, equipment, technologies or lines of business, (iii) issue shares of Common Stock and/or Preferred Stock in connection with the Company’s option or award plans, stock purchase plans, rights plans, warrants or options, (iv) issue shares of Common Stock and/or Preferred Stock in connection with the acquisition of products, licenses, equipment or other assets and strategic partnerships or joint ventures; (v) issue shares of Common and/or Preferred Stock to consultants and/or advisors as consideration for services rendered or to be rendered, (vi) issue and sell equity or debt securities in a public offering, (vii) issue and sell any equity or debt securities in a private placement (other than in connection with any Prohibited Transaction), (viii) issue equity securities to equipment lessors, equipment vendors, banks or similar lending institutions in connection with leases or loans, or in connection with strategic commercial or licensing transactions, (ix) issue securities in connection with any stock split, stock dividend, recapitalization, reclassification or similar event by the Company, and (x) issue shares of Common Stock to the Investor under any other agreement entered into between the Investor and the Company.

     (b) Notwithstanding the foregoing, the Company shall not engage in any Permitted Transaction during any Draw Down Pricing Period.

     Section 6.07. Prohibited Transactions. During the term of this Agreement, the Company shall not enter into any Prohibited Transaction without the prior written consent of the Investor, which consent may be withheld at the sole discretion of the Investor. For the purposes of this Agreement, the term “Prohibited Transaction” shall refer to the issuance by the Company of any “future priced securities,” which shall be deemed to mean the issuance of shares of Common Stock or securities of any type whatsoever that are, or may become, convertible or exchangeable into shares of Common Stock where the purchase, conversion or exchange price for such Common Stock is determined using any floating discount or other post-issuance adjustable discount to the market price of Common Stock, including, without limitation, pursuant to any equity line or other financing that is substantially similar to the financing provided for under this Agreement.

     Section 6.08. Corporate Existence. The Company shall take all steps necessary to preserve and continue the corporate existence of the Company; provided, however, that nothing in this Agreement shall be deemed to prohibit the Company from engaging in any Excluded Merger or Sale with another Person provided that in the event of an Excluded Merger or Sale, if the surviving, successor or purchasing Person does not agree to assume the obligations under the Warrant, then the Company shall deliver a notice to the Investor at least ten (10) days before the consummation of such Excluded Merger or Sale, the Investor may exercise the Warrant at any time before the consummation of such Excluded Merger or Sale (and such exercise may be made contingent upon the consummation of such Excluded Merger or Sale), and any portion of the Warrant that has not been exercised before consummation of such Excluded Merger or Sale shall terminate and expire, and shall no longer be outstanding.

     Section 6.09. Non-Disclosure of Non-Public Information. Except as otherwise expressly provided in this Agreement, the Registration Rights Agreement or the Warrant, none of the Company, its officers, directors, employees nor agents shall disclose material non-public information to the Investor, its advisors or representatives.

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     Section 6.10. Notice of Certain Events Affecting Registration; Suspension of Right to Request a Draw Down. The Company shall promptly notify the Investor upon the occurrence of any of the following events in respect of the Registration Statement or the Prospectus related to the offer, issuance and sale of the Shares and the Warrant Shares hereunder: (i) receipt of any request for additional information by the Commission or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to the Registration Statement or the Prospectus; (ii) the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; and (iii) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. The Company shall not be required to disclose to the Investor the substance or specific reasons of any of the events set forth in clauses (i) through (iii) of the previous sentence, only that the event has occurred. The Company shall not request a Draw Down during the continuation of any of the foregoing events.

     Section 6.11. Amendments to the Registration Statement. When the Registration Statement is declared effective by the Commission, the Company shall (i) not file any amendment to the Registration Statement or make any amendment or supplement to the Prospectus of which the Investor shall not previously have been advised or to which the Investor shall reasonably object after being so advised and (ii) so long as, in the reasonable opinion of counsel for the Investor, a Prospectus is required to be delivered in connection with sales of the Shares by the Investor, if the Company files any information, documents or reports that are incorporated by reference in the Registration Statement pursuant to the Exchange Act, the Company shall deliver a copy of such information, documents or reports to the Investor promptly following such filing.

     Section 6.12. Prospectus Delivery. From time to time for such period as in the reasonable opinion of counsel for the Investor a prospectus is required by the Securities Act to be delivered in connection with sales by the Investor, the Company will expeditiously deliver to the Investor, without charge, as many copies of the Prospectus (and of any amendment or supplement thereto) as the Investor may reasonably request. The Company consents to the use of the Prospectus (and of any amendment or supplement thereto) in accordance with the provisions of the Securities Act and state securities laws in connection with the offering and sale of the Shares and the Warrant Shares and for such period of time thereafter as the Prospectus is required by the Securities Act to be delivered in connection with sales of the Shares and the Warrant Shares.

ARTICLE VII

CONDITIONS TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW
DOWN

     The obligation of the Investor hereunder to accept a Draw Down Notice and to acquire and pay for the Shares in accordance therewith is subject to the satisfaction or waiver, at each Condition Satisfaction Date, of each of the conditions set forth below. Other than those conditions set forth in Section 7.12 which are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion, the conditions are for the Investor’s sole benefit and may be waived by the Investor at any time in its sole discretion. As used in this Agreement, the term “Condition Satisfaction Date” shall mean, with respect to each Draw Down, the date on which the applicable Draw Down Notice is delivered to the Investor and each Settlement Date in respect of the applicable Draw Down Pricing Period.

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     Section 7.01. Accuracy of the Company’s Representations and Warranties. Each of the representations and warranties of the Company shall be true and correct in all material respects as of the date when made as though made at that time except for representations and warranties that are expressly made as of a particular date.

     Section 7.02. Performance by the Company. The Company shall have, in all material respects, performed, satisfied and complied with all covenants, agreements and conditions required by this Agreement, the Registration Rights Agreement and the Warrant to be performed, satisfied or complied with by the Company.

     Section 7.03. Compliance with Law. The Company shall have complied in all material respects with all applicable federal, state and local governmental laws, rules, regulations and ordinances in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, except for any failures to so comply which could not reasonably be expected to have a Material Adverse Effect.

     Section 7.04. Effective Registration Statement. Upon the terms and subject to the conditions set forth in the Registration Rights Agreement, the Registration Statement shall have previously become effective and shall remain effective and (i) neither the Company nor the Investor shall have received notice that the Commission has issued or intends to issue a stop order with respect to the Registration Statement or that the Commission otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or intends or has threatened to do so (unless the Commission’s concerns have been addressed and the Investor is reasonably satisfied that the Commission no longer is considering or intends to take such action), and (ii) no other suspension of the use or withdrawal of the effectiveness of the Registration Statement or the Prospectus shall exist.

     Section 7.05. No Knowledge. The Company shall have no Knowledge of any event that could reasonably be expected to have the effect of causing the Registration Statement with respect to the resale of the Registrable Securities by the Investor to be suspended or otherwise ineffective (which event is more likely than not to occur within eight Trading Days following the Trading Day on which a Draw Down Notice is delivered).

     Section 7.06. No Suspension. Trading in the Company’s Common Stock shall not have been suspended by the Commission, the Principal Market or the NASD and trading in securities generally as reported on the Principal Market shall not have been suspended or limited.

     Section 7.07. No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

     Section 7.08. No Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against the Company or any subsidiary, or any of the officers, directors or affiliates of the Company or any subsidiary seeking to enjoin, prevent or change the transactions contemplated by this Agreement.

     Section 7.09. Sufficient Shares Registered for Resale. The Company shall have sufficient Shares, calculated using the closing trade price of the Common Stock as of the Trading

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Day immediately preceding such Draw Down Notice, registered under the Registration Statement to issue and sell such Shares in accordance with such Draw Down Notice.

     Section 7.10. Warrant. The Warrant shall have been duly executed, delivered and issued to the Investor, and the Company shall not be in default in any material respect under any of the provisions thereof, provided that any refusal by or failure of the Company to issue and deliver Warrant Shares in respect of any exercise (in whole or in part) thereof shall be deemed to be material for the purposes of this Section 7.10.

     Section 7.11. Opinion of Counsel. The Investor shall have received an opinion of counsel to the Company, dated as of the Effective Date, in the form reasonably agreed to by the Investor and its counsel prior to the date hereof.

     Section 7.12. Accuracy of Investor’s Representation and Warranties. The representations and warranties of the Investor shall be true and correct in all material respects as of the date when made as though made at that time except for representations and warranties that are made as of a particular date.

     Section 7.13. No Material Adverse Change. Since the date of this Agreement no event or series of events has occurred or have occurred that, individually or in the aggregate, (i) has had or have had, or (ii) could reasonably be expected to have, a Material Adverse Effect on the Company, other than any such Material Adverse Effect that has been cured as of the Condition Satisfaction Date.

     Section 7.14. Payment of Fees. The Company shall be current on all undisputed expense invoices that the Company is required to pay pursuant to Section 10.01.

ARTICLE VIII

TERMINATION

     Section 8.01. Term. Unless otherwise terminated in accordance with Section 8.02 below, this Agreement shall terminate upon the earlier to occur of (i) the expiration of the Commitment Period or (ii) the issuance of Shares pursuant to this Agreement in an amount equal to the Maximum Commitment Amount.

     Section 8.02. Other Termination.

     (a) The Investor may terminate this Agreement upon (x) one (1) day’s notice if the Company enters into any Prohibited Transaction as set forth in Section 6.07 without the Investor’s prior written consent, or (y) one (1) day’s notice within ten (10) Trading Days after the Investor obtains actual knowledge that an event resulting in a Material Adverse Effect has occurred.

     (b) The Investor may terminate this Agreement upon one (1) day’s notice to the Company at any time in the event that the Registration Statement is not declared effective in accordance with the Registration Rights Agreement.

     (c) The Investor may terminate this Agreement upon one (1) business day’s notice to the Company at any time in the event that following the first twelve (12) month period of the term, the Company fails to make cumulative Draw Downs of at least $2 million during any consecutive

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twelve (12) month period during the term. For the avoidance of doubt, this provision shall not entitle the Investor to terminate this Agreement prior to the end of the twenty-fourth (24^th) month of the term.

     (d) The Company may terminate this Agreement upon one (1) day’s notice; provided, however, that the Company shall not terminate this Agreement pursuant to this Section 8.02(d) during any Draw Down Pricing Period; provided further; that, in the event of any termination of this Agreement by the Company hereunder, so long as the Investor owns Shares purchased hereunder and/or Warrant Shares, unless all of such shares of Common Stock may be resold by the Investor without registration and without any time, volume or manner limitations pursuant to Rule 144(k) (or any similar provision then in effect) under the Securities Act, the Company shall not suspend or withdraw the Registration Statement or otherwise cause the Registration Statement to become ineffective, or voluntarily delist the Common Stock from, the Principal Market without listing the Common Stock on another Principal Market.

     (e) Each of the parties hereto may terminate this Agreement upon one (1) day’s notice if the other party has breached a material representation, warranty or covenant to this Agreement and such breach is not remedied within ten (10) Trading Days after notice of such breach is delivered to the breaching party.

     (f) The obligation of the Investor to purchase shares of Common Stock shall terminate permanently in the event that the Commission shall issue any stop order concerning, or suspend the effectiveness of, the Registration Statement for an aggregate of thirty (30) calendar days during the Commitment Period.

     Section 8.03. Effect of Termination. In the event of termination by the Company or the Investor, written notice thereof shall forthwith be given to the other party and the transactions contemplated by this Agreement shall be terminated without further action by either party. If this Agreement is terminated as provided in Section 8.01 or 8.02 herein, this Agreement shall become void and of no further force and effect, except as provided in Section 10.13. Nothing in this Section 8.03 shall be deemed to release the Company or the Investor from any liability for any breach under this Agreement occurring prior to such termination, or to impair the rights of the Company and the Investor to compel specific performance by the other party of its obligations under this Agreement arising prior to such termination.

ARTICLE IX

INDEMNIFICATION

     Section 9.01. Indemnification.

     (a) Except as otherwise provided in this Article IX, unless disputed as set forth in Section 9.02, the Company agrees to indemnify, defend and hold harmless the Investor and its affiliates and their respective officers, directors, agents, employees, subsidiaries, partners, members and controlling persons (each, an “Investor Indemnified Party”), to the fullest extent permitted by law from and against any and all Damages directly resulting from or directly arising out of any breach of any representation or warranty, covenant or agreement by the Company in this Agreement, the Registration Rights Agreement or the Warrant; provided, however, that the Company shall not be liable under this Article IX to an Investor Indemnified Party to the extent that such Damages resulted or arose from the breach by an Investor Indemnified Party of any representation, warranty, covenant or agreement of an Investor Indemnified Party contained in

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this Agreement, the Registration Rights Agreement or the Warrant or the gross negligence, recklessness, willful misconduct or bad faith of an Investor Indemnified Party. The parties intend that any Damages subject to indemnification pursuant to this Article IX will be net of insurance proceeds (which the Investor Indemnified Party agrees to use commercially reasonable efforts to recover). Accordingly, the amount which the Company is required to pay to any Investor Indemnified Party hereunder (a “Company Indemnity Payment”) will be reduced by any insurance proceeds actually recovered by or on behalf of any Investor Indemnified Party in reduction of the related Damages. In addition, if an Investor Indemnified Party receives a Company Indemnity Payment required by this Article IX in respect of any Damages and subsequently receives any such insurance proceeds, then the Investor Indemnified Party will pay to the Company an amount equal to the Company Indemnity Payment received less the amount of the Company Indemnity Payment that would have been due if the insurance proceeds had been received, realized or recovered before the Company Indemnity Payment was made.

     (b) Except as otherwise provided in this Article IX, unless disputed as set forth in Section 9.02, the Investor agrees to indemnify, defend and hold harmless the Company and its affiliates and their respective officers, directors, agents, employees, subsidiaries, partners, members and controlling persons (each, a “Company Indemnified Party”), to the fullest extent permitted by law from and against any and all Damages directly resulting from or directly arising out of any breach of any representation or warranty, covenant or agreement by the Investor in this Agreement, the Registration Right Agreement or the Warrant; provided, however, that the Investor shall not be liable under this Article IX to a Company Indemnified Party to the extent that such Damages resulted or arose from the breach by a Company Indemnified Party of any representation, warranty, covenant or agreement of a Company Indemnified Party contained in this Agreement, the Registration Right Agreement or the Warrant or gross negligence, recklessness, willful misconduct or bad faith of a Company Indemnified Party. The parties intend that any Damages subject to indemnification pursuant to this Article IX will be net of insurance proceeds (which the Company agrees to use commercially reasonable efforts to recover). Accordingly, the amount which the Investor is required to pay to any Company Indemnified Party hereunder (an “Investor Indemnity Payment”) will be reduced by any insurance proceeds theretofore actually recovered by or on behalf of any Company Indemnified Party in reduction of the related Damages. In addition, if a Company Indemnified Party receives an Investor Indemnity Payment required by this Article IX in respect of any Damages and subsequently receives any such insurance proceeds, then the Company Indemnified Party will pay to the Investor an amount equal to the Investor Indemnity Payment received less the amount of the Investor Indemnity Payment that would have been due if the insurance proceeds had been received, realized or recovered before the Investor Indemnity Payment was made.

     Section 9.02. Notification of Claims for Indemnification. Each party entitled to indemnification under this Article IX (an “Indemnified Party”) shall, promptly after the receipt of notice of the commencement of any claim against such Indemnified Party in respect of which indemnity may be sought from the party obligated to indemnify such Indemnified Party under this Article IX (the “Indemnifying Party”), notify the Indemnifying Party in writing of the commencement thereof. Any such notice shall describe the claim in reasonable detail. The failure of any Indemnified Party to so notify the Indemnifying Party of any such action shall not relieve the Indemnifying Party from any liability which it may have to such Indemnified Party (a) other than pursuant to this Article IX or (b) under this Article IX unless, and only to the extent that, such failure results in the Indemnifying Party’s forfeiture of substantive rights or defenses or the Indemnifying Party is prejudiced by such delay. The procedures listed below shall govern the procedures for the handling of indemnification claims.

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     (a) Any claim for indemnification for Damages that do not result from a Third Party Claim as defined in the following paragraph, shall be asserted by written notice given by the Indemnified Party to the Indemnifying Party. Such Indemnifying Party shall have a period of thirty (30) days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such thirty (30) day period, such Indemnifying Party shall be deemed to have refused to accept responsibility to make payment as set forth in Section 9.01. If such Indemnifying Party does not respond within such thirty (30) day period or rejects such claim in whole or in part, the Indemnified Party shall be free to pursue such remedies as specified in this Agreement.

     (b) If an Indemnified Party shall receive notice or otherwise learn of the assertion by a person or entity not a party to this Agreement of any threatened legal action or claim (collectively a “Third Party Claim”), with respect to which an Indemnifying Party may be obligated to provide indemnification, the Indemnified Party shall give such Indemnifying Party written notice thereof within twenty (20) days after becoming aware of such Third Party Claim.

     (c) An Indemnifying Party may elect to defend (and, unless the Indemnifying Party has specified any reservations or exceptions, to seek to settle or compromise) at such Indemnifying Party’s own expense and by such Indemnifying Party’s own counsel, any Third Party Claim. Within thirty (30) days after the receipt of notice from an Indemnified Party (or sooner if the nature of such Third Party Claim so requires), the Indemnifying Party shall notify the Indemnified Party whether the Indemnifying Party will assume responsibility for defending such Third Party Claim, which election shall specify any reservations or exceptions. If such Indemnifying Party does not respond within such thirty (30) day period or rejects such claim in whole or in part, the Indemnified Party shall be free to pursue such remedies as specified in this Agreement. In case any such Third Party Claim shall be brought against any Indemnified Party, and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to assume the defense thereof at its own expense, with counsel satisfactory to such Indemnified Party in its reasonable judgment; provided, however, that any Indemnified Party may, at its own expense, retain separate counsel to participate in such defense at its own expense. Notwithstanding the foregoing, in any Third Party Claim in which both the Indemnifying Party, on the one hand, and an Indemnified Party, on the other hand, are, or are reasonably likely to become, a party, such Indemnified Party shall have the right to employ separate counsel and to control its own defense of such claim if, in the reasonable opinion of counsel to such Indemnified Party, either (x) one or more significant defenses are available to the Indemnified Party that are not available to the Indemnifying Party or (y) a conflict or potential conflict exists between the Indemnifying Party, on the one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable; provided, however, that in such circumstances the Indemnifying Party (i) shall not be liable for the fees and expenses of more than one counsel to all Indemnified Parties and (ii) shall reimburse the Indemnified Parties for such reasonable fees and expenses of such counsel incurred in any such Third Party Claim, as such expenses are incurred, provided that the Indemnified Parties agree to repay such amounts if it is ultimately determined that the Indemnifying Party was not obligated to provide indemnification under this Article IX. The Indemnifying Party agrees that it will not, without the prior written consent of the Indemnified Party, settle, compromise or consent to the entry of any judgment in any pending or threatened claim relating to the matters contemplated hereby (if any Indemnified Party is a party thereto or has been actually threatened to be made a party thereto) unless such settlement, compromise or consent includes an unconditional release of such Indemnified Party from all liability arising or that may arise out of such claim. The Indemnifying Party shall not be liable for any settlement of any claim effected against an Indemnified Party without the Indemnifying Party’s written consent, which consent shall not be unreasonably

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withheld, conditioned or delayed. The rights accorded to an Indemnified Party hereunder shall be in addition to any rights that any Indemnified Party may have at common law, by separate agreement or otherwise; provided, however, that notwithstanding the foregoing or anything to the contrary contained in this Agreement, nothing in this Article IX shall restrict or limit any rights that any Indemnified Party may have to seek equitable relief.

ARTICLE X

MISCELLANEOUS

     Section 10.01. Fees and Expenses. Each of the Company and the Investor agrees to pay its own expenses incident to the performance of its obligations hereunder, except that the Company shall be solely responsible for (i) all reasonable attorneys fees and expenses incurred by the Investor in connection with (A) the preparation, negotiation, execution and delivery of this Agreement, the Registration Rights Agreement and the Warrant, and (B) the review, and assistance in preparation, of the Registration Statement, correspondence with the Commission and amendments and supplements to the Registration Statement and Prospectus, (ii) all reasonable fees and expenses incurred by the Investor in connection with any amendments, modifications or waivers of this Agreement, including, without limitation, all reasonable attorneys fees and expenses, (iii) all reasonable fees and expenses incurred in connection with the Investor’s enforcement of this Agreement, including, without limitation, all reasonable attorneys fees and expenses, (iv) due diligence expenses incurred by the Investor during the term of this Agreement equal to $12,500 per calendar quarter, and (v) all stamp or other similar taxes and duties, if any, levied in connection with issuance of the Shares pursuant hereto; provided, however, that in each of the above instances the Investor shall provide customary supporting invoices or similar documentation in reasonable detail describing such expenses (however, the Investor shall not be obligated to provide detailed time sheets); provided further that the maximum aggregate amount payable by the Company pursuant to clause (i) above shall be $75,000 and the Investor shall bear all fees and expenses in excess of $75,000 incurred in connection with the events described under clause (i) above.

     Section 10.02. Reporting Entity for the Common Stock. The reporting entity relied upon for the determination of the trading price or trading volume of the Common Stock on any given Trading Day for the purposes of this Agreement shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of the Investor and the Company shall be required to employ any other reporting entity.

     Section 10.03. Brokerage. Each of the parties hereto represents that it has had no dealings in connection with this transaction with any finder or broker who will demand payment of any fee or commission from the other party. The Company on the one hand, and the Investor, on the other hand, agree to indemnify the other against and hold the other harmless from any and all liabilities to any Persons claiming brokerage commissions or finder’s fees on account of services purported to have been rendered on behalf of the indemnifying party in connection with this Agreement or the transactions contemplated hereby.

     Section 10.04. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written

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notice given in accordance herewith. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

If to the Company:

GenVec, Inc.
65 West Watkins Mill Road
Gaithersburg, MD 20878
Facsimile: (240) 632-0735
E-mail: pfischer@genvec.com
Attention: Paul H. Fischer, Ph.D., President and Chief Executive Officer

with a copy (which shall not constitute notice) to:

Arnold & Porter LLP
555 12^th Street, NW
Washington, DC 20002
Facsimile: (202) 942-5999
E-mail: Steven.Kaplan@aporter.com
Attention: Steven L. Kaplan, Esq.

if to the Investor:

Kingsbridge Capital Limited/ c/o Kingsbridge Corporate Services Limited
Main Street
Kilcullen, County Kildare
Republic of Ireland
Facsimile: 011-353-45-482-003
E-mail: adamgurney@eircom.net and kingsbridge@eircom.net
Attention: Adam Gurney, Chief Executive Officer

with a copy (which shall not constitute notice) to:

Clifford Chance US LLP
31 West 52^nd Street
New York, NY 10019
Facsimile: (212) 878-8375
E-mail: keith.andruschak@cliffordchance.com
Attention: Keith M. Andruschak, Esq.

Either party hereto may from time to time change its address or facsimile number for notices under this Section by giving at least ten (10) days’ prior written notice of such changed address or facsimile number to the other party hereto.

     Section 10.05. Assignment. Neither this Agreement nor any rights of the Investor or the Company hereunder may be assigned by either party to any other Person.

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     Section 10.06. Amendment; No Waiver. No party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth in this Agreement, the Warrant and the Registration Rights Agreement. Except as expressly provided in this Agreement, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by both parties hereto. The failure of the either party to insist on strict compliance with this Agreement, or to exercise any right or remedy under this Agreement, shall not constitute a waiver of any rights provided under this Agreement, nor estop the parties from thereafter demanding full and complete compliance nor prevent the parties from exercising such a right or remedy in the future.

     Section 10.07. Entire Agreement. This Agreement, the Registration Rights Agreement and the Warrant set forth the entire agreement and understanding of the parties relating to the subject matter hereof and supersedes all prior and contemporaneous agreements, negotiations and understandings between the parties, both oral and written, relating to the subject matter hereof.

     Section 10.08. Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that, such severability shall be ineffective if it materially changes the economic benefit of this Agreement to any party.

     Section 10.09. Title and Subtitles. The titles and subtitles used in this Agreement are used for the convenience of reference and are not to be considered in construing or interpreting this Agreement.

     Section 10.10. Counterparts. This Agreement may be executed in multiple counterparts, each of which may be executed by less than all of the parties and shall be deemed to be an original instrument which shall be enforceable against the parties actually executing such counterparts and all of which together shall constitute one and the same instrument.

     Section 10.11. Choice of Law. This Agreement shall be construed under the laws of the State of New York.

     Section 10.12. Specific Enforcement, Consent to Jurisdiction.

     (a) The Company and the Investor acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.

     (b) Each of the Company and the Investor (i) hereby irrevocably submits to the jurisdiction of the United States District Court and other courts of the United States sitting in the State of New York for the purposes of any suit, action or proceeding arising out of or relating to this Agreement and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the Company and the Investor consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the

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address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law.

     Section 10.13. Survival. The representations and warranties of the Company and the Investor contained in Articles IV and V of this Agreement and the covenants contained in Articles V, VI and X of this Agreement shall survive the execution and delivery hereof and the Closing until the termination of this Agreement, and the agreements and covenants set forth in Article VIII and Article IX of this Agreement shall survive the execution and delivery hereof and the Closing hereunder.

     Section 10.14. Publicity Except as otherwise required by applicable law or regulation, or Nasdaq rule or judicial process, prior to the Closing, neither the Company nor the Investor shall issue any press release or otherwise make any public statement or announcement with respect to this Agreement or the transactions contemplated hereby or the existence of this Agreement. In the event the Company is required by law, regulation, Nasdaq rule or judicial process, based upon reasonable advice of the Company’s counsel, to issue a press release or otherwise make a public statement or announcement with respect to this Agreement prior to the Closing, the Company shall consult with the Investor on the form and substance of such press release, statement or announcement. Promptly after the Closing, each party may issue a press release or otherwise make a public statement or announcement with respect to this Agreement or the transactions contemplated hereby or the existence of this Agreement; provided that, prior to issuing any such press release, making any such public statement or announcement, the party wishing to make such release, statement or announcement consults and cooperates in good faith with the other party in order to formulate such press release, public statement or announcement in form and substance reasonably acceptable to both parties.

     Section 10.15. Further Assurances. From and after the date of this Agreement, upon the request of the Investor or the Company, each of the Company and the Investor shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.

     Section 10.16. Absence of Presumption. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted.

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          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officer as of the date first written.

KINGSBRIDGE CAPITAL LIMITED
By:	/s/ Adam Gurney
	Adam Gurney
	Chief Executive Officer
	Palm Grove House
	2nd Floor
	Road Town, Tortola
	British Virgin Islands
GENVEC, INC.
By:	/s/ Paul H. Fischer
	Paul H. Fischer, Ph.D.
	President and Chief Executive Officer

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Exhibit A

Form of Registration Rights Agreement

Exhibit B

Form of Warrant

Exhibit C

Officer’s Certificate

     I, [NAME OF OFFICER], do hereby certify to Kingsbridge Capital Limited (the “Investor”), with respect to the common stock of GenVec, Inc. (the “Company”) issuable in connection with the Draw Down Notice, dated ___(the “Notice”) attached hereto and delivered pursuant to Article III of the Common Stock Purchase Agreement, dated March 15, 2006 (the “Agreement”), by and between the Company and the Investor, as follows (capitalized terms used but undefined herein have the meanings given to such terms in the Agreement):

     1. I am the duly elected [OFFICER] of the Company.

     2. The representations and warranties of the Company set forth in Article IV of the Agreement are true and correct in all material respects as though made on and as of the date hereof (except for such representations and warranties that are made as of a particular date).

     3. The Company has performed in all material respects all covenants and agreements to be performed by the Company on or prior to the date hereof related to the Notice and has satisfied each of the conditions to the obligation of the Investor set forth in Article VII of the Agreement.

     4. The Shares issuable in respect of the Notice will be delivered without restrictive legend via book entry through the Depositary Trust Company to an account designated by the Investor.

     The undersigned has executed this Certificate this ___day of                     , 200[_].

Name:

Title:

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders:
GenVec, Inc.:

We consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-101963 and No. 333-76886), on Form S-4 (No. 333-123968 and No. 333-105320) and on Form S-8 (File No. 333-110446, No. 333-55590, No. 333-55586 and No. 333-55584) of GenVec, Inc. of our reports dated March 15, 2006, with respect to (1) the balance sheets of GenVec, Inc., as of December 31, 2005 and 2004 and the related statements of operations, stockholders’ equity and comprehensive loss and cash flows for each of the years in the three-year period ended December 31, 2005, (2) management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 and (3) the effectiveness of internal control over financial reporting as of December 31, 2005, which reports appear in the December 31, 2005 annual report on Form 10-K of GenVec, Inc.

/s/ KPMG LLP

McLean, Virginia
March 15, 2006

EX-24.1

EXHIBIT 24.1

POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned directors (each, a “Signatory”) of GenVec, Inc., a corporation organized under the laws of the state of Delaware (the “Company”), hereby constitutes and appoints Paul H. Fischer, Jeffrey W. Church and Steven Kaplan (each, an “Agent”, and collectively, “Agents”) or any of them, his true and lawful attorney-in-fact and agent for and in his name, place and stead, in any and all capacities, to sign the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission. Each Signatory further grants to the Agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary, in the judgment of such Agent, to be done in connection with any such signing and filing, as full to all intents and purposes as he might or could do in person, and hereby ratifies and confirms all that said Agents, or any of them, may lawfully do or cause to be done by virtue hereof.

This Power of Attorney may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which constitute but one and the same instrument.

Signature	Title	Date
/s/ Paul H. Fischer, Ph.D.
Paul H. Fischer, Ph.D.	President, Chief Executive Officer and Director (Principal Executive Officer)	March 15, 2006
/s/ Jeffrey W. Church
Jeffrey W. Church	Chief Financial Officer, Treasurer and Corporate Secretary (Principal Financial and Accounting Officer)	March 15, 2006
/s/ Barbara Hackman Franklin
Barbara Hackman Franklin	Director	March 15, 2006
/s/ Thomas Fraser, Ph.D.
Thomas Fraser, Ph.D.	Director	March 15, 2006
/s/ Wayne T. Hockmeyer, Ph.D.
Wayne T. Hockmeyer, Ph.D.	Director	March 15, 2006
/s/ Zola Horovitz, Ph.D
Zola Horovitz, Ph.D.	Director	March 15, 2006
/s/ William N. Kelley, M.D.
William N. Kelley, M.D.	Director	March 15, 2006
/s/ Stelios Papadopoulos, Ph.D.
Stelios Papadopoulos, Ph.D.	Director	March 15, 2006
/s/ Joshua Ruch
Joshua Ruch	Director	March 15, 2006
/s/ Harold R. Werner
Harold R. Werner	Director	March 15, 2006

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Paul H. Fischer, Ph.D., certify that:

1.	I have reviewed this annual report on Form 10-K of GenVec, Inc.
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report.
4.	The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the report is being prepared;
b.)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.)	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.)	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the Audit Committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):

a.)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b.)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: March 15, 2006

/s/ Paul H Fischer Ph.D.
Paul H. Fischer, Ph.D.
President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Jeffrey W. Church, certify that:

1.	I have reviewed this annual report on Form 10-K of GenVec, Inc.
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report.
4.	The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the report is being prepared;
b.)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.)	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.)	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the Audit Committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):

a.)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b.)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: March 15, 2006

/s/ Jeffrey W. Church
Jeffrey W. Church
Chief Financial Officer, Treasurer
& Corporate Secretary

EX-32.1

Exhibit 32.1

CERTIFICATION BY CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of GenVec, Inc. (the “Registrant”) on Form 10-K as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul H. Fischer, as President and Chief Executive Officer of the Registrant, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant for the dates and periods covered by the Report.

This certificate is being made for the exclusive purpose of compliance by the Chief Executive Officer of the Company with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and may not be disclosed, distributed or used by any person or for any reason other than as specifically required by law.

A signed original of this written statement required by Section 906 has been provided to GenVec, Inc. and will be retained by GenVec, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

March 15, 2006
	/s/ Paul H. Fischer, Ph.D.
	Paul H. Fischer, Ph.D.
	President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION BY CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of GenVec, Inc. (the “Registrant”) on Form 10-K as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey W. Church, as Chief Financial Officer, Treasurer and Corporate Secretary of the Registrant, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant for the dates and periods covered by the Report.

This certificate is being made for the exclusive purpose of compliance by the Chief Financial Officer of the Company with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and may not be disclosed, distributed or used by any person or for any reason other than as specifically required by law.

A signed original of this written statement required by Section 906 has been provided to GenVec, Inc. and will be retained by GenVec, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

March 15, 2006
	/s/ Jeffrey W. Church
	Jeffrey W. Church
	Chief Financial Officer, Treasurer
	& Corporate Secretary