We are furnishing these proxy materials in connection with the solicitation of proxies, on behalf of your Board of Directors, to be voted at our Annual Meeting and at any adjournment or postponement. Lockheed Martin is a Maryland corporation.

You are invited to attend our Annual Meeting, which will be held on April 26, 2007, at 10:30 a.m., Central time, at the Hilton New Orleans Riverside Hotel, Two Poydras Street, New Orleans, Louisiana 70140. Directions to the meeting appear at the back of this proxy statement.

We commenced mailing the notice, proxy statement and proxy card for the Annual Meeting, and our Annual Report, to stockholders on or about March 16, 2007.

Questions and Answers

Do I need a ticket to attend the Annual Meeting?

You will need an admission ticket (or proof of ownership) and a form of photo identification to attend the Annual Meeting. An admission ticket is attached to your proxy card. Please detach the ticket and bring it with you to the meeting. If you vote by internet, you will be guided to an online site where you will be able to print an admission ticket. If you hold shares through an account with a bank or broker, you will need to contact your bank or broker and request a legally valid proxy from the owner of record to vote your shares. This will serve as your admission ticket.

We also will admit you if you bring a recent brokerage statement or letter from your broker showing that you owned Lockheed Martin stock in your account as of March 1, 2007. In that case, you will not be able to vote your shares, since they only may be voted by the record holder or a valid proxy holder.

If you do not have an admission ticket (or proof of ownership) and valid photo identification, you will not be admitted to the Annual Meeting. As a safety measure, all attendees must leave any bags, briefcases or packages at the registration desk prior to entering the meeting room.

Will the Annual Meeting be webcast?

Yes. We will webcast the Annual Meeting live on April 26, 2007. You are invited to visit http://www.lockheedmartin.com/investor at 10:30 a.m., Central time, on April 26, 2007 to access the live webcast. Registration for the webcast is required. Stockholders who wish to access the webcast should pre-register on our website. Listening to our Annual Meeting via the webcast will not represent attendance at the meeting, and you will not be able to cast your vote via our website as part of the live webcast.

Who is entitled to vote at the Annual Meeting?

Holders of our common stock, $1 par value per share, at the close of business on March 1, 2007, are entitled to vote their shares at the Annual Meeting. As of the record date, there were 422,425,920 shares outstanding. Each share outstanding on the record date is entitled to one vote on each proposal presented at the Annual Meeting. This includes shares held through Direct Invest, our dividend reinvestment and stock purchase plan or through our employee benefit plans. Your proxy card shows the number of shares held in your account(s).

What is the difference between holding shares as a registered stockholder and as a beneficial owner?

If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered the “registered stockholder” of those shares. We mail the proxy statement materials and our 2006 Annual Report to you directly.

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial owner” of the shares which are registered in a street name. In that case, the proxy materials and our 2006 Annual Report were forwarded to you by your broker, bank or other nominee who is considered the registered stockholder. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares by following the voting instructions included in their mailing.

What am I voting on and what are the Board’s voting recommendations?

Our stockholders will be voting on the following items:

Can other matters be decided at the Annual Meeting?

At the time the proxy statement went to press, we were not aware of any other matters to be presented at the Annual Meeting.

If other matters are properly presented for consideration at the Annual Meeting, the proxies appointed by your Board of Directors (who are named in your proxy card if you are a registered stockholder) will have the discretion to vote on those matters for you in accordance with their best judgment.

How do I vote?

If your shares are registered in your name, you may vote using any of the methods described below. If your shares are held in the name of a broker, bank or other nominee, your nominee will provide you with voting instructions.

By Internet or Telephone

Our internet and telephone voting procedures for registered stockholders are designed to authenticate your identity, allow you to give your voting instructions and confirm that those instructions are properly recorded.

You may access the internet voting site at http://www.investorvote.com. Please have your proxy card in hand when you go online. You will receive instructional screen prompts to guide you through the voting process. You also will have the ability to confirm your voting selections before your vote is recorded.

You can vote by calling toll free 1-800-652-8683 within the U.S., Canada and Puerto Rico or 1-781-575-2300 from other countries. A toll will apply to calls from other countries. Please have your proxy card in hand when you call. You will receive voice prompts to guide you through the process, and an opportunity to confirm your voting selections before your vote is recorded.

Internet and telephone voting facilities for registered stockholders will be available 24 hours a day up until 11:59 p.m., Eastern time, on April 25, 2007. If you vote on the internet or by telephone, you do not have to return your proxy card.

The availability of internet and telephone voting for beneficial owners will depend on the voting processes of your broker, bank or other nominee. We recommend that you follow the voting instructions in the materials that you receive from your nominee.

By Mail

Simply mark, date and sign the proxy card and return it in the postage-paid envelope provided.

If you want to vote in accordance with the Board’s recommendations, all you have to do is sign, date and return the proxy card. The named proxies will vote unmarked proxy cards per the Board’s recommendations.

If you are a registered stockholder, and the prepaid envelope is missing, please mail your completed proxy card to Lockheed Martin Corporation, c/o Computershare Trust Company, N.A., Shareholder Relations, P.O. Box 43023, Providence, R.I. 02940-3023.

In person at the Annual Meeting

All stockholders may vote in person at the Annual Meeting. Voting your proxy by internet, telephone or mail does not limit your right to vote at the Annual Meeting. You also may be represented by another person at the Annual Meeting by executing a legally valid proxy designating that person to vote on your behalf. If you are a beneficial owner of shares, you must obtain a legally valid proxy from your broker, bank or other nominee and present it to the inspectors of election with your ballot to be able to vote at the Annual Meeting. A legally valid proxy is an

authorization from your broker, bank or other nominee to vote the shares held in the nominee’s name that satisfies Maryland and Securities and Exchange Commission (“SEC”) requirements for proxies.

Your vote is important. You can save us the expense of a second mailing by voting promptly, even if you plan to attend the Annual Meeting.

Can I change my proxy vote?

Yes. If you are a registered stockholder, you can change your proxy vote or revoke your proxy at any time before the Annual Meeting by:

If you are a beneficial owner of shares, you may submit new voting instructions by contacting your bank, broker or other nominee. You may also vote in person at the Annual Meeting if you obtain a legally valid proxy from the registered stockholder as described in the answer to the previous question.

Your personal attendance at the Annual Meeting does not revoke your proxy. Your last vote, prior to or at the Annual Meeting, is the vote that will be counted.

What if I return my proxy/proxy voting direction card but do not provide voting instructions?

Proxies and voting directions that are signed and returned but do not contain voting instructions will be voted:

How do I vote if I participate in one of the Company’s 401(k) or Defined Contribution Plans?

As a participant in one of the Company’s 401(k) or defined contribution plans, you may direct the plan trustees how to vote shares allocated to your account(s) on a proxy voting direction card, by telephone, or by internet. Most active employees who participate in Lockheed Martin’s savings plans will receive an email notification announcing internet availability of this proxy statement and how to submit proxies or voting directions. If you do not provide timely directions to the plan trustee, shares allocated to your account will be voted by the plan trustee depending on the terms of your plan or other legal requirements.

Plan participants are entitled to attend the Annual Meeting, but may not vote plan shares at the Annual Meeting. If you wish to vote, whether you plan to attend the Annual Meeting or not, you should direct the trustee of your plan(s) how you wish to vote your plan shares.

How many shares or votes must be present to hold the Annual Meeting?

In order for us to conduct our Annual Meeting, a majority of the shares outstanding and entitled to vote as of March 1, 2007 must be present in person or by proxy. This is referred to as a quorum. Your shares are counted as present at the Annual Meeting if you attend the Annual Meeting and vote in person or if you properly return a proxy by internet, telephone or mail. We will count abstentions and broker non-votes for purposes of determining a quorum.

Will my shares be voted if I do not provide my proxy or instruction form?

If you are a registered stockholder, your shares will not be voted, unless you provide a proxy or vote in person at the Annual Meeting. If you are a participant in one of the Company’s 401(k) or defined contribution plans and you do not provide timely directions to the plan trustee, shares allocated to your account will be voted by the plan trustee depending on the terms of your plan or other legal requirements. If you hold shares through an account with a bank, broker or other nominee and you do not provide voting instructions, your shares may still be voted on certain matters.

Brokerage firms have authority under New York Stock Exchange (“NYSE”) rules to vote shares on routine matters for which their customers do not provide voting instructions. The election of directors and the ratification of Ernst & Young LLP as our independent registered public accounting firm for 2007 are considered routine matters. The stockholder proposals to be voted on at the Annual Meeting are not considered routine. If a proposal is not routine and the brokerage firm does not receive voting instructions from the beneficial owner, the brokerage firm cannot vote the shares on that proposal. Shares that a broker is not authorized to vote are known as “broker non-votes.” Because we require the affirmative vote of a majority of the outstanding shares to approve a proposal, broker non-votes have the effect of a negative vote on each of the stockholder proposals.

What are the voting requirements to elect directors and approve each of the proposals?

The affirmative vote of a majority of the votes entitled to be cast at a meeting, duly called and at which a quorum is present, is required to take or authorize action upon any matter which may properly come before the meeting, unless applicable law or our charter provides otherwise for a particular matter. There are no special voting requirements under Maryland law or our charter for any of the matters described in the notice for the Annual Meeting. Accordingly, each of the matters described in the notice will be decided by the vote of the holders of a majority of our outstanding shares of common stock. For the election of directors, a vote withheld for a nominee for director has the effect of a vote against that nominee. For the ratification of Ernst & Young LLP and each of the stockholder proposals, a stockholder who submits a ballot or proxy is considered present and entitled to vote, so an abstention has the effect of a vote against the proposal.

Who will count the votes?

Representatives of our transfer agent, Computershare Trust Company, N.A., will tabulate the votes and act as inspectors of election for the 2007 Annual Meeting.

What is “householding” and how does it affect me?

We have adopted a procedure approved by the SEC called “householding.” Under this procedure, we send only one Annual Report and Proxy Statement to eligible stockholders who share a single address, unless

we have received instructions to the contrary from any stockholder at that address. This practice is designed to reduce our printing and postage costs. Stockholders who participate in householding will continue to receive separate proxy cards. We do not use householding for any other stockholder mailings, such as dividend checks, Forms 1099 or account statements.

If you are eligible for householding, but receive multiple copies of the Annual Report and Proxy Statement and prefer to receive only a single copy of each of these documents for your household, please contact our transfer agent, Computershare Trust Company, N.A., Shareholder Relations, P.O. Box 43023, Providence, RI 02940-3023 or call 1-877-498-8861. If you are a registered stockholder residing at an address with other registered stockholders and wish to receive a separate Annual Report or Proxy Statement in the future, please contact Computershare as indicated above. If you own shares through a bank, broker or other nominee, you should contact the nominee concerning householding procedures.

Can I receive a copy of the 2006 Annual Report?

Yes. We will provide a copy of our 2006 Annual Report without charge, upon written request, to any registered or beneficial owner of common stock entitled to vote at the Annual Meeting. Requests should be made in writing addressed to Jerry Kircher, Vice President, Investor Relations, Lockheed Martin Corporation, 6801 Rockledge Drive, Bethesda, MD 20817, by calling Lockheed Martin Shareholder Direct at 1-800-568-9758 or by accessing the Lockheed Martin website at http://www.lockheedmartin.com/investor. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information regarding registrants, including Lockheed Martin.

Can I view the Proxy Statement and Annual Report over the internet instead of receiving them by mail?

Yes. If you are a registered or beneficial stockholder, you can elect to view future Annual Reports and Proxy Statements over the internet rather than receiving copies in the mail by visiting http://www.shareholder.com/lmt/shareholder.cfm and completing the online consent form. Your request for electronic transmission will remain in effect for all

future annual reports and proxy statements, unless withdrawn. Withdrawal procedures are also located online at the above referenced website.

Most active employees who participate in Lockheed Martin’s savings plans will receive an email notification announcing internet availability of the 2006 and future editions of the Annual Report and Proxy Statement.

Who pays for the cost of this proxy solicitation?

Lockheed Martin pays for the cost of soliciting proxies on behalf of the Board for the Annual Meeting. We may solicit proxies by mail, telephone, internet or in person. We may make arrangements with brokerage houses and other custodians, nominees and fiduciaries to send proxy material to beneficial owners on our behalf. We reimburse them for their reasonable expenses. We have retained Morrow & Co., Inc. to aid in the solicitation of proxies and to verify related records at a fee of $45,000 plus expenses. To the extent necessary to ensure sufficient representation at the Annual Meeting, we may request the return of proxies by mail, express delivery, courier, telephone, internet or other means. Stockholders are requested to return their proxies without delay.

How do I submit a proposal for the Annual Meeting of Stockholders in 2008?

Any stockholder who wishes to submit a proposal for consideration at the 2008 Annual Meeting and for inclusion in the Proxy Statement should send their proposal to:

Lockheed Martin Corporation

Attention: Vice President and Corporate Secretary

6801 Rockledge Drive

Bethesda, MD 20817

so that it is received no later than November 17, 2007. Proposals must be received by that date and satisfy the requirements under applicable SEC Rules (including SEC Rule 14a-8) to be included in the proxy statement and on the proxy card that will be used for solicitation of proxies by the Board for the 2008 Annual Meeting.

Our bylaws also require advance notice of any proposal by a stockholder to be presented at the Annual Meeting which is not included in our proxy statement

and on the proxy card, including any proposal for the nomination of a director for election. To be properly brought before the 2008 Annual Meeting, written nominations for directors or other business to be introduced by a stockholder must be received between the dates of November 17, 2007 and December 17, 2007, inclusive. A notice of a stockholder proposal must contain specified information about the matter to be brought before the meeting and about the stockholder proponent. Waiver of these requirements by us in a particular instance does not constitute a waiver applicable to any other stockholder proposal, nor does it obligate us to waive the requirements for future submissions. A list of the information which is required to be included in a stockholder proposal may be found in Section 1.11 of our bylaws on our website at http:www.lockheedmartin.com/investor.

How can I contact the Company’s non-management directors?

Stockholders may communicate confidentially with the presiding director or with the non-management directors as a group. If you wish to raise a question or concern to the presiding director or the non-management directors as a group, you may do so by contacting:

Mr. James R. Ukropina

Chairman, Nominating and Corporate Governance Committee

or

Directors

c/o Nominating and Corporate Governance Committee

Lockheed Martin Corporation

6801 Rockledge Drive, MP 220

Bethesda, MD 20817.

Our Vice President and Corporate Secretary reviews all correspondence sent to the Board. The Board has authorized our Vice President and Corporate Secretary to respond to correspondence regarding routine stockholder matters and services (e.g., stock transfer, dividends, etc.). Correspondence from stockholders relating to accounting, internal controls or auditing matters are immediately brought to the attention of the Audit Committee. All other correspondence is forwarded to the Chairman of the Nominating and Corporate Governance Committee who determines whether distribution to the full Board for review is

appropriate. Any director may at any time review a log of all correspondence addressed to the Board and request copies of such correspondence.

Can I find additional information on the Company’s website?

Yes. Although the information contained on our website is not part of this proxy statement, you will find information about Lockheed Martin and our corporate governance practices at http://www.lockheedmartin.com/investor.

Our website contains information about our Board, Board committees, copies of our charter and bylaws, Code of Ethics and Business Conduct and Corporate Governance Guidelines. Information about insider transactions also is available on our website. Stockholders may obtain, without charge, hard copies of the above documents by writing to:

Lockheed Martin Investor Relations

6801 Rockledge Drive

Bethesda, MD 20817.

Corporate Governance Guidelines

At Lockheed Martin, we are committed to maintaining and practicing the highest standards of ethics and corporate governance. The Board has adopted Corporate Governance Guidelines that provide a flexible framework within which the Board and its Committees oversee the governance of the Company. The guidelines are included as Appendix A to the proxy statement and posted on our website at http://www.lockheedmartin.com/investor.

The guidelines contain the Board’s views on a number of governance topics. They reflect our commitment to, and appreciation of the importance of, good governance in protecting and enhancing stockholder value. Our governance guidelines are not static. The Nominating and Corporate Governance Committee of the Board regularly assesses our governance practices in light of emerging trends and practices.

Our guidelines cover a wide range of subjects, including: the role of the Board and directors; the designation of a presiding director; a comprehensive Code of Ethics and Business Conduct; director nomination procedures and qualifications; director independence standards; a policy for the review, approval and ratification of related person transactions; procedures for regular annual evaluations of the Board, its committees and directors; a position regarding adoption of poison pills; and director stock ownership.

Described below are some of the significant corporate governance practices that have been instituted by your Board.

Role of the Board of Directors

Your Board plays an active role in overseeing management and representing the interests of stockholders. Directors are expected to attend all Board meetings and the meetings of committees on which they serve. Directors also are frequently consulted for advice and counsel between formal meetings.

In 2006, the Board met a total of 9 times. All directors attended at least 75% of the total board and committee meetings to which they were assigned in 2006.

Presiding Director

Our Corporate Governance Guidelines provide for the Chairman of the Nominating and Corporate

Governance Committee to preside over all executive sessions of the independent directors. In addition to presiding over executive sessions of the non-management directors, the Presiding Director also serves as a contact person to facilitate communications among stockholders, the non-management directors, Lockheed Martin’s management and employees, and other constituents. Mr. James R. Ukropina currently serves as our Presiding Director.

Code of Ethics and Business Conduct

At Lockheed Martin, ethics is part of our history and culture. We are committed to ethical behavior in all that we do. This is reflected in our vision statement “Powered by Innovation, Guided by Integrity, We Help Our Customers Achieve Their Most Challenging Goals”, and our value statements: “Do What’s Right;” “Respect Others;” and “Perform with Excellence.”

We have had an ethics code in place since the company was formed in 1995, well before codes became fashionable or required for stock exchange listing. We and our heritage companies were among the first in the aerospace and defense industry to adopt an ethics code.

Our Code of Ethics and Business Conduct applies to all of our directors, officers and employees. It sets forth our policies and expectations on a number of topics, including our commitment to good citizenship and integrity, promoting a positive and safe work environment, transparency in our public disclosures, avoiding conflicts of interest, confidentiality, preservation and use of company assets, compliance with laws (including insider trading laws), and business ethics.

We also maintain a toll-free ethics help line for employees as a means of raising concerns or seeking advice. The help line is available to all employees worldwide, 7 days a week, 24 hours a day. Employees using the help line may choose to remain anonymous. All help line inquiries are forwarded to Lockheed Martin’s Office of Ethics and Business Conduct. Our Ethics Office is headed by our Vice President - Ethics and Business Conduct who reports directly to the Chief Executive Officer (“CEO”) and the Ethics and Corporate Responsibility Committee of the Board. Any matters reported to our Ethics Office, whether through the help line or otherwise, involving accounting, internal control or audit matters, or any fraud involving

management or persons who have a significant role in Lockheed Martin’s internal controls, also are reported directly to the Audit Committee.

Each of our directors and employees participate in annual ethics training, which consists of a live training session. We also devote significant resources to our business conduct compliance training program. In 2006, our employees completed over 500,000 on-line business conduct compliance training modules.

We regularly review our Code of Ethics and Business Conduct for revision. There have been no amendments or waivers from any provisions of our Code for directors or executive officers, and any such waivers or amendments would be promptly disclosed to stockholders via our website.

Our Code is posted on our website at http://www.lockheedmartin.com/investor. Printed copies of our Code may be obtained, without charge, by contacting Investor Relations, Lockheed Martin Corporation, 6801 Rockledge Drive, Bethesda, MD 20817.

Identifying and Evaluating Nominees for Directors

Each year, the Nominating and Corporate Governance Committee (“the Committee”) recommends to the Board the slate of directors to serve as management’s nominees for election by the stockholders at the annual meeting. The process for identifying and evaluating candidates to be nominated to the Board starts with an evaluation of a candidate by the Chairman of the Committee followed by the Committee in its entirety and the CEO. Director candidates may also be identified by stockholders. The Company also has utilized outside search firms to suggest potential candidates.

Stockholder Nominees

Stockholder proposals for nominations to the Board should be submitted to the Nominating and Corporate Governance Committee, care of the Vice President and Corporate Secretary, at 6801 Rockledge Drive, Bethesda, MD 20817. To be considered by the Board for nomination at the 2008 Annual Meeting, written notice of nominations by a stockholder must be received between the dates of November 17, 2007 and December 17, 2007, inclusive.

The information requirements for any stockholder proposal or nomination can be found in Section 1.11 of our bylaws, available at http://www.lockheedmartin.com/investor. A summary of the requirements can be found in the General Information section of this Proxy Statement on page 5. Self-nominations will not be considered. Proposed stockholder nominees are presented to the Chairman of the Committee, who decides if further consideration should be given to the nomination by the Committee.

Director Qualifications

The Board seeks a diverse group of candidates who at a minimum possess the background, skills, expertise and time to make a significant contribution to the Board, Lockheed Martin, and its stockholders. The Nominating and Corporate Governance Committee annually reviews and establishes the criteria for selection of director nominees. The criteria used by the Committee in nominating the current slate of directors include the following:

Nominees for Election at 2007 Annual Meeting

There are 15 nominees for election to the Board at the Annual Meeting. Their biographical information starts on page 58. Each nominee currently serves as a director and was recommended for reelection by the Nominating and Corporate Governance Committee of the Board. Except for Mr. Stevens, the Committee has determined that all of the current directors and

nominees are independent under the listing standards of the NYSE and our Corporate Governance Guidelines.

The Board ratified the slate of directors and recommends that the stockholders vote for the election of all directors nominated by the Board.

Director Independence

Under applicable NYSE listing standards, a majority of the Board and each member of the Audit Committee, the Nominating and Corporate Governance Committee, and the Management Development and Compensation Committee must be independent.

Under the NYSE rules and our Corporate Governance Guidelines, a director is not independent if the director has a direct or indirect material relationship with Lockheed Martin. The Nominating and Corporate Governance Committee annually reviews the independence of all directors and reports its findings to the full Board. To assist in this review, the Board has adopted director independence guidelines that are contained as part of our overall Corporate Governance Guidelines.

Our director independence guidelines set forth certain relationships between Lockheed Martin and directors and their immediate family members, or entities with which they are affiliated, that the Board, in its judgment, has deemed to be material or immaterial for purposes of assessing a director’s independence. In the event a director has a relationship with Lockheed Martin that is not addressed in the independence guidelines, the independent members of the Board determine whether such relationship is material.

The Board determined that none of these relationships impaired the independence of any non-management director. In making these determinations, the Board considered that transactions may occur between Lockheed Martin and entities with which some of our directors are, or have been, affiliated. In each case, the amount of these transactions or contributions did not exceed the thresholds set forth in the NYSE listing standards and our governance guidelines, and, as a result, were considered immaterial.

The Board has determined that the following directors are independent: E. C. “Pete” Aldridge, Jr., Nolan D. Archibald, Marcus C. Bennett, James O. Ellis, Jr.,

Gwendolyn S. King, James M. Loy, Douglas H. McCorkindale, Eugene F. Murphy, Joseph W. Ralston, Frank Savage, James M. Schneider, Anne Stevens, James R. Ukropina and Douglas C. Yearley. As Chairman, President and CEO, Robert J. Stevens is an employee of Lockheed Martin and is not independent under the NYSE rules or our Corporate Governance Guidelines.

In determining that each of the non-management directors is independent, the Board considered the relationships described under “Certain Relationships and Related Person Transactions of Directors, Executive Officers and 5 Percent Stockholders,” on page 10, which it determined were immaterial to the directors’ independence.

The Committee and Board also considered that the Company in the ordinary course of business purchases products and services from, or sells products and services to, companies at which some of our directors are or have been directors or officers. In each case, the amount paid to or received from these companies did not exceed the greater of $1 million or 2% of the total revenue of Lockheed Martin or the other company. These relationships included: Mr. Aldridge, a director of Alion Science and Technology Corporation; Mr. Ellis, a director of Inmarsat plc.; Mrs. King, a director of Marsh and McLennan Companies, Inc.; Mr. McCorkindale, a director of Prudential Mutual funds; Mr. Ralston, a director of The Timken Company; Ms. Stevens, formerly an executive officer of Ford Motor Corporation; Mr. Ukropina, a director of Pacific Mutual Holding Company and Pacific Life Insurance Company; and Mr. Yearley, a director of Heidrick & Struggles International, Inc. In determining that these relationships did not affect the independence of those directors, the Board considered that none of the directors serving as directors or officers of other companies had any direct material interest in, or received any special compensation in connection with, Lockheed Martin’s business relationships with those companies.

The Committee and Board also determined that Mr. Ukropina’s status as Of Counsel to O’Melveny & Myers LLP, a law firm used by the Company, does not affect his independence. Mr. Ukropina, who retired from the firm in 2000, is not a partner, member or officer of the firm, nor does he provide legal services to the Company. The Committee and Board are further

satisfied that, because Mr. Ukropina is retired and provides no active services to O’Melveny & Myers LLP, he is independent for purposes of serving on the Audit Committee.

Related Person Transaction Policy

In February 2007, the Board approved a written policy and procedures for the review, approval and ratification of transactions among Lockheed Martin and its directors, executive officers and their related interests. Under the policy, all related person transactions (as defined in the policy) are to be reviewed by the Nominating and Corporate Governance Committee of the Board. The Committee may approve or ratify related person transactions at its discretion if deemed fair and reasonable to the Company. This may include situations where Lockheed Martin provides products or services to related persons on an arm’s length basis on terms comparable to those provided to unrelated third parties. Any director who participates in or is the subject of an existing or potential related person transaction may not participate in the decision-making process of the Committee.

Under the policy, and consistent with SEC regulations, a related person transaction is any transaction in which Lockheed Martin was, is, or will be a participant, where the amount involved exceeds $120,000 and in which a related person had, has, or will have a direct or indirect material interest. A related person includes any director or executive officer of the company, any person who is known to be the beneficial owner of more than 5% of any class of the company’s voting securities, an immediate family member of any person described above; and any firm, corporation, or other entity controlled by any person described above.

The policy requires each director and executive officer to annually complete a questionnaire to identify their related interests and persons, and to notify the Company of changes in that information. Based on that information, the Company maintains a master list of related persons for purposes of tracking and reporting related person transactions. Before entering into the related person transaction, the related person or business area notifies the Company’s Vice President, Ethics & Business Conduct. The Ethics Department then reviews the related person’s relationship to Lockheed Martin and interest in the transaction, the

material facts of the proposed transaction, and prepares management’s recommendation for consideration by the Committee.

The policy contemplates that the Committee may ratify transactions after they commence or pre-approve categories of transactions or relationships, since it may not be possible or practical to pre-approve all related person transactions. If the Committee declines to approve or ratify, the related person transaction is referred to management to make a recommendation to the Committee for consideration at its next meeting concerning whether the transaction should be terminated or amended in a manner that is acceptable to the Committee.

Certain Relationships and Related Person Transactions of Directors, Executive Officers and 5 Percent Stockholders

The following transactions or relationships are considered to be “related person” transactions under our corporate policy and applicable SEC regulations. Each of these transactions was reviewed, approved or ratified by the Nominating and Corporate Governance Committee of the Board in February 2007 when our related person transaction policy was adopted.

One of our directors, Mr. Schneider, served as Senior Vice President of Dell, Inc. until February 2007. In 2006, we paid $47,460,000 for the purchase of computer equipment and services from Dell in the ordinary course of business, which amount represented less than 1% of Dell’s 2006 revenues.

Two of our directors, Messrs. Loy and Ralston, are employed as Senior Counselor and Vice Chairman, respectively, of The Cohen Group, a consulting business that performs services for the Company. In 2006, we paid The Cohen Group approximately $675,000 for consulting services and expenses.

We currently employ approximately 140,000 employees and have an active recruitment program for soliciting job applications from qualified candidates. We seek to hire the most qualified candidates and consequently do not preclude the hiring of family members. The employment of various family members of current directors and executive officers is described below.

These relationships (and 2006 base salary including Management Incentive Compensation Plan (“MICP”) and stock options or restricted stock unit (“RSU or RSUs”) awards granted in 2006, where applicable) include Mr. Bennett’s son-in-law, Jeffrey D. MacLauchlan, Vice President, Finance and Business Operations for our Information Systems & Global Services business area ($310,000 in base salary, $261,600 in MICP, a stock option award of 6,000 shares, and a RSU award of 2,000 units); Mr. Ralston’s brother-in-law, Mark E. Dougherty, Director, Business Development Analysis ($138,834); Michael F. Camardo’s son-in-law, John P. Foley, Director, Pricing Policy Analysis ($132,000 in base salary, $30,500 in MICP, and a RSU award of 125 units); and retired executive officer G. Thomas Marsh’s brother-in-law, Larry Roubidoux, Director, Engineering Planning ($145,722 in base salary, $32,200 in MICP, and a RSU award of 400 units). Those individuals also participate in other employee benefit plans and arrangements which are generally made available to other employees at their level (including health, welfare, vacation and retirement plans). The compensation of each family member was established in accordance with the Company’s employment and compensation practices applicable to employees with equivalent qualifications, experience and responsibilities. None of these individuals served as an executive officer during 2006.

In addition, from time to time, the Company has purchased services in the ordinary course of business from financial institutions that beneficially own 5% or more of the Company’s common stock. In 2006, the Company paid fees of $154,931 to Barclay’s Global Investors, N.A. in credit-facility or foreign exchange fees and $11,036,669 to State Street Bank and Trust Company and its affiliates for credit-facility and benefit-plan-administration fees.

The Board also considered comments made and issues raised by others concerning the qualifications of directors. On May 11, 2004, the Secretary of the U.S. Department of Labor and certain former outside directors of Enron Corporation, including Mr. Savage, entered into a consent decree which provides, among other things, that for the five year period following entry of the decree, none of the former Enron directors will, without the consent of the Secretary of Labor,

serve an ERISA-covered plan in a fiduciary capacity in the manner set forth in the decree. It is the view of the Committee that service by Mr. Savage on the Board of Directors of the Company or any of its committees is permitted by the decree.

Board Evaluation

Each year the Board evaluates its performance and effectiveness. Each director completes an evaluation form developed by the Nominating and Corporate Governance Committee to solicit feedback on specific aspects of the Board’s role, organization and meetings. The collective ratings and comments are then compiled by the Vice President, Internal Audit, and presented to the full Board. Additionally, each Board Committee conducts an annual self-evaluation of its performance through a similar process.

Shareholder Rights Plan

Lockheed Martin does not have a Shareholder Rights Plan, or so called “Poison Pill.” As part of our Corporate Governance Guidelines, the Board has communicated that it has no intention of adopting one at this time. If the Board of Directors does choose to adopt a Shareholder Rights Plan, the Board has indicated that it would seek stockholder ratification within 12 months from the date of adoption.

Equity Ownership by Directors

The Board believes that directors and management should hold meaningful equity ownership positions in Lockheed Martin. To further encourage a link between director and stockholder interests, the Board has adopted stock ownership guidelines for directors. Similar guidelines apply to our management. Directors receive half of their compensation in the form of Lockheed Martin common stock units or stock options (with the potential to defer the remaining cash portion in stock units). In addition, directors are expected to own shares or stock units equal to two times the annual retainer within five years of joining the Board. Until a director has achieved these stock ownership guidelines, a director is expected to select common stock units as the form of any annual equity compensation award.

Committees

The Board of Directors has six standing committees as prescribed by our bylaws:

In addition, the Board has established a Classified Business Review Committee, which functions as a special committee.

Our bylaws contain the charter for each of the standing committees. Our bylaws and the charter of the Classified Business Review Committee are posted on our website at http://www.lockheedmartin.com/investor under the heading “Corporate Governance.”

Audit Committee

The Audit Committee oversees our financial reporting process on behalf of the Board. It also is directly responsible for the appointment, compensation, and oversight of the Company’s independent auditors. The functions of the Audit Committee are further described below under the heading “Audit Committee Report” and in the Committee’s charter.

All of the members of the Audit Committee are independent within the meaning of the listing standards of the NYSE, our Corporate Governance Guidelines, and applicable SEC regulations. In order to be considered independent under SEC regulations, a member of the Audit Committee cannot accept any consulting, advisory or other compensatory fee from Lockheed Martin, or be an affiliated person of Lockheed Martin or its subsidiaries.

The Board has determined that Mr. Yearley, Chairman of the Audit Committee, and Mr. Schneider are qualified as audit committee financial experts within the meaning of SEC regulations, and that they have the accounting and related financial management expertise within the meaning of NYSE listing standards.

Classified Business Review Committee

The Classified Business Review Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to the Company’s business activities that require special security clearance levels for access to information. The Classified Business Review Committee’s responsibilities are further described in the Committee’s charter.

Ethics and Corporate Responsibility Committee

The Ethics and Corporate Responsibility Committee monitors compliance and recommends changes to our Code of Ethics and Business Conduct. It reviews our policies, procedures and compliance in the areas of environmental, safety and health, Equal Employment Opportunity (EEO), and diversity. It also oversees matters pertaining to community and public relations, including government relations and charitable contributions. The Committee’s responsibilities are further described in its charter.

Executive Committee

The Executive Committee primarily serves as a means for taking action requiring Board approval between regularly scheduled meetings of the Board. The Executive Committee is authorized to act for the full Board on matters other than those specifically reserved by Maryland law to the Board.

Management Development and Compensation Committee

The Management Development and Compensation Committee is responsible for reviewing and approving corporate goals and objectives relevant to the compensation of the Company’s CEO, evaluating the performance of the CEO and, either as a committee or together with the other independent members of the Board, determining and approving the compensation levels of the CEO and senior management of the Company.

Additional information regarding the role of the Committee, and our compensation practices and procedures, is provided under the captions “Compensation Committee Report” on page 26 and “Compensation Discussion & Analysis” on page 27 of this proxy statement, and in the Committee’s charter.

All members of the Committee are independent within the meaning of the NYSE listing standards and our Corporate Governance Guidelines.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee is responsible for developing and implementing policies and practices relating to corporate governance, including our Corporate Governance Guidelines. The Committee assists the Board by selecting and recommending Board nominees, making recommendations concerning the composition of Board committees, and by overseeing the Board and committee evaluation process.

The Committee also reviews and recommends to the Board the compensation of directors. Our executive officers do not play a role in determining director pay, although the Chairman of the Board is consulted

regarding the impact of any change in director pay on the Company as a whole. During 2006, Hewitt Associates, an outside compensation consultant, assisted the Committee by providing market data on director pay at other companies.

The functions of the Committee are further described under the caption “Corporate Governance” and in the Committee’s charter. All members of the Committee are independent within the meaning of the NYSE listing standards and our Corporate Governance Guidelines.

Strategic Affairs and Finance Committee

The Strategic Affairs and Finance Committee reviews and recommends to the Board of Directors our long-term strategy including allocation of corporate resources. The functions of the Committee are further described in its charter.

We oversee Lockheed Martin’s financial reporting process on behalf of the Board.

Lockheed Martin’s management is responsible for the financial reporting process and preparation of the quarterly and annual consolidated financial statements, including maintaining a system of internal control over financial reporting. We are directly responsible for the appointment, compensation, retention, oversight and termination of the Corporation’s independent auditors, Ernst & Young LLP, an independent registered public accounting firm. The independent auditors are responsible for auditing the annual consolidated financial statements and expressing an opinion on the conformity of those financial statements with U.S. generally accepted accounting principles.

In connection with the December 31, 2006 audited consolidated financial statements, we have:

Based on the reviews and discussions above, we recommended to the Board of Directors that the audited consolidated financial statements for 2006 be included in Lockheed Martin’s Annual Report on Form 10-K for the year ended December 31, 2006 for filing with the SEC. The Board approved our recommendation.

The following table summarizes the compensation of our directors including changes effective November 1, 2006 for the remainder of 2006 and 2007. As Chairman and CEO, Mr. Stevens was eligible for the Directors

Charitable Award Plan (“DCAP”) but did not receive any separate compensation or other benefits for his service as a director.

Under the Lockheed Martin Corporation Directors’ Equity Plan (“Directors’ Equity Plan”), each non-employee director may elect to receive:

Except in certain circumstances, options and stock units vest on the first anniversary of grant. Upon a change in control, a director’s stock units and outstanding options become fully vested, and directors would have the right to exercise their options immediately. Upon a director’s termination of service from our Board, we distribute the vested stock units, at the director’s election, in whole shares of stock or in cash, in a lump sum or in up to ten annual installments. Prior to distribution, a director has no voting, dividend or other rights with respect to the stock units held under the plan, but receives additional stock units representing dividend equivalents (converted to stock units based on the closing market price of our common stock on the dividend payment dates). The options have a term of ten years. The Directors’ Equity Plan was approved by the stockholders in 1999.

The Directors’ Equity Plan provides that the grants are made with respect to a particular year on January 15 or the next business day if January 15 is not a business day. The exercise price (in the case of option grants) is the closing price for our stock on the NYSE on the date of grant.

The Lockheed Martin Corporation Directors’ Deferred Compensation Plan (“Directors’ Deferred Compensation Plan”) provides non-employee directors the opportunity to defer up to 100% of the cash portion of their fees. Deferred amounts earn interest at a rate that tracks the performance of the prime rate, the published index for the Standard & Poor’s 500 Index (“S&P 500 Index”) (with dividends reinvested), or our common stock (with dividends reinvested), at the

director’s election. We distribute participating directors deferred fees at the director’s election in a lump sum or in up to 15 installments commencing in the January following the year in which the director terminates service, the next January 15 or July 15 after the director terminates service, or the January 15 in the year after the director has terminated service and reached a specified birthday.

Each director may elect to be provided a home computer and printer. We provide technical assistance for the computer equipment and internet access. The average cost per director in 2006 for the computer, printer, internet service, technical support and training assistance, and software was $2,210.

NOTES TO TABLE:

(1)    Includes the aggregate dollar amount of 2006 fees earned or paid in cash for services as a director, including annual retainer fees and committee chairman fees. Amounts reported on the table reflect payments through October 31, 2006 based on an annual cash retainer rate of $90,000 and payments for November and December 2006 at an annual cash retainer rate of $110,000.

(2)    Includes the amount recognized in accordance with Statement of Financial Accounting Standards (“FAS”) 123R in our financial statements for the year ended December 31, 2006 for stock units awarded to the directors under the Directors’ Equity Plan. We recognize expense based upon the change in market value during the year for all stock units credited to the director, whether credited in 2006 or prior years. The number of units includes dividend equivalents that are credited as stock units. The table shows the expense associated with the equity portion of the Director’s retainer for 2006 on one line and the appreciation and credited dividend equivalents associated with units awarded in 2006 and prior years on the second line. The outstanding number of stock units credited to each director under the Directors’ Equity Plan as of December 31, 2006 was Mrs. King 12,967; Ms. Stevens 4,300; Mr. Aldridge 5,119; Mr. Archibald 6,632; Mr. Bennett 12,291; Mr. Ellis 2,866; Mr. Loy 1,900; Mr. McCorkindale 4,592; Mr. Ralston 5,385; Mr. Savage 5,783; Mr. Schneider 747; Mr. Ukropina 12,967; and Mr. Yearley 12,967. For 2006, each of Mrs. King, Ms. Stevens and Messrs. Aldridge, Archibald, Bennett, Ellis, Loy, Ralston, Savage, Ukropina and Yearley were credited with 1,369.4461 stock units with an aggregate grant date value of $90,000, and each of Messrs. McCorkindale and Schneider were credited with 684.7231 units with an aggregate grant date value of $45,000. The grant date value is based on the closing price of our stock on January 17, 2006 ($65.72).

(3)    Represents the amount recognized in accordance with FAS 123R in our financial statements for the year ended December 31, 2006 for options granted to Messrs. McCorkindale, Murphy and Schneider in 2005 and 2006. We recognize expense ratably in monthly increments over the one-year vesting period. The assumptions used in determining the fair value of the options is set forth in Note 11 to our financial

statements contained in our Annual Report on Form 10-K for the year ended December 31, 2006. For 2006, we awarded each of Messrs. McCorkindale and Schneider 3,072 options with a grant date value of $50,842 and Mr. Murphy 6,143 options with a grant date value of $101,667. The grant date value is based on the closing price of our stock on January 17, 2006 ($65.72). The outstanding number of stock options awarded to each director as of December 31, 2006 was Mr. McCorkindale 14,340; Mr. Murphy 38,847; and Mr. Schneider 3,299.

(4)    Column (e) deleted because our directors did not earn “Non-equity Incentive Plan Compensation” in 2006.

(5)    Includes a portion of the interest earned in 2006 by Messrs. Bennett and Murphy, Mrs. King and Ms. Stevens on cash retainer fees credited to the “prime rate” investment option under the Directors’ Deferred Compensation Plan. The amount shown is the amount in excess of 120% of the Applicable Federal Rate published by the IRS.

(6)    For each of Messrs. Aldridge, Archibald, Bennett, McCorkindale, Murphy, Ralston, Savage, Ukropina and Yearley and Mrs. King and Ms. Stevens, we contributed $1,000,000 at the recommendation of each of the named directors to tax-exempt charitable organizations or educational institutions on behalf of the Lockheed Martin Corporation Directors Charitable Award Fund at the Vanguard Charitable Endowment Program.

None of the directors has received or will receive any benefit from, or receive any portion of the $1,000,000 and the contributions are not considered taxable income to the director.

DCAP was amended in 2006 to provide for the current payment of contributions and its termination. We transferred the full cash amount to be contributed on behalf of the directors pursuant to the DCAP to the Vanguard Charitable Endowment Program in December 2006 to fund the Lockheed Martin Directors Charitable Award Fund. We previously had purchased corporate-owned life insurance to fund the payments due under the DCAP. All premiums due on those policies have been paid and we will recoup the

December 2006 contribution to the Vanguard Charitable Endowment Program in the future as the policies’ proceeds are paid to the Company.

As a result of a 2004 plan amendment limiting participation in the DCAP to directors elected prior to the 2004 Annual Meeting, Messrs. Ellis, Loy and Schneider were not eligible to recommend to the Company that a charitable contribution be made to a specific charity or charities. The Company’s contribution to a tax-exempt charitable organization recommended by Mr. Stevens pursuant to the DCAP is reported in column (i) in the Summary Compensation Table on page 38. Mr. Stevens is an employee and does not receive cash or equity compensation for his services as a director.

(7)    Includes regular retainer and retainer for Mr. Archibald’s service as chairman of the Management Development and Compensation Committee.

(8)    Includes regular retainer and, effective November 1, 2006, retainer for Mr. Ellis’ service as chairman of the Classified Business Review Committee.

(9)    Includes regular retainer and retainer for Mrs. King’s service as chairman of the Ethics and Corporate Responsibility Committee.

(10)    Includes regular retainer and retainer for Mr. McCorkindale’s service as chairman of the Strategic Affairs and Finance Committee.

(11)    Includes regular retainer and retainer for Mr. Ukropina’s service as chairman of the Nominating and Corporate Governance Committee.

(12)    Includes regular retainer and retainer for Mr. Yearley’s service as chairman of the Audit Committee.

(13)    Includes the cost to the Company of providing a home computer system, tax gross up payments made in 2006, company recognition items with our logo and the incremental cost of spousal personal use of corporate aircraft while accompanying a director on business travel. The DCAP contribution (see footnote 6) directed by 12 directors (as indicated) is listed separately.

(14)    Mr. Bennett participates in deferred compensation and other plans related to his service as a director of an acquired company (COMSAT Corporation) and his prior service as an officer of Martin Marietta Corporation and Lockheed Martin. None of the benefits under these plans were earned for service as a director of Lockheed Martin and they are not included in the table. The aggregate amounts with respect to these plans for 2006 were $35,768.

(15)    Shows the total of all other columns separately from the total for DCAP. Variances in the total compensation reported for each director (other than DCAP) results from the inclusion of fees for service as a committee chairman and the reporting in column (c) of amounts expensed in 2006 for all stock awards to a director during his or her tenure, including awards in 2006.

(16)    Neither Mr. Loy’s nor Mr. Ralston’s compensation includes fees paid to The Cohen Group for consulting services. These fees are described in the section on Certain Relationships and Related Person Transactions of Directors, Executive Officers and 5 Percent Stockholders on page 10.

The following table shows the Lockheed Martin common stock beneficially owned and stock units credited to each named executive officer, director, and all directors and executive officers as a group as of February 1, 2007. Except as otherwise noted, the named individuals had sole voting and investment

power with respect to such securities. The total common stock and stock units owned by each director and executive officer represented less than 1% of our outstanding common stock. All amounts are rounded to the nearest whole share. No shares have been pledged.

NOTES TO TABLE:

(1)    Includes restricted stock awards (“RSAs”). As of February 1, 2007 each of Messrs. Camardo, Coutts, Heath, Kubasik, Sloane and Stevens have 25,000; 25,000; 15,000; 10,000; 25,000; and 50,000 RSAs, respectively.

(2)    Includes shares not currently owned but which could be acquired within 60 days following February 1, 2007 through the exercise of stock options for Messrs. Camardo, Coutts, Heath, Kubasik, McCorkindale, Murphy, Schneider and Stevens in the amount of 338,333; 208,500; 100,333; 170,333; 14,340; 38,847; 3,299; and 950,000 shares, respectively.

(3)    Includes the number of shares attributable to the participant’s account in the Lockheed Martin Salaried Savings Plan (“Salaried Savings Plan”) as of February 1, 2007 for Messrs. Bennett, Camardo, Coutts, Heath, Kubasik, Sloane and Stevens of 880; 5,022; 1,408; 1,455; 988; 3,507; and 26, respectively. Participants have voting power and investment power over the shares.

(4)    Includes shares that have shared voting and investment power.

(5)    Includes stock units under the Directors’ Equity Plan. As of February 1, 2007 each of Mrs. King and Messrs. Ukropina and Yearley have been credited with 14,101 stock units, respectively; Ms. Stevens and Messrs. Aldridge, Archibald, Bennett, Ellis, Loy, McCorkindale, Ralston, Savage and Schneider have been credited with 5,434; 6,253; 7,766; 13,425; 4,000; 3,034; 5,159; 6,519; 6,917; and 1,314 units, respectively. Units are distributed in the form of cash or stock as elected by the director. There are no voting rights associated with stock units.

(6)    Shares shown also include the number of equivalent stock units attributable to the participant’s account (if applicable) in the Lockheed Martin Corporation Supplemental Savings Plan (“NQSSP”) as of February 1, 2007 for Messrs. Camardo, Coutts, Heath, Kubasik, Sloane and Stevens of 8,425; 3,325; 1,692; 1,511; 1,623; and 680, respectively. Amounts credited to a participant’s account in the NQSSP are distributed in cash following termination of employment. There are no voting rights associated with stock units.

(7)    Includes the number of equivalent stock units attributable to the participant’s account in the Lockheed Martin Corporation Deferred Management Incentive Compensation Plan (“DMICP”) (including units credited under the Long Term Incentive Performance (“LTIP”) program awards under the Lockheed Martin 1995 Omnibus Performance Award Plan (“Award Plan”) and the Lockheed Martin Corporation Amended and Restated 2003 Incentive Performance Award Plan (“IPA Plan”) as of February 1, 2007 for Messrs. Camardo, Coutts, Heath, Kubasik, Sloane and Stevens of 25,936; 25,203; 8,508; 24,078; 3,559; and 19,472, respectively. Although most of the units will be distributed following termination or retirement in shares of stock, none of the units are convertible into shares of stock within 60 days of February 1, 2007. There are no voting rights associated with stock units.

(8)    Includes RSUs. As of February 1, 2007 each of Messrs. Camardo, Coutts, Heath, Kubasik, Sloane and Stevens have been credited with 5,500; 10,850; 9,150; 22,200; 8,600; and 164,500 RSUs, respectively. The RSUs represent a contingent right to receive one share of common stock. There are no voting rights associated with RSUs.

(9)    Includes stock units under the Lockheed Martin Corporation Directors’ Deferred Stock Plan (“Directors’ Deferred Stock Plan”). As of February 1, 2007 each of Mrs. King and Messrs. Murphy, Savage, Ukropina and Yearley have been credited with 1,147 stock units. There are no voting rights associated with stock units.

(10)    Includes stock units under the Directors’ Deferred Compensation Plan representing deferred cash compensation for Messrs. McCorkindale, Savage and Ukropina. As of February 1, 2007 Messrs. McCorkindale, Savage and Ukropina have been credited with 8,394; 16,041; and 3,165 stock units, respectively. The stock units (including dividend equivalents credited as stock units) are distributed in the form of cash. There are no voting rights associated with stock units.

(11)    Includes shares held in trust under the former Deferred Compensation Plan for Directors of Lockheed Corporation. Deferred amounts are

distributable after a participant ceases to be a director. In the event a participant’s status as a director is involuntarily terminated other than by death, common stock in the director’s trust account will be distributed within 15 days of termination. As of February 1, 2007

Messrs. Savage, Ukropina and Yearley have been credited with 2,502; 494; and 494 shares, respectively, pursuant to the plan. The directors do not have or share voting or investment power for their respective shares held in the trust except in the event of a tender offer.

Section 16(a) of the Securities Exchange Act of 1934 requires that our officers and directors (and persons who own more than 10% of our equity securities) file reports of ownership and changes in ownership with

the SEC, the NYSE and with us. Based solely on our review of copies of forms we have received or written representations from reporting persons, we believe that all ownership filing requirements were timely met during 2006.

The following table shows information regarding each person known to be a “beneficial owner” of more than 5% of our common stock. For purposes of this table, beneficial ownership of securities generally means the power to vote or dispose of securities, regardless of

any economic interest in the securities. All information shown is based on information reported on Schedule 13G filed with the SEC on the dates indicated in the footnotes to this table.

NOTES TO TABLE:

(1)    As reported in Schedule 13G filed on January 23, 2007 by Barclays Global Investors, N.A. (“Barclays”). Barclays reported it had beneficial ownership of and sole dispositive power over 23,073,040 shares and sole voting power over 19,502,094 shares; Barclays Global Fund Advisors reported it had beneficial ownership of and sole voting and dispositive power over 1,821,777 shares; Barclays Global Investors, Ltd., with principal offices at Murray House, 1 Royal Mint Court, London, EC3N 4H, England, reported it had beneficial ownership of and sole voting and dispositive power over 2,496,449 shares; Barclays Global Investors Japan Trust and Banking Company Limited, with principal offices at Ebisu Prime Square Tower, 8^th Floor, 1-1-39 Hiroo Shibuya-Ku, Tokyo 150-0012 Japan, reported it had beneficial ownership of, and sole voting and dispositive power over 387,471 shares; and Barclay Global Investors Japan Limited, with principal offices at the aforementioned Japan office, reported it had beneficial ownership of and sole voting and dispositive power over 886,036 shares.

(2)    As reported in Schedule 13G filed on February 13, 2007 by State Street Bank and Trust Company (“State Street”). State Street reported it had beneficial ownership of, and shared dispositive power with respect to 79,152,828 shares of common stock of which 68,032,197 shares of common stock were held

by it as trustee for certain Lockheed Martin employee benefit plans. State Street also reported that it had sole voting power with respect to 13,439,196 shares, of which 2,318,565 shares of common stock it had sole voting power as trustee for certain Lockheed Martin employee benefit plans. State Street has expressly disclaimed beneficial ownership of the shares reported on its Schedule 13G.

(3)    As reported in Schedule 13G Amendment filed on February 14, 2007 by U.S. Trust Company, N.A. (“U.S. Trust”). U.S. Trust reported it had beneficial ownership of 67,826,560 shares of common stock, shared voting power with respect to 66,978,312 shares, sole voting power with respect to 668,678 shares, sole dispositive power with respect to 693,132 shares, and shared dispositive power with respect to 186,466 shares. With respect to 65,713,632 shares of the shares reported, U.S. Trust acts as co-fiduciary for certain Lockheed Martin employee benefit plans with State Street. As a result of the two institutions’ status as co-fiduciaries, both U.S. Trust and State Street have reported beneficial ownership of 65,713,632 shares of the shares reported on their respective Schedule 13G. U.S. Trust also reported beneficial ownership and shared voting power for 631,899 for which U.S. Trust acts as co-fiduciary with Fidelity Management Trust Company, a wholly-owned subsidiary of FMR

Corporation, for certain employee benefit plans sponsored by a subsidiary of Lockheed Martin and 601,381 shares for which U.S. Trust acts as co-fiduciary with Vanguard Fiduciary Trust Company for an employee benefit plan sponsored by a subsidiary of Lockheed Martin. reported on their respective Schedule 13G. U.S. Trust also reported beneficial ownership and shared voting power for 631,899 for which U.S. Trust acts as co-fiduciary with Fidelity Management Trust Company, a wholly-owned subsidiary of FMR Corporation, for certain employee

benefit plans sponsored by a subsidiary of Lockheed Martin and 601,381 shares for which U.S. Trust acts as co-fiduciary with Vanguard Fiduciary Trust Company for an employee benefit plan sponsored by a subsidiary of Lockheed Martin.

(4)    As described in footnotes 2 and 3, because U.S. Trust and State Street are co-fiduciaries of benefit plans, both entities have reported beneficial ownership of the same 65,713,632 shares.

The Management Development and Compensation Committee makes recommendations to the Board of Directors concerning the compensation of the Corporation’s executives. We have reviewed and discussed with management the Compensation Discussion and Analysis included in the Corporation’s Schedule 14A Proxy Statement, filed pursuant to

Section 14(a) of the Securities Exchange Act of 1934 (the “Proxy”). Based on that review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Proxy Statement and incorporated by reference in the Corporation’s 2006 Form 10-K. The Board has approved that recommendation.

Our Compensation Discussion and Analysis (“CD&A”) is organized into three parts:

In our discussion, references to “the Committee” mean the Management Development and Compensation Committee of our Board of Directors. We use the term “Executives” in the CD&A to refer to the Executives listed in the Summary Compensation Table.

Overview and Objectives of Executive Compensation Program

Our executive compensation policies are designed to provide incentives and compensation that both advance the interests of stockholders and enhance our ability to attract and retain top executive management talent. We implement this policy through a combination of base salary and variable at-risk compensation. The variable pay opportunities provided to the Executives are market-based while actual incentive payouts are performance-based. In other words, we derive the level of pay opportunities (targets for annual incentive bonus and long-term incentives, stock option grants, and restricted stock unit awards) by reference to market data. At the same time, our incentive plans include significant differentiation in payouts based on performance. As a result, we believe our actual compensation payouts should be market-appropriate given our performance for that year or period.

We review our compensation policies regularly and the compensation of the Executives at least annually. As a result of these reviews, we make adjustments to our program and to individual compensation based on a variety of changing factors, including Comparator

Group data (discussed below), performance incentives and achievements, longevity, pay equity, and retention. We use performance metrics but retain discretion over elements of the compensation program. All of our Executives are at-will employees and serve at the pleasure of our Board.

The nature of our business demands that we adopt a business strategy that anticipates customers’ needs, fully understands customers’ expectations, and measures success by our customers’ success. To execute this strategy, especially over the long life cycle of many of our products, requires retention of key leadership talent. The pool of executive talent with knowledge of customer requirements, government cost accounting standards, high-level security clearances and experience in managing long-term, technically advanced contracts is limited. To that end, our compensation package contains many elements designed to enhance retention.

The following elements make up our executive compensation program:

Each year we ask an outside consultant to collect compensation data from a group of 25 publicly held companies (referred to as our “Comparator Group”) in the aerospace and defense industry and other companies of a size, complexity and quality similar to ours. The Comparator Group used in 2006 included the following companies:

We use Comparator Group data to identify competitive levels of compensation. We compare our compensation program to the median compensation levels of the Comparator Group, adjusted to reflect the relative sizes of the businesses as measured by revenue. Our pay elements and the mix of pay among these elements, likewise, are based on Comparator Group data.

Our Chairman, President and CEO, with input from our Senior Vice President, Human Resources and management’s outside executive compensation consultant, recommends to the Committee base salary, target bonus levels, actual bonus payouts and long-term incentive grants for our Executives. The Committee, with input from our Senior Vice President, Human Resources and Comparator Group data from the Committee’s outside executive compensation consultant, recommends to the Board of Directors the compensation of the CEO.

The Committee retains discretion in setting the Executives’ compensation. As a result, total compensation (or any particular component of compensation) received by an Executive may differ materially from the median of the Comparator Group. Market data, position, tenure, individual and organizational performance, retention needs and internal pay equity have been the primary factors considered in decisions to increase or decrease compensation opportunities materially.

The Committee historically has approved annual bonus (MICP) and long-term incentive grants in the first quarter. In 2006, the Committee evaluated and adjusted the Executives’ base salaries at the same time. Special or additional grants and base salary adjustments are made periodically at other Committee meeting dates.

Role of Compensation Consultants

The Committee has hired a compensation consultant (Watson Wyatt Worldwide, Inc.) with whom it reviews selected matters. Management recommendations to the Committee are developed using data provided by a separate consultant hired by management (Hewitt Associates). The Committee has adopted a policy that the Committee’s consultant should maintain independence relative to providing counsel and advice to the Committee, and otherwise providing advice and services to us. On an annual basis, the Committee intends to perform an assessment of its advisory firm’s independence. In performing this assessment, the Committee will consider the nature and level of work performed for the Committee during the year, the nature of other services performed for us and the amount of fees paid to the firm in relation to the firm’s total revenues. The advisory firm will prepare and provide to the Committee an independence letter annually based on criteria set forth by the Committee. The Committee will discuss the letter with the consultant and consider it in its assessment. Based on its review, the Committee concluded its consultant was independent in 2006.

Description of the Elements of Our

Compensation Program

Base Salary

Base salary is a standard element of executive pay.

How We Determine Base Salary

The Committee evaluates each Executive’s base salary by reference to the median for base salary of comparable executive positions in the Comparator Group, adjusted to reflect the size of the business. Our compensation philosophy permits adjustment of an Executive’s base salary above or below the median of the Comparator Group upon consideration of the following:

Base Salary Determinations in 2006

The Committee approved the Executives’ annual merit raises in February 2006. The raises reflected general business practice to adjust salaries annually and recognition of continued strong performance by management. Effective December 1, 2006, the Committee also approved increases in base salaries for five of the six Executives as a result of our decision to cease paying for certain perquisites.

Mr. Camardo will retire on April 1, 2007 and consequently did not receive an increase in base salary as a result of the change in our perquisite policy.

Short-Term Incentive Award – Management Incentive Compensation

What MICP Rewards

MICP provides an opportunity for the Executives to earn at-risk cash compensation based on:

Although quantitative measures of performance are reviewed in determining MICP bonuses, the MICP award process incorporates subjective elements (subject to the quantitative performance limits based on cash flow, discussed below).

Reasons for Having MICP

Through our annual bonus plan (the MICP Plan), a substantial portion of an Executive’s annual compensation is placed at risk. This is intended to focus management on meeting (or exceeding) stated goals and to encourage employees to work individually and as teams.

How MICP Payments Are Determined

Each Executive is assigned a target percentage of base salary determined by the level of contribution and responsibility of the Executive’s position, and in a range comparable to annual incentive targets for similar positions in the Comparator Group. The target amounts are reported in the Grants of Plan-Based Awards table and range from 75% to 125% of salary.

We calculate MICP bonuses by multiplying an Executive’s target percentage by a corporate performance factor and an individual performance factor, each of which is based on the level of assessed performance noted below:

The higher numbers associated with the corporate factor reflect the importance we place on team performance. Ratings for both corporate and individual performance may be assigned at intervals between the levels noted in the table.

Bonuses awarded under the MICP can range from 0 to 195% of target (maximum corporate factor of 1.5 times by a maximum individual factor of 1.3 equals 1.95). The maximum bonus for the CEO is 244% of base rate of pay on December 1 (195% times the target percentage of 125%).

The MICP limits the bonus paid for 2006 to the CEO to 0.3% of 2006 cash flow and the bonus for each of the other Executives to 0.2% of 2006 cash flow. These limitations were approved at our April 2006 annual meeting of stockholders, and are intended to qualify MICP payments as “performance-based compensation,” exempt from the $1 million limit on deductibility under Internal Revenue Code Section 162(m).

For purposes of the MICP awards for 2006, “cash flow” means net cash flow from operations adjusted for:

In the first quarter, based on input from the Senior Vice President, Human Resources and Executive Vice President and Chief Financial Officer (“CFO”), the Committee established objectives for the CEO for the year derived from our long range plan and our then publicly available forecasted outlook for the year. The CEO’s goals also serve as the corporate-level organizational goals for the other Executives. The objectives are both quantitative and qualitative and provide a framework for reviewing performance. Meeting, exceeding, or falling short of an identified objective does not mandate a particular organizational factor but is considered as one factor among many for evaluating the year’s performance. The determination of the organizational factor associated with a level of performance of any particular objective or all the objectives as well as the weight given to each objective remains within the discretion of the Committee. The Committee also has the discretion to consider other factors it deems relevant.

In January of each year, the Executive Vice President and CFO in conjunction with the Senior Vice President, Human Resources prepare an assessment of our operational, strategic and financial results and an initial recommendation for the annual MICP Corporate Factor, applicable to all of the Executives. The recommendation is reviewed and adjusted by the CEO, as appropriate. The CEO, with assistance from the Senior Vice President, Human Resources, assesses the performance of the individual Executives (other than himself) and makes recommendations of MICP Individual Factors to the Committee. The Committee assesses the performance of the CEO.

MICP in 2006 - 2006 Performance Objectives

The Committee identified performance objectives for 2006 for the CEO at its February 2006 meeting. The objectives for financial performance included sales, cash, return on invested capital (“ROIC”)¹, and operating margin. The level of performance for each objective was within the ranges of forecasted financial

¹ We define ROIC in our 2006 Annual Report on Form 10-K as net earnings plus after-tax expense divided by average invested capital (stockholders’ equity plus debt), after adjusting stockholders’ equity by adding back amounts related to postretirement benefit plans. See “Selected Financial Data,” Note (f), included in our 2006 Annual Report on Form 10-K, for further definition and calculation methodology.

performance contained in our outlook for 2006 as publicly disclosed in connection with our release of earnings for the year ended December 31, 2005. The qualitative objectives included a wide range of corporate initiatives including continuing efforts for diversity awareness, development of new lines of business, deployment of cash to increase value, increased productivity, leadership development, differentiation of our Company from competitors and reduction in the rate of escalation of employee health care costs through health and wellness programs. When established in February 2006, management considered the objectives achievable.

MICP Bonuses for 2006 Performance

The Committee assessed 2006 corporate performance as far exceeding organizational objectives in all categories resulting in a factor of 1.5 for organizational performance. Underpinning the Committee’s assessment were record-breaking financial results, most significantly delivering one-year Total Stockholder Return (“TSR”) to our investors of 47%, outperforming the TSR of 25% for the S&P Aerospace Index and 16% for the S&P 500 Index. The Committee also credited the Executives with record sales, segment operating profit, earnings per share (“EPS”), cash from operations and ROIC, all of which exceeded our original publicly available outlook.

The Committee credited the management team for achieving our strategic imperatives to sustain key programs and advance growth through the capture of new business, internal investment in growth-enabling technologies and an acquisition process focused on

² Segment Operating Profit represents the total earnings from our business segments before interest, taxes and unallocated corporate expense net. See “Note 15 – Information on Business Segments” to our financial statements included as part of our 2006 Annual Report on Form 10-K for a reconciliation of Segment Operating Profit to Consolidated Operating Profit.

growth and technological development. The Committee also acknowledged management’s efforts to advance the work force through leadership development and its effort to manage risk. Notable programmatic accomplishments included:

The Committee also considered programmatic and other disappointments including the January 2007 stop-work order issued in the Littoral Combat Ship program and continuing supplier issues with the Deepwater contract with the Coast Guard in which we participate through a joint venture.

The Committee assigned individual performance factors for 2006 for the Executives ranging from 1.25 to 1.3 based on each individual’s contribution to 2006 performance. The Committee assessed each Executive’s contribution to our results. As part of its review, it considered the limitations in the MICP plan based on cash flow (0.3% of cash flow for the CEO and 0.2% for each of the other Executives). None of the awards exceeded the percentage limits.

Long-Term Incentive Program

Our long-term incentive program had three elements in 2006: stock options, a LTIP award and RSUs; each type of award is granted under our IPA Plan. The terms of the awards are contained in the award agreements. Our long-term incentive program is designed to reward financial and programmatic excellence. Stock options and RSUs reward Executives based on stock appreciation whereas our LTIP rewards Executives based on TSR, ROIC and the generation of cash. Management believes that these three measures (TSR,

ROIC and cash generation) are three financial metrics important to stockholders and align the Executives’ interests with the interests of stockholders.

In making long-term incentive awards, the Committee reviews the current economic value provided under long-term awards made by the Comparator Group. The Senior Vice President, Human Resources advises the Committee of the awards’ economic value based on information provided by management’s compensation consultant, who develops these amounts using standard valuation approaches such as the Black-Scholes options pricing methodology. The Committee then makes awards based on approximate weightings of the components of our long-term incentive program shown below.

Management recommended this weighting to the Committee based on its view that the trend in the equity component of executive compensation was to move away from options and toward alternative equity grants such as RSUs.

The Senior Vice President, Human Resources, with market data collected by management’s outside consultant, makes recommendations to the Committee for award opportunities. The Executive Vice President and CFO makes recommendations to the Committee as to the establishment of performance metrics.

Stock Options

What Stock Options Reward

Stock options reward common stock price appreciation from the market price on date of grant. Our stock options have a 10-year term, and normally vest in equal increments over three years.

Why We Use Stock Options

We use stock options because stock options provide compensation only to the extent our stock price increases over the term of the option.

Policy Regarding Timing of Option and Other Equity Grants

The IPA Plan allows the Committee to set a date in the future as the date of grant of an award. If the Committee’s action occurs in close proximity to release of our annual earnings, the Committee’s practice has been to designate as the date of grant a future date at least 48 hours following the release of our annual earnings. The closing price for our stock on the NYSE on the date specified as the date of grant is the exercise price for an option award. The Committee’s action in February 2006 took place after our release of earnings by more than 48 hours and so this practice was not used during 2006.

How Grant Sizes Are Determined

Grant sizes are calculated by multiplying the 50% weight we have given to stock options in our executive compensation program by the market value for long-term incentives and dividing that result by the value of a single option as determined under the Black-Scholes methodology. We assign market value based upon information provided by management’s outside executive compensation consultant based upon Comparator Group data.

Option Grants in 2006

Option grants made in February 2006 are included in the Grants of Plan-Based Awards table. The terms are more fully described in the narrative following that table.

LTIP Awards

Our LTIP is a cash-based long-term incentive program that measures corporate performance over a three-year cycle using performance criteria established by the Committee at the beginning of the performance period. For each cycle, we establish a dollar target for each Executive, reported for 2006 in the Grants of Plan-Based Awards table. We derive these targets by multiplying the 30% weight we assigned to LTIP times the Comparator Group long-term incentive values. We also consider the targets of prior year LTIP awards.

The economic value delivered through the LTIP program is a function of the LTIP target award. The target awards are adjusted for discounts and premiums in consultation with management’s consultant, Hewitt Associates.

At the end of the three-year performance period, 50% of the combined amount earned under the performance measures is payable in cash. Payment of the remaining portion of the award is deferred for two years, subject to continued employment, and treated during that period as if it were invested in our common stock. Amounts deferred become payable in cash on the second anniversary date of the end of the performance period.

Awards are subject to forfeiture upon termination of employment prior to the end of the performance period (or second anniversary of the end of the performance period in the case of the deferred portion). Awards are prorated in the case of retirement, death, disability, divestiture or change in control. Termination payments are discussed in more detail in the Payments on Account of Termination, Retirement, Change in Control, Disability, Death section.

LTIP in 2006

In 2006, the Committee established LTIP targets for the Executives for the 2006-2008 performance cycles and in January 2007, approved LTIP payments to the Executives for the 2004-2006 performance cycles.

Grant of Awards for the 2006-2008 Cycle - What It Rewards

Our 2006-2008 LTIP measures corporate performance over a three-year cycle from January 1, 2006 through December 31, 2008. It rewards performance during this period against pre-established internal and external metrics and continued tenure.

Why We Use LTIP for the 2006-2008 Cycle

We included the 2006-2008 LTIP because it

How Payouts Will be Calculated

The targets established for the Executives for the 2006-2008 LTIP are included in the Grants of Plan-Based

Awards table. The amount earned at the end of the three-year performance period may be more or less than the target based upon our performance, of which we measure 50% by an external metric and 50% by our internal metrics.

³ ROIC is defined in the award agreement as A divided by B, where:

A = Average annual (i) net income plus (ii) interest expense times one minus the highest marginal federal corporate tax rate; and

B = Average quarter-end (beginning with the quarter-end immediately preceding the beginning of the performance period) (i) debt (including current maturities of long-term debt) plus (ii) stockholders’ equity plus the minimum pension liability determined at year-end as included in our Statement of Stockholder Equity.

Management believes performance resulting in a payment of 100% of target for the internal performance metrics under the 2006-2008 LTIP is achievable.

Payment of LTIP Awards for the 2004-2006 Cycle

The Executives each received LTIP awards for the 2004-2006 performance cycles. The Committee reviewed and certified performance for the 2004-2006 cycles at its January 2007 meeting; the amounts paid under the 2004-2006 LTIP are shown in Column (g) of the Summary Compensation Table.

Target awards made in 2004 for the 2004-2006 LTIP measured performance by comparing our percentile ranking of TSR in the three-year performance period to the TSR of the other companies in the S&P 500 Index at the beginning of the cycle.

⁴ Cumulative Cash Flow during the performance period is expressed as a percentage of the cumulative Cash Flow forecasted in our 2006 Long Range Plan for the performance period. Cash Flow is defined as net cash flow from operations but not taking into account: