UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934

Filed by the registrantx

Filed by a party other than the registrant¨

Check the appropriate box:

General Dynamics Corporation

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

Payment of filing fee (check the appropriate box):

Notice of Annual Meeting

and

Proxy Statement

2010

March 19, 2010

Dear Fellow Shareholder:

You are invited to our Annual Meeting of Shareholders on Wednesday, May 5, 2010, at 9:00 a.m. local time. The meeting will be held at our headquarters located at 2941 Fairview Park Drive, Falls Church, Virginia. The principal items of business will be the election of directors and an advisory vote on the selection of the company’s independent auditors. Shareholders may raise other matters, as described in the accompanying Proxy Statement.

Your vote is important. We encourage you to consider carefully the matters before us.

We have elected to provide the proxy materials for our 2010 annual meeting to most of our shareholders via the Internet, as permitted by the rules of the Securities and Exchange Commission. We believe this method of providing proxy materials will expedite receipt of proxy materials by many of our shareholders and lower the costs of our annual meeting. Additional information regarding proxy materials distribution is provided on page 2 of our proxy statement. If you are receiving this proxy statement in hard copy, enclosed are your proxy card, return envelope and our 2009 Annual Report.

Please let us know if you plan to attend so that we may send your admission card.

Sincerely yours,

Jay L. Johnson

President and Chief Executive Officer

2941 Fairview Park Drive, Suite 100

Falls Church, Virginia 22042-4513

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

Important Notice Regarding the Availability of Proxy Materials

for the Shareholder Meeting to Be Held on May 5, 2010

The Proxy Statement and 2009 Annual Report are available atwww.generaldynamics.com/2010proxy.

The Annual Meeting of Shareholders of General Dynamics Corporation, a Delaware corporation, will be held on Wednesday, May 5, 2010, at 9:00 a.m. local time at the General Dynamics Corporation headquarters located at 2941 Fairview Park Drive, Falls Church, Virginia. Proposals to be considered at the Annual Meeting include:

The Board of Directors unanimously recommends that you vote FOR proposals 1 and 2.

The Board of Directors unanimously recommends that you vote AGAINST proposal 3.

The Board of Directors set the close of business on March 8, 2010, as the record date for determining the shareholders entitled to receive notice of, and to vote at, the Annual Meeting. It is important that your shares be represented and voted at the meeting. Please complete, sign and return a proxy card, or use the telephone or Internet voting systems.

A copy of the 2009 Annual Report is included with this Notice and Proxy Statement and is available on the website listed above.

By Order of the Board of Directors,

Gregory S. Gallopoulos

Secretary

Falls Church, Virginia

March 19, 2010

Proxy Statement

2011

March 18, 2011

Dear Fellow Shareholder:

You are invited to our Annual Meeting of Shareholders on Wednesday, May 4, 2011, at 9:00 a.m. local time. The meeting will be held at our headquarters located at 2941 Fairview Park Drive, Falls Church, Virginia. The principal items of business will be the election of directors; an advisory vote on the selection of the company’s independent auditors; an advisory vote on executive compensation; and an advisory vote on the frequency of future advisory votes on executive compensation. Shareholders may raise other matters, as described in the accompanying Proxy Statement.

We have elected to provide the proxy materials for our 2011 annual meeting to most of our shareholders via the Internet, as permitted by the rules of the Securities and Exchange Commission. We believe this method of providing proxy materials will expedite receipt of proxy materials by many of our shareholders and lower the costs of our annual meeting. Additional information regarding proxy materials distribution is provided on page 2 of our proxy statement.

Your vote is important. We encourage you to consider carefully the matters before us.

Sincerely yours,

Jay L. Johnson

Chairman and Chief Executive Officer

2941 Fairview Park Drive, Suite 100

Falls Church, Virginia 22042-4513

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

Important Notice Regarding the Availability of Proxy Materials

for the Shareholder Meeting to Be Held on May 4, 2011

The Proxy Statement and 2010 Annual Report are available atwww.generaldynamics.com/2011proxy.

The Annual Meeting of Shareholders of General Dynamics Corporation, a Delaware corporation, will be held on Wednesday, May 4, 2011, at 9:00 a.m. local time at the General Dynamics Corporation headquarters located at 2941 Fairview Park Drive, Falls Church, Virginia. Proposals to be considered at the Annual Meeting include:

The Board of Directors unanimously recommends that you vote FOR proposals 1, 2 and 3.

The Board of Directors unanimously recommends for proposal 4 that you vote to hold future executive compensation advisory votes EVERY THREE YEARS.

The Board of Directors unanimously recommends that you vote AGAINST proposals 5 and 6.

The Board of Directors set the close of business on March 7, 2011, as the record date for determining the shareholders entitled to receive notice of, and to vote at, the Annual Meeting. It is important that your shares be represented and voted at the meeting. Please complete, sign and return a proxy card, or use the telephone or Internet voting systems.

A copy of the 2010 Annual Report is included with this Notice and Proxy Statement and is available on the website listed above.

By Order of the Board of Directors,

Gregory S. Gallopoulos

Secretary

Falls Church, Virginia

March 18, 2011

Proxy Statement

March 19, 201018, 2011

The Board of Directors of General Dynamics Corporation is soliciting your proxy for the Annual Meeting of Shareholders to be held on May 5, 2010,4, 2011, at 9:00 a.m. local time, or at any adjournment or postponement of the meeting. This Proxy Statement, and the accompanying Notice of Annual Meeting of Shareholders and proxy card, are being distributed on or about March 19, 2010,18, 2011, to holders of General Dynamics common stock, par value $1.00 per share (Common Stock). General Dynamics is a Delaware corporation.

Table of Contents

Information Regarding Voting

All shareholders of record at the close of business on March 8, 2010,7, 2011, are entitled to vote their shares of Common Stock at the Annual Meeting. On the record date, General Dynamics had 384,491,631373,358,310 shares of Common Stock issued and outstanding.

Annual Meeting Attendance

Attending the Annual Meeting.    All shareholders are welcome to attend the Annual Meeting. You will need an admission card or proof of ownership of Common Stock and personal photo identification for admission. If you hold shares directly in your name as a shareholder of record, you may obtain an admission card through the telephone or Internet voting systems or by marking the appropriate box on a proxy card. If your shares are held by a bank, broker or other holder of record (commonly referred to as registered in “street name”), you are considered a beneficial owner of those shares rather than a shareholder of record. In that case, you must present at the Annual Meeting proof of ownership of Common Stock, such as a bank or brokerage statement.

Quorum for the Transaction of Business.    A quorum is the presence, in person or by proxy, of holders of a majority of the issued and outstanding shares of Common Stock as of the record date. If you submit a properly completed proxy in accordance with one of the voting procedures described below or appear at the Annual Meeting to vote in person, your shares of Common Stock will be considered present. For purposes of determining whether a quorum exists, abstentions and broker non-votes (as described below) will be counted as present. Once a quorum is present, voting on specific proposals may proceed. In the absence of a quorum, the Annual Meeting may be adjourned.

Proxy Materials Distribution

As permitted by the rules of the Securities and Exchange Commission (SEC), we are providing the proxy materials for our 20102011 Annual Meeting via the Internet to most of our shareholders. For some shareholders, such as participants in our 401(k) plans, we are required to deliver proxy materials in hard copy. Nevertheless, we believe the use of the Internet availability will expedite receipt of the 20102011 proxy materials by many of our shareholders and lower the costs of our Annual Meeting. On March 19,18, we initiated delivery of proxy materials to our shareholders of record one of two ways: (1) a notice containing instructions on how to access proxy materials via the Internet or (2) a printed copy of those materials. If you received a notice in lieu of a printed copy of the proxy materials, you will not automatically receive a printed copy of the proxy materials in the mail. Instead, the notice provides instructions on how to access the proxy materials on the Internet and how to vote online or by telephone. If you received such a notice, but would also like to receive a printed copy of the proxy materials, the notice includes instructions on how you may request a printed copy.

Voting

Voting Procedures.    You must be a shareholder of record on the record date to vote your shares at the Annual Meeting. Each shareholder of record is entitled to one vote on all matters presented at the Annual Meeting for each share of Common Stock held. You are considered a shareholder of record if your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A. (Computershare), as of the record date. If you are a shareholder of record, Computershare provides proxy materials to you on our behalf. If your shares are registered in different names or held in more than one account, you may receive more than one proxy card or set of voting

instructions. In that case, you will need to vote separately for each set of shares in accordance with the voting procedures outlined below.

Shareholders of record may cast their vote by:

The telephone and Internet voting systems are available 24 hours a day. They will close at 11:59 p.m. Eastern Time on May 4, 2010.3, 2011.Please note that the voting deadline differs for participants in our 401(k) plans, as described below. All shares represented by properly executed, completed and unrevoked proxies that are received on time will be voted at the Annual Meeting in accordance with the specifications made in the proxy card. If you return a proxy card but do not specifically direct the voting of shares, your proxy will be voted as follows:

If your shares are held by a bank, broker or other holder of record, you are the beneficial owner of those shares rather than the shareholder of record. If you are a beneficial owner, your bank, broker or other holder of record will forward the proxy materials to you. As a beneficial owner, you have the right to direct the voting of your shares by following the voting instructions provided with these proxy materials. Please refer to the proxy materials forwarded by your bank, broker or other holder of record to see if the voting options described above are available to you.

The Northern Trust Company (Northern Trust) is the holder of record of the shares of Common Stock held in our 401(k) plans – the General Dynamics Corporation Savings and Stock Investment Plans and the General Dynamics Corporation Savings and Stock Investment Plan for Represented Employees. If you are a participant in one of these plans, you are the beneficial owner of the shares of Common Stock credited to your plan account. As beneficial owner and named fiduciary, you have the right to instruct Northern Trust, as plan trustee, how to vote your shares. In the absence of timely voting instructions, Northern Trust has the right to vote shares at its discretion.

Computershare provides proxy materials to participants in these plans on behalf of Northern Trust. If you are a plan participant and a shareholder of record, Computershare may combine the shares registered directly in your name and the shares credited to your 401(k) plan account onto one proxy card. If Computershare does not combine your shares, you will receive more than one set of proxy

materials. In that case, you will need to submit a vote for each set of shares. The vote you submit via proxy card or the telephone or Internet voting systems will serve as your voting instructions to Northern Trust.To allow sufficient time for Northern Trust to vote your 401(k) plan shares, your vote, or any re-vote as described below, must be received by 9:009 a.m. Eastern Time on May 3, 2010.2, 2011.

Revoking a Proxy.    A shareholder of record may revoke a proxy at any time before it is voted at the Annual Meeting by:

Our Corporate Secretary must receive notice of revocation, or a subsequent proxy card, before the vote at the Annual Meeting for a revocation to be valid. Except as described above for participants in our 401(k) plans, a re-vote by the telephone or Internet voting systems must occur before 11:59 p.m. Eastern Time on May 4, 2010.3, 2011. If you are a beneficial owner, you must revoke your proxy through the appropriate bank, broker or other holder of record.

Vote Required

Broker Non-Vote.    A broker non-vote occurs when a bank, broker or other holder of record holding shares for a beneficial owner does not vote on a particular proposal because that holder does not have discretionary voting power for the proposal and has not received voting instructions from the beneficial owner. Banks, brokers and other holders of record have discretionary authority to vote shares without instructions from beneficial owners only on matters considered “routine” by the New York Stock Exchange, such as the advisory vote on the selection of the independent auditors. On non-routine matters, such as the election of directors, executive compensation matters and the shareholder proposal,proposals, these banks, brokers and other holders of record do not have discretion to vote uninstructed shares and thus are not “entitled to vote” on such proposals, resulting in a broker non-vote for those shares.

Unlike in prior years, New York Stock Exchange rules now classify the election of directors as a non-routine matter. Accordingly, banks and brokers will not be able to vote on the election of directors without instructions from the beneficial owners.We encourage all shareholders that hold shares through a bank, broker or other holder of record to provide voting instructions to such parties to ensure that their shares are voted at the Annual Meeting.

Proposal 1 – Election of the Board of Directors of the Company.    Directors will be elected by a majority of the votes cast and entitled to vote at the Annual Meeting. A “majority of the votes cast” means that the number of votes cast “for” a director’s election exceeds the number of votes cast “against” that director’s election. You may vote for, vote against or abstain from voting for any or all nominees. Abstentions and broker non-votes will not be counted as a vote cast “for” or “against” a director’s election.

Proposal 2 – Selection of Independent Auditors.    This proposal requires an affirmative vote of a majority of shares present in person or represented by proxy and entitled to vote at the Annual Meeting to be approved. You may vote for, vote against or abstain from voting on this matter. Abstentions will have the effect of a vote against this proposal.

Proposal 3 – Advisory Vote on Executive Compensation.    This proposal requires an affirmative vote of a majority of shares present in person or represented by proxy and entitled to vote at the Annual Meeting to be approved. You may vote for, vote against or abstain from voting on this matter. Abstentions will have the effect of a vote against this proposal.

Proposal 4 – Advisory Vote on the Frequency of Future Executive Compensation Advisory Votes.    For this proposal, you may choose to express a preference for holding future advisory votes on executive compensation every year, every two years or every three years. For any particular frequency to be approved, it must receive an affirmative vote of a majority of shares present in person or represented by proxy and entitled to vote at the Annual Meeting. You may choose instead to abstain from voting on this matter. Abstentions will have the effect of a vote against each choice.

Proposals 5 and 6 – Shareholder ProposalProposals.    Proposal 3 requiresProposals 5 and 6 each require an affirmative vote of a majority of shares present in person or represented by proxy and entitled to vote on the proposal to be approved. You may vote for, vote against or abstain from voting on this matter.these matters. Abstentions will have the effect of a vote against the proposal.proposals.

Voting Tabulation.    Representatives of American Election Services, LLC, will tabulate the vote at the Annual Meeting.

Proxy Solicitation.    The Board of Directors is soliciting proxies from shareholders. Directors, officers and other employees of General Dynamics may solicit proxies from our shareholders by mail, e-mail, telephone, facsimile or in person. In addition, Innisfree M&A Incorporated (Innisfree), 501 Madison Avenue, New York, New York, is soliciting brokerage firms, dealers, banks, voting trustees and their nominees.

We will pay Innisfree approximately $15,000 for soliciting proxies for the Annual Meeting and will reimburse brokerage firms, dealers, banks, voting trustees, their nominees and other record holders for their out-of-pocket expenses in forwarding proxy materials to the beneficial owners of Common Stock. We will not provide compensation, other than their usual compensation, to our directors, officers and other employees who solicit proxies.

Election of the Board of Directors of the Company

(Proposal 1)

This year, 1011 nominees are standing for election to the Board of Directors. Each nominee elected as a director will hold office until:

In the event that any nominee withdraws or for any reason is unable to serve as a director, your proxy will be voted for any remaining nominees (except as otherwise indicated in your proxy) and any replacement nominee designated by the Nominating and Corporate Governance Committee of the Board of Directors.

Ms. Barra’s business and educational background, including a bachelors degree in electrical engineering and a masters degree in business administration, enable her to provide valuable strategic, operational and business advice to the company. Ms. Barra’s current position with General Motors as senior vice president, global product development, and her former positions as vice president, global human resources, and vice president, global manufacturing engineering, position her well to advise our businesses on a broad range of matters in the areas of human resources, engineering, manufacturing, and research and development. Her strong and diversified business background provides her with a deep understanding of the challenges facing large public companies with complex global operations.

		Nicholas D. Chabraja,, 67, 68, director since 1994.   Chairman sincefrom June 1997. Chairman and1997 to May 2010. Chief Executive Officer from June 1997 to July 2009. Vice Chairman from December 1996 to May 1997. Executive Vice President from March 1994 to December 1996. Mr. Chabraja currently serves as a director of Northern Trust Corporation.Corporation and as non-executive chairman of Tower International, Inc. He served as a director of Ceridian Corporation, a former public company, until November 2007, within the past five years.

Mr. Chabraja’s 15 years of service as a senior executive officer and 12-year tenure as chairman and chief executive officer of our company make him an experienced and trusted advisor. He has in-depth knowledge of all aspects of General Dynamics and a deep understanding and appreciation of our customers, business operations and approach to risk management. His service at General Dynamics combined with his service on other public company boards provides him with a valuable perspective on governance and management matters that face large public companies.

As the longest-serving member of our board and a significant shareholder, Mr. Crown has an abundance of knowledge regarding General Dynamics and its history. As president of Henry Crown and Company, a private investment firm with diversified interests, Mr. Crown has broad experience in general business management and capital deployment strategies. His many years of service as a director of our company and two other large public companies have provided him with a deep understanding of the roles and responsibilities of a board inof a large public company.

		William P. Fricks, 63,66, director since 2003.   Chairman and Chief Executive Officer of Newport News Shipbuilding Inc. from 1997 to 2001. Chief Executive Officer and President of Newport News Shipbuilding Inc. from 1995 to 1996.

Mr. Fricks’ prior senior executive positions at Newport News Shipbuilding Inc., including chairman and chief executive officer, president and chief executive officer, vice president-finance, controller and treasurer, give him critical knowledge of the management, financial and operational requirements of a large company and a keen understanding of our key customers. In these positions, Mr. Fricks gained extensive experience in dealing with accounting principles and financial reporting, evaluating financial results and the financial reporting process of a large company. Based on this experience, the Board has determined that Mr. Fricks is an Audit Committee Financial Expert.

Prior to joining General Dynamics as vice chairman in September 2008, Mr. Johnson served as both chief executive officer of large gas and electric utility businesses and as an Admiral in the U.S. Navy. He served as a director of General Dynamics for six years before becoming vice chairman.an executive officer of the company. Mr. Johnson rose through the ranks of the U.S. Navy to become Chief of Naval Operations and a member of the Joint Chiefs of Staff. Mr. Johnson’s superior business acumen, knowledge of all aspects of the company’s business and history, and prior military experience position him well to serve as our presidentchairman and chief executive officer and as a director.officer.

Mr. Joulwan had a distinguished career in the U.S. Army prior to joining our Board in 1998. As a General, Mr. Joulwan served as Commander in ChiefCommander-in-Chief of the Southern Command and the European Command and as the 11^thSupreme Allied Commander, Europe. Mr. Joulwan’s unique perspective on U.S. and foreign military strategy and operations, including NATO operations, provides him with valuable insight into international defense markets and the global defense industry. Mr. Joulwan’s demonstrated leadership and management skills make him a valuable strategic advisor to our aerospace and defense businesses.

		Paul G. Kaminski, 67,68, director since 1997.   Under Secretary of U.S. Department of Defense for Acquisition and Technology from 1994 to 1997. Chairman and Chief Executive Officer of Technovation, Inc., (consulting) since 1997. Senior Partner of Global Technology Partners, LLC, (consulting) since 1998.from 1998 to 2010. Dr. Kaminski served as a director of Anteon International Corporation, a former public company, within the past five years.

Dr. Kaminski’s prior service as the Under Secretary of Defense for Acquisition and Technology provides him with valuable insight into research and development, procurement, acquisition reform and logistics at the U.S. Department of Defense. In addition, Dr. Kaminski’s education and business background in advanced technology, including dual master’s degrees in aeronautics-astronautics and electrical engineering and a doctorate in aeronautics and astronautics, enable him to provide valuable strategic and business advice to our aerospace and defense businesses.

Prior to retiring from the U.S. Army at the rank of General, Mr. Keane served as Vice Chief of Staff of the Army. As a senior officer, Mr. Keane managed significant operating budgets and addressed complex operational and strategic issues. Mr. Keane’s astute appreciation for the complexities of the U.S. military and the defense industry combined with his demonstrated leadership and management skills make him a valuable strategic advisor to our aerospace and defense businesses. Mr. Keane also has gained a strong understanding of public company governance and operations through his service on three public company boards.

Prior to retiring from the U.S. Air Force at the rank of General, Mr. Lyles served as Commander of the Air Force Materiel Command and Vice Chief of Staff of the U.S. Air Force. In these positions, Mr. Lyles managed significant operating budgets and addressed complex operational issues. The broad knowledge of the U.S. military and the defense industry he attained through these experiences, combined with his engineering and aerospace educational background, enable Mr. Lyles to provide critical strategic and business advice to our aerospace and defense businesses. In addition, Mr. Lyles has gained a strongthorough understanding of the challenges that face public companies through his service on several public company boards.

		William A. Osborn, 62,63, director since 2009.   Chairman of Northern Trust Corporation (multibank holding company) from October 1995 to November 2009. Chief Executive Officer of Northern Trust Corporation from 1995 to 2007 and President of Northern Trust Corporation and The Northern Trust Company (banking services) from 2003 to 2006. Mr. Osborn currently serves as a director of Abbott Laboratories, Caterpillar, Inc., Nicor Inc. and Tribune Company, a public company until December 2007. He served as a director of Nicor Inc. and Northern Trust Corporation within the past five years. Appointed to the Board in December 2009, Mr. Osborn was recommended as a director nominee by the Nominating and Corporate Governance Committee. Mr. Osborn was initially identified to the committee by a non-management director and by the then-serving chief executive officer.

Mr. Osborn’s prior service as a senior executive of Northern Trust Corporation, including as chairman and chief executive officer, president and chief operating officer, provides him with extensive knowledge of the complex financial, operational and governance issues of a large public company. He brings to our board a well-developed awareness of financial strategy and asset management and a strong understanding of public company governance. The Board has determined that Mr. Osborn’s extensive experience with accounting principles, financial reporting and evaluation of financial results qualifies him as an Audit Committee Financial Expert.

Mr. Walmsley’s prior service as Chief of Defence Procurement for the United Kingdom Ministry of Defence gives him acute comprehension of international defense matters. Moreover, his service as a Vice Admiral in the Royal Navy and his appointments as Controller, Chairman of the Naval Nuclear Technical Safety Panel and Director General, Submarines, provide him with an important perspective on our aerospace and defense businesses. Mr. Walmsley’s service as a public company director in the United States and the United Kingdom positions him well to understand complex operational and governance matters at a large public company.

Your Board of Directors unanimously recommends a vote FOR all the director nominees listed above.

J. Christopher Reyes will not stand for re-election at the Annual Meeting. General Dynamics and the Board appreciate his service and valuable counsel as a director of the company.

Governance of the Company

Board of Directors

The Board of Directors oversees General Dynamics’ business and affairs pursuant to the General Corporation Law of the State of Delaware and our Certificate of Incorporation and Bylaws. The Board is the ultimate decision-making body, except on matters reserved for the shareholders.

Corporate Governance Guidelines

Our Board of Directors believes that a commitment to good corporate governance enhances shareholder value. To that end, on the recommendation of the Nominating and Corporate Governance Committee, the Board has adopted governance policies and procedures to ensure effective governance of both the Board and the company. The policies and procedures are stated in the General Dynamics Corporate Governance Guidelines, available on our website atwww.generaldynamics.com, under the “Investor Relations – Corporate Governance” captions, or in print upon request. The Board benchmarksregularly reviews these guidelines against theand updates them periodically in response to changing regulatory requirements and evolving best practices of other public companies and considers suggestions made by various groups knowledgeable about corporate governance. Further, the Board regularly evaluates these guidelines to ensure compliance with the rules and regulations of the SEC and the New York Stock Exchange. The Board may modify existing policies or adopt new policies to comply with new legislation and with rule changes made by the SEC or the New York Stock Exchange.practices.

Codes of Ethics

Since the inception of a formal ethics program in 1985, our Board of Directors and management have devoted significant time and resources to maintaining an active and robust ethics program. Since 1985, we have had a Standards of Business Ethics and Conduct Handbook that applies to all employees. This handbook, known as the “Blue Book,” has been updated and improved as we have grown and changed over the years. Our ethics program also includes a 24-hour ethics hotline,helpline, which employees can call to communicate any business ethics-related concerns, and periodic training on ethics and compliance topics for all employees.

We also have adopted ethics codes specifically applicable to our financial professionals and our Board of Directors. The Code of Ethics for Financial Professionals, which supplements the Blue Book, applies to our chief executive officer, chief financial officer, controller and any person performing similar financial functions. In addition, there is a Code of Conduct for Members of the Board of Directors that embodies our Board’s commitment to manage our business in accordance with the highest standards of ethical conduct.

Copies of the Standards of Business Ethics and Conduct Handbook, Code of Ethics and Code of Conduct are available on our website atwww.generaldynamics.com, under the “Investor Relations – Corporate Governance” captions, or in print upon request. We will disclose on our website any amendments to or waivers from the Standards of Business Ethics and Conduct, Code of Ethics or Code of Conduct on behalf of any of our executive officers, financial professionals or directors.

Related Person Transactions Policy

Our Board of Directors has adopted a written policy on the review and approval of related person transactions. Related persons covered by the policy are:

A related person transaction is defined by this policy as a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which: (1) General Dynamics will be a participant; (2) the amount involved exceeds $120,000; and (3) any related person will have a direct or indirect material interest. The following interests and transactions are not subject to the policy:

The Nominating and Corporate Governance Committee is responsible for reviewing, approving and, where applicable, ratifying related person transactions. If a member of the committee has an interest in a related person transaction, then he or she will not be part of the review process.

In considering the appropriate action to be taken regarding a related person transaction, the committee or the Board (as the case may be) will consider the best interests of General Dynamics and whether the transaction is fair to the company, is on terms that would be obtainable in an arms-length transaction and serves a compelling business reason, and any other factors it deems relevant. As a condition to approving or ratifying any related person transaction, the committee or the Board may impose whatever conditions and standards it deems appropriate, including periodic monitoring of ongoing transactions.

The following transaction with a related person was determined to pose no actual conflict of interest and was approved by the committee pursuant to our related person transactions policy:

In January 2010, Nicholas D. Chabraja the chairman of the Board, entered intoan agreement to purchase a sales agreement withmid-sized pre-owned aircraft from Gulfstream Aerospace Corporation, a subsidiary of General Dynamics, for the purchase of a mid-sized pre-owned aircraft for a price of approximately $8,500,000. The purchase was completed in the first quarter of 2010. The terms and conditions of the sales agreement were negotiated in an arms-length transaction and represent standard terms and conditions for a pre-owned aircraft sale.

Director Independence

Our Board of Directors assesses the independence of our directors and examines the nature and extent of any relationships between General Dynamics and our directors, their families and their affiliates. For a director to be considered independent, the Board must determine that a director does not have any

direct or indirect material relationship with General Dynamics. Our Board has established director independence guidelines (the Director Independence Guidelines) as part of the Corporate Governance Guidelines to assist in determining director independence in accordance with the rules of the New York Stock Exchange. The Director Independence Guidelines provide that an “independent director”:

For purposes of the Director Independence Guidelines, references to General Dynamics include any of our subsidiaries and the term “immediate family member” includes a person’s spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and anyone (other than domestic employees) who shares the person’s home.

In March 2010,2011, the Board of Directors considered whether each member of the Board meets the definition of an “independent director” in accordance with the rules of the New York Stock Exchange and the Director Independence Guidelines. The Board determined that Mary T. Barra, James S. Crown, William P. Fricks, George A. Joulwan, Paul G. Kaminski, John M. Keane, Lester L. Lyles, William A. Osborn J. Christopher Reyes and Robert Walmsley each qualifies as an “independent director” in accordance with the rules of the New York Stock Exchange and the Director Independence Guidelines. In addition, theindependent director. The Board also determined that Nicholas D. Chabraja and Jay L. Johnson are not independent directors due to Mr. Chabraja’s recent service as chief executive officer and Mr. Johnson’s current service as president and chief executive officer. To make this determination,these independence determinations, the Board reviewed all relationships between General Dynamics and the directors and affirmatively determined that none of the directors who qualifies as independent has a material business, financial or other type of relationship with General Dynamics (other

(other than as a director or shareholder of the company). Specifically, the Board considered the following relationships and found them to be immaterial for the reasons discussed below:

Ms. Barra and Messrs. Crown, Joulwan, Kaminski, Keane, Lyles Osborn and ReyesOsborn serve as members of the boards of charitable and other non-profit organizations to which General Dynamics has made

payments or contributions in the usual course of our business and annual giving programs. All payments or contributions by General Dynamics were below the greater of $1 million or 2 percent of the organizations’ gross revenues.

Messrs. Crown, Joulwan, Kaminski, Keane, Lyles, Osborn Reyes and Walmsley serve as directors of companies, and Mr. Walmsley serves as a consultant to companies and Ms. Barra is an executive officer of a company, to which we sell products and services, or from which we purchase products and services, in the ordinary course of business. All paymentsNone of the directors had any material interest in, or received any special compensation in connection with, the purchase and sale of the products and services by General Dynamics were below the greater of $1 million or 2 percent of the other companies’ consolidated gross revenues.these ordinary-course business relationships.

Board Leadership Structure

Our Board elects a chairman from among the directors. While we have historically combineddirectors and determines whether to separate or combine the roles of chairman and chief executive officer we combine or separate the roles based on what we believeit believes best serves the needs of the company and its shareholders at any particular time. Mr. Johnson currently serves asIn July 2009, the president andBoard separated the roles to facilitate the seamless transition of the chief executive officer andposition from Mr. Chabraja currently serves as chairman. We believe this structure supportedto Mr. Johnson. In May 2010, the seamless transition in corporate leadership in 2009.

The Board continues to review and consider whetherdetermined that it iswas in the best interests of the company and its shareholders to separate or combinerecombine the roles of chairman and chief executive officer, at which point Mr. Johnson began serving as the chairman and chief executive officer. As partThe Board believes that Mr. Johnson’s in-depth knowledge and keen understanding of this review, inthe company’s operations and risk management practices position him to provide strong and effective leadership to the Board and to ensure that the Board is informed of important issues facing the company. The Board also believes that having a combined role promotes a cohesive, strong and consistent vision and strategy for the company.

In February 2010 the Board amended the Corporate Governance Guidelines to establishcreated the position of a lead director. The lead director will be selected annually by the Board from among the independent directors. Mr. Crown was selected as lead director effective May 2010. The Board believes that thisthe lead director position will provideprovides additional independent oversight of senior management and board matters in our current structure where the chairman is not an independent director.matters. The selection of a lead director is meant to facilitate, and not to inhibit, communication among the directors or between any of them and the chairman. Accordingly, directors are encouraged to continue to communicate among themselves and directly with the chairman.

The lead director’s authority and responsibilities are as follows:

The lead director will be selected annually by the Board from among the independent directors. The Board intends to select a lead director no later than its Board meeting in May 2010.

Risk Oversight

We believe the Board leadership structure described above supports a risk-management process in which senior management is responsible for our company’s day-to-day risk-management processes and the Board provides oversight of those processes. To fulfill this responsibility, the Board oversees risk management at both the full Board and committee levels.

The full Board reviews and approves annually a corporate policy addressing the delegation of authority and assignment of responsibility to ensure that the responsibilities and authority delegated to senior management are appropriate from an operational and risk-management perspective. In addition, the Board assesses the company’s strategic and operational risks throughout the year, with particular focus on these risks at an annual three-day Board meeting in early February. At this meeting, senior management provides a strategic reportreports on the opportunities and risks faced by the company in the aerospace and defense markets.markets in which the company conducts business. Additionally, each business unit president and each business group executive vice president presents the unit’s and group’s respective operating plan and strategic initiatives for the year. The Board reviews, adjusts where appropriate, and approves the business unit and business group goals and adopts our company operating plan for the year. These plans and related risks are then monitored throughout the year as part of periodic financial and performance reports given to the Board by the senior vice president and chief financial officer and executive vice presidents of each business group.

In addition, the Audit Committee has responsibility for oversight of the company’s policies and practices concerning risk assessment and risk management. The committee reviews and takes appropriate action with respect to the company’s annual and quarterly financial statements, the internal audit program, the ethics program and disclosures made with respect to the company’s internal controls. To facilitate these risk oversight responsibilities, the committee receives regular briefings from members of senior management on the internal audit plan; Sarbanes-Oxley 404 compliance; significant litigation; ethics program matters; and health, safety and environmental matters. The committee also holds anregular executive sessionsessions with the staff vice president, internal audit, and an executive session with the senior partners of the KPMG LLP audit team following each in-person committee meeting.team.

In addition to the Audit Committee’s role in risk oversight, each of the other Board committees considers risk as it relates to its particular areas of responsibility. The Finance and Benefit Plans Committee oversees the management of the company’s finance policies and the assets of the company’s employee benefit plans. To assess risks in these areas, the committee receives regular briefings from our vice president and treasurer, and senior vice president and chief financial officer, on finance policies and asset performance. The Compensation Committee oversees and administers our incentive and equity compensation programs to ensure that the programs create incentives for strong operational performance and for the long-term benefit of the company and its shareholders. The committee receives regular briefings from the presidentchairman and chief executive officer and the senior vice president, human resources and administration, on compensation matters. Finally, the Nominating and Corporate Governance Committee oversees risks related to board composition and governance matters and receives regular briefings from the senior vice president, general counsel and secretary.

Board Meetings and Attendance

During 2009,2010, the Board of Directors held eightnine meetings. This included a three-day meeting in February to review our 20092010 operating plan, including the operating plan of each of our business units and business groups. In April 2010, the Board visited the Basel, Switzerland facility of our Jet Aviation subsidiary and met with Jet Aviation’s management. Each of our directors attended at least 8590 percent

of the meetings of the Board and committees on which they served in 2009.2010. We encourage directors to attend each meeting of shareholders. All of our directors at the time attended the 20092010 annual meeting of shareholders.

Executive Sessions of the Board

Our Board holds executive sessions of the non-management directors in conjunction with all regularly scheduled Board meetings. The non-management directors may also meet without management present at other times as desired by any non-management director. In addition, the independent directors meet in executive session at least once a year. Currently, the chairs of the four standing committees rotate as chair of these executive sessions. Once theThe lead director is selected by the Board, the lead director will serveserves as chair at thesethe executive sessions.

Board Committees

The Board of Directors has four standing committees, described below. Currently, allthree of the four Board committees are composed of independent, non-management directors, including those committees that are required by the rules of the New York Stock Exchange to be composed solely of independent directors. Each of thesethe Board committees has a written charter. Copies of these charters are available on our website atwww.generaldynamics.com, under the “Investor Relations – Corporate Governance” captions, or in print upon request.

Committee Members.    Listed below are the members of each of the four standing committees as of March 8, 2010,7, 2011, with the chair appearing first.

Audit Committee.This committee provides oversight on accounting, financial reporting, internal control, auditing and regulatory compliance activities. It selects and evaluates our independent auditors and evaluates their independence. In addition, this committee reviews our audited consolidated financial statements with management and the independent auditors, recommends to the Board whether the audited consolidated financial statements should be included in our annual report on Form 10-K and prepares a report to shareholders that is included in our proxy statement. This committee also evaluates the performance, responsibilities, budget and staffing of the internal audit function, as well as the scope of the internal audit plan. This committee held 11 meetings in 2009.2010. The Board of Directors has determined that Mr. Fricks, the chair of the Audit Committee, and Mr. Osborn each qualifies as an “audit committee financial expert” as defined by the SEC.

Finance and Benefit Plans Committee.    This committee provides strategic oversight of management with respect to the finance policies of General Dynamics and the management of the assets of our employee benefit plans (other than multiemployer plans). This committee, formerly named the Benefit Plans and Investment Committee, held three meetings in 2009.

Compensation Committee.    This committee evaluates the performance of the chief executive officer and other officers and reviews and approves their compensation. The processes and procedures for the review and approval of executive compensation are described in the Compensation Discussion and Analysis section of this Proxy Statement. In addition, this committee has responsibility for recommending to the Board the level and form of compensation and benefits for directors. It also administers our incentive compensation plans and reviews and monitors succession plans for the chief executive officer and other officers. This committee held five meetings in 2009.2010.

Consistent with its obligations and responsibilities, the Compensation Committee may form subcommittees of one or more members of the committee and delegate its authority to the subcommittees as it deems appropriate. In addition, the committee has the authority to retain and terminate external advisors in connection with the discharge of its duties. The committee’s charter also provides that the committee has engaged external advisorssole authority to approve consultant fees (to be funded by the company) and the terms of the consultant’s retention. Pursuant to the charter, the Compensation Committee has, from time to time, but didengaged PricewaterhouseCoopers LLP (PwC) as a compensation consultant to provide advice on executive compensation matters. In 2010, the committee, after reviewing fees paid by the company to PwC for other services and considering PwC’s independence generally, engaged PwC to provide context on the current executive compensation landscape from the perspective of regulators, shareholders and the competitive market, and to conduct a review of our executive compensation processes. PwC is also available to provide advice to the chairman of the Compensation Committee or the Compensation Committee as a whole on executive compensation matters on an as-needed basis. PwC does not, however, regularly attend Compensation Committee meetings or make any specific recommendations on the amount or form of compensation for any of our executives.

In 2010, the chairman of the Compensation Committee approved fees of approximately $17,000 to PwC in 2009.its capacity as external advisor to the Compensation Committee. Management neither made, nor recommended, the decision to engage PwC. The PwC group providing compensation services to the Compensation Committee reports directly to the chairman of the Compensation Committee, and is not involved in providing any other services to the company. During 2010, we also retained PwC to provide services to the company unrelated to executive compensation including tax, accounting support, executive financial planning and other business-related services. The aggregate fees paid for those services in 2010 were approximately $2,570,000.

Finance and Benefit Plans Committee.    This committee oversees the management of the finance policies of General Dynamics and the assets of our employee benefit plans (other than multiemployer plans). This committee held three meetings in 2010.

Nominating and Corporate Governance Committee.    This committee evaluates board and management effectiveness; advises the Board on corporate governance matters; monitors developments, trends and best practices in corporate governance; and recommends corporate governance guidelines that comply with legal and regulatory requirements. It also identifies qualified individuals to serve as directors and recommends the director nominees proposed either for election at the annual meeting of shareholders or to fill vacancies and newly created directorships between annual meetings. This committee held foursix meetings in 2009.2010.

Director Nominations

The Nominating and Corporate Governance Committee considers director nominees from various sources. The committee considers and makes recommendations to the Board concerning the appropriate size and composition of the Board, including the relevant characteristics and experience required of new members. Nominees are chosen with the primary goal of ensuring that the entire Board collectively serves the interests of shareholders based on the attributes, experience, qualifications and skills noted below. In assessing director candidates, the Nominating and Corporate Governance Committee considers the background and professional experience of the candidates in the context of the current Board composition to ensure there is a diverse range of backgrounds, talent, skill and expertise among the directors. Relevant criteria considered by the committee include: business and financial expertise, technical expertise and familiarity with the issues affecting defenseaerospace and aerospace defense

businesses. The committee also carefully considers any potential conflicts of interest. All nominees must possess good judgment, an inquiring and independent mind, and a reputation for the highest personal and professional ethics, integrity and values. Nominees must be willing to devote sufficient time and effort to carrying out their duties and responsibilities effectively, and should be committed to serve on the Board for an extended period of time.

Each year the directors undertake a self-assessment that elicits feedback on the performance and effectiveness of the Board and each committee. As part of this self-assessment, the directors are asked to consider whether, among other things, the current directors possess the appropriate mix of skills, experience and diverse viewpoints to enable the Board to function effectively. The results of the self-assessment are presented to the Nominating and Corporate Governance Committee and the full Board.

The Nominating and Corporate Governance Committee will consider director nominees recommended by shareholders. To recommend a qualified person to serve on the Board of Directors, a shareholder should write to the Corporate Secretary, General Dynamics Corporation, 2941 Fairview Park Drive, Suite 100, Falls Church, Virginia 22042. The written recommendation must contain (1) all information for each director nominee required to be disclosed in a proxy statement by the Securities Exchange Act of 1934, as amended (the Exchange Act); (2) the name and address of the shareholder making the recommendation, and the number of shares owned and the length of ownership; (3) a statement as to whether the director nominee meets the criteria for independence under the rules of the New York Stock Exchange and the Director Independence Guidelines; (4) a description of all arrangements or understandings, and the relationship, between the shareholder and the director nominee, as well as any similar arrangement, understanding or relationship between the director nominee or the shareholder

and General Dynamics; and (5) the written consent of each director nominee to serve as a director if elected. The committee will consider and evaluate persons recommended by shareholders in the same manner as it considers and evaluates potential directors identified by the company.

Communications with the Board

Any shareholder or other interested party who has a concern or question about the conduct of General Dynamics may communicate directly with our non-management directors or the full Board. Communications may be confidential or anonymous. Communications should be submitted in writing to the chair of the Nominating and Corporate Governance Committee in care of the Corporate Secretary, General Dynamics Corporation, 2941 Fairview Park Drive, Suite 100, Falls Church, Virginia 22042. The Corporate Secretary will receive and process all written communications and will refer all substantive communications to the chair of the Nominating and Corporate Governance Committee in accordance with guidelines approved by the independent members of the Board. The chair of the Nominating and Corporate Governance Committee will review and, if necessary, investigate and address all such communications and will report the status of these communications to the non-management directors as a group or the full Board on a quarterly basis.

Our employees and other interested parties may also communicate concerns or complaints about our accounting, internal control over financial reporting or auditing matters directly to the Audit Committee. Communications may be confidential or anonymous and can be submitted in writing or reported by telephone. Written communications should be submitted to the chair of the Audit Committee in care of our ethics officer at the address in the preceding paragraph. Our employees can call a toll-free hotlinehelpline number provided to all employees. The ethics officer will review, investigate and address any concerns or complaints unless the Audit Committee instructs otherwise. The ethics officer will report the status of all concerns and complaints to the Audit Committee. The Audit

Committee may also direct that matters be presented to the full Board and may direct special treatment of any concern or complaint addressed to it, including the retention of outside advisors or counsel.

Director Orientation and Continuing Education

The general counsel and the chief financial officer of the company provide an orientation for new directors and periodically provide materials and briefing sessions for all directors on subjects that assist them in discharging their duties. Within six months of election to the Board, each new director receives a series of briefings in person on our operating plans; significant financial, accounting and risk-management matters; and key policies and practices. At this orientation, a new director also receives briefings on the responsibilities, duties and activities of the committees on which the director will serve. Annually, the Board holds a three-day meeting with our senior management to review and approve the operating plan of each of our business units and business groups and the company as a whole. In addition, directors visit our business units regularly. These visits allow the directors to interact with a broader group of our executives and employees and gain a firsthand view of our operations. All directors are also encouraged to attend director continuing education programs sponsored by educational and other institutions.

Director Compensation

We compensate each non-management director for service on the Board of Directors. The Compensation Committee reviews director compensation on an annual basis. In early 2009,2010, at the request of the committee, management reviewed director compensation at peer companies. In support of this review, management engaged Meridian Compensation Partners, LLC (Meridian), a company that spun off from Hewitt Associates (Hewitt)in 2010, to conduct a director compensation

survey that included cash retainers, meeting fees, equity compensation and additional director benefits. HewittMeridian provided director compensation data for two peer groups. The first group consisted of the following companies in the aerospace and defense sector or with substantial aerospace or defense revenues:

To assist the Compensation Committee in understanding director compensation practices and trends in the broader industrial base, management also requested director compensation data from HewittMeridian for a larger group of companies comprising the 10 companies listed above and five13 additional companies. The companies in the larger group were:

In each group, the average sales of the group approximated our sales. The committee benchmarked director compensation against these two peer groups. The Compensation Committee reviewed the survey data provided to management by HewittMeridian and, based on this review, recommended an increase in the annual retainer. Based upon the recommendation of the committee, the Board approved at its February 20092010 meeting an increase in the annual retainerequity award to $65,000.$122,000. All other elements of director compensation were unchanged.

Director compensation for 20092010 included the following:

In early 2010,2011, as part of its annual review of director compensation, the committee requested that management update its director compensation analysis. Management engaged HewittMeridian to provide survey data for the first peer groupgroups listed above and for the broader peer group discussed under “Compensation Discussion and Analysis – Market Data” on page 27 of this Proxy Statement.above. The committee reviewed the survey data provided by HewittMeridian and, based on this review, recommended an

a $5,000 increase in the annual equity award.retainer and a $500 increase in attendance fees for Board meetings. Based upon the recommendation of the committee, the Board approved these changes at its February 2010 meeting an increase in the annual equity award to $122,000.2011 meeting. All other elements of director compensation are unchanged for 2010.2011.

Non-management directors have the option of receiving all or part of their annual retainers in the form of Common Stock. The annual retainer, additional committee chair retainer (if any) and attendance fees paid to each director during 20092010 are reflected in the Fees Earned or Paid in Cash column of the Director Compensation for Fiscal Year 20092010 table, irrespective of whether a director took the annual retainer in shares of Common Stock. The annual equity award consists of a restricted stock award valued at approximately one-third of the total equity award and a stock option award valued at approximately two-thirds of the total equity award.

We began compensating Mr. Chabraja for his service on the Board after he retired as chief executive officer on June 30, 2009. At that time, Mr. Chabraja began receiving the compensation listed above as a non-management director. In addition, for his service as non-executive chairman from June 2009 until May 2010 Mr. Chabraja receivesreceived an annual retainer of $750,000. In determining Mr. Chabraja’s retainer, the Compensation Committee requested information from management regarding retainer compensation amounts paid to non-executive chairs. Management engagedobtained survey data from Hewitt to provide survey dataAssociates for companies that publicly disclosed compensation amounts for non-executive chairs, which resulted in the following companies:

The AES Corporation		Marathon Oil Corporation
The AllState Corporation		McDonald’s Corporation
American International Group, Inc.		Murphy Oil Corporation
AmerisourceBergen Corporation		Anheuser-Busch Companies,ONEOK, Inc.
The Bank of New York Mellon Corporation		The Pepsi Bottling Group, Inc.
Bristol-Myers Squibb Company		The Progressive Corporation
Cardinal Health, Inc.		Publix Super Markets, Inc.
CBS Corporation		Rite Aid Corporation
CHS Inc.		Sun Microsystems, Inc.
Coca-Cola Enterprises Inc.		The TJX Companies, Inc.
Costco Wholesale Corporation		Tech Data Corporation
Federal National Mortgage Association		Texas Instruments Incorporated
Freeport-McMoran Copper & Gold Inc.		Time Warner Inc.
Health Net, Inc.		Tyson Foods, Inc.
Humana Inc.		UnitedHealth Group Incorporated
Ingram Micro Inc.		Viacom Inc.
Intel Corporation		The Walt Disney Company
L-3 Communications Holdings, Inc.		Waste Management, Inc.
Loews Corporation		Marathon Oil Corporation McDonald’s Corporation Murphy Oil Corporation ONEOK, Inc. The Pepsi Bottling Group, Inc. The Progressive Corporation Publix Super Markets, Inc. Rite Aid Corporation Sun Microsystems, Inc. The TJX Companies, Inc. Tech Data Corporation Texas Instruments Incorporated Time Warner Inc. Tyson Foods, Inc. UnitedHealth Group Incorporated Viacom Inc. The Walt Disney Company Waste Management, Inc.

In connection with the creation of a Lead Director position by the Board in February 2010, the committee asked management to provide information regarding amounts paid to lead directors. Management provided information for companies in the Fortune 200 with lead directors. Based upon this information, the committee established a $25,000 lead director additional retainer, which represented the median of the comparative data.

In light of the travel required by service on the Board, we also provide each director with accidental death and dismemberment insurance coverage. Payments by General Dynamics for director accidental death and dismemberment insurance premiums are reflected in the All Other Compensation column of the Director Compensation for Fiscal Year 20092010 table.

Director Stock Ownership Guidelines

The Board of Directors believes that each director should develop a meaningful ownership position in General Dynamics. Therefore, the Board of Directors adopted stock ownership guidelines for non-management directors. Pursuant to these guidelines, each non-management director is expected to own at least 4,000 shares of our Common Stock. Non-management directors are expected to achieve the target ownership threshold within five years of election to the Board. Management directors are subject to the ownership requirements discussed under “Compensation Discussion and Analysis – Stock Ownership Guidelines.”

Director Compensation Table

The table below provides total compensation for the last completed fiscal year for each of General Dynamics’ non-management directors. On June 30, 2009, Mr. Chabraja retired as chief executive officer ofdirectors serving during the company and began receiving compensation for his services as a director. Pursuant to the rules of the SEC, compensation paid to Mr. Chabraja for his services as a director is shown in the Summary Compensation Table and is not included in the table below.year. The number of shares of restricted stock and the number of shares subject to options awarded to the directors annually are the same for each director.

Director Compensation for Fiscal Year 20092010

Compensation Discussion and Analysis

Our Compensation Philosophy

Our executive compensation program is designed to create incentives both for strong operational performance in the current year and for the long-term benefit of the company, thereby closely aligning the interests of management with the interests of our shareholders. At the executive level, the majority of compensation is equity-based, vests over time and is tied directly to long-term shareholder value. Stringent stock ownership requirements for our executive officers, which require our executive officers to hold Common Stock with values ranging from eight to 15 times base salary, ensure that our management team is incentivized to act in the best interests of our shareholders.

Over the past 10 years, we along with our shareholders have enjoyed strong performance measured by double-digit growth in revenues and earnings and consistent, solid returns. Free cash flow, defined as cash from operating activities less capital expenditures, has exceeded net earnings during this period. We have deployed this cash to make 4138 acquisitions totaling approximately $12.4$12.5 billion, to repurchase approximately $3.4$4.4 billion of our Common Stock and to return approximately $3.4$3.8 billion in quarterly dividends.dividends over this period. We have increased our annual dividend each year during the period.

Ten-Year Historical Performance

(December 19992000 – December 2009)2010)

As the 10-year performance graph on the prior page shows, in the past decade we have generated a total return for shareholders of 204115 percent, well in excess of the Standard and Poor’s^® 500 Index and the Standard & Poor’s^® Aerospace and Defense Index. This graph also illustrates the economic downturn that our company, particularly our Aerospace group, and the broader markets experienced in late 2008 and 2009. During this period, our management team aggressively managed our businesses to preservemaximize profitability, including implementing cost-cutting measures, scaling production and overhead, and focusing on continuous improvement efforts to drive operational efficiencies. Consistent with our focus on strong operational performance and long-term shareholder value creation, our management also remainedremains focused on growing our business in a disciplined manner, executing on backlog, continuously improving our processes to reduce cost and maximize profitability, and efficiently converting earnings into cash.

Our senior management team, led by our chairman and chief executive officer, remains dedicated to achieving consistently strong financial results and is compensated in ways to ensure a continual focus on creating shareholder value. Four corporate executive vice presidents provide guidance to the individual operating business units within their respective business groups – Aerospace, Combat Systems, Marine Systems, and Information Systems and Technology – and report directly to the chairman and chief executive officer on the financial and operational performance of their group. Our chairman and chief executive officer is also supported by four corporate senior vice presidents who oversee their respective functional areas throughout the company – finance, human resources and administration, legal, and planning and development. A president of each business unit is responsible for profit and loss performance by that business unit.

Approximately 500 employees, including our senior management team, participate in our executive compensation program, which includes a salary, a performance-based bonus and equity awards, along with company-provided benefits. Salaries are intended to provide executives with a fair and competitive wage. We use independently provided survey data to set salaries that are targeted at the median (50th percentile) for salaries of executives in comparable positions at our peer group companies based on the survey data described below. On average, however, salaries account for less than half of our senior executives’ compensation. The majority of their compensation is performance-basedin the form of bonuses and equity awards (restricted stock and stock options), which are tied to the performance of the company, individual performance of the executive and, where applicable, that of their business group and, therefore, is at risk. For our named executive officers, more than 80 percent or more of their compensation is at risk. For our presidentchairman and chief executive officer, that number is over 90 percent. Bonuses, when earned, are paid in cash. Equity awards are granted as restricted stock and stock options.

In practice, equity awards provide the greatest risk and possible reward to our executives. The initial value of an equity grant that an executive receives is driven by an assessment of company performance and his or her individual performance in the prior year. The ultimate value of that grant depends in large part on the impact of the company’s future performance on the value of our Common Stock over the long term. This is essential in aligning the interests of management with the interests of shareholders. If the company does well, management and shareholders both benefit. Clearly, the opposite is also true. TheMarket conditions in recent volatile economic conditions and the resulting market downturnyears have caused the value of our executives’ stock holdings and equity awards to be significantly reduced or, in the case of certain option awards, reduced to zero. Because of our focus on aligning the interests of management with those of our shareholders, as a matter of principle we do not consider the value of past equity grants when determining current compensation. Our responsibility in setting compensation is to ensure that the expected value of the equity grants, at the time they are received, is reasonable under the then-current circumstances.reasonable.

We believe that achieving excellent results starts by setting strong goals. Every year, senior management establishes business unit and business group operating goals and an operating plan for the company as a whole. Our Board of Directors reviews, adjusts where appropriate, and approves the business unit and business group goals and adopts our operating plan for the year. The Board reviews and monitors our performance throughout the year as compared to the plan. Our responsibility in setting the operating plan goals is to ensure that they are aggressive, achievable in light of current market conditions, incentivize value creation and ultimately contribute to the creation of shareholder value.

The Annual Compensation Process.Setting compensation for our executives is a 16-month process that begins in the fall of each year when senior management establishes company operating goals for the coming year. The business unit presidents develop business plans and present the plans to the presidentchairman and chief executive officer in November. He, in consultation with the chief financial officer and the executive vice presidents, establishes the business unit and business group operating goals and the company operating plan for the coming year based on those business unit plans. At a three-day Board meeting in early February, the business unit presidents and the business group executive vice presidents present their plans to the Board of Directors. The Board then reviews, adjusts where appropriate, and approves the business unit and business group operating goals and adopts our company operating plan for the year. Throughout the year, the Board reviews and monitors company performance as compared to the operating plan through a series of financial and operating reports given by the senior vice president and chief financial officer and executive vice presidents.

A review of the year’s performance begins the following January. At that time, the presidentchairman and chief executive officer, the senior vice president and chief financial officer, and the executive vice presidents assess the performance of business units, business groups and the company compared with the operating plan goals adopted the year before. The presidentchairman and chief executive officer presents the results of that assessment to the Board of Directors at the Board’s three-day Board meeting in early February. Following this review, the presidentchairman and chief executive officer, after consultation with senior management, in the Human Resources department, presents an initial proposal on compensation to the Compensation Committee for analysis and comment. As part of this initial proposal, the presidentchairman and chief executive officer provides the committee with a performance assessment of each officer (other than himself) and makes specific recommendations to the committee regarding each officer’s compensation. Finally, the Compensation Committee convenes in early March to review and approve final executive compensation proposals. At this meeting the presidentchairman and chief executive officer offers further analysis of executive compensation recommendations as requested by the committee. The Compensation Committee reviews and approves compensation for the presidentchairman and chief executive officer in executive session at the March meeting.

The Compensation Committee, presidentchairman and chief executive officer, and senior management are entrusted to exercise judgment in making the compensation recommendations and decisions described above. Although we use survey data to target each element of cash compensation and total equity compensation, the compensation determinations are not formulaic and involve the exercise of discretion by senior management and the Compensation Committee. We believe the adoption of a specific performance formula could inadvertently encourage undesirable behavior (e.g., favoring achievement of particular financial measuresobjectives to the exclusion of other important objectives and values). To this end, we do not have targeted payout amounts, and the company, business group and individual performance categories for named executive officers are not assigned specific weights. We believe the use of discretion results in reasonable and rational compensation decisions, allowing us to set aggressive goals while not encouraging excessive risk-taking that could be detrimental to our shareholders.

Components of Our Compensation Program

Our executive compensation program has two parts: direct compensation and benefits. Direct compensation consists of a base salary, a bonus and equity awards. Company-sponsored benefits include insurance plans, retirement plans and perquisites.

Direct Compensation

Salary.We pay executives an annual salary in cash targeted at the median (50th percentile) for salaries of executives in comparable positions at our peer group companies based on the survey data described below. Salaries are reviewed annually, and increases, when they occur, are market driven. In simplest terms, we seek to pay an executive salary that is “middle of the road” in competitiveness. We do this deliberately. We believe that high-performance organizations make an effort to pay salaries at no more than market and therefore create a performance-based culture around bonus and equity incentives to encourage the achievement of aggressive goals.

Bonus.    We award executives bonuses based on the prior year’s performance of the company, their individual performance, and, where applicable, that of their business group. The bonus is designed to place at risk a significant portion of an executive’s annual cash compensation. He or she has upside potential if the company, or the business group where applicable, performs well against the operating plan, and downside potential if performance does not meet expectations. When combined with base salaries, cash bonuses generally bring total executive cash compensation between the 50th and 75th percentiles of cash compensation for executives in comparable positions at our peer group companies based on the survey data described below.

Equity Awards.    We believe that equity awards are an effective tool for aligning long-term executive performance with value creation. Accordingly, most of the potential value of our executives’ annual compensation is in the form of equity. In addition, we require officers to retain Common Stock until they own outright shares with a market value ranging from eight to 15 times their base salary depending on the officer’s position. Once an officer attains his or her required ownership level, the officer must maintain that ownership level until he or she no longer serves as an officer. As a result, over time our officers become shareholders with considerable personal financial interest in the health and performance of our company.

We determine the amount of equity awards to be granted to an executive in a particular year using a multiple of the executive’s total cash compensation. Therefore, the ultimate value of the equity award is driven in part by prior-year performance and in part by the executive’s ability to create value going forward. As a reasonableness test, we base the multiples on surveys ofsurvey data for the ratio of long-term incentives to cash compensation that our peer group companies award to their executives in similar positions. The ratio of long-term incentives to cash compensation for our executives is generally between the 50th and 75th percentiles of the survey data.

Equity awards consist of awards of restricted stock and stock options. The allocation in recent years has been approximately one-third in restricted stock and two-thirds in stock options. We believe this allocation is conducive to creating a healthy risk and reward profile for our executives. Stock options are more sensitive to fluctuations in the stock market as well as ourcompany performance during the life of the options. As explained in greater detail below, ourOur outstanding options granted prior to 2011 expire five years after the date of grant. Options granted in 2011 expire seven years after the date of grant. We balance the risk inherent in options against the relative level of stability implicit in restricted stock to motivate our executives to achieve operating goals that are aggressive, but achievable. Pursuant to our stock ownership guidelines, when

exercising options, executive officers who have not yet met the ownership guideline may not sell shares acquired upon exercise, except to cover transaction costs and taxes. Similarly, shares received upon release of restricted stock may not be sold until the ownership guidelines are met.

As a matter of practice, we grant restricted stock awards and stock options based on the “fair market value” of our Common Stock on the first Wednesday of March each year. For new hires or promotions, restricted stock awards and stock options are granted at fair market value on the later of the effective date of the event or the date the award is approved by the Compensation Committee. The number of shares of restricted stock awarded, and the exercise price of stock options, are based on the “fair market value” of our Common Stock on the date of the equity grant. We define fair market value of our Common Stock as the average of the high and low stock price on the date of the equity grant.

Restricted Stock.    A grant of restricted stock is an award of shares of Common Stock that is released approximately four years after the grant date. Restricted stock awards are designed to attract and retain executives by providing them with some of the benefits associated with stock ownership during the restriction period, while incentivizing them to remain with General Dynamics. During the restriction period, recipients may not sell, transfer, pledge, assign or otherwise convey their restricted shares. Recipients are eligible, however, to vote their shares and to receive dividend payments and other distributions on our Common Stock. Executives who voluntarily resign or are terminated for cause prior to the end of the restriction period forfeit their restricted stock unless otherwise determined by the Compensation Committee. Finally, no one participant may be granted an award of more than 200,000 shares of restricted stock in any calendar year. In practice, the number of shares of restricted stock granted to the named executive officers is well below this share limit.

Stock Options.    Stock options give an executive the right to buy a share of our Common Stock in the future at a predetermined “exercise price,” which is established as the average of the high and low sales price of our Common Stock on the date of grant. We value stock options using the Black-Scholes formula. The formula is based on a set of key variables and assumptions and is an accepted model for valuing stock options under Financial Accounting Standards Board ASC Topic 718 (formerly FAS 123(R)).718. Stock options vest over two years: 50 percent of the grant is exercisable in one year; the remainder is exercisable the following year. AllOur outstanding options granted prior to 2011 expire five years after the grant date. Options granted in 2011 expire seven years after the grant date. The Compensation Committee determined that a seven-year expiration date would better serve the company’s retention goals by (1) bringing the option exercise date more in line with practices of other companies with whom we compete for talent and (2) more appropriately mitigating employees’ risk exposure to market volatility. No one recipient may be granted an award of options to purchase more than 1,000,000 shares of Common Stock in any calendar year. In practice, the number of shares underlying stock option awards granted to the named executive officers is well below this share limit. As with restricted stock grants, executives who voluntarily resign or are terminated for cause immediately forfeit all options that have not vested unless otherwise determined by the Compensation Committee. Our equity compensation plan prohibits the repricing of stock options without the approval of shareholders.

Stock Ownership Guidelines.    Our stock ownership and retention guidelines preclude corporate officers from selling shares of Common Stock until they own outright shares with a market value ranging from eight to 15 times their base salary. Unreleased shares of restricted stock and shares (or share equivalents) held through our 401(k) plans are not counted for purposes of meeting the ownership guidelines. The chief executive officer must retain outright ownership worth 15 times his

base salary. Our executive vice presidents and senior vice presidents must retain outright ownership worth 10 times their respective base salaries. Vice presidents must retain outright ownership worth eight times their respective base salaries. When exercising options, executives who have not yet met the ownership guideline may not sell shares acquired upon exercise, except to cover transaction costs and taxes. Similarly, shares received upon release of restricted stock may not be sold until the ownership guidelines are met. Once an officer attains his or her required ownership level, the officer must maintain that ownership level until he or she no longer serves as an officer. WeBased on data from the Center On Executive Compensation and Equilar, Inc., we believe our stock ownership and retention guidelines are some of the most stringent among public companies and strongly align the interests of management with the interests of shareholders because over time, executives become shareholders with a considerable investment in General Dynamics. Our stock ownership and retention guidelines are reviewed annually by the Compensation Committee.

Market Data.    To assist the Compensation Committee in its determinations, we utilize survey data provided by Aon Hewitt. Through the use of regression analysis using the scope and responsibilities of the position and company revenue, the Aon Hewitt data providesprovide a median salary (the 50th percentile) and the 50th to 75th percentiles for total cash compensation for comparable positions at the peer group companies. Aon Hewitt also provides survey data for the 50th to 75th percentiles for ratios of long-term incentives to annual cash compensation for comparable positions at the peer group companies.

For the March 20102011 compensation determinations, we obtained data about compensation levels at companies within two peer groups. These peer groups were used to benchmark the compensation for our named executive officers. The 20092010 revenues of General Dynamics approximated both the median and mean revenues of both peer groups. In selecting the companies that comprise these peer groups, we considered the size, revenues, industry group, organizational structure and compensation practices of each peer company.

The core peer group consisted of companies in the aerospace and defense sector or companies that have substantial aerospace or defense revenues. We selected companies with whom we compete for business opportunities and executive talent. The companies in the core peer group were:

The broader peer group consisted of the companies in the core peer group plus 13 additional companies from other industries to provide a broader view of compensation for executives. These additional companies have similar complexity of operations and organizational structure to General Dynamics. The companies in the broader peer group were:

3M Company The Boeing Company Caterpillar, Inc. Deere & Company The Dow Chemical Company Emerson Electric Co. Goodrich Corporation Honeywell International Inc. Illinois Tool Works Inc. International Business Machines Corp. International Paper Company ITT Corporation		Johnson Controls, Inc.
The Boeing Company		L-3 Communications Holdings, Inc.
Caterpillar, Inc.		Lockheed Martin Corporation
Deere & Company		Northrop Grumman Corporation
The Dow Chemical Company		Oshkosh Corporation
Emerson Electric Co.		Raytheon Company
Goodrich Corporation		Rockwell Collins, Inc.
Honeywell International Inc.		SAIC, Inc.
Illinois Tool Works Inc.		Textron Inc.
International Business Machines Corp.		Tyco International Ltd.
International Paper Company		United Technologies Corporation
ITT Corporation

Company-Provided Benefits

General Dynamics-provided benefits are an important tool used to attract and retain outstanding employees throughout the company. Benefit packages are not, however, standard across General Dynamics. Instead, our business units and corporate headquarters tailor their individual offerings based on their competitive marketplace. As a business matter, we weigh the benefits we need to offer to attract and retain talented employees against the benefits we can afford to pay and remain competitive. Benefit levels are reviewed periodically to ensure they are cost-effective and competitive, and support the overall needs of our employees.

This section describes the benefits that we provide to key executives and notes those instances when benefits for the named executive officers differ from the general plan. In some instances, we also describe the programs we offer across the company as context to specific discussions about executive benefits. Prior to their retirements, we also had employment or retirement agreements with two of our named executive officers that affect their retirement benefits. The material terms of these agreements are described beginning on page 43 in the narrative discussion following the Pension Benefits for Fiscal Year 2009 table.

Benefits for Active Employees.    We make available medical, dental, life insurance and disability coverage to eligible, full-time U.S.-based employees, including all the named executive officers. Employees can select the level of coverage appropriate for their circumstances.

We provide, at no cost to the employee, group life insurance coverage worth one times base salary and 50 percent long-term disability coverage to the majority of U.S.-based employees. For our named executive officers, we also provide at no cost to the officers additional life insurance coverage worth a total of two times their base salary.

Retiree Benefits.    Retiree benefits vary significantly across our U.S.-based business units and may include retiree medical and dental coverage. Eligible employees at our headquarters, including the named executive officers, can elect, at their own expense, to continue COBRA-eligible benefits through General Dynamics until they reach age 65. There is no retiree medical or dental benefit available to employees at our headquarters after they have reached age 65.

Eligible key executives throughout the company can purchase group term life insurance prior to retiring. For executives who retire prior to age 65, we pay for insurance coverage equal to one-half the executive’s base salary until the executive reaches age 65. Upon the retiree’s reaching age 65, or for executives retiring at or after age 65, we pay for insurance coverage up to two times an executive’s base salary. This coverage is ratably reduced over a five-year period following the executive’s retirement, or beginning at age 65 for early retirees, subject to a maximum coverage level of 25 percent of the coverage in effect at the time of retirement.

Company-sponsored Retirement Plans.    We provide a number of defined-benefit and defined-contribution retirement plans to our eligible employees, including the eligible named executive officers, through a combination of qualified and non-qualified plans.

Below are descriptions of the retirement plans that cover employees at our headquarters, including the named executive officers. Mr. DeMuro participates in a legacy retirement plan that is described on page 4342 in the narrative discussion following the Pension Benefits for Fiscal Year 20092010 table.

Defined-Benefit Retirement Plan.    We sponsor the General Dynamics Salaried Retirement Plan, which is a funded, tax-qualified, noncontributory defined-benefit pension plan. The Salaried Retirement Plan was amended effective January 1, 2007, to exclude any employee initially hired after that date. The benefit formula under the Salaried Retirement Plan for employees hired before December 31, 2006, is 1.0 percent times a participant’s highest final average pay multiplied by years of service earned on and after January 1, 2007, plus 1.3333 percent times a participant’s highest final average pay prior to January 1, 2011, multiplied by years of service earned prior to January 1, 2007. There is no limit on the number of years of service under this formula, and the benefit is payable as a life annuity. A participant’s base salary and cash bonus are used to calculate retirement benefits. We make contributions to the Salaried Retirement Plan through payments into a trust fund from which the benefits are paid.

Supplemental Retirement Plan.    The amount of cash compensation used to calculate pension benefits for participants in the Salaried Retirement Plan is limited by the Internal Revenue Code ($245,000 in both 20092010 and 2010)2011). To provide a benefit calculated on compensation in excess of this compensation limit, we provide eligible executives coverage under the General Dynamics Corporation Supplemental Retirement Plan. Benefits under the Supplemental Retirement Plan are general unsecured obligations of General Dynamics.

Savings and Stock Investment (401(k)) Plan.    All our named executive officers are eligible to participate in the General Dynamics Corporation Savings and Stock Investment Plan – Plan 4.5 (the SSIP), a tax-qualified defined-contribution retirement plan. All participants are eligible to make before-tax contributions and receive company matching contributions under the SSIP. During 2009,2010, the SSIP provided for a company-matching contribution of (1) 100 percent on before-tax contributions up to the first 3 percent of a participant’s eligible pay and (2) 50 percent on before-tax contributions on the next 3 percent of a participant’s eligible pay. Our matching contributions during 20092010 for the named executive officers are included in footnote (d) to the All Other Compensation column of the Summary Compensation Table on page 3536 of this Proxy Statement.

Supplemental Savings and Stock Investment Plan.    We provide a Supplemental Savings and Stock Investment Plan (the Supplemental SSIP) to key employees, including all the named executive officers. The purpose of the Supplemental SSIP is to allow key executives to defer salary and receive matching contributions on compensation in excess of the $245,000 compensation limit imposed by the Internal Revenue Service on earnings used to calculate 401(k) contributions. Our matching contributions during 20092010 for the named executive officers are included in footnote (d) to the All Other Compensation column of the Summary Compensation Table on page 3536 of this Proxy Statement.

Perquisites.    We provide perquisites to key executive officers, including the named executive officers, as a recruiting and retention tool. We also provide perquisites to ensure the security and accessibility of our executives and to facilitate the transaction of business. We believe that our perquisites are appropriate. As a reasonableness test, we compare these perquisites to generally accepted corporate practices. In April 2009, the Compensation Committee adopted aOur policy effective January 1, 2010, thatis to not reimburse executive officers will no longer be reimbursed by the company for personal taxes owed by them resulting from their receipt of perquisites.

The perquisites provided to our named executive officers in 20092010 were: club memberships; financial planning and tax preparation services; physical exams; home security systems; personal liability and supplemental accidental death and dismemberment insurance; relocation expenses; and the personal use of automobiles owned or leased by the company. In addition, personal use of our aircraft was provided to our chairman and chief executive officer as required by the Board to help ensure security and accessibility. In February 2011, the Compensation Committee determined that the company would no longer provide country club memberships to our executive officers at our corporate headquarters. These executives will receive a one-time payment in 2011 equal to the value of three years’ of club dues to address any transition issues caused by the policy change.

We have provided additional information on perquisites in footnote (d) to the All Other Compensation column of the Summary Compensation Table on page 3536 of this Proxy Statement.

Change in Control Agreements, Employment Agreements and Retirement Agreements

We have change in control agreements, also known as severance protection agreements, with key executives throughout the company, including each of the named executive officers currently employed by the company.officers. We believe that these agreements are an important tool for recruiting and retaining highly qualified executives who could have other job alternatives that may appear to the executive to be less risky absent these agreements. The agreements are structured to protect the interests of shareholders by including a “double trigger” mechanism that is activated only when:

A “change in control” is defined to include specified stock acquisition, merger or disposition transactions involving General Dynamics. Appropriate payment and benefit levels under the change in control agreements were established in the early 1990s and have beenare evaluated and reviewed over the years both internally and by outside advisors.regularly. These reviews support our view that the agreements are consistent with market practice. In April 2009, the Compensation Committee took action to revise ourThe form of severance protection agreement to be entered into with futurefor executive officers to remove theappointed after April 2009 excludes any provision providing for reimbursement of excise taxes that may become due upon a change in control.

Prior to his retirement, we had an employment agreement with Mr. Chabraja, our chairman and former chief executive officer, that provided for payments and retirement benefits upon termination of his employment. The payment and benefit levels established in the agreement were intended to extend Mr. Chabraja’s tenure as chairman and chief executive officer through June 30, 2009, by providing him with a competitive package of payments and benefits. The retirement benefits provided for in the agreement and paid upon his retirement are described in the narrative following the Pension Benefits for Fiscal Year 2009 table on page 43 of this Proxy Statement.

Prior to his retirement, we had a retirement benefit agreement with David A. Savner, our former senior vice president and general counsel, that provided for additional retirement benefits. The retirement benefits provided for in the agreement and paid upon his retirement are described in the narrative following the Pension Benefits for Fiscal Year 2009 table on page 44 of this Proxy Statement.

Payments and benefits provided to our named executive officers pursuant to the change in control agreements and individual agreements, where applicable, are described in the Potential Payments upon Termination or Change in Control section beginning on page 4644 of this Proxy Statement.

Analysis of 20092010 Compensation for the Named Executive Officers

This section provides an analysis of the specific compensation that we paid to our named executive officers for 20092010 based on the compensation philosophy articulated earlier in this Compensation Discussion and Analysis.

20092010 Base Salaries

The Compensation Committee reviews salaries annually in February and March for the upcoming year. Salary increases, when they occur, are market driven. For 2009,2010, the Compensation Committee approved the following salaries for the named executive officers: Mr. ChabrajaJohnson – $1,400,000; Mr. Johnson – $860,000 (which increased to $1,400,000 in July 2009 upon Mr. Johnson becoming chief executive officer); Mr. Redd – $745,000; Mr. Hall – $645,000;$755,000; Mr. DeMuro – $655,000;$660,000; Mr. Heebner – $640,000; and Mr. SavnerHelm – $625,000. Except as described above for Mr. Johnson, these$560,000. These salaries were effective on March 23, 2009.22, 2010, except for Mr. Heebner whose salary became effective on May 1, 2010, and Mr. Helm whose salary became effective on May 3, 2010. Since the Summary Compensation Table on page 3536 reflects total salaries paid in 2009,2010, the salary data in the table includes the salaries paid for the first three months of 20092010 – at the 20082009 salary level – and the remaining nine months paid at the 20092010 level. The salariessalary paid to Mr. Chabraja and Mr. Johnson in their respective positions as chiefHelm during 2010 was at the 50th percentile of the competitive market based on the survey data. The 2010 salaries for other named executive officer during 2009officers were below the 50th percentile of the competitive market based on the survey data. The 2009 salaries for our other named executive officers were at the 50th percentile of the market.

20092010 Bonuses and 20102011 Equity Awards

The majority of our executive compensation is performance-based. Bonuses are paid based on the performance of the company, individual performance of the executive and, where applicable, that of their business group. Equity awards are determined based on a multiple of the named executive officer’s total cash compensation.

For 20092010 compensation decisions, senior management and the Compensation Committee considered the results for the company and each of the business groups, as applicable, compared against certainthe operating plan goals for 2009.2010. In addition, the committee considered the leadership and management skills of each of our executives during 2009,2010, including the named executive officers. In reviewing 2009 performance, the committee took into account the effect of the unexpected deterioration in the global economic environment in late 2008 and early 2009 and the significant direct negative impact this had on the business-aviation market and the resulting impact on the company as a whole. The committee recognized management’s efforts to aggressively manage our businesses to preserve profitability and shareholder value, including implementing cost-cutting measures, scaling production and overhead, and focusing on continuous improvement efforts to drive operational efficiencies. The committee also considered the outstanding performance across our defense businesses that offset a difficult business-aviation market experienced by our Aerospace group. These considerations are consistent with our belief that the use of discretion and judgment in setting compensation must be a part of any effective compensation program.

For Mr.Messrs. Johnson, Redd and Mr. Redd,Helm, who have responsibility for company-wide performance, the Compensation Committee’s operating performance review focused on earnings from continuing operations, free cash flow from operations, return on invested capital and earnings per share at the company level. In the contextWe believe that these metrics are good indicators of the economic downturn referenced above,company’s overall performance and lead to the creation of long-term value for our shareholders. In particular:

The committee considered that for 2009:2010: the company’s earnings from continuing operations of $2.407$2.628 billion were slightly belowabove the plan goal of $2.583$2.453 billion; free cash flow from operations of $2.470$2.616 billion exceeded the plan goal of $2.253$2.064 billion; return on invested capital of 17.817.5 percent was slightly belowabove the plan goal of 19.316.1 percent; and earnings per share of $6.20$6.82 was belowabove the plan goal of $6.61.$6.25. Return on invested capital is defined as net operating profit after taxes divided by the average debt and equity for the period. Net operating profit after taxes is defined as earnings from continuing operations plus after-tax interest and amortization expense. For Mr. Johnson, the committee consideredrecognized his exceptional performance in executing a seamless transition of corporate leadership. The committee also recognized Mr. Johnson’s strong managementleadership of the company in a difficultdynamic economic environment and his focus on preserving profitability, maintaining strong operational performance, efficiently converting earnings into cash and creating long-term shareholder value. For Mr. Redd, the committee recognized his leadership in managing our financial risk profile, and the guidance he provided to the company through his management and oversight of our finance organization and the role he played in difficult economic conditionsexecuting effectively the company’s capital deployment strategy. For Mr. Helm, the committee recognized his successful transition into his new senior leadership position with the company and challenging credit markets. The committee also noted the efficient managementhis leadership and guidance of the company’s short-planning and long-term borrowings by Mr. Redd’s finance organization.development organization during a time of defense budget pressure.

For Mr. HallMessrs. DeMuro and Mr. DeMuro,Heebner, the Compensation Committee reviewed the operating performance of their business groups and focused on earnings before interest and taxes (EBIT) and business group cash flow. We believe that EBIT measures the ability of our business groups to grow their businesses and maximize profitability through continuous improvement and disciplined processes and that business group cash flow measures the ability of the business groups to efficiently convert operating earnings into cash that can be deployed throughout the company. The committee considered that for 2009:2010: (a) the Combat Systems group’s EBIT of $1.271 billion exceeded the plan goal of $1.230 billion; and business group cash flow of $1.005 billion exceeded the plan goal of $812 million; and (b) the Information Systems and Technology group’s EBIT of $1.152$1.218 billion exceeded the plan goal of $1.110$1.217 billion; and business group cash flow of $971$672 million fell below the plan goal of $778 million; and (b) the Combat Systems group’s EBIT of $1.273 billion fell slightly below the plan goal of $1.277 billion; and business group cash flow of $863 million exceeded the plan goal of $752$828 million. Additionally, for Mr. HallMessrs. DeMuro and Mr. DeMuro,Heebner, the committee recognized (1) the leadership provided by both executives in managing their business groups, (2) their focus on continuous improvement efforts to drive process improvement and operational efficiencies, (3) their emphasis on disciplined program management and executing on backlog, and (4) their ability to obtain excellent results while managing continuing growth in a challengingdynamic economic environment.environment and, (5) for Mr. Heebner, his efforts to ensure a seamless transition to the position of executive vice president for the Combat Systems group.

As previously agreed, Mr. Chabraja did not receive an equity award for his service in 2009 as chief executive officer of the company. Additionally, pursuant to agreements with the company described on pages 43 and 44 of this Proxy Statement, Mr. Chabraja and Mr. Savner each received a 2009 bonus award equal to the bonus award they received in 2008. These bonus payments brought total cash compensation for these individuals above the 75th percentiles of the competitive market based on the survey data. For Mr. Hall, his total cash compensation was slightly above the 75th percentile. The bonus award for each of the other named executive officers brought total cash compensation between the 50th and 75th percentiles of the competitive market based on the survey data for Messrs. Johnson, Heebner and Helm. For Messrs. Redd and DeMuro, the bonus award brought total cash compensation above the 75th percentile of the competitive market based on the survey data. Bonus awards are reflected in the Bonus column of the Summary Compensation Table. For each named executive officer receiving an equity award,Messrs. Johnson, Heebner and Helm, the ratio of long-term incentives to cash compensation used to determine the executive’s equity-award multiple was between the 50th and 75th percentiles of the competitive market based on the survey data except for Messrs. Redd and DeMuro whose ratios were above the 75th percentile of the competitive market based on the survey data. The number of options and shares of restricted stock awarded to each named executive officer in 20092010 is reflected in the Grants of Plan-Based Awards in Fiscal Year 20092010 table.

The following graph depicts the 20092010 compensation paid to the named executive officers (other than Messrs. Chabraja and Savner who have retired from the company) by type of compensation as a percentage of the executive’s direct compensation. The graph demonstrates the compensation philosophy described in this Compensation Discussion and Analysis section under which the majority of our executives’ compensation is at risk in the form of performance-based bonuses and equity awards.

Executive Compensation

Summary Compensation

The Summary Compensation Table is formatted in accordance with Item 402(c) of Regulation S-K and shows base salary, cash bonus, equity awards – both restricted stock and stock options – and all other compensation, which includes among other things the value of perquisites, 401(k) contributions and tax reimbursements (see footnote (d) to the Summary Compensation Table for a complete listing of categories included in All Other Compensation). The table also includes a column titled Change in Pension Value and Nonqualified Deferred Compensation Earnings. For our eligible named executive officers, this includes only the change in pension value (see footnote (c)), which is an actuarial estimate of the present value of the future cost of pension benefits. The value does not reflect a current cash cost to General Dynamics or, necessarily, the pension benefit that an executive would receive, since that is determined by a number of factors, including length of service, age at retirement and longevity.

As we discusseddiscuss in greater detail in the Compensation Discussion and Analysis section, our executive compensation program has two components: direct compensation and benefits. Direct compensation includes base salary, bonus and equity awards. Salary increases, when they occur, are market driven and can result in salaries up to the median (50th percentile) of the survey data based on the executive’s experience. The bonus is designed to place at risk a significant portion of an executive’s annual cash compensation. Total cash compensation (base salary and bonus) is targeted between the 50th and 75th percentiles of the survey data. Long-term equity compensation is determined based on a multiple of the executive’s total cash compensation. Therefore, the ultimate value of the long-term equity compensation is driven in part by prior-year performance and in part by the executive’s ability to create value going forward.

Summary Compensation Table

$125,160–$31,290 relates to relocation expenses;expenses and Mr. ReddHeebner – $102,804$69,024 relates to relocation expenses; and Mr. Savner – $28,119 relates to the use of company-owned automobiles.expenses. The aggregate incremental cost to General Dynamics for Mr. Chabraja’s and Mr. Johnson’s personal travel aboard aircraft owned by the company (products of subsidiary Gulfstream Aerospace Corporation), as required by the Board to help ensure Mr. Chabraja’s and Mr. Johnson’s security and accessibility, was $168,118 for Mr. Chabraja and $89,927 for Mr. Johnson.$116,922. The aggregate incremental cost to General Dynamics of personal use of aircraft owned by the company is calculated based on the following variable operating costs to the company: fuel costs, trip-related maintenance expenses, landing fees, trip-related hangar and parking fees, on-board catering expenses and crew expenses. No additional direct operating cost is incurred if a family member accompanies an executive on a flight. The aggregate incremental cost to the company of relocation expenses for Messrs.Mr. Johnson and ReddMr. Heebner represents mortgage differential payments. The aggregate incremental cost to the company of personal use of company-owned automobiles represents a portion of the lease and maintenance costsMortgage differential payments for the automobiles and salary costs for drivers.

(e)	Mr. Johnson served as vice chairman until July 1, 2009, at which time he became president and chief executive officer.

(f)

In accordance with SEC rules, “All Other Compensation” for Mr. Chabraja includes a $3 million donation that the company made directly to Northwestern Universityended in recognition of Mr. Chabraja’s 12 years of leadership as the company’s chairman and chief executive officer. No direct payment was made to Mr. Chabraja in connection with this donation and there is no income to him.

(g)

Mr. Chabraja retired as chief executive officer on June 30, 2009. In July 2009, Mr. Chabraja was paid a one-time lump sum in the amount of $8,944,194 in lieu of future corporate aircraft usage, reimbursement for office support and administrative support, reimbursement for moving expenses and applicable tax gross-up to which he was entitled under his amended and restated employment agreement dated June 7, 2007. For his services as a chairman of the Board following his retirement as an executive officer, Mr. Chabraja received the following: (1) Fees earned or paid in cash – $419,000; (2) Stock Awards – $94,416; (3) Option Awards – $189,214; (4) All Other Compensation – $0. The total of these amounts was $702,630 and is included in the All Other Compensation column of the Summary Compensation Table. The amounts reported as Stock Awards and Option Awards in this column reflect the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board ASC Topic 718.March 2010.

20092010 Equity-Based Awards

General Dynamics’ long-term compensation for senior executives, including the named executive officers, consists of equity awards in the form of restricted stock and stock options. The following table provides information on the equity awards in 20092010 for the named executive officers. The table includes the grant date of each equity award, the number of shares of restricted stock, the number of stock options, the exercise price of the stock options, the closing price of our Common Stock on the date of grant and the grant date fair value of restricted stock and stock option awards. As discussed in the Compensation Discussion and Analysis section, we use the average of the high and low stock price of our Common Stock on the date of the grant, not the closing price, to value the restricted stock and set the exercise price for stock options.

Grants of Plan-Based Awards in Fiscal Year 20092010

Option Exercises and Stock Vested

The following table shows the stock options exercised by the named executive officers and restricted stock released to them during 2009.2010. As explained in the Compensation Discussion and Analysis section, we require officers to retain shares of Common Stock issued to them as compensation, up to pre-determined levels, based on their position in General Dynamics. Our chief executive officer must retain outright ownership of Common Stock worth 15 times his base salary. Our executive vice presidents and senior vice presidents must retain 10 times their respective base salaries. Vice presidents must retain eight times their respective base salaries. Once an ownership level is attained, the officer must maintain that minimum ownership level until he or she no longer serves as an officer of General Dynamics. When exercising options, are exercised, executives who have not yet met the ownership guideline may not sell only enough shares acquired upon exercise, except to cover transaction costs and taxes, until they meet the ownership requirement.taxes. In manyall cases below, the named executive officers exercised options and held net shares, selling only enough shares to cover both the transaction costs and the income taxes due on the resulting gain. The amounts reported in the Value Realized on Exercise and the Value Realized on Vesting columns in the table below are before-tax amounts.

Option Exercises and Stock Vested in Fiscal Year 20092010

Outstanding Equity Awards

The following table provides information on outstanding stock option and restricted stock awards held by the named executive officers as of December 31, 2009.2010. Stock options can be exercised as follows: 50 percent beginning on the first anniversary of the grant date and the remainder beginning on the second anniversary. Restricted stock grants are released approximately four years after the grant date. During the restriction period, recipients of restricted stock awards may not sell, transfer, pledge, assign or otherwise convey the shares underlying the award. Recipients are eligible however, to vote their shares and to receive dividends or dividend equivalents on the shares from the date of grant. The table shows the number of stock options that a named executive officer holds (both exercisable and unexercisable), the option exercise price and its expiration date. For restricted stock awards, the table includes the number of shares of restricted stock that are still subject to the restriction period (i.e., have not vested) and their market value based on the closing price of the company’s Common Stock on December 31, 2009.2010.

Outstanding Equity Awards at 20092010 Fiscal Year-End

(a)

Of the 848,600399,100 stock options held by Mr. Johnson with an exercise price of $73.49, 199,550 became exercisable on March 3, 2011, and 199,550 will become exercisable on March 3, 2012. The 424,300 stock options held by Mr. Johnson with an exercise price of $40.09 424,300 became exercisable on March 4, 2010,2011. Of the 102,100 stock options held by Mr. Redd with an exercise price of $73.49, 51,050 became exercisable on March 3, 2011, and 424,30051,050 will become exercisable on March 4, 2011.3, 2012. The 81,500 stock options held by Mr. Johnson with an exercise price of $93.13 will become exercisable on September 2, 2010. The 3,300 stock options held by Mr. Johnson with an exercise price of $82.78 became exercisable on March 5, 2010. Of the 17,800 stock options held by Mr. Chabraja with an exercise price of $56.20, 8,900 will become exercisable on August 5, 2010, and 8,900 will become exercisable on August 5, 2011. The 323,000 stock options held by Mr. Chabraja with an exercise price of $82.78 became exercisable on March 5, 2010. Of the 229,200114,600 stock options held by Mr. Redd with an exercise price of $40.09 114,600 became exercisable on March 4, 2010,2011. Of the 107,200 stock options held by Mr. DeMuro with an exercise price of $73.49, 53,600 became exercisable on March 3, 2011, and 114,60053,600 will become exercisable on March 4, 2011.3, 2012. The 54,150 stock options held by Mr. Redd with an exercise price of $82.78 became exercisable on March 5, 2010. Of the 244,500 stock options held by Mr. Hall with an exercise price of $40.09, 122,250 became exercisable on March 4, 2010, and 122,250 will become exercisable on March 4, 2011. The 64,325 stock options held by Mr. Hall with an exercise price of $82.78 became exercisable on March 5, 2010. Of the 248,100124,050 stock options held by Mr. DeMuro with an exercise price of $40.09 124,050 became exercisable on March 4, 2010,2011. Of the 3,700 stock options held by Mr. Heebner with an exercise price of $77.33, 1,850 will become exercisable on April 30, 2011, and 124,0501,850 will become exercisable on April 30, 2012. Of the 92,850 stock options held by Mr. Heebner with an exercise price of $73.49, 46,425 became exercisable on March 3, 2011, and 46,425 will become exercisable on March 4, 2011.3, 2012. The 64,90087,600 stock options held by Mr. DeMuro with an exercise price of $82.78 became exercisable on March 5, 2010. Of the 210,200 stock options held by Mr. SavnerHeebner with an exercise price of $40.09 105,100 became exercisable on March 4, 2010, and 105,100 will become exercisable on March 4, 2011. The 48,300Of the 40,450 stock options held by Mr. SavnerHelm with an exercise price of $82.78 became$74.97, 20,225 will become exercisable on MarchMay 5, 2010.2011, and 20,225 will become exercisable on May 5, 2012.

Company-Sponsored Retirement Plans

General Dynamics offers retirement programs through a combination of qualified and nonqualified Employee Retirement Income Security Act of 1974 plans. The named executive officers other than Mr.Messrs. Johnson and Helm participate in each of the retirement programs indicated next to their name in the table below. Mr.Messrs. Johnson isand Helm are not eligible to participate in any of the company’s defined-benefit retirement plans because, effective January 1, 2007, new employees were no longer offered participation in the plans. The table shows the actuarial present value as of December 31, 2009,2010, of the pension benefits earned for each named executive officer over the course of his career. To the extent that a named executive officer has an individual retirement agreement, the table shows the pension benefit associated with that agreement. All other retirement plans in the table operate in exactly the same manner for the named executive officers as for all other plan participants.

Following the table is a description of the material terms and conditions of each of these plans and agreements.

Pension Benefits for Fiscal Year 20092010