Lockheed Martin Corporation
6801 Rockledge Drive Bethesda, MD 20817
Robert J. Stevens
Chairman, President and Chief Executive Officer
		March 23, 2006

Dear Fellow Stockholder:

     On behalf of our Board of Directors, I cordially invite you to attend Lockheed Martin Corporation’s 2006 Annual Meeting of Stockholders on Thursday, April 27, 2006, at 10:30 a.m. Eastern time, at the Norfolk Marriott Waterside Hotel, 235 East Main Street, Norfolk, Virginia 23510. You are also invited to join the Board of Directors and representatives of senior management at a reception beginning at 10:00 a.m. If you are unable to join us in person, you can listen to a webcast of the Annual Meeting, accessible through the Lockheed Martin website, http://www.lockheedmartin.com/investor.

     The Annual Meeting will begin with a report on your company’s 2005 performance followed by discussion and voting on matters set forth in the accompanying Notice of Annual Meeting and Proxy Statement.

     Whether or not you plan to attend, please be sure your shares are voted. Your shares are represented at the meeting by returning your voting instructions in the enclosed envelope. If you plan on attending, let us know by marking the appropriate box on the Annual Meeting Proxy Card, or by indicating your plans when you cast your vote by internet or telephone.

     I look forward to seeing you in Norfolk.

		Sincerely,
		Robert J. Stevens

LOCKHEED MARTIN CORPORATION

6801 Rockledge Drive
Bethesda, Maryland 20817

NOTICE OF 2006 ANNUAL MEETING OF STOCKHOLDERS

DATE		Thursday, April 27, 2006
TIME		10:30 a.m. Eastern time (Stockholder reception begins at 10:00 a.m.)
PLACE		Norfolk Marriott Waterside Hotel
		235 East Main Street
		Norfolk, Virginia 23510
WEBCAST		A live webcast of the Annual Meeting of Stockholders (“Annual Meeting”) will feature audio of the meeting, including management presentations, and video of presentation charts. The webcast can be accessed on the Lockheed Martin website, http://www.lockheedmartin.com/investor.
ITEMS OF BUSINESS		(1) Election of fifteen directors to serve on the Board for a one-year term ending at next year’s annual meeting;
		(2) Ratification of the appointment of Ernst & Young LLP, an independent registered public accounting firm, as our independent auditors for this year;
		(3) Management Proposal –Adoption of Performance Goals Within the 2006 Management Incentive Compensation Plan;
		(4) Management Proposal – Approval of Amendment and Restatement of The Charter;
		(5) Four stockholder proposals shown and discussed in the accompanying Proxy Statement; and
		(6) Consideration of any other matters which may properly come before the meeting.
RECORD DATE		Holders of Lockheed Martin Corporation common stock of record at the close of business on March 1, 2006 are entitled to vote at the meeting.
ANNUAL REPORT		The Corporation’s 2005 Annual Report on Form 10-K (the “Annual Report”) which is not part of the proxy soliciting materials, is enclosed.
PROXY VOTING		It is important that your shares be represented and voted at the Annual Meeting. You can vote your shares by completing and returning the Annual Meeting Proxy Card (“Proxy Card”) sent to you. Stockholders can also vote their shares over the internet or by telephone. Instructions for internet and telephone voting are printed on the Proxy Card.

		Lillian M. Trippett
		Vice President, Corporate Secretary and
		Associate General Counsel

March 23, 2006

		Page
General Information			1
Annual Meeting Admission			1
“Householding” of Documents			1
View Future Annual Reports and Proxy Statements Online and Reduce Mailing Costs			1
Requests for Written Copies of 2005 Annual Report			1
2007 Annual Meeting and Stockholder Proposals			1
Corporate Governance Information			2
How to Contact the Non-management Directors of Lockheed Martin Corporation			2
Voting Information			3
How to Vote			3
How to Revoke a Vote			3
Voting Representation and Tabulation			3
Solicitation of Proxies			4
Governance Matters			5
Nominating and Corporate Governance Committee			5
Identifying and Evaluating Nominees for Directors			5
Stockholder Nominees			5
Director Qualifications			5
Director Independence			6
Certain Relationships and Related Party Transactions of Directors, Executive Officers and 5 Percent Stockholders			7
Nominees for Election at 2006 Annual Meeting			8
Corporate Governance Guidelines			8
Committees Of The Board Of Directors			9
Board Committee Membership Roster			9
Functions of Committees			10
Audit Committee Report			12
Compensation Committee Interlocks and Insider Participation			12
Directors’ Compensation			13
Securities Owned By Directors, Nominees And Named Executive Officers			15
Section 16(a) Beneficial Ownership Reporting Compliance			17
Security Ownership Of Certain Beneficial Owners			18
Stock Price Performance Graph			19
Executive Compensation			20
Compensation Committee Report on Executive Compensation			20
Summary Compensation Table			25
Option/SAR Grants in Last Fiscal Year			27
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Values			28
Long-Term Incentive Plans – Awards in Last Fiscal Year			29
Other Benefits			30
Defined Contribution Plans			30
Pension Plans			31
Equity Compensation Plan Information			34
Proposals You May Vote On			35
Election of Directors			35
Ratification of Appointment of Independent Auditors			39
Pre-Approval of Audit Services			40
Fees Paid to Independent Auditors			40
Management Proposal – Adoption of Performance Goals Within The 2006 Management Incentive Compensation Plan			41
Management Proposal – Approval of Amendment and Restatement of The Charter			44
Stockholder Proposals			47
Appendix A –Adoption of Performance Goals Within The 2006 Management Incentive Compensation Plan			A-1
Appendix B – Approval of Amendment and Restatement of The Charter			B-1
Appendix C – Directions To Annual Meeting Location			C-1

 i 

GENERAL INFORMATION

Lockheed Martin Corporation (the “Corporation”) is furnishing this Proxy Statement to solicit proxies on behalf of the Board of Directors (the “Board”) of the Corporation for the Annual Meeting to be held on Thursday, April 27, 2006 at 10:30 a.m. Eastern time at the Norfolk Marriott Waterside Hotel, 235 East Main Street, Norfolk, Virginia 23510, and at any adjournment or postponement thereof. Please refer to the directions to the meeting location that appear at the back of this Proxy Statement. Our principal executive office is located at 6801 Rockledge Drive, Bethesda, Maryland 20817. The Notice of the Annual Meeting, this Proxy Statement, the Proxy Card and the enclosed Annual Report will be sent to our stockholders commencing on or about March 23, 2006.

Annual Meeting Admission

An admission ticket or proof of ownership (such as a recent brokerage statement or letter from your broker showing that you owned Lockheed Martin’s stock as of March 1, 2006) and a form of photo identification are required for admission to the meeting. A detachable admission ticket is attached to your Proxy Card. Internet voters will be guided to a site where they will be able to print an admission ticket.

All bags, briefcases and packages will be held at registration and will not be allowed in the meeting.

“Householding” of Documents

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, known as “householding,” is designed to reduce our printing and postage costs. If a registered stockholder residing at an address with other registered stockholders wishes to receive a separate Annual Report or Proxy Statement in the future, he or she may contact Computershare Trust Company, N.A., Shareholder Relations, P.O. Box 43023, Providence, RI 02940-3023 or call 1-877-498-8861. If you own shares through a bank, broker, or other nominee, you should contact the nominee concerning householding procedures.

View Future Annual Reports and Proxy Statements Online and Reduce Mailing Costs

Registered and beneficial stockholders wishing to view future Annual Reports and Proxy Statements over the internet rather than receiving copies in the mail should go online at http://www.shareholder.com/lmt/shareholder.cfm and complete the online consent form. Your request for electronic transmission will remain in effect for all future Annual Reports and Proxy Statements, unless it is withdrawn. Withdrawal procedures are also located online at the above referenced website.

Requests for Written Copies of 2005 Annual Report

We will provide, without charge, a copy of our Annual Report for the year ended December 31, 2005, filed with the Securities and Exchange Commission (“SEC”) upon the written request of any registered or beneficial owner of common stock entitled to vote at the Annual Meeting. Requests should be made by mailing Investor Relations, Lockheed Martin Corporation, 6801 Rockledge Drive, Bethesda, Maryland 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.

2007 Annual Meeting and Stockholder Proposals

Under the SEC’s Rule 14a-8, proposals of stockholders to be presented at our 2007 Annual Meeting must be received by the Secretary of the Corporation at our principal executive office no later than November 17, 2006 to be included in the Proxy Statement and on the Proxy Card that will be solicited by the Board. The inclusion of any proposal will be subject to applicable rules of the SEC.

GENERAL INFORMATION

Our bylaws require advance notice of any proposal by a stockholder intended to be presented at the Annual Meeting that is not included in our notice of meeting and proxy statement or made by or at the direction of the Board, including any proposal for the nomination for election of a director. To be properly brought before the 2007 Annual Meeting, written notice of nominations for directors or other business to be introduced by a stockholder must be received between the dates of November 17, 2006 and December 15, 2006, inclusive. A notice of a stockholder proposal must contain specified information concerning the matter to be brought before the meeting and concerning the stockholder proponent. Any waiver by us of these requirements relating to a particular stockholder proposal will not constitute a waiver of any other stockholder proposal nor will it obligate us to waive these requirements regarding future submissions of that or any other stockholder proposal. A complete list of the information 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.

Corporate Governance Information

Stockholders will find information about our corporate governance practices on Lockheed Martin’s website at http://www.lockheedmartin.com/investor. Our website contains information about our Board, Board committees, copies of our bylaws and charter, Code of Ethics and Business Conduct and Corporate Governance Guidelines. Information about our insider transactions is also 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.

How to Contact the Non-management Directors of Lockheed Martin Corporation

The Nominating and Corporate Governance Committee of the Lockheed Martin Board has created a process by which parties 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
Nominating and Corporate Governance
Committee
Lockheed Martin Corporation
6801 Rockledge Drive, MP 200-10
Bethesda, MD 20817

All correspondence is reviewed by the Secretary of the Corporation. At the direction of the Board, correspondence regarding routine stockholder matters and services (e.g., stock transfer, dividends, etc.) will be resolved by the Secretary of the Corporation. Concerns 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 will determine whether full Board attention is required. Any director may at any time review a log of all correspondence received by the Corporation that is addressed to the Board and request copies of such correspondence.

VOTING INFORMATION

We are soliciting your vote on the election of directors, ratification of the appointment of the independent auditors, a management proposal on the adoption of the performance goals within the 2006 Management Incentive Compensation Plan, a management proposal to approve the Amendment and Restatement of The Charter and four stockholder proposals. Stockholders as of the close of business on the record date, March 1, 2006 are entitled to vote at the Annual Meeting. On March 1, 2006 there were 439,114,935 shares outstanding of Lockheed Martin’s common stock, $1.00 par value per share. Each share outstanding on the record date (including shares held through Direct Invest, our dividend reinvestment and stock purchase plan or through our employee benefit plans) is entitled to one vote on each proposal presented at the Annual Meeting. The number of shares held in your account(s) is shown on the Proxy Card sent to you.

How to Vote

Registered stockholders may vote their proxy by internet, telephone or mail, as explained below. Doing so does not limit your right to vote at the Annual Meeting. If your shares are registered in your name, you will need the control number that appears on your Proxy Card when you access the website or when you call. If your shares are held in the name of a broker, bank or other nominee, you will be provided voting instructions from the nominee.

•		INTERNET: Access the internet voting site at http://www.computershare.com/expressvote 24 hours a day up until 11:59 p.m. on April 26, 2006. Instructional screen prompts will guide you through the voting process and a confirmation of your voting selections will be required before your vote is recorded.
•		TELEPHONE: Dial toll free 1-800-652-8683, 24 hours a day up until 11:59 p.m. on April 26, 2006 (or 1-781-575-2300 toll call outside of U.S.). Voice prompts will guide you through the voting process and a confirmation of voting selections will be required before your vote is recorded.
•		PROXY CARD: Simply mark, date and sign the Proxy Card and return it to Computershare Trust Company, N.A. in the postage-paid envelope provided. To vote in accordance with the Board’s recommendations, simply sign and date the Proxy Card and return it in the postage-paid envelope provided.

How to Revoke a Vote

You may revoke your vote at any time before the Annual Meeting by resubmitting your vote by internet, telephone or mail; by voting a ballot at the meeting; or by specifically revoking your vote in a letter to the Secretary of the Corporation at our principal executive office or at the Annual Meeting. Your personal attendance at the meeting does not revoke your proxy. Your last vote, prior to or at the Annual Meeting, is the vote that will be counted.

Voting Representation and Tabulation

A quorum, consisting of a majority of the shares outstanding and entitled to vote, is necessary to conduct the Annual Meeting, elect directors and consider the proposals on the agenda at the Annual Meeting. A quorum will be determined by the number of shares represented by persons attending the Annual Meeting and by properly executed and returned proxies. All matters to be presented at the Annual Meeting require the affirmative vote of a majority of the votes entitled to be cast at the meeting.

Votes at the Annual Meeting will be tabulated by two independent judges of election from Computershare Trust Company, N.A. An abstention will not be counted “for” or “against” a proposal but will be counted for the purpose of determining the existence of a quorum. Because our bylaws require the affirmative vote of a majority of the votes entitled to be cast at a meeting to authorize action on any matter, abstentions have the effect of a vote against a proposal. Accordingly, votes withheld from

VOTING INFORMATION

director-nominees are tabulated as votes against the director-nominees in the election of directors’ proposal.

Under the rules of the New York Stock Exchange (“NYSE”), if your shares are held by a broker, you must give specific voting instructions to the broker on how you wish to vote with regard to the election of directors, the ratification of the appointment of independent auditors and the management proposals on the adoption of the performance goals within the 2006 Management Incentive Compensation Plan and approval of the Amended and Restatement of the Charter or the broker may vote your shares at his or her discretion. Conversely, the NYSE rules do not allow your broker to use his or her discretion to vote on the four stockholder proposals. Without specific instructions from you on how you wish to vote on the four stockholder proposals, a “broker non-vote” may result, which has the effect of a negative vote on the four stockholder proposals.

If you hold shares through one of our defined contribution plans, you may instruct a plan fiduciary on how you wish to vote shares allocated to your account. You will receive separate information from a plan fiduciary concerning how you can instruct your plan fiduciary. If you don’t provide instructions, your shares will be voted at the applicable plan fiduciary’s discretion.

Solicitation of Proxies

All expenses of soliciting proxies for the Annual Meeting will be paid by the Corporation. Proxies may be solicited by personal interview, telephone or mail and arrangements are made with brokerage houses and other custodians, nominees and fiduciaries to send proxy material to beneficial owners. We will, upon request, 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 telephone, internet or otherwise. Stockholders are requested to return their proxies without delay.

GOVERNANCE MATTERS

Nominating and Corporate Governance Committee

Lockheed Martin’s Nominating and Corporate Governance Committee (the “Committee”) is a standing committee of the Board and its charter is available to stockholders on our website at http://www.lockheedmartin.com/investor. The Committee is independent under the listing standards of the NYSE. Its principal purposes are to recommend to the Board—

•		the composition of the Board and its committees including size and qualifications;
•		the role of the Board in the corporate governance process; and
•		compensation for the Board.

The Committee also oversees the evaluation of the Board and its committees.

Identifying and Evaluating Nominees for Directors

Each year, 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 Corporation’s process for identifying and evaluating candidates to be nominated to the Board starts with an evaluation of a candidate by the Chairman of the Nominating and Corporate Governance Committee followed by the Nominating and Corporate Governance Committee in its entirety and the Chief Executive Officer (“CEO”). Director candidates may also be identified by stockholders. The Corporation has also 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 Secretary of the Corporation at our principal executive office, 6801 Rockledge Drive, Bethesda, Maryland 20817. To be considered by the Board for nomination at the 2007 Annual Meeting, written notice of nominations by a stockholder must be received between the dates of November 17, 2006 and December 15, 2006, 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 under the heading “2007 Annual Meeting and Stockholder Proposals” on page 1. Self-nominations will not be considered. Proposed stockholder nominees will be presented to the Chairman of the Nominating and Corporate Governance Committee, who will decide if further consideration should be given to the nomination by the full Nominating and Corporate Governance Committee.

Director Qualifications

The Committee annually reviews the criteria for selection of director nominees. 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, to the Corporation and its stockholders. Criteria against which the slate of nominees have been measured include the following:

•		meets bylaw age requirement;
•		reflects highest personal and professional integrity;
•		meets NYSE independence criteria;
•		has relevant educational background;
•		has exemplary professional background;
•		has relevant past and current employment affiliation(s), Board affiliations and experience;
•		is free from conflicts of interest;
•		is technology-proficient;
•		possesses diverse background;
•		has demonstrated effectiveness;
•		possesses sound judgment;
•		has adequate time to devote to Board responsibilities;
•		brings diversity; and
•		represents the best interests of all stockholders.

During 2005 particular emphasis was placed on identifying candidates with financial expertise,

GOVERNANCE MATTERS

government or aerospace industry experience. Korn/Ferry International was retained by the Corporation to assist in identifying potential nominees.

Director Independence

Each director-nominee’s independence from the Corporation is evaluated by the Committee and the Board to ensure compliance with the independence requirements of the NYSE listing and other regulatory standards. Our standards are as follows:

The Board believes that a director is independent if the director meets the current NYSE listing standards regarding independence and there is no relationship between the director and Lockheed Martin that would present, or appear to present, any conflict of interest to the Corporation. The Board will make determinations concerning a director’s independence based on a broad consideration of all relevant facts and circumstances.

A director is not independent if:

•		The director is, or has been within the last three years, an employee of Lockheed Martin, or an immediate family member is, or has been within the last three years, an executive officer of Lockheed Martin.
•		The director has received, or has an immediate family member who is an executive officer and has received, during any twelve-month period within the last three years, more than $100,000 in direct compensation from Lockheed Martin, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service).
•		(A) The director or an immediate family member is a current partner of a firm that is Lockheed Martin’s internal or external auditor; (B) the director is a current employee of such a firm; (C) the director has an immediate family member who is a current employee of such a firm and who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or (D) the director or an immediate family member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on Lockheed Martin’s audit within that time.
•		The director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of Lockheed Martin’s present executive officers at the same time serves or served on that company’s compensation committee.
•		The director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, Lockheed Martin for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2 percent of such other company’s consolidated gross revenues (as reported in the last completed fiscal year of such other company).

No director qualifies as independent unless the Board affirmatively determines that the director has no material relationship with Lockheed Martin (either directly or as a partner, stockholder or officer of an organization that has a relationship with Lockheed Martin).

Under NYSE rules, “immediate family member” includes a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such person’s home. An “executive officer” has the same meaning specified for the term “officer” in Rule 16a-1(f) under the Securities Exchange Act of 1934. “Lockheed Martin” includes any subsidiary of Lockheed Martin that is required to be consolidated under generally accepted accounting principles.

GOVERNANCE MATTERS

The Committee and the Board conducted their annual review of director independence in February 2006. As part of this review, the Committee and Board considered transactions and relationships between each director or any member of his or her immediate family and the Corporation and its subsidiaries and affiliates.

As a result of this review, the Board affirmatively determined that all of the directors nominated for election at the Annual Meeting are independent of the Corporation, with the exception of Robert J. Stevens. The Board determined that Mr. Stevens is not independent as a result of his employment as CEO of the Corporation.

In determining that each of the other directors is independent, the Committee and Board considered the relationships described below and those disclosed under “Certain Relationships and Related Party Transactions,” which it determined were immaterial to the directors’ independence. The Committee and Board considered that the Corporation and its subsidiaries in the ordinary course of business purchase products and services to, or sell products and services to, companies at which some of our directors are or have been officers. In each case, the amount paid to or received from these companies in each of the last three years did not exceed the greater of $1 million or 2 percent of total revenue threshold described above. The Board also considered that some directors were directors (but not officers) of companies or institutions to which the Corporation purchases or sells products and services. These relationships included: Mrs. King, director of Marsh and McLennan Companies, Inc. and Mr. Ellis, director of Inmarsat plc. In determining that these relationships did not affect the independence of those directors, the Board considered that none of the directors serving on other companies’ boards had any direct material interest in, or received any special compensation in connection with, Lockheed Martin’s business relationships with those companies.

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

The Committee and the Board considered the following relationships:

The Committee and Board determined that Messrs. Loy’s and Ralston’s employment as Senior Counselor and Vice Chairman, respectively, of The Cohen Group, a consulting business that performs services to the Corporation, does not affect the two directors’ independence. In 2005, the Corporation paid The Cohen Group approximately $550,000, an amount constituting less than the greater of $1 million or 2 percent of The Cohen Group’s revenues in 2005.

The Committee and Board determined that Mr. Ukropina’s status as Of Counsel to O’Melveny and Myers, a law firm used by the Corporation, 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 Corporation. The Committee and Board are further satisfied that, because Mr. Ukropina is retired and provides no active services to O’Melveny and Myers, he is independent for purposes of serving on the Audit Committee.

The Corporation currently employs approximately 135,000 employees and has an active recruitment program for soliciting job applications from qualified candidates. The Corporation seeks to hire the most qualified candidates and consequently does 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 2005 base salary including MICP and stock options granted in 2005, where applicable) include Mr. Bennett’s son-in-law, Jeffrey D. MacLauchlan, Vice President, Financial Strategies ($285,000 in base salary, $232,500 in MICP and a stock option

GOVERNANCE MATTERS

award of 11,500 shares); Mr. Ralston’s brother-in-law, Mark E. Dougherty, Director, Business Development Analysis ($135,713); Mr. Savage’s son, Mark Savage, Financial Analyst-Staff ($91,080); Michael F. Camardo’s two sons-in-law, Robert M. Rynkar, Financial Analyst ($59,740) and John P. Foley, Cost Estimation Director ($122,800 in base salary and $20,700 in MICP); and G. Thomas Marsh’s brother-in-law, Larry Roubidoux, Engineering Planning Senior Manager ($137,473). The compensation of each family member was established in accordance with the Corporation’s employment and compensation practices applicable to employees with equivalent qualifications, experience and responsibilities. None of these individuals served as executive officers during 2005.

Mr. Kubasik is entitled to a fixed monthly payment at age 65 from an ERISA-qualified pension plan sponsored by Ernst & Young LLP, our independent auditors and Mr. Kubasik’s employer from 1983 to 1999. The net present value of this benefit is less than $100,000.

The Board 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 Corporation or any of its committees is permitted by the decree.

In addition, from time to time, the Corporation has purchased services in the ordinary course of business from financial institutions that beneficially own five percent or more the Corporation’s common stock. In 2005, the Corporation paid fees of $323,000 to Barclay’s Global Investors, N.A. for serving as a participating bank in certain of the Corporation’s credit facilities and $867,000 to State Street Bank and Trust Company and its affiliates for credit-facility and benefit-plan-administration fees.

Nominees for Election at 2006 Annual Meeting

There are 15 nominees for election to the Board in April 2006, and their biographical information is provided on page 35. Each nominee currently serves as a director. 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.

The Board ratified the slate of directors and recommends that the stockholders vote for the nomination of directors.

Corporate Governance Guidelines

The Corporation’s governance guidelines are available for viewing on our corporate website at http://www.lockheedmartin.com/investor.

COMMITTEES OF THE BOARD OF DIRECTORS

Board Committee Membership Roster

Management

Nominating

Strategic

Ethics and

Development

and

Affairs

Corporate

and

Corporate

and

Name

Audit1

Responsibility1

Executive

Compensation

Governance

Finance

E. C. “Pete” Aldridge, Jr.

X

X3

Nolan D. Archibald

X

X2, 3

X

Marcus C. Bennett

X

X

James O. Ellis, Jr.

X

X

Gwendolyn S. King

X2

X

X3,5

James M. Loy

X

X

Douglas H. McCorkindale

X

X6

X2

Eugene F. Murphy

X3

X

Joseph W. Ralston

X

X

Frank Savage

X

X

James M. Schneider

X4

X3

Anne Stevens

X

X3

Robert J. Stevens

X2

James R. Ukropina

X

X

X2

Douglas C. Yearley

X2, 4

X

X

Number of Meetings in 2005

6

1

0

5

3

3

NOTES TO TABLE:

(1)		Effective August 5, 2005, the Audit and Ethics Committee was renamed the Audit Committee with the transfer of ethics oversight to the new Ethics and Corporate Responsibility Committee.
(2)		Committee Chairman
(3)		Member, Stock Option Subcommittee
(4)		The Board has determined that Messrs. Schneider and Yearley meet the SEC’s criteria of an “audit committee financial expert.” The two directors are independent under the Corporate Governance standards of the NYSE.
(5)		Effective April 27, 2006, Mrs. King will leave the membership of the Management Development and Compensation Committee and Stock Option Subcommittee and join the Nominating and Corporate Governance Committee.
(6)		Effective April 27, 2006, Mr. McCorkindale will leave the membership of the Nominating and Corporate Governance Committee and join the Management Development and Compensation Committee and Stock Option Subcommittee.

COMMITTEES OF THE BOARD OF DIRECTORS

Functions of Committees

The complete text of our Committee charters are contained in our bylaws which can be found under the heading “Corporate Governance” on our website at http://www.lockheedmartin.com/investor.

Audit Committee:

•		Directly responsible for appointment, termination, compensation and retention of independent auditors;
•		Responsible for pre-approval of all audit, audit-related, tax and all other services performed by independent auditors;
•		Reviews results of independent auditors’ internal quality control procedures;
•		Reviews and assesses independent auditors’ independence; monitors lead partner rotation;
•		Reviews independent auditors’ report on critical accounting policies and practices, including alternative treatments under GAAP;
•		Reviews independent auditors’ reports on management’s assessment of internal control over financial reporting and on the effectiveness of internal control over financial reporting;
•		Reviews with independent auditors any audit issues and management’s response;
•		Reviews results and assessment of disclosure controls and procedures;
•		Reviews/discusses CEO and Chief Financial Officer (“CFO”) certifications for financial statements;
•		Reviews with the General Counsel status of litigation/legal matters;
•		Reviews and discusses annual report, Form 10-K, Form 10-Qs, including financial statements and Management’s Discussion and Analysis;
•		Reviews and discusses quarterly/annual earnings releases;
•		Reviews risk assessments and related management policies;
•		Reviews and assesses Committee’s charter;
•		Performs annual performance evaluation of Committee;
•		Establishes procedures for hiring former employees of independent auditors;
•		Reviews qualifications and work of the Corporation’s internal audit staff, the scope of the internal audit staff’s work plan for the year, and associated resources, as appropriate, significant findings and management’s actions to address these findings;
•		Establishes procedures for (i) the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters and (ii) the confidential, anonymous submission of concerns regarding questionable accounting or auditing matters; and reviews any complaints received pursuant to such procedures;
•		Reviews the Corporation’s internal controls with the internal and independent auditors;
•		Meets in executive session as a Committee and meets periodically in executive session with representatives of the Corporation’s independent auditors, management and internal audit department;
•		Recommends inclusion of audited consolidated financial statements in Form 10-K; and
•		Reviews correspondence relating to compliance with the Foreign Corrupt Practices Act.

Ethics and Corporate Responsibility Committee:

•		Monitors compliance with Code of Ethics and Business Conduct and recommends amendments to that Code;
•		Reviews and monitors environmental, health and safety laws and regulations;
•		Reviews and monitors the adequacy of the Corporation’s policies and procedures with respect to diversity and Equal Employment Opportunity (EEO);
•		Oversees matters pertaining to community and public relations, including governmental relations; and
•		Reviews the proposed charitable contributions budget of the Corporation and makes recommendations to the Board for adoption.

COMMITTEES OF THE BOARD OF DIRECTORS

Executive Committee:

•

May exercise powers in the management of our business and affairs as may be authorized by the Board, subject to applicable law.

Management Development and Compensation Committee:

•		Reviews and approves corporate goals and objectives relevant to the CEO’s compensation; evaluates the CEO’s performance; and recommends to the independent members of the Board the compensation level based on this evaluation;
•		Reviews proposed candidates for senior officer positions and their development plans and recommends to the Board the compensation to be paid for services of senior elected officers;
•		Appraises the performance of management and fixes the compensation of all other elected officers;
•		Recommends to the Board incentive compensation plans which includes approval of the benefits provided by any bonus, supplemental, and special compensation plans, including pension, insurance, and health plans, but excluding performance-based executive compensation plans; and
•		Conducts a performance evaluation of the committee.

Stock Option Subcommittee:

•

Administers any equity or performance-based executive compensation plan and approves awards granted.

Nominating and Corporate Governance Committee:

•		Recommends to the Board nominees for election to fill any vacancy and the slate of directors to stand for election by the stockholders at the annual meeting; reviews the criteria for selection of director nominees and identifies individuals for nomination as directors;
•		Oversees the organization and function of the Board’s committees; recommends to the Board the membership of each committee and the filling of any vacancy occurring on a committee;
•		Develops and recommends to the Board corporate governance guidelines;
•		Reviews and recommends to the Board the compensation of the Board, including the nature and adequacy of director and officer indemnification and liability insurance;
•		Develops and recommends to the Board an annual self-evaluation of the Board and each of its committees; conducts a performance evaluation of the committee; and
•		The Chair is the presiding director at Board meetings while in executive sessions of the Board, or when the Chairman is ill, absent, incapacitated or otherwise unable to carry out the duties of Chairman.

Strategic Affairs and Finance Committee:

•		Reviews and recommends to the Board management’s long-term strategy, which includes the allocation of corporate resources;
•		Reviews and recommends to the Board certain strategic decisions regarding exit from existing lines of business and entry into new lines of business, acquisitions, joint ventures, investments or dispositions of businesses and assets, and the financing of related transactions;
•		Reviews the allocation of corporate resources, including the relationship of activities and allocations with the long-term business objectives and strategic plans;
•		Reviews our financial condition and the status of all benefit plans and recommends to the Board proposed changes to the capital structure, including the incurrence of indebtedness and the issuance of additional equity securities; and
•		Reviews and recommends to the Board our proposed capital expenditure budget.

COMMITTEES OF THE BOARD OF DIRECTORS

Audit Committee Report

We oversee Lockheed Martin’s financial reporting process on behalf of the Board. All members of the Committee meet the independence requirements of the SEC and NYSE. We operate under a written charter approved by the Board, consistent with the corporate governance rules issued by the SEC and the NYSE. Our charter is contained in Section 3.03 of the Corporation’s Bylaws, which is available on the Corporation’s website at http://www.lockheedmartin.com/investor.

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 external 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, 2005 audited consolidated financial statements, we have:

1.		reviewed and discussed with management and the independent auditors the Corporation’s audited consolidated financial statements, including discussions regarding critical accounting policies, other financial accounting and reporting principles and practices appropriate for the Corporation, the quality of such principles and practices, and the reasonableness of significant judgments;
2.		discussed with the independent auditors the items that are required to be discussed under applicable professional auditing standards and regulations, including discussions about the quality of the financial statements and clarity of the related disclosures; and
3.		reviewed and considered the written disclosures in the letter received from Ernst & Young LLP, as required by Independence Standards Board Standard No. 1, including a discussion about their independence from Lockheed Martin and management.

Based on the reviews and discussions above, we recommended to the Board that the audited consolidated financial statements for 2005 be included in Lockheed Martin’s Annual Report on Form 10-K for the year ended December 31, 2005, for filing with the SEC. The Board approved our recommendation.

Submitted on February 23, 2006 by the Audit Committee:

Douglas C. Yearley, Chairman		Anne Stevens
E. C. “Pete” Aldridge, Jr.		James R. Ukropina
James M. Schneider

Compensation Committee Interlocks and Insider Participation

There are no disclosures under this section.

DIRECTORS’ COMPENSATION

Directors receive a portion of their compensation in the form of our common stock. Each director has the option to defer all cash compensation and be credited with earnings as though the cash compensation had been invested in our common stock. This approach aligns the interests of the Board with the stockholders.

During 2005, the Board held 10 meetings, and all incumbent directors attended at least 75 percent of scheduled Board and committee meetings.

The following table summarizes the compensation of our directors including changes effective November 1, 2005 for the remainder of 2005 and 2006. Mr. Stevens was not compensated for his service as a director.

2005 Annual Compensation

Cash retainer		$75,000; $90,000 effective November 1, 2005
Stock retainer1		$75,000 ($90,000 effective January 1, 2006) in stock units, stock options or 50/50 combination thereof
Non-Employee Chairman of the Board retainer2		$500,000 annualized (effective and prorated accordingly for the period January 1, 2005 through April 28, 2005)
Committee Chairman retainer		$5,000; $12,500 effective November 1, 2005
Audit Committee Chairman retainer		$5,000; $20,000 effective November 1, 2005
Deferred compensation plan3		Cash retainer deferrable with earnings at prime rate, S&P 500 or LMT stock return
Charitable award program4 [Participation in program limited to directors elected prior to 2004 Annual Meeting.]		$1,000,000 donation ($100,000 following director’s retirement; $900,000 in 9 annual installments following director’s death)
Travel accident insurance5		$1,000,000
Director education institutes/activities		Reimbursed for costs and expenses
Perquisites6		Home computer system

NOTES TO TABLE:

(1)

Under the Lockheed Martin Corporation Directors’ Equity Plan (“Directors’ Equity Plan”), each non-employee director may elect to receive (i) a number of stock units with a value on January 15 equal to $75,000 or (ii) options to purchase a number of shares of stock, which options have an aggregate fair market value on January 15 of $75,000 or (iii) a combination of stock units with a value on January 15 equal to $37,500 and options to purchase a number of shares of stock which options have an aggregate fair market value on January 15 of $37,500. The amount a director ultimately receives will depend upon the performance of Lockheed Martin stock following the award. 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, the vested stock units are distributed, at the director’s election, in whole shares of stock or in cash, in a

DIRECTORS’ COMPENSATION

		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 applicable dividend payment dates). Stock options are rights to purchase a specified number of shares of our common stock at an exercise price equal to 100 percent of the fair market value of the stock on the grant date. The options granted pursuant to the Directors’ Equity Plan are non-qualified stock options and have a term of ten years. A director may exercise the options during the ten-year term after meeting a one-year vesting requirement. A director has no voting, dividend or other stockholder rights for the shares of common stock covered by an option until he or she becomes the holder of record of those shares. The Directors’ Equity Plan was approved by the stockholders in 1999. Effective January 1, 2006, each non-employee director’s annual equity award was increased from $75,000 to $90,000.
(2)		Dr. Vance D. Coffman served as non-employee Chairman of the Board from January 1, 2005 until his retirement April 28, 2005.
(3)		The Lockheed Martin Corporation Directors’ Deferred Compensation Plan (the “Directors’ Deferred Compensation Plan”) provides non-employee directors the opportunity to defer up to 100 percent of the cash portion of their fees. Deferred amounts earn interest at a rate that tracks the performance of (i) the prime rate, (ii) the published index for the Standard & Poor’s 500 Index (“S&P 500 Index”) (with dividends reinvested) or (iii) our common stock (with dividends reinvested), at the director’s election. A participating director’s deferred fees generally will be distributed (in a lump sum or in up to 15 installments) commencing (i) the January following the year in which the director terminates service; (ii) the next January 15 or July 15 after the director terminates service; or (iii) the January 15 in the year after the director has terminated service, and reached a specified birthday.
(4)		The Lockheed Martin Corporation Directors’ Charitable Award Plan (the “Directors’ Charitable Award Plan”), which was amended to limit participation to directors elected prior to the 2004 Annual Meeting, provides that Lockheed Martin will make donations to tax-exempt organizations previously recommended by the director up to an aggregate of $1 million for each director. The Directors’ Charitable Award Plan, amended effective April 2004, provides that $100,000 will be contributed at the time of retirement of a director; the remaining $900,000 will be contributed upon the death of the director. Directors are vested under this Plan if they have served for at least five years on the Lockheed Martin Board or their service on the Lockheed Martin Board is terminated due to death, disability or retirement. Under the terms of the Directors’ Charitable Award Plan, if there is a change in control of Lockheed Martin, all participating directors in the plan shall immediately become vested.
(5)		Each non-employee director is provided travel accident insurance up to $1 million in the event the director is involved in an accident while traveling on business related to Lockheed Martin.
(6)		Each director may elect to be provided a home computer and printer. Technical assistance and internet access are provided by the Corporation. The average cost per director in 2005 was $2,200.

SECURITIES OWNED BY DIRECTORS, NOMINEES AND NAMED
EXECUTIVE OFFICERS

The following table shows the Lockheed Martin common stock beneficially owned by and stock units credited to each named executive officer, director nominee, and all directors and executive officers as a group as of February 1, 2006. 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 one percent of the common stock outstanding. All amounts have been rounded to the nearest whole share.

		Common Stock
Name of Individual or		Beneficially
Identity of Group		Owned1,2				Stock Units				Total
E. C. “Pete” Aldridge, Jr.			0				5,041	4			5,041
Nolan D. Archibald			0				6,530	4			6,530
Marcus C. Bennett			20,872				12,103	4			32,975
Michael F. Camardo			337,330				36,886	5,6,7			374,216
Robert B. Coutts			284,441				32,667	5,6,7			317,108
James O. Ellis, Jr.			0				2,822	4			2,822
Gwendolyn S. King			552	3			13,898	4,8			14,450
Christopher E. Kubasik			166,238				28,192	5,6,7			194,430
James M. Loy			0				1,871	4			1,871
G. Thomas Marsh			159,445				44,116	5,6			203,561
Douglas H. McCorkindale			11,268				11,489	4,9			22,757
Eugene F. Murphy			38,704				1,130	8			39,834
Joseph W. Ralston			0				5,302	4			5,302
Frank Savage			7,746				25,122	4,8,9,10			32,868
James M. Schneider			2,000	3			736	4			2,736
Anne Stevens			5,078				8,415	4,9			13,493
Robert J. Stevens			844,301				148,877	5,6,7			993,178
James R. Ukropina			1,630				17,508	4,8,9,10			19,138
Douglas C. Yearley			3,260	3			14,392	4,8,10			17,652
All directors and executive officers as a group (25 individuals including those named above)			2,130,552				461,755				2,592,307

SECURITIES OWNED BY DIRECTORS, NOMINEES AND NAMED
EXECUTIVE OFFICERS

NOTES TO TABLE:

(1)		Includes shares not currently owned but which could be acquired within 60 days following February 1, 2006 through the exercise of stock options for Messrs. Bennett, Camardo, Coutts, Kubasik, Marsh, McCorkindale, Murphy, Savage, Stevens and Ms. Stevens in the amount of 10,000; 289,666; 230,666; 138,332; 133,666; 11,268; 32,704; 7,745; 764,766; and 5,078 shares, respectively.
(2)		The shares shown include an approximation of the number of shares attributable to the participant’s account in the Lockheed Martin Salaried Savings Plan (“Salaried Savings Plan”) as of February 1, 2006 for Messrs. Bennett, Camardo, Coutts, Kubasik, Marsh and Stevens of 871; 4,675; 1,363; 906; 779; and 712, respectively. Participants have voting power and investment power over such shares. Previously, participants had only voting power over shares contributed by us as matching contributions to that plan until age 55 when they could also assume investment power over shares contributed by us as matching contributions to the plan.
(3)		Shared voting and investment power.
(4)		Includes stock units under the Directors’ Equity Plan. As of February 1, 2006 each of Mrs. King and Messrs. Ukropina and Yearley have been credited with 12,768 stock units respectively; Ms. Stevens and Messrs. Aldridge, Archibald, Bennett, Ellis, Loy, McCorkindale, Ralston, Savage and Schneider have been credited with 4,234; 5,041; 6,530; 12,103; 2,822; 1,871; 4,521; 5,302; 5,694; and 736 units, respectively. There are no voting rights associated with stock units. Units are distributed in the form of cash or stock as elected by the director.
(5)		Shares shown also include an approximation of the number of equivalent stock units credited to the Participant’s account (if applicable) in the Lockheed Martin Corporation Supplemental Savings Plan (“Supplemental Plan”) as of February 1, 2006 for Messrs. Camardo, Coutts, Kubasik, Marsh and Stevens of 7,594; 2,913; 1,202; 2,667; and 4,045, respectively. Amounts credited to a participant’s account in the Supplemental Plan are distributed from the participant’s account in the form of cash following the participant’s termination of employment. There are no voting rights associated with stock units.
(6)		The shares shown include an approximation of the number of equivalent stock units in the participant’s 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 (“Omnibus Plan”)) account as of February 1, 2006 for Messrs. Camardo, Coutts, Kubasik, Marsh and Stevens of 23,792; 22,754; 18,491; 41,449; and 12,833, respectively. There are no voting rights associated with stock units. 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, 2006.
(7)		Includes restricted stock units (“RSUs”) under the Amended and Restated Incentive Performance Award Plan (“Award Plan”). As of February 1, 2006 each of Messrs. Camardo, Coutts, Kubasik and Stevens have been credited with 5,500; 7,000; 8,500; and 132,000 RSUs, respectively. There are no voting rights associated with RSUs. The RSUs represent a contingent right to receive one share of common stock and a cash payment equal to cash dividends paid on our stock. The RSUs are subject to a one-year performance period. If the value of the RSUs on the date of grant exceeds the performance goal specified in the award agreement, a number of RSUs equal in value to the performance shortfall is forfeited. Subject to the performance period, the RSUs for each of the foregoing executives, except Mr. Stevens, vest 100 percent on February 1, 2009, the third anniversary of the grant. Vesting may accelerate in the case of retirement, death, disability, layoff, and change in control or divestiture. Subject to the performance period, Mr. Stevens’ RSUs vest as follows: 40,000 vest on February 1, 2009 (a position of which vests upon retirement after January 31, 2007 but before full vesting); 55,200 vest on September 8, 2011; and the remaining 36,800 vest in equal annual installments of 7,360 RSUs for each of the next 5 years beginning on September 8, 2012.
(8)		Includes stock units under the Lockheed Martin Corporation Directors’ Deferred Stock Plan (“Directors’ Deferred Stock Plan”). As of February 1, 2006 each of Mrs. King and Messrs. Murphy, Savage, Ukropina and Yearley have been credited with 1,130 stock units. There are no voting rights associated with stock units.
(9)		Includes stock units under the Directors’ Deferred Compensation Plan representing deferred

SECURITIES OWNED BY DIRECTORS, NOMINEES AND NAMED
EXECUTIVE OFFICERS

		cash compensation for Ms. Stevens and Messrs. McCorkindale, Savage and Ukropina. As of February 1, 2006 Ms. Stevens and Messrs. McCorkindale, Savage and Ukropina have been credited with 4,181; 6,967; 15,796; and 3,116 stock units, respectively. There are no voting rights associated with stock units and the stock units are distributable in the form of cash.
(10)		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, 2006 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) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires that our officers and directors (and persons who own more than 10 percent 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 2005.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table shows information regarding each person known to be a “beneficial owner” of more than five percent 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 notes to this table.

Amount and Nature of

Percent of Class

Name and Address of Beneficial Owner

Class of Stock

Beneficial Ownership

Owned

Barclays Global Investors, N.A

Common

28,940,875

1

6.66

45 Fremont Street San Francisco, California 94105

State Street Bank and Trust Company

Common

82,842,904

2

19.10

225 Franklin Street Boston, Massachusetts 02110

U.S. Trust Co., National Association

Common

70,562,672

3

16.25

515 S. Flower Street, #2800 Los Angeles, California 90071

NOTES TO TABLE:

(1)

As reported in Schedule 13G filed on January 26, 2006 by Barclays Global Investors, N.A. (“Barclays”). Barclays reported it had beneficial ownership of and sole dispositive power over 24,573,512 shares (5.66 percent) and sole voting power over 21,077,339 shares; Barclays Global Fund Advisors reported it had beneficial ownership of and sole dispositive power over 1,523,798 shares (0.35 percent) and sole voting power over 1,509,665 shares; Barclays Global Investors, Ltd., with principal offices at Murray House, 1 Royal Mint Court, London, EC3N 4HH, England, reported it had beneficial ownership of and sole dispositive power over 2,515,300 shares (0.58 percent) and sole voting power over 2,266,904 shares; and Barclays Global Investors Japan Trust and Banking Company Limited, with principal offices at Ebisu Prime Square Tower, 8th Floor, 1-1-39 Hiro Shibuya-Ku, Tokyo 150-0012 Japan, reported it had beneficial ownership of, and sole voting and dispositive power over 328,265 shares (0.08 percent).

(2)

As reported in Schedule 13G filed on February 14, 2006 by State Street Bank and Trust Company (“State Street”). State Street reported it had beneficial ownership of, and shared dispositive power with respect to 82,842,904 shares of common stock of which 70,738,296 shares of common stock (16.28 percent) 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 14,518,622 shares, of which 2,414,014 shares of common stock (0.56 percent) 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 15, 2006 by U.S. Trust Corporation (“U.S. Trust”). U.S. Trust reported it had beneficial ownership of 70,562,672 shares of common stock, shared voting power with respect to 69,564,709 shares, sole voting power with respect to 742,239 shares, sole dispositive power with respect to 828,410 shares, and shared dispositive power with respect to 196,651 shares. With respect to 68,324,282 shares of the shares reported (15.73 percent), U.S. Trust Company, N.A., a wholly-owned subsidiary of 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 68,324,282 shares of the shares reported on their respective Schedules 13G. U.S. Trust also reported beneficial ownership and shared voting power for 558,217 shares (approximately 0.13 percent) for which U.S. Trust Company, N.A. 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 654,010 shares (approximately 0.15 percent) for which U.S. Trust Company, N.A. acts as co-fiduciary with Vanguard Fiduciary Trust Company for an employee benefit plan sponsored by a subsidiary of Lockheed Martin.

STOCK PRICE PERFORMANCE GRAPH

COMPARISON OF CUMULATIVE TOTAL RETURN THROUGH 2005
LOCKHEED MARTIN, S&P 500 INDEX AND
S&P AEROSPACE & DEFENSE INDEX^1,2

The following chart compares the total return on a cumulative basis of $100 invested in Lockheed Martin common stock (“LMT”) on December 31, 2000 to the Standard and Poors Aerospace & Defense Index and the S&P 500 Index.

EXECUTIVE COMPENSATION

Compensation Committee Report on Executive Compensation

Overview

The Board has assigned the Management Development and Compensation Committee and the Stock Option Subcommittee (together the “Committee”) the task of reviewing and overseeing the Corporation’s executive compensation policies and programs. The Committee’s charter is part of the Corporation’s bylaws and is available on our website at http://www.lockheedmartin.com/investor.

The Committee consists entirely of Board members who are independent and are not officers or employees of the Corporation. The decisions of the Committee involving the compensation of the named executive officers were reviewed with the independent members of the Board and reflect the views of both the Committee and the other independent members of the Board.

None of the Corporation’s executive officers have employment agreements. All executive officers are at-will employees and serve at the pleasure of the Board.

Philosophy

Our executive compensation policies are designed to provide Lockheed Martin’s executives with incentives and compensation in a manner that advances the long- and short-term interests of shareholders while ensuring that the Corporation is able to attract and retain top executive management talent.

Methodology

Generally, management’s recommendations to the Committee are developed in consultation with an independent compensation consultant. The Committee has hired a separate independent compensation consultant with whom it reviews selected matters under our purview. Each year the Committee examines compensation information collected for us by an independent consultant from a group of 25 publicly held companies (referred to as our “Comparator Group”) of a size, complexity and quality similar to that of the Corporation. The Committee uses this survey data to identify competitive levels of compensation. The Committee compares our compensation program to the compensation levels of the Comparator Group using figures that have been weighted to reflect the relative size of the businesses. The Committee retains discretion over compensation decisions in making compensation awards to executives. Accordingly, the actual compensation (or any particular component of compensation) received by an executive may differ materially from the median of the Comparator Group.

Compensation Structure

Our executive compensation structure consists of three elements:

•		Annual base salary;
•		Annual incentive compensation – which is paid in cash with an option to defer; and
•		Long-term incentive compensation – which may include cash in the case of long term performance awards, stock options, RSUs, and restricted stock, each of which may be subject to performance-based and/or time-based vesting requirements.

Each element is described further below.

Annual Base Salary. The Committee evaluates each individual executive’s base salary by reference to the median for base salary of comparable executive positions in the Comparator Group. Our senior executive base salary philosophy permits the adjustment of an individual executive’s actual base salary above or below the median of the Comparator Group upon consideration of the following:

•

Sustained high level performance;

EXECUTIVE COMPENSATION

•		Demonstrated success in meeting or exceeding key financial and other business objectives;
•		Proven ability to create stockholder value;
•		Highly developed skills and abilities critical to the success of the business unit or Corporation;
•		Experience and time in position; and
•		Consideration of compensation paid to other executives with comparable responsibilities.

The Committee historically has evaluated the base salaries of the Corporation’s executive officers in September of each year. In September 2005, the Committee decided to review base salaries in the first quarter of each year to coincide with the end of the performance year and annual incentive compensation awards.

Annual Incentive. The Management Incentive Compensation Plan (“MICP”) provides an opportunity for executives to earn at-risk cash compensation based on the Committee’s assessment of performance measured against individual and organizational goals. Participation in the MICP is granted, in the Committee’s discretion, to key employees who are positioned to contribute significantly to the success of the Company. The Committee also considers subjective criteria such as the accomplishment of pre-established individual performance goals and contributions to operational performance as well as the individual’s implementation of and adherence to our policy on ethics and standards of conduct, customer satisfaction, teamwork, and retention and development of key personnel.

Each of the named executive officers is assigned a target percentage (ranging from 65 percent to 125 percent) of base salary determined by the level of contribution and responsibility of the participant’s position in the Corporation. The target percentages are in a range that is comparable to annual incentive targets for similar positions in the Comparator Group. The amount of incentive compensation generated by the target percentage is adjusted upwards or downwards after assessment of organizational performance (corporate or, in the case of business area participants other than the business area executive vice presidents, business area performance), as well as an individual’s contribution to that performance. Following adjustment for organizational and individual performance, bonuses awarded under the MICP for the named officers can range from 0 percent to approximately 195 percent of the target percentage.

Organizational performance is assessed based on a comparison to the Corporation’s long-range plan, as established at the end of the prior year and other standard measures of financial performance such as orders, sales, earnings, cash generation and return on invested capital (ROIC). Contract performance, percentage of contract award fees earned, rate and dollar value of new business won, backlog, achievement of cost efficiencies and effectiveness under the LM21 Program, level of profit margin and inter-company sales and earnings may be taken into account. Non-financial performance factors such as mission success, workplace safety and health, workforce diversity and strategic initiatives are also considered. Management’s assessment of performance relative to identified criteria is reviewed with the Committee. Selection of criteria and weighting of the various criteria in determining adjustments is within the discretion of the Committee.

Executives may elect to defer all or a portion of their bonus awards in a bookkeeping account that tracks the performance of the Corporation’s common stock, or an interest index, under the Corporation’s DMICP.

For 2006 the Committee has adopted, subject to stockholder approval, new performance-based standards to be reflected in the 2006 Management Incentive Compensation Plan (the “2006 MICP”). The 2006 MICP is intended to be eligible for full tax deductibility under Section 162(m) of the Internal Revenue Code. Additional information about this plan may be found at page 41.

Long-Term Incentive Compensation. The LTIP program provides for stock-based or cash-based incentive awards, the value of which is based on the Corporation’s performance under

EXECUTIVE COMPENSATION

specified criteria. During 2005 the Committee granted nonqualified stock options and LTIP program awards.

In making long-term incentive compensation awards, the Committee looks at the current economic value provided under long-term awards made by the Comparator Group. Long-term compensation awards are intended to provide the recipient the opportunity to receive a competitive level of long-term compensation where the actual amount received is linked to the performance of the Corporation. Stock options link compensation to the future return of the Corporation’s stock on an absolute basis; our LTIP award program links compensation to stockholder return on a comparative basis with the stockholder return of the S&P 500 Index.

Stock options were awarded to named executive officers and a group of approximately 2,140 key personnel in 2005. All options awarded to executive officers have an exercise price equal to the closing market price of our common stock on the date of grant and are subject to a three-year vesting schedule. Information concerning the terms of stock option awards is shown in the footnotes to the table at page 27.

The competitive level of economic value for both stock options and LTIP Awards is expressed as a multiple of base salary. Under the LTIP program, a dollar target amount (the “Target Award”) is identified for each recipient. At the end of a specified performance period, the actual cash award a participant would be eligible to receive may be larger or smaller than the Target Award, or no award at all, depending on the relative ranking at the end of that period of our total stockholder return (“TSR”) to the TSR of the companies in the S&P 500 Index of companies at the beginning of the performance period. Based on the Corporation’s relative TSR to the S&P 500 Index, over the 2003-2005 performance cycle applicable to the 2003 Target Awards, the Committee determined that the performance criteria were not met. Performance criteria were not met for this period due to the stock’s performance during 2003. As a result, no LTIP awards were paid.

LTIP award payments may range from 0 percent to 200 percent of the Target Award. To the extent any payment is made at the end of the performance period, 50 percent is payable in cash and 50 percent is deferred automatically as stock units that track the performance of the Corporation’s common stock for a period of two years. The allocation between the percent paid in cash and the percent deferred may be adjusted to satisfy plan limitations. Information concerning additional terms of previous LTIP awards is shown in the footnotes to the table at page 29.

For 2006, following a review of recent trends in executive compensation, the Committee decided to change the long-term incentive compensation program so that executive officers and selected key employees would receive a combination of stock options, RSUs and LTIP awards. Historically, stock options had served as the primary vehicle for equity grants to key employees under the Corporation’s 2003 Incentive Performance Award Plan, and a limited number of corporate officers were eligible for LTIP awards. RSUs were added as a new component of long-term compensation, and the relative weighting of stock options was reduced, for the 2006 awards. In deciding to rely less heavily on stock options, the Committee considered changes in accounting rules that require that stock options be expensed as of January 1, 2006, compensation trends at other companies, and the fact that stock options are comparatively more dilutive to earnings than RSUs.

Relationship of Corporate Performance to Compensation

Consistent with its charter responsibilities, the Committee reviewed and approved corporate goals and objectives for 2005 relevant to the CEO’s compensation. To confirm that the CEO’s compensation package was appropriate and within the market range, the Committee consulted an independent executive compensation consultant. The consultant studied a subset of the Comparator Group consisting of: The Boeing Company, General

EXECUTIVE COMPENSATION

Dynamics Corporation, Honeywell International Inc., Northrop Grumman Corporation, Raytheon Company and United Technologies Corporation. The review included analysis of performance–based LTIP awards, restricted stock awards and RSUs. The independent consultant concluded that the 2005 executive pay package for the CEO was appropriate and within a competitive range in light of the Corporation’s performance.

The Committee selected 2005 corporate goals and objectives to help evaluate Mr. Stevens’ performance:

•		Financial goals in the Long Range Plan;
•		Corporate program objectives;
•		Execution of acquisitions opportunistically and efficiently;
•		Competitive win rates and customer funding of existing and new programs;
•		ROIC improvement;
•		Achievement of enterprise-wide savings;
•		Enhanced productivity through LM21, our cost efficiencies and effectiveness program;
•		Compliance with Sarbanes-Oxley requirements;
•		Successful human resources initiatives including diversity and enterprise talent management;
•		Company-wide ethics and compliance training; and
•		Enhancement of shareholder value through a cash deployment strategy.

In reviewing Mr. Stevens’ performance for the year, the Committee considered the Corporation’s strategic, operational and financial results for 2005:

•		All key financial targets in the Operating Plan were exceeded;
•		Sales increased by 5 percent to a record level of $37.2 billion and backlog at year-end approximated $75 billion;
•		Earnings per share were up 45 percent to $4.10;
•		Cash from operations approximated $3.2 billion, reflecting another record level of performance; and
•		The Corporation repurchased 19.7 million common shares, and increased quarterly dividends by 20 percent from $0.25 to $0.30 per share, effective fourth quarter 2005.

The Committee also considered the performance of the Corporation relative to the S&P 500 Index which focuses on the large-cap segment of the stock market. Lockheed Martin recorded a TSR of 17 percent in 2005, compared to 5 percent for the S&P 500 Index and 16 percent for the S&P Aerospace & Defense Index. On a three-year basis, Lockheed Martin provided an average annual return of 4 percent, compared to 13 percent for the S&P 500 Index and 17 percent for the S&P Aerospace & Defense Index. Longer-term return data was more favorable. Over the past five years, Lockheed Martin’s average annual return was 15 percent, compared to 5 percent for the S&P Aerospace & Defense Index and 0 percent for the S&P 500 Index.

The Committee also reviewed the year’s disappointments, including the Aerial Common Sensor (ACS) program termination for convenience (in January 2006) and the loss of the Los Alamos Laboratory management bid with the Department of Energy.

Compensation for the CEO in 2005

For 2005 Mr. Stevens earned a base salary of $1,380,000 and an MICP bonus of $3,250,000. The Committee credits Mr. Stevens for the outstanding performance of the Corporation in 2005 in key operational, strategic and financial metrics. Mr. Stevens’ skilled management of the Corporation’s sophisticated engineering, scientific and systems integration assets has elevated the Corporation among major aerospace and defense contractors as an industry leader. His focus on leadership development and diversity has also been important to the Corporation’s ability to attract the best and the brightest talent and foster an inclusive work environment. Mr. Stevens’ long-term incentive compensation, awarded in January 2005, consisted of 300,000 stock options and an LTIP award with a target of $4,250,000. These awards link Mr. Stevens’ future compensation

EXECUTIVE COMPENSATION

directly with the future return on the Corporation’s stock.

Mr. Stevens’ annual cash compensation was set at the middle of the range of total compensation with respect to 2005 for companies included in the Comparator Group. The actual amount awarded to Mr. Stevens is expected to move into the upper range of the Comparator Group. Mr. Stevens’ compensation is consistent with our philosophy (described earlier in this report), which rewards executives for sustained short-term and long-term performance, and takes into account experience and time in position.

Compensation for Other Named Executives in 2005

For purposes of determining awards for the other named executive officers, the Committee measured the Corporation’s or business area’s performance against the various financial, operational and strategic factors discussed above, with operational and financial performance as the two most significant criteria. During 2005, for purposes of awarding bonuses under the MICP, particular emphasis was placed on orders, sales, cash-flow generation, earnings per share, ROIC, the record of the business area or unit in performing on existing contracts and securing new business during 2005. The total compensation for the named executive officers, consisting of annual cash compensation and long-term compensation, is at the upper level of the Comparator Group range with respect to 2005.

Tax Matters

Internal Revenue Code Section 162(m) disallows tax deductions to public companies for compensation in excess of $1 million per year paid to the Corporation’s chief executive officer or any of the four other most highly compensated executive officers. For 2005 approximately $3.4 million of compensation that would otherwise be deductible in 2005 is not deductible on account of the $1 million limitation. Section 162(m), however, does not limit the deductibility of certain performance-based compensation.

As discussed previously, our stock option grants and LTIP awards are intended to meet the requirements for deductible performance-based compensation under Internal Revenue Code Section 162(m). The Committee has taken further steps to expand the deductibility of executive compensation through the proposed adoption and stockholder approval of the performance standards reflected in the 2006 MICP, described further in this proxy statement at page 41. In addition, RSU awards made in January 2006 to executive officers contain performance goals intended to meet the requirements of Section 162(m).

The Committee considers the anticipated tax treatment to the Company and the executive officers in its review and establishment of compensation programs and payments. Generally, the Committee will seek to maximize the tax deductibility of executive compensation as permitted by Section 162(m), provided that doing so permits the most appropriate methods of compensation and is determined to be in the best interests of the Corporation and its stockholders.

Submitted on February 23, 2006 by the Management Development and Compensation Committee

and Stock Option Subcommittee:

		Nolan D. Archibald, Chairman		Eugene F. Murphy
		E. C. “Pete” Aldridge, Jr.		James M. Schneider
		Gwendolyn S. King		Anne Stevens

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table shows annual and long-term compensation awarded, earned or paid for services in all capacities to the named executive officers for the fiscal year ended December 31, 2005. Information in the “Option/SAR Grants in Last Fiscal Year” and “Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Values” relate to stock options and stock appreciation rights (SARs) with respect to our Corporation. Numbers have been rounded to the nearest whole dollar or share.

						Annual Compensation												Long-Term Compensation
																		Awards								Payouts
														Other				Restricted				Securities								All
														Annual				Stock				Underlying				LTIP				Other
Name and Principal						Salary				Bonus				Compensation1				Awards2				Options/SARs				Payouts3				Compensation4
Position		Year				($)				($)				($)				($)				(#)				($)				($)
Robert J. Stevens			2005				1,248,750				3,250,000				144,610				0				300,000				0				136,857
President and Chief			2004				1,071,442				2,300,000				69,623				2,282,000				175,000				1,400,000				97,798
Executive Officer			2003				901,154				1,740,000				25,782				0				175,000				3,700,000				104,103
Robert B. Coutts			2005				744,000				1,102,700				39,027				0				60,000				0				50,252
Executive Vice President			2004				713,769				862,400				22,691				1,141,000				70,000				665,000				52,416
Electronic Systems			2003				655,385				753,500				19,725				0				70,000				1,572,500				52,241
Christopher E. Kubasik			2005				622,500				954,300				55,347				0				50,000				0				24,327
Executive Vice President			2004				522,596				674,900				78,401				0				40,000				420,000				20,789
and Chief Financial Officer			2003				434,231				455,400				31,494				1,203,000				35,000				925,000				17,338
Michael F. Camardo Executive Vice President Information & Technology Services			2005				648,000				913,500				40,617				0				50,000				0				53,084
			2004				621,538				754,000				20,642				1,141,000				60,000				595,000				33,199
			2003				565,385				682,500				15,000				0				60,000				1,387,500				22,581
G. Thomas Marsh			2005				604,000				896,300				61,756				0				60,000				0				29,847
Executive Vice President			2004				556,192				699,800				45,517				1,141,000				70,000				385,000				35,468
Space Systems			2003				478,077				520,100				69,056				0				25,000				832,500				472,680
Frank H. Menaker5			2005				763,000				893,500				40,697				0				60,000				0				35,742
Senior Vice President			2004				741,777				721,600				30,214				684,600				65,000				560,000				29,636
			2003				688,231				664,300				33,180				0				65,000				1,387,500				30,162

EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

OPTION/SAR GRANTS IN LAST FISCAL YEAR ¹

The following table presents additional information concerning the option awards shown in the Summary Compensation Table for fiscal year 2005. These options to purchase our common stock were granted to the named executive officers under the Award Plan².

		Individual Grants
		Number of
		Securities				% of Total				Exercise
		Underlying				Options/SARs				or Base
		Options/SARs				Granted to				Price								Grant Date
Name		Granted				Employees in 2005				($/Share)				Expiration Date				Present Value ($)3
Robert J. Stevens			300,000				4.68				57.81				01/31/2015				4,248,000
Robert B. Coutts			60,000				0.94				57.81				01/31/2015				849,600
Christopher E. Kubasik			50,000				0.78				57.81				01/31/2015				708,000
Michael F. Camardo			50,000				0.78				57.81				01/31/2015				708,000
G. Thomas Marsh			60,000				0.94				57.81				01/31/2015				849,600
Frank H. Menaker			60,000				0.94				57.81				01/31/2015				849,600

EXECUTIVE COMPENSATION

AGGREGATED OPTION/SAR¹ EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES

The following table shows information for the named executive officers concerning:

(i) pre-tax value of stock options exercised during 2005 and

(ii) the number and pre-tax values of unexercised stock options as of December 31, 2005.

										Number of Securities
										Underlying Unexercised								Value of Unexercised
										Options/SARs at Fiscal								In-The-Money
										Year End								Options/SARs at Fiscal Year End
Name		Shares Acquired on Exercise (#)				Value Realized ($)				Exercisable				Unexercisable				Exercisable ($)				Unexercisable ($)
Robert J. Stevens			0				0				548,099				475,001				9,324,452				4,152,263
Robert B. Coutts			22,000				402,088				253,999				130,001				4,713,207				1,311,713
Christopher E. Kubasik			20,000				762,136				96,666				88,334				1,667,624				820,126
Michael F. Camardo			20,000				438,850				251,000				110,000				4,716,105				1,116,000
G. Thomas Marsh			49,500				1,288,089				81,999				115,001				1,080,347				1,123,763
Frank H. Menaker			0				0				278,999				125,001				4,454,781				1,242,964

EXECUTIVE COMPENSATION

LONG-TERM INCENTIVE PLANS – AWARDS IN LAST FISCAL YEAR

This table shows grants to the named executives of LTIP Awards awarded during 2005 pursuant to the Award Plan¹.

		Number of
		Shares, Units		Performance or				Estimated Future Payouts
		or Other		Other Period Until				Under Non-Stock Price-Based Plans
Name		Rights		Maturation or Payout				Threshold2				Target3				Maximum4
Robert J. Stevens		¾			01/01/05 – 12/31/07			$	1,062,500			$	4,250,000			$	8,500,000
Robert B. Coutts		¾			01/01/05 – 12/31/07				212,500				850,000				1,700,000
Christopher E. Kubasik		¾			01/01/05 – 12/31/07				168,750				675,000				1,350,000
Michael F. Camardo		¾			01/01/05 – 12/31/07				187,500				750,000				1,500,000
G. Thomas Marsh		¾			01/01/05 – 12/31/07				212,500				850,000				1,700,000
Frank H. Menaker		¾			01/01/05 – 12/31/07	5			187,500				750,000				1,500,000

EXECUTIVE COMPENSATION

Other Benefits

The Lockheed Martin Post-Retirement Death Benefit Plan for Elected Officers provides a death benefit for retired elected officers at a level of 1.5 times the officer’s base salary at the time of retirement. During active employment, our elected officers are provided personal liability insurance coverage of $5 million and accidental death and dismemberment coverage of $1 million. Elected corporate officers are also eligible for reimbursement of financial counseling expenses up to an annual amount of 3-1/2 percent of base salary or $10,000, whichever is less.

Deferred Management Incentive Compensation Plan

The DMICP provides certain key management employees the opportunity to elect annually to defer, until termination of service or beyond, the receipt of all or a portion of incentive compensation awards under the MICP and any amounts payable as LTIP Awards. The DMICP provides that a participant may choose, at the time the MICP deferral election is made, between two accounts (the “Interest Investment Option” or the “Stock Investment Option”). Under the Stock Investment Option, earnings on deferred amounts will accrue at a rate that tracks the performance of our common stock (including reinvestment of dividends). Under the Interest Investment Option, earnings on deferred amounts will accrue at a rate equivalent to the then published rate for computing the present value of future benefits under Cost Accounting Standard No. 415, Deferred Compensation. Amounts attributable to the Stock Investment Option will be paid in shares of our common stock. All amounts accumulated under the DMICP must be paid in a lump sum within 15 days following a change in control.

As a result of his retirement on February 1, 2006, Mr. Menaker will receive a payment of his account balance in the DMICP in accordance with plan terms in the amount of $5,897,942. This represents bonus and LTIP payments voluntarily and mandatorily deferred in prior years plus the amount accrued as earnings on deferred amounts. The deferred bonus amounts and LTIP amounts credited to his DMICP balance during his tenure as a named executive officer were included under the “Bonus” and “LTIP Payouts” columns, respectively, of the Summary Compensation Table in the proxy for the year the bonus or LTIP were earned and deferred.

Defined Contribution Plans

We sponsor a number of different defined contribution plans which cover nearly all our employees. During 2005 the Salaried Savings Plan covered the named executive officers.

The Salaried Savings Plan permits eligible employees (including the named executive officers) to make regular savings contributions on a pre-tax or after-tax basis. For the year ended December 31, 2005 participants could contribute up to 17 percent of their current base salary (maximum of 16 percent on a pre-tax basis) subject to Internal Revenue Code limitations. Employees who are at least 50 years of age are allowed to make “Catch-up Contributions” in accordance with the Internal Revenue Code. In addition, we made a matching contribution to each participant’s account equal to 50 percent of up to the first 8 percent of compensation contributed by the participant.

All contributions to the Salaried Savings Plan are 100 percent vested. Full distribution under the Salaried Savings Plan is generally available upon the termination, layoff, retirement, disability or death of the participant.

Participants in the Salaried Savings Plan may direct the investment of employee contributions among 14 different investment options including unitized funds invested in our common stock

EXECUTIVE COMPENSATION

and a self-managed brokerage account. All of our matching contribution is invested in the ESOP Fund, which is in part funded by an employee stock ownership feature of the plan.

Because of Internal Revenue Code limitations on annual contributions to the Salaried Savings Plan, certain employees are not allowed to elect to contribute the maximum 17 percent of compensation otherwise permitted by the Salaried Savings Plan. The Supplemental Plan has been established for certain Salaried Savings Plan participants (including the named executive officers) affected by these limits. The investment options available under the Salaried Savings Plan, including investments in our common stock, are available under the Supplemental Plan with the exception of the self-managed account, with investments in the Supplemental Plan reflecting only bookkeeping entries rather than actual purchases of the underlying instruments. The investment elections made by a participant under the Supplemental Plan need not be the same as his or her investment elections under the Salaried Savings Plan. The Supplemental Plan provides for payment following termination of employment in a lump sum or up to 20 annual installments. All amounts accumulated and unpaid under the Supplemental Plan must be paid in a lump sum within 15 calendar days following a change in control.

As a result of his retirement on February 1, 2006, Mr. Menaker will receive beginning February 2006 the first of ten installments of his account balance of $1,208,634 in the Non-qualified Supplemental Plan in accordance with the terms of that plan. This represents salary deferrals and company match from periods prior to retirement plus earnings. The deferred salary and match during his tenure as a named executive officer also were included in the proxy statement for the year the salary and match were earned and deferred under the “Salary” and “All Other Compensation” columns, respectively, of the Summary Compensation Table.

Pension Plans

We sponsor a number of pension plans for salaried employees who were hired before January 1, 2006 and for union represented employees. During 2005 the named executive officers participated in the Lockheed Martin Retirement Program (“LMRP”), which is made up of a number of component grandfathered pension plans and formulas.

The calculation of retirement benefits under the LMRP is determined by a formula which takes into account the participant’s years of credited service and average compensation for the highest three years of the last ten years of employment with the Corporation preceding retirement. Average compensation includes the employee’s normal rate of pay (without overtime), bonuses earned under the MICP and lump sum payments in lieu of a salary increase. Normal retirement age is 65; however, benefits are payable as early as age 55 at a reduced amount or without reduction at age 60. Certain employees who retire on or before January 1, 2011 between ages 60 and 62 are eligible for supplemental payments ending at age 62. Participants in the LMRP (including the names executive officers) will receive a pension calculated in accordance with the formula used in the LMRP for all service or if the pension benefit would be greater, in accordance with the heritage plan formula for service through June 30, 2002, plus the LMRP formula for service after that date.

Certain salaried employees (including the named executive officers) also participate in nonqualified supplemental retirement plans. These supplemental plans pay benefits in excess of Internal Revenue Code limits on qualified plan benefits or in some instances in accordance with a grandfathered or special pension formula. The supplemental plans generally pay benefits at the same time and in the same form as benefits are paid under the LMRP, although lump sum payments are available under some supplemental plans. The Supplemental Plans provide that the

EXECUTIVE COMPENSATION

actuarial equivalent of a participant’s accrued benefit be paid in a lump sum within 15 days following a change in control.

As of December 31, 2005 the estimated annual benefits payable upon retirement at age 65 for the individuals named in the compensation table, based on continued employment at current compensation, are as follows: Messrs. Stevens $1,583,829; Coutts $1,197,881; Kubasik $639,145; Camardo $927,457; Marsh $913,209; and Menaker $873,869. These amounts (as well as the amounts shown on the table) include benefits payable under the supplemental plans. The years of credited service as of December 31, 2005 for Messrs. Stevens, Coutts, Kubasik, Camardo, Marsh and Menaker were 18 years, 33 years, 6 years, 41 years, 36 years and 34 years, respectively.

In addition to the LMRP determined benefit, Messrs. Coutts and Camardo will receive the value of employee contributions they made to the Plan prior to January 1, 1995 in the form of a lump sum or a five year certain life annuity. Based on current interest rates, the annual payment under the five-year certain life annuity beginning at age 65 is projected to be $5,727 for Mr. Coutts and $5,028 for Mr. Camardo. For Messrs. Menaker and Marsh, the greater projected benefit is based on a special grandfathered formula for all service.

As of his retirement in February 2006, Mr. Menaker had an estimated accrued annual benefit of $870,178 payable as a single life annuity, including an estimated accrued annual qualified benefit of $144,081 and an estimated accrued annual nonqualified benefit, including benefits accrued after December 31, 2005 of $726,097. Mr. Menaker has elected to receive the qualified benefit in the form of a 75 percent joint and survivor annuity. The annual qualified benefit payable to Mr. Menaker is $116,417. Mr. Menaker has elected to receive the nonqualified benefit as a lump sum payment. The estimated lump-sum, payable to Mr. Menaker six months following his retirement date, is $8,628,343.

Lump sum payments are calculated as an actuarial equivalent based upon the interest rate used by the Pension Benefit Guarantee Corporation to determine the present value of an immediate lump-sum distribution on termination of a pension plan, as in effect on the first day of the month of termination of employment plus one percent, and the 1983 Group Annuity Mortality Table with gender distinction.

EXECUTIVE COMPENSATION

The amounts listed on the table below are not subject to any deduction for Social Security benefits or other offsets and are computed as single life annuities. The pension table shows the estimated annual benefits payable upon retirement for specified earnings and years of service under the LMRP.

Maximum Annual Benefit Payable Upon Normal Retirement
Lockheed Martin Retirement Program¹

3-Year Average				15 Years of				20 Years of				25 Years of				30 Years of				40 Years of				45 Years of
Compensation				Service				Service				Service				Service				Service				Service
$	100,000			$	21,629			$	28,934			$	36,239			$	43,544			$	58,635			$	63,239
	150,000				32,879				43,934				54,989				66,044				88,635				96,989
	200,000				44,129				58,934				73,739				88,544				118,635				130,739
	300,000				66,629				88,934				111,239				133,544				178,635				198,239
	400,000				89,129				118,934				148,739				178,544				238,635				265,739
	500,000				111,629				148,934				186,239				223,544				298,635				333,239
	600,000				134,129				178,934				223,739				268,544				358,635				400,739
	700,000				156,629				208,934				261,239				313,544				418,635				468,239
	800,000				179,129				238,934				298,739				358,544				478,635				535,739
	900,000				201,629				268,934				336,239				403,544				538,635				603,239
	1,000,000				224,129				298,934				373,739				448,544				598,635				670,739
	1,200,000				269,129				358,934				448,739				538,544				718,635				805,739
	1,400,000				314,129				418,934				523,739				628,544				838,635				940,739
	1,600,000				359,129				478,934				598,739				718,544				958,635				1,075,739
	1,800,000				404,129				538,934				673,739				808,544				1,078,635				1,210,739
	2,000,000				449,129				598,934				748,739				898,544				1,198,635				1,345,739
	2,500,000				561,629				748,934				936,239				1,123,544				1,498,635				1,683,239
	3,000,000				674,129				898,934				1,123,739				1,348,544				1,798,635				2,020,739
	3,500,000				786,629				1,048,934				1,311,239				1,573,544				2,098,635				2,358,239
	4,000,000				899,129				1,198,934				1,498,739				1,798,544				2,398,635				2,695,739
	4,500,000				1,011,629				1,348,934				1,686,239				2,023,544				2,698,635				3,033,239

EXECUTIVE COMPENSATION

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information about Lockheed Martin’s equity compensation plans that authorize the issuance of shares of Lockheed Martin common stock to employees and directors. The information is provided as of December 31, 2005.

(a)

(b)

(c)

Number of securities to be

Number of securities remaining

issued upon exercise of

available for future issuance

outstanding options,

Weighted-average exercise

under equity compensation plans

warrants

price of outstanding options,

(excluding securities reflected in

Plan category

and rights (#)

warrants and rights ($)

column (a)) (#)

Equity compensation plans approved by security holders1,2, 3, 4, 6

33,646,269

$

47.64

21,583,701

Equity compensation plans not approved by security holders5

1,660,133

—

3,339,867

Total 4, 5, 6

35,306,402

$

47.64

24,923,568

NOTES TO TABLE:

(1)		Amounts include the Award Plan, the former Omnibus Plan and the Directors’ Equity Plan, all of which have been approved by the stockholders of the Corporation.
(2)		As of December 31, 2005 there were 21,583,701 shares available for grant under the Award Plan as options, SARs, restricted stock or stock units; there are no restrictions on the number of the available shares that may be issued in respect of SARs or stock units. As currently in effect, no more than 28 percent of shares authorized under the Award Plan (9,660,000 shares) may be issued as restricted stock. As of December 31, 2005, 615,000 shares have been granted as restricted stock under the Award Plan. Of the 21,583,701 shares available for grant on December 31, 2005, 3,809,600 and 1,310,550 shares are issuable pursuant to options and RSUs, respectively, granted on February 1, 2006. Amounts in column (c) also include 911,330 shares that may be issued under the Directors’ Equity Plan and 5,648 shares that may be issued under the Directors’ Deferred Stock Plan, a plan that was approved by the stockholders in 1995; effective May 1, 1999 no additional shares may be awarded under the Directors’ Deferred Stock Plan. Stock units payable in cash only under the Award Plan, former Omnibus Plan or other plans sponsored by Lockheed Martin are not included in the table.
(3)		Under the Directors’ Equity Plan, each director may elect to receive stock units, options or a combination of stock units and options with a fair market value on January 15 equal to $75,000; effective January 1, 2006 this amount was increased to $90,000.
(4)		Amounts exclude options granted under equity compensation plans that were subsequently assumed by the Corporation. Options issued by COMSAT Corporation were assumed as part of the completion of the Corporation’s acquisition of COMSAT in 2000. At December 31, 2005 a total of 491,422 shares of Lockheed Martin common stock were issuable upon the exercise of the assumed options that remain outstanding. The weighted average exercise price of those outstanding options was $24.11 per share. The amounts also exclude 3,490 stock grants held in a trust pursuant to the Deferred Compensation Plan for Directors of Lockheed Corporation. No further grants may be made under the assumed plans.
(5)		The DMICP was approved by the stockholders in 1996. As adopted originally, phantom stock units were credited to a participant’s account and paid in cash upon termination or retirement. The DMICP was amended by the Board in 2004 to provide for the payment of phantom stock units in stock upon termination or retirement. Since the phantom stock units settle in stock upon termination or retirement, there is no weighted average exercise price for the units. As a result, the phantom stock units also were

EXECUTIVE COMPENSATION

		not considered in calculating the total weighted-average exercise price in column (b).
(6)		The maximum number of shares of stock that may be subject to stock options, SARs, restricted stock and stock units granted or issued under the Award Plan in any calendar year is 1.6 percent of the Corporation’s outstanding shares of stock on December 31 of the calendar year immediately preceding the date of grant of the award, calculated in a manner consistent with the method for calculating outstanding shares for reporting the Corporation’s Annual Report.

PROPOSALS YOU MAY VOTE ON

 

ELECTION OF DIRECTORS
(Proposal # 1 on Proxy Card)

There are 15 nominees for election to the Board this year, and their biographical information is provided below. Each nominee is currently serving as a director.

Directors are expected to attend the Annual Meeting. All directors nominated for election at the 2005 Annual Meeting attended the 2005 Annual Meeting. Messrs. Loy and Schneider were elected to the Board in August 2005 and December 2005, respectively. All directors are elected to a one-year annual term that will end at the 2007 Annual Meeting. If any of the nominees are unable to stand for reelection at the 2006 Annual Meeting (an event which is not anticipated), the Board may reduce its size or designate a substitute. If a substitute is designated, proxies may vote for the substitute nominee or refrain from voting for any other nominee at their discretion. If any other matters come before the stockholders at the Annual Meeting, the persons holding the proxies will vote in their discretion the shares represented by proxy. Directors’ ages are as of the 2006 Annual Meeting.

The Board unanimously recommends a vote FOR each of the director-nominees.

Nominees

E. C. “Pete” Aldridge, Jr.
Director since June 2003
Age 67

Named by President Bush to Chair the President’s Commission on the Implementation of the U.S. Space Exploration Vision, January 2004; Under Secretary of Defense (Acquisition, Technology, and Logistics) from May 2001 until his retirement in May 2003. President and Chief Executive Officer of The Aerospace Corporation from March 1992 until May 2001; President of the McDonnell Douglas Electronic Systems Company from December 1988 until March 1992; Secretary of the Air Force from June 1986 until December 1988; Under Secretary of the Air Force from 1981 until 1986; director of United Industrial Corp. from 1993 to 2001; director of Global Crossing Ltd. and Alion Science and Technology.

PROPOSALS YOU MAY VOTE ON

 

Nolan D. Archibald
Director since April 2002
Age 62

Chairman of the Board and Chief Executive Officer of The Black & Decker Corporation since 1986, President of The Black & Decker Corporation since 1985, and Chief Operating Officer of The Black & Decker Corporation from 1985 to 1986. Held various management positions at Beatrice Companies, Inc., from 1977 to 1985, including Senior Vice President and President of the Consumer & Commercial Products Group; director of The Black & Decker Corporation, Brunswick Corporation and Huntsman Corporation.

Marcus C. Bennett
Director since March 1995
Age 70