May 23, 1985

The chairman of the embattled General Dynamics Corporation, David S. Lewis, said yesterday that he would retire from the giant military contracting company by the end of this year. The 67-year-old Mr. Lewis made his announcement one day after the Secretary of the Navy, John F. Lehman Jr., canceled two contracts and suspended the signing of new ones at two of the company's biggest divisions. Secretary Lehman cited ''pervasive'' business misconduct by General Dynamics, which has been under investigation for fraud and deliberate overcharges on a variety of military projects. But he turned down a recommendation from the Pentagon's Inspector General to ban Mr. Lewis and two other top company officials from working on military contracts.

THURSDAY, MAY 23, 1985 Companies General Dynamics' chairman intends to retire by the end of the year. The announcement by David S. Lewis, 67, came one day after the Navy cited the defense contractor for ''pervasive'' business misconduct and said it was canceling two contracts and suspending the signing of new ones. General Dynamics has been under investigation for purported fraud and overcharges in its work for the military. Mr. Lewis will be succeeded by Stanley C. Pace, a vice chairman of TRW. [Page A1.] The Secretary of the Navy said he learned last Friday that Mr. Lewis planned to retire, but he said that did not affect the decision to impose sanctions on the company. [D6.] CBS said it would consider anti-takeover measures, including acquisitions, divestitures and recapitalization. The move reverses an earlier decision and is apparently aimed at thwarting a takeover bid by Ted Turner. [D4.]

''I have always acted in the best interest of the Navy and my country during my 64 years of military service.

The push toward interstate banking has been dealt a severe setback this week by an appeals court ruling involving the Federal Reserve Board and the U.S. Trust Company of New York, bankers and Federal regulators said today. A three-judge panel of the 11th Circuit in Atlanta ruled unanimously on Tuesday that chartering of so-called limited-service banks that permit bank holding companies to cross state boundaries was illegal because it violated the intent of Congress in the Bank Holding Act of 1956. The court reversed the Federal Reserve Board's approval in March 1984 of the bank's application to change its Florida trust company into a deposit-taking, limited-service bank. Bankers and Federal regulators said the decision, unless reversed, effectively ended the use of limited-service banks, sometimes called ''non-bank banks,'' as a means of circumventing the Federal prohibition of interstate banking.

All day long, researchers wander in and out of their glass-walled laboratory here, running the experiments that turn out several new inventions each day. They have no regular assigned hours and no dress code, and work on a bonus system with only modest fixed salaries. Outside, they can see what looks like a Japanese-style doghouse, complete with tiled roof and four cats, a tribute to the company president's affection for cats. The president is Kiyoshi Inoue, an eccentric individualist. And his two companies - Japax Inc. and Inoue Japax Research - are not only unconventional, but standouts as well in an economy where freewheeling venture businesses are rare. His companies are often cited as among the few here truly engaged in high-technology research. But he is among the first to say that in Japan, the environment for venture businesses is harsh.