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

2011

March 18, 201115, 2013

Dear Fellow Shareholder:

You are invited to our Annual Meeting of Shareholders on Wednesday, May 4, 2011,1, 2013, 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;directors, an advisory vote on the selection of the company’s independent auditors; an advisory vote on executive compensation;auditors, and an advisory vote on the frequency of future advisory votes onto approve executive compensation. Shareholders may raise other matters as described in the accompanying Proxy Statement.proxy statement.

We have elected to provide theare providing this year’s proxy materials on the Internet 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 providingCommission rules. Internet access to our proxy materials will expedite receipt of proxy materials byfor many of our shareholders and lower thehelp to keep mailing costs offor our annual meeting. Additional information regarding proxy materials distribution is provided on page 2meeting as low as possible. Page 1 of our proxy statement.statement provides additional information on proxy materials distribution.

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

Sincerely yours,

Jay L. JohnsonPhebe N. Novakovic

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, 20111, 2013

The Proxy Statement and 20102012 Annual Report are available atwww.generaldynamics.com/2011proxy2013proxy.

The Annual Meeting of Shareholders of General Dynamics Corporation, a Delaware corporation, will be held on Wednesday, May 4, 2011,1, 2013, 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 54 and 6.5.

The Board of Directors set the close of business on March 7, 2011,2013, 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 20102012 Annual Report is included withaccompanies 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, 201115, 2013

Proxy Statement

March 18, 201115, 2013

The Board of Directors of General Dynamics Corporation is soliciting your proxy for the Annual Meeting of Shareholders to be held on May 4, 2011,1, 2013, 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 18, 2011,15, 2013, 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 7, 2011,2013, are entitled to vote their shares of Common Stock at the Annual Meeting. On the record date, General Dynamics had 373,358,310354,019,542 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 with our transfer agent, Computershare Trust Company, N.A. (Computershare), you may obtain an admission card through the telephone or Internet voting systems or by marking the appropriate box on ayour proxy card.card (if you received or requested one). 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 your beneficial ownership of Common Stock, such as a recent 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 20112013 Annual Meeting via the Internet to most of our shareholders. Use of the Internet will expedite receipt of the 2013 proxy materials by many of our shareholders and will help to keep mailing costs for our Annual Meeting as low as possible. For some shareholders such aswho are participants in our 401(k) plans we are required to deliver proxy materials in hard copy. Nevertheless, we believe the use of the Internet will expedite receipt of the 2011 proxy materials by many of our shareholders and lower the costs of our Annual Meeting. On March 18,15, we initiated delivery of proxy materials to our shareholders of record in 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 butand 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 following voting procedures outlined below.procedures.

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 Time1:00 a.m. eastern time on May 3, 2011.1, 2013.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 signed 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 NorthernFidelity Management Trust Company (Northern Trust)(Fidelity), as trustee, 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 Plans401(k) Plan and the General Dynamics Corporation Savings and Stock Investment401(k) 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,Fidelity, as plan trustee, how to vote your shares. In the absence ofIf you do not provide Fidelity with timely voting instructions Northernthen, consistent with the terms of the plans, Evercore Trust has the rightCompany, N.A. (Evercore) will direct Fidelity, in Evercore’s discretion, how to vote shares at its discretion.the shares. Evercore serves as the independent fiduciary and investment manager for the General Dynamics Stock Fund of the 401(k) plans.

Computershare provides proxy materials to participants in these plans on behalf of Northern Trust.Fidelity. 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.Fidelity.To allow sufficient time for Northern TrustFidelity to vote your 401(k) plan shares, your vote or any re-vote as described below, must be received by 9 a.m. Eastern Timeeastern time on May 2, 2011.April 29, 2013.

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 Time1:00 a.m. eastern time on May 3, 2011.1, 2013. 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 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.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 onto Approve 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.

ProposalProposals 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 Proposals.    Proposals 54 and 65 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 these matters. Abstentions will have the effect of a vote against thethese 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 1110 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 bachelorsbachelor’s degree in electrical engineering and a mastersmaster’s degree in business administration, enableenables 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 68,, 70, director since 1994.   Chairman from June 1997 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 and as non-executive chairman of Tower International, Inc. He served as a director of Ceridian Corporation, a former public company, 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.

		James S. Crown 57,, 59, director since 1987.   Lead Director since May 2010. President of Henry Crown and Company (diversified investments) since 2002. Vice President of Henry Crown and Company from 1985 to 2002. Mr. Crown currently serves as a director of J.P. Morgan Chase & Co. andHe served as a director of Sara Lee Corporation.Corporation within the past five years.

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 providedprovide him with a deep understanding of the roles and responsibilities of a board of a large public company.

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 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 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 chairman and chief executive officer.

		George A. Joulwan, 71, director since 1998. Retired General, U.S. Army. Supreme Allied Commander, Europe, and Commander-in-Chief, European Command, from 1993 to 1997. Commander-in-Chief, Southern Command, from 1990 to 1993. President of One Team, Inc., (consulting) since 1999. Adjunct Professor at the National Defense University from 2001 to 2005. Olin Professor, National Security, at the U.S. Military Academy at West Point from 1998 to 2000.

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-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.

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, enableenables 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.

		Lester L. Lyles,Lyle 64,s, 66, director since 2003.   Retired General, U.S. Air Force. Commander, Air Force Materiel Command from 2000 to 2003. Vice Chief of Staff of the Air Force from 1999 to 2000. Chairman of the Board of United States Automobile Association since November 2012 and Vice Chairman from November 2008 to November 2012. Mr. Lyles currently serves as a director of DPL Inc., KBR, Inc., and Precision CastPartsCastparts Corp. He served as a director of DPL, Inc., and MTC Technologies, Inc., each a former public company, within the past five years.

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 thorough understanding of the challenges that face public companies through his service on several public company boards.

Ms. Novakovic’s service as a senior officer of General Dynamics since 2002 makes her a valuable and trusted advisor. Through her roles as chairman and chief executive officer, president and chief operating officer, and executive vice president, Marine Systems, she has developed a deep understanding of the company’s business operations, growth opportunities and challenges. As senior

vice president, planning and development, she gained a strong understanding of our core customers and the global marketplace in which we operate. Ms. Novakovic’s current service as a public company director provides her with a valuable perspective on corporate governance matters and the roles and responsibilities of a public company board.

		William A. Osborn 63,, 65, 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 tothrough 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 and Caterpillar, 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.

Mr. Osborn’s prior service as a senior executive of Northern Trust Corporation, including as chairman and chief executive officer, and 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 boardBoard 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.

		Robert Walmsley,Walmsle 70,y, 72, director since 2004.   Retired Vice Admiral, Royal Navy. Chief of Defence Procurement for the United Kingdom Ministry of Defence from 1996 to 2003. Senior Advisor to Morgan Stanley & Co. Limited (investment banking) sincefrom February 2004.2004 to October 2012. Mr. Walmsley currently serves as a director of Cohort plc and Ultra Electronics plc. He served as a director of British Energy Group plc, EDO Corporation and Stratos Global Corporation, each a former public company, within the past five years.

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.

Based on its Bylaws and Corporate Governance Guidelines, the company’s policy is not to nominate individuals for election to the Board of Directors who have reached the age of 72 as of the scheduled date for the annual meeting. However, the Nominating and Corporate Governance Committee recommended and the Board unanimously requested that Robert Walmsley stand for re-election. The Board took this action in recognition of the continued valuable counsel and insight that Mr. Walmsley provides to the Board with respect to international defense matters and the complex operational and governance matters of a large public company.

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

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.captions. The Board regularly reviews these guidelines and updates them periodically in response to changing regulatory requirements and evolving best 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, weWe 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 helpline, which employees can callaccess via telephone or online, 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,Also, 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-lengtharm’s-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 entered an agreement to purchase a mid-sized pre-owned aircraft from Gulfstream Aerospace Corporation,Schedule 13G filing made with the SEC, BlackRock, Inc., a subsidiaryglobal provider of investment, advisory and risk management solutions, reported beneficial ownership of more than 5 percent of General Dynamics’ outstanding common stock as of December 31, 2012. In a subsequent Schedule 13G filing in March 2013, BlackRock reported that, effective February 28, 2013, it holds less than 5 percent of General Dynamics Common Stock. An affiliate of BlackRock provides investment management and transition management services for a price of approximately $8,500,000. The purchase was completed in the first quarter of 2010. The terms and conditionscertain of the sales agreementcompany’s benefit plans. The agreements with BlackRock were negotiated in an arms-length transactionarm’s-length transactions and the ownership of General Dynamics stock plays no role in the business relationship between the company and BlackRock. In addition, we believe that the agreements represent standard terms and conditions for a pre-owned aircraft sale.

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 sixfour meetings in 2010.2012.

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 aerospace and 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 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.paragraph or at the address in the Standards of Business Ethics and Conduct Handbook provided to all employees. Our employees can call a toll-free helpline number or access the helpline at a web address, each of which is 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 director orientation. The orientation consists of a series of in-person briefings in person on our business operations; operating plans; significant financial, accounting and risk-management matters; corporate governance; investor relations; and key policies and practices. AtThe chief executive officer, senior vice presidents and executive vice presidents provide in-depth reviews of the areas under their authority. Additionally, at this orientation a new director also receives briefings on the responsibilities, duties and activities of the committees on which the director will serve. The general counsel and chief financial officer also periodically provide materials and briefing sessions on subjects that assist the directors in discharging their duties. 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.periodically. 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 2010,2012, 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 in 2010, to conduct a director compensation survey that included cash retainers, meeting fees, equity compensation and additional director benefits. Meridian provided director compensation data for two peer groups. The first group consisted of the following companies 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 Meridian for a larger group of companies comprising the 10 companies listed above and 13 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 for these two peer groups provided to management by Meridian and, based on this review, recommended an increaseno change in the annual retainer. Based upon the recommendation of the committee, the Board approved at its February 2010 meeting an increase in the annual equity award to $122,000. All other elements ofdirector compensation. Accordingly, director compensation were unchanged.

Director compensation for 20102012 included the following:

In early 2011,2013, as part of its annual review of director compensation, the committeeCompensation Committee requested that management update its director compensation analysis. Management again engaged Meridian to provide survey data for the core peer groupsgroup listed above. above and a revised larger peer group consisting of the following companies:

The committee reviewed the survey data regarding director compensation provided by Meridian and, based on this review, recommended a $5,000 increase inno change to the annual retainer, and a $500 increase inlead director retainer, committee chair retainer, attendance fees, or annual equity award for Board meetings. Based upon the recommendation of thesecond consecutive year. The committee recommended, and the Board approved, these changesa per diem fee of $10,000 for non-employee directors who perform specific projects for the company at its February 2011 meeting. All other elementsthe request of director compensation are unchanged for 2011.the chairman.

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 20102012 are reflected in the Fees Earned or Paid in Cash column of the Director Compensation for Fiscal Year 20102012 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 received 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 obtained survey data from Hewitt Associates 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		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

In connection with the creation of a Lead Director position by the Board in February 2010, the committeeCompensation 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. Information provided in connection with the February 2013 annual review of director compensation showed that $25,000 continued to represent the median of the comparative data for lead director retainers.

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 20102012 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 serving during the 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 20102012

Compensation Discussion and Analysis

Our CompensationOverview and Philosophy

Our 2012 performance did not reflect General Dynamics’ long history of excellent results. While some of our businesses performed extremely well, others experienced significant financial and operational challenges, driven in part by declining defense budgets worldwide that in many cases resulted in delayed contract awards and lower than anticipated volume. Our results also reflect some performance-related shortcomings that we are addressing in 2013 and several acquisitions that failed to meet expectations. In the current challenging budget environment, our businesses remain focused on execution as well as managing for profitability, including implementing cost-cutting measures and continuous improvement initiatives.

In determining 2012 compensation, our philosophy remains unaltered. We tie the majority of executive compensation to our performance as a company thereby aligning the interests of our executives with those of our shareholders. When company performance does not meet the mark, it is reflected in the executives’ compensation. Notable aspects of the Compensation Committee’s March 2013 compensation determinations include:

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 ofand 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 requirementslevels 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. Additionally, we continue to offer only perquisites that we feel are reasonable and necessary to be competitive in attracting and retaining a strong management team. We also continue to have no employment agreements with our named executive officers.

OverWhile our company encountered significant challenges in 2012, our long-term performance has been strong. As the 10-year performance graph on the next page shows, in the past 10decade we have generated a total return for shareholders of 114 percent, higher than the Standard and Poor’s^® 500 Index. This graph also illustrates macroeconomic pressures affecting the broader markets over the past several years we along withand defense spending concerns affecting our shareholders have enjoyed strong performance measured by double-digit growth in revenuescompany 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 38 acquisitions totaling approximately $12.5 billion, to repurchase approximately $4.4 billionmany of our Common Stock and to return approximately $3.8 billion in quarterly dividendscompetitors, particularly over this period. We have increased our annual dividend each year during the period.past several years.

Ten-Year Historical Performance

(December 20002002 – December 2010)2012)

Our Compensation Program

As the 10-year performance graph on the prior page shows,Executive Compensation Program Participants and Overview.    The named executive officers included in the past decade we have generated a total return for shareholdersSummary Compensation Table are key members of 115 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 maximize 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 remains 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. This 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 corporateCorporate executive vice presidents at the direction of the chief executive officer provide guidance to the individual operating business units within their respectiveeach of the 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.officer. A president of each business unit is responsible for profit and loss performance by that business unit.unit and has a direct reporting line for their responsibilities to the chief executive officer. In 2012, the Board appointed Phebe N. Novakovic to the position of president and chief operating officer as part of our chief executive officer succession plan. Ms. Novakovic served in this role until assuming the position of chairman and chief executive officer in January 2013.

Approximately 500450 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 standard 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.companies. On average, however, salaries account for less than half of our senior executives’ compensation. The majority of their compensation is in 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, 80 percent or more of their compensation is at risk. For our chairman and chief executive officer, that number is 9085 percent. Bonuses, when earned, are paid in cash. Equity awards are granted as a combination of stock options, restricted stock and restricted stock options.units (RSUs).

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 grantequity awards 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. Market conditions in recent years have caused the value of our executives’ stock holdings and equity awards totrue, as can be significantly reduced or,seen in the casevalues of certain option awards, reduced to zero.the performance RSUs granted in 2012. 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 grantsawards when determining current compensation. Our responsibility in setting compensation is to ensure that the expected value of the equity grants,awards, at the time they are received, is reasonable.

We believe that achieving excellent resultsmaintaining a focus on driving shareholder value 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,challenging but 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 chairman and chief executive officer in November. He,She, 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 late January/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 chief financial officer and the executive vice presidents.

A review of the year’s performance begins the following January. At that time, the chairman and chief executive officer, the 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.prior year. This rigorous assessment results in a score for each business unit that focuses on key financial metrics (earnings before interest and taxes, referred to as EBIT, and cash) and programmatic goals. The chairman and chief executive officer presentsand senior management report the results of that assessment to the Board of Directors at the Board’s three-day meeting in late January/early February. Following this review,these reports, the chairman and chief executive officer, after consultation with senior management, presentsundertakes an initial proposal on compensation todiscussion with the Compensation Committee regarding executive compensation for analysis and comment. As part of this initial proposal, the chairman 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, theyear. The Compensation Committee convenes in early March to review and approve final executive compensation proposals. At this meeting, the chairman and chief executive officer offers further analysisprovides the committee with a performance assessment of executive compensationeach officer (other than herself) and makes specific recommendations as requested byto the committee.committee regarding each officer’s compensation. The Compensation Committee reviews and approves compensation for the chairman and chief executive officer in executive session at the March meeting.

The Compensation Committee, chairman and chief executive officer, and senior management are entrusted to exercise judgment in making the compensation recommendations and decisions described above.decisions. 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 objectives 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 aggressivechallenging 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.data. 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 ofGenerally, our disciplined process results in salaries at no more than the road” in competitiveness. We do this deliberately.median. We believe that high-performancehigh-performing 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 aggressivechallenging 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 cash compensation between the 50th and 75th percentiles of cash compensation for executives in comparable positions at our peer group companies based on survey data. However, total cash compensation can be below the survey data described below.50th percentile when warranted by performance.

Equity Awards.    We believe that equity awards are an effective tool for aligning long-term executive performanceinterests with value creation.those of our shareholders. 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, 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 survey 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 ofstock options, restricted stock and restricted stock options. Theunits (RSUs). For March 2013 awards, the Compensation Committee approved an equity award allocation of one-half in recent years has been approximately one-thirdstock options, one-quarter in restricted stock (or RSUs for some participants outside the United States due to tax considerations) and two-thirdsone-quarter in stock options.RSUs that are subject to a specific performance measure (PRSUs). We believe this allocationthat providing a mix of stock options, restricted stock and PRSUs 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 company performance during the life of the options. Our outstandingcurrent practice is to grant options granted prior to 2011 expire five years after the date of grant. Options granted in 2011that expire seven years after the date of grant. For PRSUs, the amount of units ultimately received will depend upon whether the applicable performance measure is met. We balance the risk inherent in stock options and PRSUs against the relative stability implicit in restricted stock to motivate our executives to achieve operating goals that are aggressive,challenging, 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 stockequity awards and stock options on the first Wednesday of March each year. For new hires or promotions, restricted stockequity awards and stock options are granted 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, RSUs and PRSUs 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.award. 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.award.

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.Stock when declared by the Board of Directors. Restricted stock awards are service-based, meaning that the executives must remain in the employment of the company during the restriction period in order to receive the shares upon release. 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.

Restricted Stock Units.    An RSU represents a promise by General Dynamics to deliver a share of Common Stock in the future, subject to certain conditions. While we have historically awarded RSUs to certain participants outside the United States only, in March 2012 PRSUs were awarded to all participants. These PRSUs have both a performance measure and a service component. Each year, the Compensation Committee determines the appropriate performance metric to be used, which for 2012 and 2013 awards was return on invested capital. We selected return on invested capital as the performance measure because it reflects our ability to generate returns from the capital invested in our company. This metric is a good measure of the company’s economic

efficiency and ability to create value. Depending on the company’s performance in relation to this metric, the number of PRSUs earned may be less than, equal to or greater than the original number of PRSUs awarded. The earned units are then subject to three years of additional service-based vesting. The PRSUs will be credited with dividend equivalents in the form of additional PRSUs which are also subject to the performance and service conditions. We believe the combination of performance and service features for PRSUs strikes an appropriate balance between pay for performance and incentivizing executives to focus on operational goals on the one hand and executive retention considerations on the other hand. As with restricted stock grants, executives who voluntarily resign or are terminated for cause immediately forfeit all PRSUs that have not been released unless otherwise determined by the Compensation Committee.

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.award. 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. Stock options vest over two years: 50 percent of the grant is exercisable in one year; the remainder is exercisable the following year. Our outstanding options granted prior to 2011 expire five years after the grant date. Options granted beginning 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,and PRSU awards, 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.Guidelines and Hedging Policy.    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. UnreleasedShares held outright, unreleased shares of restricted stock or RSUs 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

her 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.taxes and are expected to hold any remaining shares until the guidelines are met. Similarly, shares received upon release of restricted stock and RSUs 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. Based 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 executives become shareholders with a considerable investment in General Dynamics. Our stock ownership and retention guidelines are reviewed annually by the Compensation Committee. In addition, our insider trading policy prohibits our directors and executive officers from engaging in hedging transactions.

Market Data.    To assist the Compensation Committee in its determinations for executive compensation, 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 provide 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 20112013 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 20102012 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 industrieswith similar complexity of operations and organizational structure as General Dynamics 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		International Paper Company
The Boeing Company		Johnson Controls, Inc.
The Boeing CompanyCaterpillar, Inc.		L-3 Communications Holdings, Inc.
Caterpillar,Cisco Systems, Inc.		Lockheed Martin Corporation
Deere & Company		Northrop Grumman Corporation
The Dow Chemical Company		Oshkosh CorporationRaytheon Company
Emerson Electric Co.		Raytheon CompanyRockwell Collins, Inc.
Goodrich Corporation		Rockwell Collins,SAIC, Inc.
Honeywell International Inc.		SAIC,Textron Inc.
Illinois Tool Works Inc.		Textron Inc.
International Business Machines Corp.		Tyco International Ltd.
International Paper CompanyIntel Corporation		United Technologies Corporation
ITT CorporationInternational Business Machines Corp.

Company-Provided Benefits

General Dynamics-provided benefits are an important tool used to attract and retain outstanding employees throughout the company.employees. 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.

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 corporate 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 priorearly (prior to age 65,65), 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 forFor executives retiring at or after age 65, or for early retirees who have made a required election prior to turning 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. Prior to his retirement, Mr. DeMuro participateshas participated in a legacy retirement plan that is described on page 42 in the narrative discussion following the Pension Benefits for Fiscal Year 20102012 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 onThe plan was further amended in January 2013 to freeze benefits as of December 31, 2013, under the number of years of serviceplan for employees at our corporate headquarters, including the named executive officers. The benefit under this formula, and the benefitplan 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 ($245,000250,000 in both 20102012 and 2011)$255,000 in 2013). 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))401(k) Plan.    All our named executive officers are eligible to participate in the General Dynamics Corporation 401(k) Plan 4.5, formerly known as the General Dynamics Corporation Savings and Stock Investment Plan – Plan 4.5 (the SSIP)401(k) Plan), a tax-qualified defined-contributiondefined contribution retirement plan. All participants are eligible to make before-tax contributions and receive company matching contributions for the named executive officers under the SSIP.401(k) Plan. During 2010,2012, the SSIP401(k) Plan 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 20102012 for the named executive officers are included in footnote (d) to the All Other Compensation column of the Summary Compensation Table on page 36 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 SSIPSavings Plan 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 20102012 for the named executive officers are included in footnote (d) to the All Other Compensation column of the Summary Compensation Table on page 36 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. Our policy is to not reimburse executive officers for personal taxes owed by them resulting from their receipt of perquisites.

The perquisites provided to our named executive officers in 20102012 were: club memberships; financial planning and tax preparation services; physical exams; home security systems; club memberships; 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 2011,2013, the Compensation Committee determined that the company wouldto no longer provide country club membershipsleased cars to our executive officers, at our corporate headquarters. These executives will receive a one-time payment in 2011 equalwith any existing leases to the value of three years’ of club dues to address any transition issues caused by the policy change.be terminated no later than December 31, 2014.

We have provided additional information on perquisites in footnote (d) to the All Other Compensation column of the Summary Compensation Table on page 36 of this Proxy Statement.

Change in Control 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. 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 activatedresults in a severance payout 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 are evaluated and reviewed regularly. These reviews support our view that the agreements are consistent with market practice. The form of severance protection agreement for executive officers appointed after April 2009 excludes any provision for reimbursement of excise taxes that may become due upon a change in control.

Payments and benefits provided to our named executive officers pursuant to the change in control agreements are described in the Potential Payments upon Termination or Change in Control section beginning on page 44 of this Proxy Statement.

Analysis of 20102012 Compensation for the Named Executive Officers

ThisAt the company’s 2012 annual meeting of shareholders, a significant majority of our shareholders (approximately 77%) voted in favor of the company’s advisory resolution to approve executive compensation. As a result, the Compensation Committee determined that its philosophy of tying a substantial portion of executive compensation to shareholder value, thereby aligning the interests of executives with those of the company’s shareholders, is effective and supported by our shareholders and that no significant changes to the executive compensation program were necessary. The committee will continue to evaluate the executive compensation program to ensure adherence to its stated philosophy and good governance practices, and will continue to consider results of shareholder advisory votes on executive compensation when making future compensation decisions.

For 2012, our named executive officers were:

The below section provides an analysis of the specific compensation that we paid to our named executive officers for 20102012 based on the compensation philosophy articulated earlier in this Compensation Discussion and Analysis.Analysis section.

2010 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 2010,2012, the Compensation Committee

approved the following salaries for the named executive officers:officers, effective on March 19, 2012: Mr. Redd – $790,000; Mr. DeMuro – $710,000; Mr. Heebner – $685,000; and Mr. Johnson – $1,400,000; Mr. Redd – $755,000; Mr. DeMuro – $660,000; Mr. Heebner – $640,000; and Mr. Helm – $560,000. These$1,650,000. The 2012 salaries for these named executive officers were effectivebelow the 50th percentile of the competitive market based on March 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.the survey data. Since the Summary Compensation Table on page 36 reflects total salaries paid in 2010,2012, the salary data in the table includes the salaries paid for the first three months of 20102012 – at the 20092011 salary level – and the remaining nine months paid at the 20102012 level. TheFor Ms. Novakovic, the Compensation Committee approved a salary paid to Mr. Helm during 2010of $1,100,000 for her position as President and Chief Operating Officer, effective from May through December, which was at the 50th percentile of the competitive market based ondata. In late 2012, the survey data. The 2010 salariesCompensation Committee also approved a salary of $1,500,000 for other namedMs. Novakovic effective upon her assumption of the chairman and chief executive officers wereofficer position in January 2013, which was below the 50th percentile of the competitive market based on the survey data.

2010 Bonuses and 2011 Equity Awards

The majority of our executive compensation is performance-based. Bonuses are paid based on the prior year’s 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 20102012 compensation decisions, senior management and the Compensation Committee considered the results for the company and each of the business groups, as applicable, compared against the operating plan goals for 2010.2012. In addition, for each named executive officer the committee considered the leadership and management skills of each of our executivesthe officer during 2010, including the2012. The committee also received a tally sheet for each named executive officers. The committee recognized management’s efforts to aggressively manage our businesses to preserve profitabilityofficer showing the various elements of the executive’s compensation, benefits and shareholder value, including implementing cost-cutting measures, scaling production and overhead, and focusing on continuous improvement efforts to drive operational efficiencies.stock ownership. 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 Messrs. Johnson, Redd and Helm,officers who have responsibility for company-wide performance (our chief executive officer, chief financial officer, and president and chief operating officer), the Compensation Committee’s operating performance review focused on earnings from continuing operations, free cash flow from operations and return on invested capital and earnings per share at the company level.capital. We believe that these metrics are good indicators of the company’s overall performance and lead to the creation of long-term value for our shareholders. In particular:

The committee considered that for 2010: the company’s earnings from continuing operations of $2.628 billion were above the plan goal of $2.453 billion; free cash flow from operations of $2.616 billion exceeded the plan goal of $2.064 billion; return on invested capital of 17.5 percent was above the plan goal of 16.1 percent; and earnings per share of $6.82 was above the plan goal of $6.25.operations. 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 recognized his strong leadership of the company in a dynamic 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, the guidance he provided to the company through his management and oversight of our finance organization and the role he played in executing 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 his leadership and guidance of the planning and development organization during a time of defense budget pressure.

For Messrs. DeMuro and Heebner,our executive vice presidents, the Compensation Committee reviewed the operating performance of their respective business groups and focused on earnings before interest and taxes (EBIT)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 disciplined processes, continuous improvement and disciplined processescost-cutting initiatives and that business group cash flow measures the ability of the business groups to efficiently convert operating earnings into cash.

For Ms. Novakovic, who served as Executive Vice President, Marine Systems, for a portion of 2012 and as President and Chief Operating Officer for the remainder of the year, the committee determined her bonus amount based upon her performance in both roles. Accordingly, the committee considered that (a) the Marine Systems group’s EBIT of $750 million exceeded the plan goal of $676 million; and cash flow of $495 million exceeded the plan goal of $439 million, and (b) the company’s free cash flow from operations of $2.237 billion exceeded the plan goal of $2.080 billion; while loss from continuing operations of $332 million was below the plan goal of $2.591 billion; and return on invested capital of negative 0.4 percent was below the plan goal of 15.8 percent. In addition, for Ms. Novakovic the committee recognized:

For Mr. Redd, the committee considered the company’s financial performance mentioned above, as well as:

For Mr. DeMuro, the committee considered that for 2010: (a)2012 the Information Systems and Technology group’s EBITloss before interest and taxes of $1.218$1.371 billion fell below the plan goal of $1.112 billion of EBIT; and cash flow of $771 million exceeded the plan goal of $1.217 billion;$756 million. The committee also considered:

For Mr. Heebner, the committee considered that for 2012 the Combat Systems group’s EBIT of $672$662 million fell below the plan goal of $778 million;$1.223 billion; and (b) the Combat Systems group’s EBITcash flow of $1.273 billion$731 million fell slightly below the plan goal of $1.277 billion;$746 million. The committee also considered:

For each individual discussed above, management provided the Compensation Committee with market data for each of their respective positions that reflected the 50th to 75th percentiles of total cash compensation for comparable positions at the peer group companies. Based upon the specific considerations for each individual, the company’s or business group’s performance for 2012, as applicable, and the market data, the Compensation Committee awarded bonus amounts of $2,000,000 for Ms. Novakovic, $500,000 for Mr. Redd, $500,000 for Mr. DeMuro and $905,000 for Mr. Heebner. These bonus amounts were determined by the committee in the exercise of its discretion taking all of the factors into consideration, rather than focusing upon any one factor.

For Mr. Johnson, his bonus was determined in accordance with the provisions of his retirement agreement entered into with the company in June 2012. As stated in his retirement agreement and discussed in our current report on Form 8-K filed with the SEC on June 6, 2012, Mr. Johnson received a bonus in the amount of $3,600,000 for his services during 2012.

The bonus award for each of the named executive officers broughtresulted in total cash compensation betweenbelow the 50th and 75th percentilespercentile 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.each named executive officer. Bonus awards are reflected in the Bonus column of the Summary Compensation Table.

The number of options, shares of restricted stock and PRSUs awarded to each named executive officer in 2012 is reflected in the Grants of Plan-Based Awards in Fiscal Year 2012 table. As described under “Equity Awards,” the Compensation Committee determines the amount of equity awards using a multiple of the executive’s total cash compensation. The multiples are determined based upon the value of equity awards at peer group companies. The multiples approved by the committee for 2012 awards were: Ms. Novakovic – 160%; Mr. Redd – 145%; Mr. DeMuro – 160%; Mr. Heebner – 160%; and Mr. Johnson – 235%. For Messrs. Johnson, Heebner and Helm,each named executive officer, 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. Redddata. Ms. Novakovic did not receive an equity award in 2012 related to her promotion to chairman and chief executive officer. Due to their retirements, neither Mr. Johnson nor Mr. 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 officerreceived an equity award in 2010 is reflected in the Grants of Plan-Based Awards in Fiscal Year 2010 table.March 2013.

The following graph depicts the 20102012 compensation paidawarded to the named executive officers (other than Messrs. DeMuro and Johnson, who have retired or are retiring 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. Because the performance metric for the PRSUs, which are included in the Stock Awards shown in the table below, was not met, all of these PRSUs were forfeited by the named executive officers, with no value realized.

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, restricted stock units 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 discuss 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

20102012 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, PRSUs and stock options. The following table provides information on the equity awards in 20102012 for the named executive officers. The table includes the grant date of each equity award, the number of shares of restricted stock, the number ofPRSUs and 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 optionthe equity 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 PRSUs and set the exercise price for stock options.

Grants of Plan-Based Awards in Fiscal Year 20102012

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 2010.2012. 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, executivesMr. Johnson, who havedid not yet metmeet the stock ownership guideline may not sell shares acquired uponrequirements at the time of exercise, except to cover transaction costs and taxes. In all 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 20102012

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, 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 to vote their shares and to receive dividends or dividend equivalents on the shares from the date of grant.2012. 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). Because the performance metric for PRSUs was not met in 2012, all PRSUs were forfeited and theirtherefore are not shown in the table below. For restricted stock, the market value is based on the closing price of the company’s Common Stock on December 31, 2010.2012.

Outstanding Equity Awards at 20102012 Fiscal Year-End