2007 SSIP

1. 2007 SSIP/401(k) and Pension Plan Changes Have this slide on the screen to start the meeting. Greet people as they enter. The General Dynamics meeting host will open the meeting. He or she will outline the purpose of the meeting, briefly discuss the reasons for the changes, and introduce you. Thank you for coming to this meeting about upcoming changes to the SSIP or 401(k) plan and Pension Plan. The presentation will last about 45 minutes. After the presentation, we’ll have about 45 minutes to take your questions. To ensure that we cover all the information in the presentation, we ask that you hold your questions until we open the question period. Then at that point, we’ll answer your general questions about the changes. Transition: Here’s what we plan to cover today. Have this slide on the screen to start the meeting. Greet people as they enter. The General Dynamics meeting host will open the meeting. He or she will outline the purpose of the meeting, briefly discuss the reasons for the changes, and introduce you. Thank you for coming to this meeting about upcoming changes to the SSIP or 401(k) plan and Pension Plan. The presentation will last about 45 minutes. After the presentation, we’ll have about 45 minutes to take your questions. To ensure that we cover all the information in the presentation, we ask that you hold your questions until we open the question period. Then at that point, we’ll answer your general questions about the changes. Transition: Here’s what we plan to cover today.

2. Why We’re Here Today Describe changes to the Savings and Stock Investment Plan (SSIP) Describe changes to the Retirement Plan for Salaried Employees (“Pension Plan”) Describe how these changes will affect your financial resources for retirement Demonstrate tools you can use and actions you can take to prepare for these changes Answer your questions First we’ll describe the changes to the Savings and Stock Investment Plan – the General Dynamics 401(k) plan. Then we’ll review changes to the Retirement Plan for Salaried Employees – the pension plan. We’ll describe how these changes will affect your General Dynamics-provided financial resources for retirement. We’ll briefly review the tools you can use and the actions you can take to prepare for the changes. And then we’ll turn to your questions. At that point, please feel free to ask any general questions you have about the plan changes. And if you have specific questions about your own situation, please contact the General Dynamics Service Center.First we’ll describe the changes to the Savings and Stock Investment Plan – the General Dynamics 401(k) plan. Then we’ll review changes to the Retirement Plan for Salaried Employees – the pension plan. We’ll describe how these changes will affect your General Dynamics-provided financial resources for retirement. We’ll briefly review the tools you can use and the actions you can take to prepare for the changes. And then we’ll turn to your questions. At that point, please feel free to ask any general questions you have about the plan changes. And if you have specific questions about your own situation, please contact the General Dynamics Service Center.

3. The Big Picture New matching contribution formula New definition of pay Immediate vesting in future General Dynamics matching contributions Ability to contribute before-tax and after-tax dollars Ability to diversify your General Dynamics Stock Fund balance We’ll start with an overview of what’s changing for SSIP starting January 1, 2007. General Dynamics will introduce a new matching formula for your contributions to the SSIP. Your contributions will be based on your 401(k) Eligible Pay instead of being limited to a percentage of only your base pay. You will have immediate vesting in – or ownership of – General Dynamics’ matching contributions to the SSIP that occur starting January 1, 2007. You will have the ability to contribute to the SSIP with both before-tax and after-tax dollars. And you may diversify your General Dynamics stock fund balance, moving investments from that fund to other funds in the plan, if you wish to do so. All SSIP plan changes take effect on January 1, 2007.We’ll start with an overview of what’s changing for SSIP starting January 1, 2007. General Dynamics will introduce a new matching formula for your contributions to the SSIP. Your contributions will be based on your 401(k) Eligible Pay instead of being limited to a percentage of only your base pay. You will have immediate vesting in – or ownership of – General Dynamics’ matching contributions to the SSIP that occur starting January 1, 2007. You will have the ability to contribute to the SSIP with both before-tax and after-tax dollars. And you may diversify your General Dynamics stock fund balance, moving investments from that fund to other funds in the plan, if you wish to do so. All SSIP plan changes take effect on January 1, 2007.

4. The Big Picture December 31st: 1.3333% formula for calculating your retirement benefit ends January 1st: 1% formula begins for future service New early retirement factor applies for benefit under 1% formula New 100% pre-retirement surviving spouse annuity January 1st: Pension Plan closed to new hires Here’s an overview of changes to the pension plan. Before we review the changes, there are a couple of key things to keep in mind: The pension benefit you have earned through December 31, 2006, will not be reduced as a result of any of the changes we’re reviewing today. (Note: Salary decreases that impact the Final Average Pay calculation could reduce the pension benefit. Likewise, interest rate changes affect the size of lump sum benefits. [All BUs except Corporate have lump sum benefit options.]) Your pension benefit will still continue to grow as you work for the Company; however, these changes will result in your total pension benefit not growing as fast as it would have otherwise. On December 31, 2006, the current pension benefit formula ends. The formula will be used to calculate the benefit you’ve earned through December 31, 2006. This current formula benefit will be referred to as your “Protected Benefit” or “1.3333% Benefit.” On January 1, 2007, a new formula will be used to calculate benefits you earn for future service. This new formula will be referred to as the “1% Benefit.” A new early retirement factor applies to benefits earned under the 1% formula. If you die while employed by General Dynamics, your spouse will be eligible for a 100% surviving spouse annuity based on the value of your pension benefit. And employees hired on or after January 1, 2007 will not participate in the pension plan. Here’s an overview of changes to the pension plan. Before we review the changes, there are a couple of key things to keep in mind: The pension benefit you have earned through December 31, 2006, will not be reduced as a result of any of the changes we’re reviewing today. (Note: Salary decreases that impact the Final Average Pay calculation could reduce the pension benefit. Likewise, interest rate changes affect the size of lump sum benefits. [All BUs except Corporate have lump sum benefit options.]) Your pension benefit will still continue to grow as you work for the Company; however, these changes will result in your total pension benefit not growing as fast as it would have otherwise. On December 31, 2006, the current pension benefit formula ends. The formula will be used to calculate the benefit you’ve earned through December 31, 2006. This current formula benefit will be referred to as your “Protected Benefit” or “1.3333% Benefit.” On January 1, 2007, a new formula will be used to calculate benefits you earn for future service. This new formula will be referred to as the “1% Benefit.” A new early retirement factor applies to benefits earned under the 1% formula. If you die while employed by General Dynamics, your spouse will be eligible for a 100% surviving spouse annuity based on the value of your pension benefit. And employees hired on or after January 1, 2007 will not participate in the pension plan.

5. Your Resources In addition to the printed documents, you have another source for information on your General Dynamics retirement benefits – the General Dynamics Benefits Web site. It’s found at www.gdbenefits.com. The Web site includes information about your retirement benefits. It’s where you can go to make changes to your SSIP contributions and investment fund choices. You may use the General Dynamics Benefits Web site to project your retirement benefit under the 1.3333% pension formula. Starting January 3, 2007 – after the changes take effect – you will be able to project your pension benefits under the 1.3333% formula and the 1% formula on the General Dynamics Benefits Web site. Until then, use the General Dynamics Benefits Web site to see your 1.3333% pension benefit along with the current SSIP match formula and Social Security. Please keep in mind that to prepare the system for the benefits changes, you will not be able to perform any transactions related to your SSIP account between 4:00 pm Eastern time on January 2, 2007 and 6:00 am Eastern time on January 3, 2007. In addition to the printed documents, you have another source for information on your General Dynamics retirement benefits – the General Dynamics Benefits Web site. It’s found at www.gdbenefits.com. The Web site includes information about your retirement benefits. It’s where you can go to make changes to your SSIP contributions and investment fund choices. You may use the General Dynamics Benefits Web site to project your retirement benefit under the 1.3333% pension formula. Starting January 3, 2007 – after the changes take effect – you will be able to project your pension benefits under the 1.3333% formula and the 1% formula on the General Dynamics Benefits Web site. Until then, use the General Dynamics Benefits Web site to see your 1.3333% pension benefit along with the current SSIP match formula and Social Security. Please keep in mind that to prepare the system for the benefits changes, you will not be able to perform any transactions related to your SSIP account between 4:00 pm Eastern time on January 2, 2007 and 6:00 am Eastern time on January 3, 2007.

6. Changes to the SSIP/401(k) Now we’ll turn to some details around the changes to the SSIP or 401(k) plan. Now we’ll turn to some details around the changes to the SSIP or 401(k) plan.

7. How Does the SSIP/401(k) Work? The Savings and Stock Investment Plan (SSIP):A tax-advantaged way to save for retirement First, the basics of General Dynamics’ Savings and Stock Investment Plan – the Company’s 401(k) plan. The SSIP is a financial vehicle that General Dynamics provides to help you prepare for retirement. It also provides you with the opportunity to become interested in Company affairs by investing in the General Dynamics Stock Fund. You may contribute between one and fifty percent of your pay, up to IRS limits. And starting in 2007, you can contribute to the GD SSIP on a before-tax basis, after-tax basis, or a combination of both. For 2007, the before-tax contribution limit as set by the IRS is $15,500. If you are age 50 or over, you may contribute an additional $5,000 each year – called catch-up contributions. Your before-tax contributions are deducted from your pay before income taxes are calculated, reducing your taxable income. General Dynamics matches a portion of your contributions according to a set formula. Then you decide how to invest the money in your account, choosing among the seven investment funds offered by General Dynamics in addition to the General Dynamics stock fund. As of January 1, 2007, all matching contributions you receive will be invested according to the same allocation percentages that you elect for your before-tax payroll contributions. Your SSIP account grows tax-free until you withdraw it. First, the basics of General Dynamics’ Savings and Stock Investment Plan – the Company’s 401(k) plan. The SSIP is a financial vehicle that General Dynamics provides to help you prepare for retirement. It also provides you with the opportunity to become interested in Company affairs by investing in the General Dynamics Stock Fund. You may contribute between one and fifty percent of your pay, up to IRS limits. And starting in 2007, you can contribute to the GD SSIP on a before-tax basis, after-tax basis, or a combination of both. For 2007, the before-tax contribution limit as set by the IRS is $15,500. If you are age 50 or over, you may contribute an additional $5,000 each year – called catch-up contributions. Your before-tax contributions are deducted from your pay before income taxes are calculated, reducing your taxable income. General Dynamics matches a portion of your contributions according to a set formula. Then you decide how to invest the money in your account, choosing among the seven investment funds offered by General Dynamics in addition to the General Dynamics stock fund. As of January 1, 2007, all matching contributions you receive will be invested according to the same allocation percentages that you elect for your before-tax payroll contributions. Your SSIP account grows tax-free until you withdraw it.

8. Changes to the SSIP/401(k) General Dynamics matches: Starting January 1, 2007, General Dynamics’ contributions to your SSIP account will be calculated according to a different formula. General Dynamics will now match up to 6% of plan eligible pay that you contribute on either a before-tax and/or after-tax basis. Your contributions will be matched $1 per $1 up to the first 3% of your pay and $0.50 per $1 you contribute up to the next 3% of your pay. If you contribute both before and after-tax money, your before-tax contributions will be matched first and then your after-tax contributions will be matched up to a total of 6%. As an enhancement to the plan, you will be immediately vested in, or own the right to, the matching contributions that General Dynamics makes to your GD SSIP account after January 1, 2007. For General Dynamics matching contributions made prior to January 1, 2007, you will still need to meet the three-year vesting rule before becoming 100% vested in those contributions. The total potential match you could receive is 4.5%. To maximize Company matching contributions, you will need to contribute 6% of your pay to receive the maximum Company match of 4.5%.Starting January 1, 2007, General Dynamics’ contributions to your SSIP account will be calculated according to a different formula. General Dynamics will now match up to 6% of plan eligible pay that you contribute on either a before-tax and/or after-tax basis. Your contributions will be matched $1 per $1 up to the first 3% of your pay and $0.50 per $1 you contribute up to the next 3% of your pay. If you contribute both before and after-tax money, your before-tax contributions will be matched first and then your after-tax contributions will be matched up to a total of 6%. As an enhancement to the plan, you will be immediately vested in, or own the right to, the matching contributions that General Dynamics makes to your GD SSIP account after January 1, 2007. For General Dynamics matching contributions made prior to January 1, 2007, you will still need to meet the three-year vesting rule before becoming 100% vested in those contributions. The total potential match you could receive is 4.5%. To maximize Company matching contributions, you will need to contribute 6% of your pay to receive the maximum Company match of 4.5%.

9. Changes to the SSIP/401(k) Base pay = $70,000 GD Match = $2,500 Basic (10% of 1st $25,000 at *100%) GD Match = $2,700 Excess(6% of $45,000 at *100%) Total GD Match = $5,200 Base pay = $70,000 GD Match = $2,800 4% of Pay at 100% GD Match = $700 2% of Pay at 50% Total GD Match = $3,500 Here’s an example showing how the change in definition of pay could impact SSIP employee and matching contributions. We’ll start with today’s definition of pay. In this example, the employee’s base pay is $70,000. The employee contributes 6% or $4,200. Because the employee is contributing 6%, the General Dynamics match is 4.5% of base pay or $3,150. With the new definition of pay starting January 1, 2007, this employee’s 401(k) Eligible Pay increases to $80,000. If the employee continues to contribute 6%, the employee contribution increases to $4,800. And General Dynamics’ 4.5% match increases to $3,600. Once again, in order to receive the maximum Company match, you must contribute at least 6% of 401(k) Eligible Pay. Here’s an example showing how the change in definition of pay could impact SSIP employee and matching contributions. We’ll start with today’s definition of pay. In this example, the employee’s base pay is $70,000. The employee contributes 6% or $4,200. Because the employee is contributing 6%, the General Dynamics match is 4.5% of base pay or $3,150. With the new definition of pay starting January 1, 2007, this employee’s 401(k) Eligible Pay increases to $80,000. If the employee continues to contribute 6%, the employee contribution increases to $4,800. And General Dynamics’ 4.5% match increases to $3,600. Once again, in order to receive the maximum Company match, you must contribute at least 6% of 401(k) Eligible Pay.

10. Changes to the SSIP/401(k) New definition of pay Current definition—base pay New definition—401(k) Eligible Pay, which includes: Base pay (regular salary or wages) + (As applicable) commissions, overtime, bonuses, etc.  With some exceptions, today’s SSIP currently only allows you to contribute a portion of your base pay to the plan. Starting in 2007, your contributions will be based on 401(k) Eligible Pay instead of being limited to a percentage of only your base pay. Starting January 1, 2007, 401(k) Eligible Pay includes base pay – your regular salary and wages – along with any commissions you may earn, overtime, shift differential or premium, and bonuses. The result of this change: your 401(k) Eligible Pay may be greater than your base pay alone resulting in a potential increase to the Company matching contribution. With some exceptions, today’s SSIP currently only allows you to contribute a portion of your base pay to the plan. Starting in 2007, your contributions will be based on 401(k) Eligible Pay instead of being limited to a percentage of only your base pay. Starting January 1, 2007, 401(k) Eligible Pay includes base pay – your regular salary and wages – along with any commissions you may earn, overtime, shift differential or premium, and bonuses. The result of this change: your 401(k) Eligible Pay may be greater than your base pay alone resulting in a potential increase to the Company matching contribution.

11. Changes to the SSIP/401(k) Today (example): Base pay = $70,000 EmployeeContribution (6%) = 4,200(0.06 X $70,000) GD match (5.0%) = 3,500(0.05 X $70,000) Total 401(k) cont. = 7,700 Today (example): 401(k) Eligible Pay = $80,000 EmployeeContribution (6%) = 4,800(0.06 X $80,000) GD match (5.0%) = 4,000(0.05 X $80,000) Total 401(k) cont. = 8,800 Here’s an example showing how the change in definition of pay could impact SSIP employee and matching contributions. We’ll start with today’s definition of pay. In this example, the employee’s base pay is $70,000. The employee contributes 6% or $4,200. Because the employee is contributing 6%, the General Dynamics match is 4.5% of base pay or $3,150. With the new definition of pay starting January 1, 2007, this employee’s 401(k) Eligible Pay increases to $80,000. If the employee continues to contribute 6%, the employee contribution increases to $4,800. And General Dynamics’ 4.5% match increases to $3,600. Once again, in order to receive the maximum Company match, you must contribute at least 6% of 401(k) Eligible Pay. Here’s an example showing how the change in definition of pay could impact SSIP employee and matching contributions. We’ll start with today’s definition of pay. In this example, the employee’s base pay is $70,000. The employee contributes 6% or $4,200. Because the employee is contributing 6%, the General Dynamics match is 4.5% of base pay or $3,150. With the new definition of pay starting January 1, 2007, this employee’s 401(k) Eligible Pay increases to $80,000. If the employee continues to contribute 6%, the employee contribution increases to $4,800. And General Dynamics’ 4.5% match increases to $3,600. Once again, in order to receive the maximum Company match, you must contribute at least 6% of 401(k) Eligible Pay.

12. Changes to the SSIP/401(k) Your 2006 election percentages (matched basic, matched excess, unmatched—as applicable) have been mapped to a single percentage of base pay The resulting percentage will be rounded down (1% minimum) This new percentage of 401(k) Eligible Pay will be deducted each pay period as a 401(k) contribution Company match will be based on that percentage of 401(k) Eligible Pay If you are currently eligible for the three-tier contribution structure (i.e., 10%, 6%, and 4%), starting January 1, 2007, you will only need to make one payroll contribution election for the GD SSIP. Your payroll contribution elections must be in whole percentages of 1% or more. Your current SSIP payroll election will automatically map to a new SSIP election that comes closest to the annual amount you currently contribute, rounded down to the nearest whole percent (with a minimum of 1%). This mapping will result in the percentage of your 401(k) Eligible Pay that will be deducted each pay period as your 401(k) contribution. It will be based on your December base pay. Going forward, the Company match will be based on the percentage of 401(k) Eligible Pay that you choose to contribute. The realignment period during which your contributions will be mapped is scheduled to begin at 4:00 pm Eastern time on January 2, 2007 and conclude at 6:00 am Eastern time on January 3, 2007. During that short period you won’t be able to perform any transactions such as changing your contributions or moving your SSIP money among investment funds. But after 6:00 am Eastern time on January 3, 2007, be sure to go to the General Dynamics Benefits Web site to verify that your payroll contribution will allow you to maximize the Company match. If you are currently eligible for the three-tier contribution structure (i.e., 10%, 6%, and 4%), starting January 1, 2007, you will only need to make one payroll contribution election for the GD SSIP. Your payroll contribution elections must be in whole percentages of 1% or more. Your current SSIP payroll election will automatically map to a new SSIP election that comes closest to the annual amount you currently contribute, rounded down to the nearest whole percent (with a minimum of 1%). This mapping will result in the percentage of your 401(k) Eligible Pay that will be deducted each pay period as your 401(k) contribution. It will be based on your December base pay. Going forward, the Company match will be based on the percentage of 401(k) Eligible Pay that you choose to contribute. The realignment period during which your contributions will be mapped is scheduled to begin at 4:00 pm Eastern time on January 2, 2007 and conclude at 6:00 am Eastern time on January 3, 2007. During that short period you won’t be able to perform any transactions such as changing your contributions or moving your SSIP money among investment funds. But after 6:00 am Eastern time on January 3, 2007, be sure to go to the General Dynamics Benefits Web site to verify that your payroll contribution will allow you to maximize the Company match.

13. Changes to the SSIP/401(k) Starting in 2007, you will have much more investment flexibility. Effective January 1, 2007, you will be eligible to diversify any amount of your General Dynamics Stock Fund balance (regardless of the contribution source) into other eligible GD SSIP investment funds. You currently have investment restrictions, such as the “five-year” restriction, on portions of GD SSIP account balances allocated to the General Dynamics Stock Fund. The change means you can move your current General Dynamics Stock Fund account balance (if any) to other GD SSIP investment funds at any time. This diversification right applies to any current balance invested in the General Dynamics Stock Fund and to future contributions. Starting in 2007, you will have much more investment flexibility. Effective January 1, 2007, you will be eligible to diversify any amount of your General Dynamics Stock Fund balance (regardless of the contribution source) into other eligible GD SSIP investment funds. You currently have investment restrictions, such as the “five-year” restriction, on portions of GD SSIP account balances allocated to the General Dynamics Stock Fund. The change means you can move your current General Dynamics Stock Fund account balance (if any) to other GD SSIP investment funds at any time. This diversification right applies to any current balance invested in the General Dynamics Stock Fund and to future contributions.

14. Changes to the SSIP/401(k) To diversify your existing balances and/or new contributions, log on to www.gdbenefits.com. The site is available 24 hours a day, 7 days a week, except during brief periods for system maintenance. And keep in mind that you will not be able to perform any SSIP transactions between 4:00 pm Eastern time on January 2, 2007 and 6:00 am Eastern time on January 3, 2007. You will need to enter your Social Security number and your General Dynamics Service Center Password. This is the same Password you use for your other benefits. If you’ve forgotten your password, please go online or call the General Dynamics Service Center to have it reset so you’ll be ready for any changes you would like to make now or after January 1.To diversify your existing balances and/or new contributions, log on to www.gdbenefits.com. The site is available 24 hours a day, 7 days a week, except during brief periods for system maintenance. And keep in mind that you will not be able to perform any SSIP transactions between 4:00 pm Eastern time on January 2, 2007 and 6:00 am Eastern time on January 3, 2007. You will need to enter your Social Security number and your General Dynamics Service Center Password. This is the same Password you use for your other benefits. If you’ve forgotten your password, please go online or call the General Dynamics Service Center to have it reset so you’ll be ready for any changes you would like to make now or after January 1.

15. Changes to the SSIP/401(k) Once you have accessed the Savings and Retirement link on the General Dynamics Benefits Web site, you can change future investment choices for your future 401(k) contributions and reallocate money currently in your 401(k) to other investment funds. If you do not have Internet access, call the General Dynamics Service Center for assistance. Likewise, the General Dynamics Service Center can answer your questions and provide assistance as you use the Benefits Web site. Once you have accessed the Savings and Retirement link on the General Dynamics Benefits Web site, you can change future investment choices for your future 401(k) contributions and reallocate money currently in your 401(k) to other investment funds. If you do not have Internet access, call the General Dynamics Service Center for assistance. Likewise, the General Dynamics Service Center can answer your questions and provide assistance as you use the Benefits Web site.

16. Changes to the Retirement Plan for Salaried Employees(The “Pension Plan”) That concludes our review of changes to the SSIP or 401(k) plan. Now we’ll review the upcoming changes to the Retirement Plan for Salaried Employees – the pension plan.That concludes our review of changes to the SSIP or 401(k) plan. Now we’ll review the upcoming changes to the Retirement Plan for Salaried Employees – the pension plan.

17. Changes to the Pension Plan December 31st: 1.3333% formula for calculating your retirement benefit ended No further service included in current formula January 1, 2007 thru December 31, 2010: changes in pay continue to be credited January 1, 2007: 1% formula began December 31, 2010: 1.3333% formula benefit frozen, using service through 12/31/2006 and pay through 12/31/2010 Early retirement: changes for 1% formula benefit Pre-retirement surviving spouse annuity benefit: increased Benefit options: condensed to simplify The GD Salaried Retirement Plan’s benefit formula will change for accruals earned on and after January 1, 2007. This change affects the rate at which you will earn future benefits, the adjustment to your benefit if you elect to retire early, and the forms of payments that are available when you retire. On December 31, 2006, the 1.3333% formula for calculating your retirement benefit ends. The Final Average Pay calculation used to determine your 1.3333% formula benefit will continue to be updated through December 31, 2010. This will be called your “protected 1.3333% benefit.” Starting January 1, 2007, the GD Salaried Retirement Plan’s 1.3333% pension benefit formula will change, but only for future benefits you earn. This benefit will be called the “1% benefit.” As of January 1, 2011, what you’ve earned under the 1.3333% formula will no longer change in value. All future growth in your pension benefit will come from your participation in the plan’s new 1% Benefit formula. If you choose to retire early, your 1% formula benefit will be reduced by a greater percentage than your 1.3333% formula benefit. If you die while employed by General Dynamics, the surviving spouse annuity will be greater. And your pension benefit payment options have been simplified by condensing.The GD Salaried Retirement Plan’s benefit formula will change for accruals earned on and after January 1, 2007. This change affects the rate at which you will earn future benefits, the adjustment to your benefit if you elect to retire early, and the forms of payments that are available when you retire. On December 31, 2006, the 1.3333% formula for calculating your retirement benefit ends. The Final Average Pay calculation used to determine your 1.3333% formula benefit will continue to be updated through December 31, 2010. This will be called your “protected 1.3333% benefit.” Starting January 1, 2007, the GD Salaried Retirement Plan’s 1.3333% pension benefit formula will change, but only for future benefits you earn. This benefit will be called the “1% benefit.” As of January 1, 2011, what you’ve earned under the 1.3333% formula will no longer change in value. All future growth in your pension benefit will come from your participation in the plan’s new 1% Benefit formula. If you choose to retire early, your 1% formula benefit will be reduced by a greater percentage than your 1.3333% formula benefit. If you die while employed by General Dynamics, the surviving spouse annuity will be greater. And your pension benefit payment options have been simplified by condensing.

18. Any benefit already earned (unless your compensation decreases) The definition of pay used to calculate your benefit(“eligible pay”) Total continuous service for plan eligibility, vesting, and early retirement eligibility Changes to the Pension Plan What’s not changing is as important as what’s changing. These things remain the same: Any benefit you’ve already earned. It’s important to remember that you do not need to retire before January 1, 2007 to preserve your 1.3333% formula benefits. Your benefits are preserved whether or not you continue to remain employed. And updates to your pay after December 31, 2006, but before December 31, 2010, will be used to determine your benefit earned through December 31, 2006. Any Acquisition Pension benefit to which you are entitled. The definition of pay used to calculate your benefit. Eligible pay: Monthly full-time base rate of pay plus executive compensation. Excludes overtime, bonuses, commissions, and incentive awards under plans like the Incentive Compensation Plan (or the Equity Compensation Plan). Total continuous service for plan eligibility, vesting, and early retirement eligibility. All of the continuous service you have earned through December 31, 2006, as well as all of the continuous service you will earn after December 31, 2006, will count towards both the pension plan’s early retirement requirements and vesting schedule. What’s not changing is as important as what’s changing. These things remain the same: Any benefit you’ve already earned. It’s important to remember that you do not need to retire before January 1, 2007 to preserve your 1.3333% formula benefits. Your benefits are preserved whether or not you continue to remain employed. And updates to your pay after December 31, 2006, but before December 31, 2010, will be used to determine your benefit earned through December 31, 2006. Any Acquisition Pension benefit to which you are entitled. The definition of pay used to calculate your benefit. Eligible pay: Monthly full-time base rate of pay plus executive compensation. Excludes overtime, bonuses, commissions, and incentive awards under plans like the Incentive Compensation Plan (or the Equity Compensation Plan). Total continuous service for plan eligibility, vesting, and early retirement eligibility. All of the continuous service you have earned through December 31, 2006, as well as all of the continuous service you will earn after December 31, 2006, will count towards both the pension plan’s early retirement requirements and vesting schedule.

19. Changes to the Pension Plan On your General Dynamics hire date, your continuous service began for purposes of being vested in your pension benefit and for purposes of early retirement eligibility. You will continue to accrue benefits under the current protected 1.3333% benefit formula through December 31, 2006. The final average pay that is used to calculate that 1.3333% formula benefit will continue to be updated through December 31, 2010. On January 1, 2007, you will begin accruing pension benefits under the new 1% benefit formula. When you retire, your General Dynamics pension benefit will be a combination of two formulas: the current 1.3333% formula and the 1% formula.On your General Dynamics hire date, your continuous service began for purposes of being vested in your pension benefit and for purposes of early retirement eligibility. You will continue to accrue benefits under the current protected 1.3333% benefit formula through December 31, 2006. The final average pay that is used to calculate that 1.3333% formula benefit will continue to be updated through December 31, 2010. On January 1, 2007, you will begin accruing pension benefits under the new 1% benefit formula. When you retire, your General Dynamics pension benefit will be a combination of two formulas: the current 1.3333% formula and the 1% formula.

20. Changes to the Pension Plan The 1.3333% Formula: Your 1.3333% monthly benefit is calculated by multiplying 1.3333% times your final average pay. As a reminder, the final average pay calculation of your pension benefit will be based on your highest 60 consecutive months of Eligible Pay using your last 120 months of pay, including pay prior to January 1, 2007. However, your eligible pay for this calculation will be updated through December 31, 2010. That amount is multiplied by your years of plan membership as of December 31, 2006 and divided by twelve to result in your protected 1.3333% pension benefit. Your 1% benefit is calculated the same way, but with a different formula. It is calculated by multiplying 1% by your final average pay and by your years of plan membership starting on January 1, 2007 and dividing by 12. When you retire, your General Dynamics pension benefit will be a combination of your protected 1.3333% benefit with pay updates and your 1% benefit.Your 1.3333% monthly benefit is calculated by multiplying 1.3333% times your final average pay. As a reminder, the final average pay calculation of your pension benefit will be based on your highest 60 consecutive months of Eligible Pay using your last 120 months of pay, including pay prior to January 1, 2007. However, your eligible pay for this calculation will be updated through December 31, 2010. That amount is multiplied by your years of plan membership as of December 31, 2006 and divided by twelve to result in your protected 1.3333% pension benefit. Your 1% benefit is calculated the same way, but with a different formula. It is calculated by multiplying 1% by your final average pay and by your years of plan membership starting on January 1, 2007 and dividing by 12. When you retire, your General Dynamics pension benefit will be a combination of your protected 1.3333% benefit with pay updates and your 1% benefit.

21. Changes to the Pension Plan Here’s an example of how the two benefits work together for an employee. Today Jill is 58 with 20 years of plan membership. For example purposes, we’ll assume her pay increases at 3.5% per year. She expects to retire in 2014 at age 65 – normal retirement age.Here’s an example of how the two benefits work together for an employee. Today Jill is 58 with 20 years of plan membership. For example purposes, we’ll assume her pay increases at 3.5% per year. She expects to retire in 2014 at age 65 – normal retirement age.

22. If the Plan remained unchanged FAP on 12/31/2013 = $89,182 Years of plan membership = 27 Benefit starting 1/1/2014 = $2,675/mo. After the Plan changes Protected 1.3333% Benefit with eligible pay updates FAP on 12/31/2010 = $80,437 Years under 1.3333% formula = 20 Benefit (frozen) = $1,787/mo. 1% Benefit with eligible pay updates FAP on 12/31/2013 = $89,182 Years under 1% formula = 7 Benefit = $520/mo. Combined benefit starting 1/1/2014 = $2,307/mo. Changes to the Pension Plan As we look at this example, keep in mind that we have rounded off the numbers for simplicity. If the 1.3333% formula had continued, her years of plan membership would have been 27 and her benefit starting in 2014 would be $2,675 per month. After the plan changes, her benefit will be calculated using the combined formulas. She will have 20 years of service under the protected 1.3333% benefit formula – through December 31, 2006. Her benefit under the 1.3333% formula will be $1,787 per month. She will have seven years of service toward the 1% benefit formula, through 2014. Her benefit under the 1% formula will be $520 per month. So her combined benefit including both the 1.3333% and 1% formula benefit will be $2,307 per month.As we look at this example, keep in mind that we have rounded off the numbers for simplicity. If the 1.3333% formula had continued, her years of plan membership would have been 27 and her benefit starting in 2014 would be $2,675 per month. After the plan changes, her benefit will be calculated using the combined formulas. She will have 20 years of service under the protected 1.3333% benefit formula – through December 31, 2006. Her benefit under the 1.3333% formula will be $1,787 per month. She will have seven years of service toward the 1% benefit formula, through 2014. Her benefit under the 1% formula will be $520 per month. So her combined benefit including both the 1.3333% and 1% formula benefit will be $2,307 per month.

23. Early Retirement Changes Effective 01/01/2007 Your benefit will be reduced if you retire before normal retirement age Changes to the Pension Plan Both of those examples showed benefits at normal retirement age. Early retirement benefits will continue to be available to eligible employees going forward. You may retire as early as age 55 provided you have 10 years of continuous service. The reduction to your protected 1.3333% benefit will continue to be 2.5% per year for every year you retire prior to age 62. The early retirement reduction to your 1% benefit will be 4.8% per year. The reduction will apply for each year you retire prior to age 65.Both of those examples showed benefits at normal retirement age. Early retirement benefits will continue to be available to eligible employees going forward. You may retire as early as age 55 provided you have 10 years of continuous service. The reduction to your protected 1.3333% benefit will continue to be 2.5% per year for every year you retire prior to age 62. The early retirement reduction to your 1% benefit will be 4.8% per year. The reduction will apply for each year you retire prior to age 65.

24. Changes to the Pension Plan This chart shows the early retirement reductions to both your protected 1.3333% benefit and your 1% benefit if you choose to retire early. For the protected 1.3333% benefit, you may receive your full benefit if you retire at age 62 or later. For the 1% benefit, you may receive your full benefit if you retire at age 65 or later.This chart shows the early retirement reductions to both your protected 1.3333% benefit and your 1% benefit if you choose to retire early. For the protected 1.3333% benefit, you may receive your full benefit if you retire at age 62 or later. For the 1% benefit, you may receive your full benefit if you retire at age 65 or later.

25. Changes to the Pension Plan Protected 1.3333% Benefit Frozen benefit = $1,108 Reduced benefit $1,053(0.025 X 2 years: 95%) Here’s an example of the early retirement reduction factors used to calculate the 1.3333% and 1% formula benefits. Thomas is planning to retire in 2012 at age 60. He’ll have benefits under both formulas. He’ll have 15 years of service toward his protected 1.3333% benefit and 5 years of service toward his 1% benefit. His frozen benefit under the 1.3333% formula will be reduced 2.5% for each year between the date he would have reached age 62 and the date his benefit begins. His 1% benefit will be reduced 4.8% for each year between the date he would have reached age 65 and the date his benefit begins. His combined benefit at age 60 will be $1,271 per month. Here’s an example of the early retirement reduction factors used to calculate the 1.3333% and 1% formula benefits. Thomas is planning to retire in 2012 at age 60. He’ll have benefits under both formulas. He’ll have 15 years of service toward his protected 1.3333% benefit and 5 years of service toward his 1% benefit. His frozen benefit under the 1.3333% formula will be reduced 2.5% for each year between the date he would have reached age 62 and the date his benefit begins. His 1% benefit will be reduced 4.8% for each year between the date he would have reached age 65 and the date his benefit begins. His combined benefit at age 60 will be $1,271 per month.

26. Effective 1/1/07: Your surviving spouse qualifies for a 100% survivor annuity Applies if you die before commencing benefit Calculated: As if you had retired and elected 100% contingent annuity option (adjusted by early retirement factor) Changes to the Pension Plan Another change to the pension plan involves the pre-retirement surviving spouse annuity. If you die after December 31, 2006, and leave an eligible surviving spouse, your surviving spouse will automatically qualify for a 100% survivor annuity (instead of the 50% survivor annuity that is payable today). As is currently the case with the 50% survivor annuity, the amount of this benefit is adjusted to reflect the cost of this survivorship feature and is also adjusted to reflect commencement prior to when you would have reached normal retirement. Another change to the pension plan involves the pre-retirement surviving spouse annuity. If you die after December 31, 2006, and leave an eligible surviving spouse, your surviving spouse will automatically qualify for a 100% survivor annuity (instead of the 50% survivor annuity that is payable today). As is currently the case with the 50% survivor annuity, the amount of this benefit is adjusted to reflect the cost of this survivorship feature and is also adjusted to reflect commencement prior to when you would have reached normal retirement.

27. Effective 1/1/07 for 1% benefit: Single-life annuity (“normal” form) 100% contingent annuity (default if married) 50% contingent annuity 10-year certain and life annuity All benefit payment options available for protected 1.3333% benefit through 2010 Starting 1/1/2011: 4-8 diverse payment options for the protected 1.3333% benefit Changes to the Pension Plan The standard (or “normal”) form of payment for both the protected 1.3333% benefit and new 1% benefit is a single life annuity. Both formulas offer other (or “optional”) forms for receiving your pension benefit. When you retire, you will need to make an election with respect to your 1% Benefit and a separate election with respect to your other pension benefits including your 1.3333% benefit and any Acquisition benefits. Starting in January 2007, the payment options available for benefits calculated using the new 1% benefit formula will be limited to include only those that are most often selected by plan participants at retirement. You will be able to choose from four different forms of payment when you receive your benefit under the 1% benefit formula—a single life annuity, a 50% contingent annuity, a 100% contingent annuity, and a 10-year certain and life annuity. All of the options available under the protected 1.3333% benefit formula will remain available through 2010. Starting January 1, 2011, the number of payment options available on the protected 1.3333% benefit will be reduced to between four and eight diverse payment options. Prior to the end of the transition period (before January 1, 2011), more details will be provided on the optional forms that are being retained. However, the four forms of payment that are applicable to the new 1% benefit will be included as available payment options after this transition period.The standard (or “normal”) form of payment for both the protected 1.3333% benefit and new 1% benefit is a single life annuity. Both formulas offer other (or “optional”) forms for receiving your pension benefit. When you retire, you will need to make an election with respect to your 1% Benefit and a separate election with respect to your other pension benefits including your 1.3333% benefit and any Acquisition benefits. Starting in January 2007, the payment options available for benefits calculated using the new 1% benefit formula will be limited to include only those that are most often selected by plan participants at retirement. You will be able to choose from four different forms of payment when you receive your benefit under the 1% benefit formula—a single life annuity, a 50% contingent annuity, a 100% contingent annuity, and a 10-year certain and life annuity. All of the options available under the protected 1.3333% benefit formula will remain available through 2010. Starting January 1, 2011, the number of payment options available on the protected 1.3333% benefit will be reduced to between four and eight diverse payment options. Prior to the end of the transition period (before January 1, 2011), more details will be provided on the optional forms that are being retained. However, the four forms of payment that are applicable to the new 1% benefit will be included as available payment options after this transition period.

28. What Do These Changes Mean for You? That concludes our review of the changes to the General Dynamics SSIP and pension plan. Based on this information, what will these changes mean for you?That concludes our review of the changes to the General Dynamics SSIP and pension plan. Based on this information, what will these changes mean for you?

29. What Do These Changes Mean for You? If you retire after 2006, your pension will be a combination of your protected 1.3333% and 1% benefits Whatever you have earned through 12/31/2006 is protected Your pension benefit will continue to grow but not as fast The longer you have to retirement, the longer you have to save through SSIP/401(k), personal savings, and other assets Your pension plan benefit will be a combination of the protected 1.3333% and 1% benefits. As we mentioned at the outset, the important thing to remember is that you will not lose any benefits that you have already earned. They are protected. You cannot lose whatever you have earned through December 31, 2006 as a result of any of the changes. Starting in 2007, your total pension benefit will still continue to grow as you work for the Company. The longer you have until retirement, the more time you have to prepare for adequate retirement income through the SSIP, your personal savings, and other assets.Your pension plan benefit will be a combination of the protected 1.3333% and 1% benefits. As we mentioned at the outset, the important thing to remember is that you will not lose any benefits that you have already earned. They are protected. You cannot lose whatever you have earned through December 31, 2006 as a result of any of the changes. Starting in 2007, your total pension benefit will still continue to grow as you work for the Company. The longer you have until retirement, the more time you have to prepare for adequate retirement income through the SSIP, your personal savings, and other assets.

30. In Summary . . . Now is the time to reexamine your retirement planning strategy! In summary, we hope that you’ll use the information provided through the announcements of these changes and spend some time considering your sources of retirement income. And take the time to consider the value of the SSIP and consider saving more.In summary, we hope that you’ll use the information provided through the announcements of these changes and spend some time considering your sources of retirement income. And take the time to consider the value of the SSIP and consider saving more.

31. In Summary . . . If you retire after January 1, 2007: Your future pension benefit will be a combination of your protected 1.3333% benefit and 1% benefit If you save in the SSIP/401(k): Company matching contributions change on 1/1/07 Your payroll contributions will be based on 401(k) Eligible Pay You’re immediately vested in Company matching contributions allocated after 1/1/07 You may immediately diversify your investments beginning 1/1/07 You may contribute before-tax and after-tax dollars If you retire after January 1, 2007, your future pension benefit will be a combination of the protected 1.3333% and 1% benefits. And if you save in the SSIP/401(k): The Company matching contributions will change on January 1, 2007 Your payroll contributions will be based on 401(k) Eligible Pay You’re immediately vested in the Company matching contributions allocated after January 1, 2007 And you may immediately diversify all SSIP investments beginning January 1, 2007.If you retire after January 1, 2007, your future pension benefit will be a combination of the protected 1.3333% and 1% benefits. And if you save in the SSIP/401(k): The Company matching contributions will change on January 1, 2007 Your payroll contributions will be based on 401(k) Eligible Pay You’re immediately vested in the Company matching contributions allocated after January 1, 2007 And you may immediately diversify all SSIP investments beginning January 1, 2007.

32. Now we’ll turn to your questions. Please ask any general questions you have. And if you have specific questions about your own situation, please contact the General Dynamics Service Center at the number shown here.Now we’ll turn to your questions. Please ask any general questions you have. And if you have specific questions about your own situation, please contact the General Dynamics Service Center at the number shown here.