UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934

Filed by the registrant x

Filed by a party other than the registrant ¨

Check the appropriate box:

¨  Preliminary Proxy Statement	¨   Confidential, For Use of the Commission Only     (as permitted by Rule 14a-6(e) (2))
x     Definitive Proxy Statement
¨     Definitive Additional Materials
¨     Soliciting Material       Pursuant to Section 240.14a-12

Lockheed Martin Corporation

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

Payment of filing fee (check the appropriate box):

x No fee required.

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

¨ Fee paid previously with preliminary materials.

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

Lockheed Martin Corporation

6801 Rockledge Drive Bethesda, MD 20817

Robert J. Stevens

Chairman, President and Chief Executive Officer

March 14, 2008

Dear Fellow Stockholders:

On behalf of the Board of Directors, I would like to invite you to attend our 2008 Annual Meeting of Stockholders. We will meet on Thursday, April 24, 2008, at 10:30 a.m., Central Daylight Time, at the Sheraton Arlington Hotel, 1500 Convention Center Drive, Arlington, Texas 76011. Prior to the meeting, you are invited to join the Board and senior management at a reception at 10:00 a.m. If you cannot attend, you may listen to a webcast of the Annual Meeting through our website, http://www.lockheedmartin.com/investor.

Two of our directors, Marcus C. Bennett and Eugene F. Murphy, will not stand for re-election and plan to retire from the Board upon expiration of their terms in April. We are immensely grateful for their many valuable contributions to our great Corporation and we wish them well in their retirements. With sadness, we note the death of Douglas C. Yearley on October 7, 2007. We will miss him greatly and give tribute to his dedicated service to our Company and Board for so many years.

The Annual Meeting will include discussion and voting on the matters described in the accompanying notice and Proxy Statement. Whether or not you plan to attend, please be sure to vote your shares. You may vote your shares by returning the enclosed proxy card, or by following the instructions for Internet or telephone voting printed on the proxy card. If you plan to attend, please let us know by marking the appropriate box when you cast your vote.

Thank you for your continued support of Lockheed Martin. I look forward to seeing you in Texas.

Sincerely,

Robert J. Stevens

LOCKHEED MARTIN CORPORATION

6801 Rockledge Drive

Bethesda, Maryland 20817

NOTICE OF 2008 ANNUAL MEETING OF STOCKHOLDERS

DATE   Thursday, April 24, 2008

TIME   10:30 a.m. Central Daylight Time

PLACE   Sheraton Arlington Hotel

1500 Convention Center Drive

Arlington, Texas 76011

WEBCAST   You may listen to a live webcast of our Annual Meeting at http://www.lockheedmartin.com/investor. Listening to the webcast will not represent attendance at the Annual Meeting and you will not be able to cast your vote on our website during the live webcast.

ITEMS OF BUSINESS   (1)    Election of 13 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 the coming year; (3)    Management Proposal to amend the Charter to provide for “simple” majority voting; (4)    Management Proposal to amend the Charter to delete Article XIII, Approval of Certain Transactions and Other Matters; (5)    Management Proposal to authorize additional shares and extend approval of performance goals for the 2003 Incentive Performance Award Plan; (6)    Management Proposal to adopt the 2009 Directors Equity Plan; (7)    Stockholder Proposal to adopt a requirement that the Corporation identify certain additional executive officers in its future proxy statements; (8)    Stockholder Proposal to require the Corporation to provide a written report to stockholders on certain information relating to the Corporation’s depleted uranium and other nuclear weapons related involvement; (9)    Stockholder Proposal to allow the Corporation’s stockholders to adopt a policy to give stockholders an opportunity to vote on a resolution, proposed by management, to ratify the compensation of the named executive officers; and (10)  Consideration of any other matters that may properly come before the meeting.

RECORD DATE    Stockholders of record at the close of business on March 3, 2008 are entitled to vote at the meeting.

ANNUAL REPORT    We have enclosed our 2007 Annual Report on Form 10-K. The report is not part of the proxy soliciting materials for the Annual Meeting.

PROXY VOTING   It is important that you vote your shares, so that your shares are counted at the Annual Meeting. You may vote your shares by completing and returning the enclosed proxy card, or by following the instructions printed on the proxy card or contained in the Proxy Statement for Internet or telephone voting.

Lillian M. Trippett

Vice President, Corporate Secretary and

Associate General Counsel

March 14, 2008

TABLE OF CONTENTS

	Page
GENERAL INFORMATION	1
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on April 24, 2008	1
Questions and Answers	1
Do I need a ticket to attend the Annual Meeting?	1
Will the Annual Meeting be webcast?	1
Who is entitled to vote at the Annual Meeting?	1
What is the difference between holding shares as a registered stockholder and as a beneficial owner?	1
What am I voting on and what are the Board’s voting recommendations?	2
Can other matters be decided at the Annual Meeting?	2
How do I vote?	2
Can I change my proxy vote?	3
What if I return my proxy but do not provide voting instructions?	3
How do I vote if I participate in one of the Corporation’s 401(k) or Defined Contribution Plans?	3
How many shares or votes must be present to hold the Annual Meeting?	3
Will my shares be voted if I do not provide my proxy or instruction form?	4
What are the voting requirements to elect directors and approve each of the proposals?	4
Who will count the votes?	5
What is “householding” and how does it affect me?	5
Can I receive a copy of the 2007 Annual Report?	5
Can I view the Proxy Statement and Annual Report on the Internet?	5
Can I choose to receive the Proxy Statement and Annual Report on the Internet instead of receiving them by mail?	5
Who pays for the cost of this proxy solicitation?	5
How do I submit a proposal for the Annual Meeting of Stockholders in 2009?	6
How can I contact the Corporation’s non-management directors?	6
Can I find additional information on the Corporation’s website?	6
CORPORATE GOVERNANCE	7
Corporate Governance Guidelines	7
Role of the Board of Directors	7
Presiding Director	7
Code of Ethics and Business Conduct	7
Identifying and Evaluating Nominees for Directors	8
Stockholder Nominees	8
Director Qualifications	8
Nominees for Election at 2008 Annual Meeting	9
Director Independence	9
Related Person Transaction Policy	10
Certain Relationships and Related Person Transactions of Directors, Executive Officers and 5 Percent Stockholders	10
Board Performance Self-Assessment	11
Shareholder Rights Plan	11
Equity Ownership by Directors	12
COMMITTEES OF THE BOARD OF DIRECTORS	13
Board Committee Membership Roster	13
Committees	14
Audit Committee Report	16
DIRECTORS’ COMPENSATION	17
SECURITIES OWNED BY DIRECTORS, NOMINEES AND NAMED EXECUTIVE OFFICERS	21
SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE	22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS	23

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TABLE OF CONTENTS

	Page
EXECUTIVE COMPENSATION	24
Compensation Committee Report	24
Compensation Committee Interlocks and Insider Participation	24
Compensation Discussion and Analysis	25
Narrative Description of Benefits and Compensation	40
Summary Compensation Table	43
Grants of Plan-Based Awards	46
Outstanding Equity Awards at Fiscal Year End	48
Option Exercises and Stock Vested	50
Nonqualified Deferred Compensation	51
Pension Benefits	53
Potential Payments Upon Termination or Change in Control	55
Equity Compensation Plan Information	62
PROPOSALS YOU MAY VOTE ON	63
Proposal 1 – Election of Directors	63
Proposal 2 – Ratification of Appointment of Independent Auditors	66
Pre-Approval of Audit Services	67
Fees Paid to Independent Auditors	67
Proposal 3 – Management Proposal – To Amend the Charter to Provide for “Simple” Majority Voting	68
Proposal 4 – Management Proposal – To Amend the Charter to Delete Article XIII, Approval of Certain Transactions and Other Matters	71
Proposal 5 – Management Proposal – To Authorize Shares and Extend Approval of Performance Goals for the 2003 Incentive Performance Award Plan	73
Proposal 6 – Management Proposal – To Adopt the 2009 Directors Equity Plan	83
Proposal 7 – 9 – Stockholder Proposals	87
APPENDIX A – CORPORATE GOVERNANCE GUIDELINES	A-1
APPENDIX B – APPROVAL OF AMENDMENT OF THE CHARTER – “SIMPLE” MAJORITY VOTING	B-1
APPENDIX C – APPROVAL OF AMENDMENT OF THE CHARTER – DELETE ARTICLE XIII	C-1
APPENDIX D – AMENDED AND RESTATED 2003 INCENTIVE PERFORMANCE AWARD PLAN (As Amended and Restated April 24, 2008)	D-1
APPENDIX E – APPROVAL OF 2009 DIRECTORS EQUITY PLAN	E-1
APPENDIX F – DIRECTIONS TO ANNUAL MEETING LOCATION	F-1

ii

GENERAL INFORMATION

We are furnishing these proxy materials in connection with the solicitation of proxies, on behalf of your Board of Directors (the “Board”), to be voted at our 2008 Annual Meeting of Stockholders (the “Annual Meeting”) and at any adjournment or postponement. Lockheed Martin Corporation (the “Corporation”) is a Maryland corporation.

You are invited to attend our Annual Meeting, which will be held on April 24, 2008, at 10:30 a.m., Central Daylight Time, at the Sheraton Arlington Hotel, 1500 Convention Center Drive, Arlington, Texas 76011. Directions to the meeting appear at the back of this Proxy Statement at Appendix F.

We began mailing the notice, Proxy Statement and proxy card for the Annual Meeting, and our Annual Report, to stockholders on or about March 14, 2008.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on April 24, 2008.

The Proxy Statement and Annual Report are available at

http://www.lockheedmartin.com/investor.

Questions and Answers

Do I need a ticket to attend the Annual Meeting?

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

A recent brokerage statement or letter from your broker showing that you owned Lockheed Martin stock in your account as of March 3, 2008 (the “Record Date”) also will qualify you for admission. In that case, you will not be able to vote your shares, since they only may be voted by the record holder or a valid proxy holder.

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

Will the Annual Meeting be webcast?

Yes. We will webcast the Annual Meeting live on April 24, 2008. You are invited to visit http://www.lockheedmartin.com/investor at 10:30 a.m., Central Daylight Time, on April 24, 2008 to access the live webcast. Registration for the webcast is required. Stockholders who wish to access the webcast should pre-register on our website. Listening to our Annual Meeting webcast will not represent attendance at the meeting, and you will not be able to cast your vote as part of the live webcast.

Who is entitled to vote at the Annual Meeting?

Holders of our common stock, $1 par value per share, at the close of business on March 3, 2008 are entitled to vote their shares at the Annual Meeting. As of the Record Date, there were 404,972,360 shares outstanding. Each share outstanding on the Record Date is entitled to one vote on each proposal presented at the Annual Meeting. This includes shares held through Direct Invest, our dividend reinvestment and stock purchase plan or through our employee benefit plans. Your proxy card shows the number of shares held in your account(s).

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

If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered the “registered stockholder” of those shares. We mail the proxy materials and our 2007 Annual Report to you directly.

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial owner” of the shares that are registered in street name. In this case, the proxy materials and our 2007 Annual Report were forwarded to you by your broker, bank or other nominee who is considered the registered stockholder. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your shares by following the voting instructions included in the mailing.

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GENERAL INFORMATION

Employees with shares allocated in an employee benefit plan account will not receive a paper mailing and should review the information on procedures for employees on page 3.

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

Our stockholders will be voting on the following items which are described in more detail beginning on page 63:

Item No.	Description	Board’s Voting Recommendation
1	Election of directors	FOR all nominees
2	Ratification of appointment of Ernst & Young LLP, independent registered public accounting firm	FOR this proposal
3-6	Management proposals	FOR these proposals
7-9	Stockholder proposals	AGAINST these proposals

Can other matters be decided at the Annual Meeting?

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

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

How do I vote?

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

Internet or By Telephone

Our Internet and telephone voting procedures for registered stockholders are designed to authenticate

your identity, allow you to give your voting instructions and confirm that those instructions are properly recorded.

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

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

Internet and telephone voting facilities for registered stockholders will be available 24 hours a day up until 11:59 p.m., Eastern Daylight Time, on April 23, 2008. If you vote on the Internet or by telephone, you do not have to return your proxy card.

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

By Mail

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

If you want to vote in accordance with the Board’s recommendations, simply sign, date and return the proxy card. The named proxy holders will vote unmarked proxy cards per the Board’s recommendations.

If you are a registered stockholder, and the postage-paid envelope is missing, please mail your completed proxy card to Lockheed Martin Corporation, c/o Computershare Investor Services, P.O. Box 43116, Providence, RI 02940-5107.

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GENERAL INFORMATION

In person at the Annual Meeting

All stockholders may vote in person at the Annual Meeting. Voting your proxy electronically by the Internet, telephone or mail does not limit your right to vote at the Annual Meeting. You also may be represented by another person at the Annual Meeting by executing a legally valid proxy designating that person to vote on your behalf. If you are a beneficial owner of shares, you must obtain a legally valid proxy from your broker, bank or other nominee and present it to the inspectors of election with your ballot to be able to vote at the Annual Meeting. A legally valid proxy is an authorization from your broker, bank or other nominee to vote the shares held in the nominee’s name that satisfies Maryland law and Securities and Exchange Commission (“SEC”) requirements for proxies.

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

Can I change my proxy vote?

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

• Returning a signed proxy card with a later date;

• Entering a new vote electronically by the Internet or telephone;

• Notifying the Corporate Secretary in writing; or

• Submitting a written ballot at the Annual Meeting.

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

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

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

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

• “For” the election of director nominees;

• “For” the ratification of Ernst & Young LLP as the Corporation’s independent registered public accounting firm for the fiscal year ending December 31, 2008;

• “For” the management proposals;

• “Against” the stockholder proposals; and

• In the best judgment of the named proxy holders on other matters properly brought before the Annual Meeting.

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

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

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

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

In order for us to conduct our Annual Meeting, a majority of the shares outstanding and entitled to vote as of March 3, 2008 must be present in person or by proxy. This is referred to as a quorum. Your shares are counted as present at the Annual Meeting if you attend

3

GENERAL INFORMATION

the Annual Meeting and vote in person or if you properly return a proxy by Internet, telephone or mail. We will count abstentions and broker non-votes for purposes of determining whether a quorum exists at the meeting.

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

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

Brokerage firms have authority under New York Stock Exchange (“NYSE”) rules to vote shares on routine matters for which their customers do not provide voting instructions. The election of directors, the ratification of Ernst & Young LLP as our independent registered public accounting firm for 2008 and Management Proposal 3 are considered routine matters. Management Proposals 4, 5 and 6 and the stockholder proposals are not considered routine. If a proposal is not routine and the brokerage firm does not receive voting instructions from the beneficial owner, the brokerage firm cannot vote the shares on that proposal. Shares for which a broker is not authorized to vote are known as “broker non-votes.” Because we require the affirmative vote of a majority of the outstanding shares to approve a proposal, broker non-votes have the effect of a negative vote on each of the management and stockholder proposals.

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

The affirmative vote of a majority of the votes entitled to be cast at a meeting, duly called and at which a quorum is present, is required to take or authorize

action upon any matter that properly may come before the meeting, unless applicable law or our Charter provides otherwise for a particular matter. A higher voting standard is required to approve one of management’s proposals. The voting standards are as follows:

Proposal	Standard
1     Election of Directors	Majority of votes entitled to be cast
2     Approval of Ernst & Young LLP	Majority of votes entitled to be cast
3     Management proposal to amend the Charter to provide for “simple” majority voting	Majority of votes entitled to be cast
4     Management proposal to amend the Charter to delete Article XIII, Approval of Certain Transactions and Other Matters	80% of the votes entitled to be cast
5     Management proposal to authorize additional shares and extend approval of performance goals for the 2003 Incentive Performance Award Plan	Majority of votes entitled to be cast
6     Management proposal to adopt the 2009 Directors Equity Plan	Majority of votes entitled to be cast
7-9   Stockholder proposals	Majority of votes entitled to be cast

For the election of directors, a vote withheld from a nominee for director has the effect of a vote against that nominee. For the vote for each director, the ratification of the selection of Ernst & Young LLP, the management proposals and each of the stockholder proposals, an abstention has the effect of a vote against the proposal.

4

GENERAL INFORMATION

Who will count the votes?

Representatives of our transfer agent, Computershare Trust Company, N.A., will tabulate the votes and act as inspectors of election for the 2008 Annual Meeting.

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

We have adopted a procedure approved by the SEC called “householding.” Under this procedure, we send only one Annual Report and Proxy Statement to eligible stockholders who share a single address, unless we have received instructions to the contrary from any stockholder at that address. This practice is designed to reduce our printing and postage costs. Stockholders who participate in householding will continue to receive separate proxy cards. We do not use householding for any other stockholder mailings, such as dividend checks, Forms 1099 or account statements.

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

Can I receive a copy of the 2007 Annual Report?

Yes. We will provide a copy of our 2007 Annual Report without charge, upon written request, to any registered or beneficial owner of common stock entitled to vote at the Annual Meeting. Requests should be made in writing addressed to Investor Relations, Lockheed Martin Corporation, 6801 Rockledge Drive, Bethesda, MD 20817, by calling Lockheed Martin Shareholder Direct at 1-800-568-9758 or by accessing the Corporation’s 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 Lockheed Martin.

Can I view the Proxy Statement and Annual Report on the Internet?

Yes. The Proxy Statement and Annual Report are available on the Internet at http://www.lockheedmartin.com/investor. All stockholders will receive paper copies of the Proxy Statement, proxy card and Annual Report by mail unless the stockholder has consented to electronic delivery or is an employee with shares allocated in an employee benefit plan as noted immediately below.

Can I choose to receive the Proxy Statement and Annual Report on the Internet instead of receiving them by mail?

Yes. If you are a registered or beneficial stockholder, you can elect to receive future Annual Reports and Proxy Statements on the Internet only and not receive copies in the mail by visiting http://investor.shareholder.com/lmt/shareholder.cfm and completing the online consent form. Your request for electronic transmission will remain in effect for all future Annual Reports and Proxy Statements, unless withdrawn. Withdrawal procedures also are located at this website.

Most active employees who participate in the Corporation’s savings plans will receive an email notification announcing Internet availability of the 2007 and future editions of the Annual Report and Proxy Statement. A paper copy will not be provided unless requested by the employee.

Who pays for the cost of this proxy solicitation?

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

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GENERAL INFORMATION

How do I submit a proposal for the Annual Meeting of Stockholders in 2009?

Any stockholder who wishes to submit a proposal for consideration at the 2009 Annual Meeting and for inclusion in the 2009 Proxy Statement should send their proposal to:

Lockheed Martin Corporation

Attention: Vice President and Corporate Secretary

6801 Rockledge Drive

Bethesda, MD 20817.

Proposals must be received no later than November 14, 2008 and satisfy the requirements under applicable SEC Rules (including SEC Rule 14a-8) to be included in the Proxy Statement and on the proxy card that will be used for solicitation of proxies by the Board for the 2009 Annual Meeting.

Our Bylaws also require advance notice of any proposal by a stockholder to be presented at the Annual Meeting that is not included in our Proxy Statement and on the proxy card, including any proposal for the nomination of a director for election. To be properly brought before the 2009 Annual Meeting, written nominations for directors or other business to be introduced by a stockholder must be received between the dates of November 14, 2008 and December 14, 2008, inclusive. A notice of a stockholder proposal must contain information required by our Bylaws about the matter to be brought before the meeting and about the stockholder proponent. Waiver of these requirements by us in a particular instance does not constitute a waiver applicable to any other stockholder proposal, nor does it obligate us to waive the requirements for future submissions. A list of the information which is required to be included in a stockholder proposal may be found in Section 1.11 of our Bylaws at http://www.lockheedmartin.com/investor.

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

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

the presiding director or the non-management directors as a group, you may do so by contacting:

Mr. James R. Ukropina

Chairman, Nominating and Corporate Governance Committee

or

Directors

c/o Nominating and Corporate Governance Committee

Lockheed Martin Corporation

6801 Rockledge Drive, MP 220

Bethesda, MD 20817.

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

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

Yes. Although the information contained on our website is not part of this Proxy Statement, you will find information about the Corporation and our corporate governance practices at http://www.lockheedmartin.com/investor. Our website contains information about our Board, Board committees, our Charter and Bylaws, Code of Ethics and Business Conduct, Corporate Governance Guidelines, and information about insider transactions. Stockholders may obtain, without charge, hard copies of the above documents by writing to:

Investor Relations

Lockheed Martin Corporation

6801 Rockledge Drive

Bethesda, MD 20817.

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CORPORATE GOVERNANCE

Corporate Governance Guidelines

Lockheed Martin is committed to maintaining and practicing the highest standards of ethics and corporate governance. The Board has adopted Corporate Governance Guidelines that describe the framework within which the Board and its Committees oversee the governance of the Corporation. The current guidelines are included as Appendix A to the Proxy Statement and posted at http://www.lockheedmartin.com/investor.

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

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

The Board has approved an amendment to the Corporate Governance Guidelines that will become effective if stockholders approve Proposal 3 to amend the Charter to provide for “simple” majority voting. The amendment to the Corporate Governance Guidelines is set forth as part of Appendix B. The amendment sets forth the Board’s expectation that any nominee who fails to receive a majority of the votes cast for election would submit his or her resignation to the Board and provides procedures for the Board to use in considering whether to accept or reject the resignation. If stockholders do not approve Proposal 3 to amend the Charter, the described changes to the Corporate Governance Guidelines will not be implemented.

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

Role of the Board of Directors

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

In 2007, the Board met a total of 10 times. All directors attended at least 75% of the total board and committee meetings to which they were assigned in 2007. All directors attended the 2007 Annual Meeting of Stockholders.

Presiding Director

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

Code of Ethics and Business Conduct

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

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

Our Code of Ethics and Business Conduct, “Setting the Standard,” applies to all directors, officers, and employees. It sets forth our policies and expectations on a number of topics, including our commitment to good citizenship and integrity, promoting a positive

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CORPORATE GOVERNANCE

and safe work environment, transparency in our public disclosures, avoiding conflicts of interest, confidentiality, preservation and use of company assets, compliance with laws (including insider trading laws), and business ethics.

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

Each of our directors and employees participate in annual ethics training, which consists of a live training session. We also devote significant resources to our business conduct compliance training program. In 2007, our employees completed over 500,000 on-line business conduct compliance training modules.

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

In 2007, there were no waivers from any provisions of our Code or amendments applicable to any director or executive officer. It is our intent to disclose any such waivers or amendments promptly to stockholders by posting on our website.

Identifying and Evaluating Nominees for Directors

Each year, the Governance Committee recommends to the Board the slate of directors to serve as management’s nominees for election by the stockholders at the Annual Meeting. The process for

identifying and evaluating candidates to be nominated to the Board starts with an evaluation of a candidate by the Chairman of the Governance Committee followed by the entire Governance Committee and the CEO. Director candidates may also be identified by stockholders. The Corporation also has utilized outside search firms, including Korn/Ferry International and Russell Reynolds Associates, to identify potential candidates.

Stockholder Nominees

Stockholder proposals for nominations to the Board should be submitted to the Nominating and Corporate Governance Committee, care of the Vice President and Corporate Secretary, at 6801 Rockledge Drive, Bethesda, MD 20817. To be considered by the Board for nomination at the 2009 Annual Meeting, written notice of nominations by a stockholder must be received between the dates of November 14, 2008 and December 14, 2008, inclusive.

The information requirements for any stockholder proposal or nomination can be found in Section 1.11 of our Bylaws, at http://www.lockheedmartin.com/investor. A summary of the requirements can be found in the “General Information” section of this Proxy Statement on page 6. Self-nominations will not be considered. Proposed stockholder nominees are presented to the Chairman of the Governance Committee, who decides if further consideration should be given to the nomination by the Governance Committee.

Director Qualifications

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

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CORPORATE GOVERNANCE

• has relevant past and current employment affiliation(s), Board affiliations and experience;

• is free from conflicts of interest;

• is technology-proficient;

• has demonstrated effectiveness;

• possesses sound judgment;

• brings a diverse background;

• has adequate time to devote to Board responsibilities; and

• represents the best interests of all stockholders.

Nominees for Election at 2008 Annual Meeting

There are 13 nominees for election to the Board at the Annual Meeting. Their biographical information starts on page 63. Each nominee currently serves as a director, except Mr. Burritt who is a nominee for the first time. Each nominee was recommended for nomination by the Governance Committee of the Board. Two of our current directors, Marcus C. Bennett and Eugene F. Murphy, are retiring from the Board at the 2008 Annual Meeting. The Governance Committee has determined that all of the current directors and nominees, except for Mr. Stevens, are independent under the listing standards of the NYSE and our Corporate Governance Guidelines.

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

Director Independence

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

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

Our director independence guidelines set forth certain relationships between the Corporation and directors

and their immediate family members, or affiliated entities, that the Board, in its judgment, has deemed to be material or immaterial for purposes of assessing a director’s independence. In the event a director has a relationship with the Corporation that is not addressed in the independence guidelines, the independent members of the Board determine whether such relationship is material.

The Board has determined that the following directors are independent: E. C. “Pete” Aldridge, Jr., Nolan D. Archibald, Marcus C. Bennett, James O. Ellis, Jr., Gwendolyn S. King, James M. Loy, Douglas H. McCorkindale, Eugene F. Murphy, Joseph W. Ralston, Frank Savage, James M. Schneider, Anne Stevens, James R. Ukropina and that Douglas C. Yearley was independent during his tenure with the Board in 2007. The Board also determined that Mr. Burritt, a nominee for election at the 2008 Annual Meeting, is independent. As Chairman, President and CEO, Robert J. Stevens is an employee of the Corporation and is not independent under the NYSE listing standards or our Corporate Governance Guidelines.

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

The Governance Committee and Board also considered that the Corporation in the ordinary course of business purchases products and services from, or sells products and services to, companies at which some of our directors (or nominee) are or have been directors or officers. In each case, the amount paid to or received from these companies did not exceed the greater of $1 million or 2% of the total revenue of the Corporation or the other company. These relationships included: Mr. Aldridge, a director of Alion Science and Technology Corporation and of Global Crossing, Ltd.; Mr. Bennett, a director of Martin Marietta Materials, Inc.; Mr. Burritt, a director of Factory Mutual Insurance Company (FM Global); Mr. Ellis, a director of Inmarsat plc. and Level 3 Communications, Inc.; Mrs. King, a director of Marsh & McLennan Companies, Inc.; Mr. McCorkindale, a director of Prudential Mutual funds; Mr. Ralston, a director of The Timken Company and URS Corporation; and Mr. Savage, a director of Bloomberg, L.P. In determining that these relationships

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CORPORATE GOVERNANCE

did not affect the independence of those directors, the Board considered that none of the directors (or nominee) serving as directors or officers of other companies had any direct material interest in, or received any special compensation in connection with, the Corporation’s business relationships with those companies.

The Governance Committee and Board also determined that Mr. Ukropina’s status as Of Counsel to O’Melveny & Myers LLP, 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 Governance Committee and Board are further satisfied that, because Mr. Ukropina is retired and provides no active services to O’Melveny & Myers LLP, he is independent for purposes of serving on the Audit Committee.

Related Person Transaction Policy

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

Under the policy, and consistent with SEC regulations, a related person transaction is any transaction in which the Corporation was, is, or will be a participant, where the amount involved exceeds $120,000 and in which a related person had, has, or will have a direct or indirect material interest. A related person includes any director or executive officer of the company, any person who is known to be the beneficial owner of more than 5% of any class of the company’s voting securities, an

immediate family member of any person described above; and any firm, corporation, or other entity controlled by any person described above.

The policy requires each director and executive officer to complete an annual questionnaire to identify their related interests and persons, and to notify the Corporation of changes in that information. Based on that information, the Corporation maintains a master list of related persons for purposes of tracking and reporting related person transactions.

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

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

The following transactions or relationships are considered to be “related person” transactions under our corporate policy and applicable SEC regulations. Each of these transactions was reviewed, approved or ratified by the Governance Committee of the Board in February 2008.

One of our directors, Mr. Schneider, served as Senior Vice President of Dell, Inc. until February 2007. In 2007, we paid $54,188,000 for the purchase of computer equipment and services from Dell in the ordinary course of business, which amount represented less than 1% of Dell’s 2007 revenues.

Two of our directors, Messrs. Loy and Ralston, are employed as Senior Counselor and Vice Chairman, respectively, of The Cohen Group, a consulting business that performs services for the Corporation. In 2007, we paid The Cohen Group approximately $710,000 for consulting services and expenses.

Mr. Burritt, a director nominee, is the Chief Financial Officer of Caterpillar Inc. In 2007, the Corporation

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CORPORATE GOVERNANCE

paid approximately $1,000,000 to Caterpillar (which amount represented less than 1% of Caterpillar’s 2007 revenues) for equipment purchases, rental fees, and processing qualifying offset credits under industrial cooperation requirements in Poland. The Corporation’s relationship with Caterpillar predates Mr. Burritt’s consideration as a nominee.

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

These relationships (and 2007 base salary including Management Incentive Compensation Plan (“MICP”) bonus, stock options, restricted stock units (“RSUs”) or Long-Term Incentive Performance (“LTIP”) awards granted in 2007, where applicable) include Mr. Bennett’s son-in-law, Jeffrey D. MacLauchlan, Vice President, Finance and Business Operations for our Information Systems & Global Services business area ($323,231 in base salary, $265,900 in MICP, a stock option award of 6,000 shares, 3,600 RSUs, and a target LTIP award for the 2007 to 2009 performance cycle of $110,000); and Mr. Ralston’s brother-in-law, Mark E. Dougherty, Director, Business Development Analyst ($141,704). Those individuals also participate in other employee benefit plans and arrangements which are generally made available to other employees at their level (including health, welfare, vacation and retirement plans). The compensation of each family member was established in accordance with the Corporation’s employment and compensation practices applicable to employees with equivalent qualifications, experience and responsibilities. None of these individuals served as an executive officer during 2007.

In addition, from time to time, the Corporation has purchased services in the ordinary course of business from a financial institution that beneficially owns 5% or more of Lockheed Martin’s common stock. In 2007, the Corporation paid fees of $6,066,000 to State Street Bank and Trust Company for credit facility and benefit plan administration fees. The Corporation also paid

$1,859,000 to CitiStreet, an affiliate of State Street Bank and Trust Company, for benefit plan administration fees. In 2007, the Corporation paid fees of $268,000 to Barclay’s Global Investors, N.A. in credit facility and foreign exchange fees. The Corporation paid U.S. Trust Company, National Association $701,000 for benefit plan management fees. U.S. Trust and Barclay’s each have filed a Schedule 13G indicating that they beneficially own less than 5% of Lockheed Martin’s common stock.

The Board also considered comments made and issues raised by others concerning the qualifications of directors. On May 11, 2004, the Secretary of the U.S. Department of Labor and certain former outside directors of Enron Corporation, including Mr. Savage, entered into a consent decree which provides, among other things, that for the five year period following entry of the decree, none of the former Enron directors will, without the consent of the Secretary of Labor, serve an ERISA-covered plan in a fiduciary capacity in the manner set forth in the decree. It is the view of the Governance Committee that service by Mr. Savage on the Board of the Corporation or any of its committees is permitted by the decree.

Board Performance Self-Assessment

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

Shareholder Rights Plan

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

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CORPORATE GOVERNANCE

Equity Ownership by Directors

The Board believes that directors and management should hold meaningful equity ownership positions in the Corporation. To further encourage a link between director and stockholder interests, the Board has adopted stock ownership guidelines for directors. Similar guidelines apply to our management. Directors receive half of their compensation in the form of

Lockheed Martin common stock units or stock options (with the potential to defer the remaining cash portion in stock units). In addition, directors are expected to own shares or stock units equal to two times the annual retainer within five years of joining the Board. Until a director has achieved these stock ownership guidelines, a director is expected to select common stock units as the form of any annual equity compensation award.

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COMMITTEES OF THE BOARD OF DIRECTORS

BOARD COMMITTEE MEMBERSHIP ROSTER
Name	Audit	Classified    Business    Review	Ethics and    Corporate    Responsibility	Executive	Management    Development    and    Compensation	Nominating    and    Corporate    Governance	Strategic    Affairs    and    Finance
E. C. “Pete” Aldridge, Jr.	X	X 1			X
Nolan D. Archibald				X	X 2	X
Marcus C. Bennett 3			X				X
James O. Ellis, Jr.		X 2				X	X
Gwendolyn S. King			X 2	X		X
James M. Loy			X				X
Douglas H. McCorkindale	X  2,4			X	X		X 2
Eugene F. Murphy 3		X			X	X
Joseph W. Ralston		X	X				X
Frank Savage			X				X
James M. Schneider	X				X
Anne Stevens	X				X
Robert J. Stevens				X 2
James R. Ukropina	X			X		X 2
Douglas C. Yearley	X  2,4			X			X
Number of Meetings in 2007	5	2	3	0	6	4	3

NOTES TO TABLE:

(1)    On October 15, 2007, Mr. Aldridge was elected to the Classified Business Review Committee following the death of Mr. Yearley on October 7, 2007.

(2)    Committee Chairman.

(3)    Retiring as a director at the 2008 Annual Meeting.

(4)    On October 15, 2007, Mr. McCorkindale was elected Audit Committee Chairman, following the death of Mr. Yearley.

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COMMITTEES OF THE BOARD OF DIRECTORS

Committees

The Board has six standing committees as prescribed by our Bylaws:

• Audit;

• Ethics and Corporate Responsibility;

• Executive;

• Management Development and Compensation;

• Nominating and Corporate Governance; and

• Strategic Affairs and Finance.

The Board has established a special Classified Business Review Committee.

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

Audit Committee

The Audit Committee oversees our financial reporting process on behalf of the Board. It is directly responsible for the appointment, compensation, and oversight of the Corporation’s independent auditors. The functions of the Audit Committee are further described under the heading “Audit Committee Report” on page 16.

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

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

Ethics and Corporate Responsibility Committee

The Ethics and Corporate Responsibility Committee monitors compliance and recommends changes to our Code of Ethics and Business Conduct. It reviews our policies, procedures and compliance in the areas of environmental, safety and health, Equal Employment Opportunity, and diversity. It also oversees matters pertaining to community and public relations, including government relations and charitable contributions.

Executive Committee

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

Management Development and Compensation Committee

The Management Development and Compensation Committee is responsible for reviewing and approving corporate goals and objectives relevant to the compensation of the CEO, evaluating the performance of the CEO and, either as a committee or together with the other independent members of the Board, determining and approving the compensation levels of the CEO and senior management. The Compensation Committee has not delegated to employees of the Corporation authority to make decisions on the amount paid as salary, bonus, long-term incentives, or equity awards to the CEO or the other named executive officers (“NEOs”) listed in the “Summary Compensation Table.”

Additional information regarding the role of the Compensation Committee and our compensation practices and procedures is provided under the captions “Compensation Committee Report” on page 24 and “Compensation Discussion and Analysis” beginning on page 25 and specifically to the discussion on Governance Considerations in Compensation Decisions beginning on page 37.

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

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COMMITTEES OF THE BOARD OF DIRECTORS

Nominating and Corporate Governance Committee

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

The Governance Committee reviews and recommends to the Board the compensation of directors. Our executive officers do not play a role in determining director pay, although the Chairman of the Board is consulted regarding the impact of any change in director pay on the Corporation as a whole. During 2007, Hewitt Associates, Inc. (“Hewitt”) an outside compensation consultant, assisted the Governance Committee by providing market data on director pay at other companies. Director pay remained unchanged in 2007.

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

Strategic Affairs and Finance Committee

The Strategic Affairs and Finance Committee reviews and recommends to the Board our long-term strategy including allocation of corporate resources.

Classified Business Review Committee

The Classified Business Review Committee assists the Board in fulfilling its oversight responsibilities relating to the Corporation’s business activities that require special security clearance levels for access to information.

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COMMITTEES OF THE BOARD OF DIRECTORS

Audit Committee Report

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

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

In connection with the December 31, 2007 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 required to be discussed under the Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended, 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 of Directors that the audited consolidated financial statements for 2007 be included in Lockheed Martin’s Annual Report on Form 10-K for the year ended December 31, 2007 for filing with the SEC. The Board approved our recommendation.

Submitted on February 28, 2008 by the Audit Committee:

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

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DIRECTORS’ COMPENSATION

2007 ANNUAL DIRECTORS’ COMPENSATION
Cash retainer	$110,000
Stock retainer	$110,000 payable under the Lockheed Martin Corporation Directors Equity Plan (“Directors Equity Plan”)
Committee Chairman retainer	$12,500 (other than Audit Committee Chairman)
Audit Committee Chairman retainer	$20,000
Deferred compensation plan	Cash retainer deferrable with earnings at prime rate, Standard & Poor’s 500 Index (“S&P 500 Index”) or Lockheed Martin stock return
Travel accident insurance	$1,000,000
Matching Gift for Colleges and Universities Program	Match of $1 per $1 of director contributions, up to $10,000 per director, to eligible educational institutions in accordance with matching program available to all employees
Director education institutes/activities	Reimbursed for costs and expenses
Perquisites	Home computer system and Internet access, tax gross-ups and incremental travel expenses for personal corporate aircraft use and for accompanying spouse while on travel

Under the Directors Equity Plan, each non-employee director may elect to receive:

• a number of stock units with a value on January 15 equal to the annual stock retainer amount ($110,000);

• options to purchase a number of shares of Lockheed Martin common stock, which options have an aggregate value on January 15 of the annual retainer amount; or

• a combination of stock units with a value on January 15 equal to 50% of the annual stock retainer amount and options to purchase a number of shares of Lockheed Martin common stock which options have an aggregate fair market value on January 15 of 50% of the annual stock retainer amount.

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

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DIRECTORS’ COMPENSATION

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

The Directors Equity Plan was approved by stockholders in 1999, and has a term of ten years. Management has proposed the adoption of a new plan (Proposal 6 on the proxy card) providing comparable compensation to replace the existing Directors Equity Plan, effective January 1, 2009. A discussion of the proposal begins on page 83.

The Lockheed Martin Corporation Directors’ Deferred Compensation Plan (“Directors’ Deferred Compensation Plan”) provides non-employee directors

the opportunity to defer up to 100% of the cash portion of their fees. Deferred amounts earn interest at a rate that tracks the performance of the prime rate, the published index for the S&P 500 Index (with dividends reinvested), or our common stock (with dividends reinvested), at the director’s election. We distribute participating directors deferred fees at the director’s election in a lump sum or in up to 15 installments commencing at a designated time following termination.

Each director may elect to be provided with a home computer and printer. We provide technical assistance for the computer equipment and Internet access.

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DIRECTORS’ COMPENSATION

DIRECTORS’ COMPENSATION
Name	Fees Earned or Paid in Cash 1 ($)	Stock Awards 2 ($)	Option Awards 3 ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings 4,5 ($)	All Other Compensation 6,7,8 ($)	Total 9 ($)
(a)	(b)	(c)	(d)	(f)	(g)	(h)
E. C. “Pete” Aldridge, Jr.	110,000	196,494	0	0	386	306,880
Nolan D. Archibald	122,500	218,769	0	0	10,000	351,269
Marcus C. Bennett	110,000	302,113	0	20,322	6,516 10	438,951
James O. Ellis, Jr.	122,500	163,320	0	0	2,716	288,536
Gwendolyn S. King	122,500	328,955	0	3,852	307	455,614
James M. Loy	110,000	149,093	0	0	0	259,093
Douglas H. McCorkindale	126,731	128,171	54,639	0	6,000	315,541
Eugene F. Murphy	110,000	16,895	109,298	8,799	12,841	257,833
Joseph W. Ralston	110,000	200,406	0	0	731	311,137
Frank Savage	110,000	223,160	0	0	208	333,368
James M. Schneider	110,000	71,557	54,639	0	17,512	253,708
Anne Stevens	110,000	184,434	0	6,446	425	301,305
James R. Ukropina	122,500	328,955	0	0	4,697	456,152
Douglas C. Yearley	100,000	328,955	0	0	11,182	440,137

NOTES TO TABLE:

(1)    Represents the aggregate dollar amount of 2007 fees earned or paid in cash for services as a director, including annual retainer fees and committee chairman fees.

(2)    Represents the amount recognized in accordance with Statement of Financial Accounting Standards No. 123(R), Share-Based Payments (FAS 123(R)) (other than disregarding the estimate of forfeitures resulting from a failure to vest) and the assumptions set forth in Note 11 to our financial statements for the year ended December 31, 2007 for stock units awarded to the directors under the Directors Equity Plan for 2007 and the appreciation associated with units awarded in 2007 and prior years under the Directors Equity Plan and Lockheed Martin Corporation Directors’ Deferred Stock Plan (“Directors’ Deferred Stock Plan”), including dividend equivalents credited as stock units. We recognize expense based upon the change in market value during the year for all stock units credited to the director, whether credited in 2007 or prior years. The outstanding number of stock units credited to each

director under the Directors Equity Plan as of December 31, 2007 was Mr. Aldridge 6,344; Mr. Archibald 7,879; Mr. Bennett 13,621; Mr. Ellis 4,059; Mrs. King 14,307; Mr. Loy 3,079; Mr. McCorkindale 5,234; Mr. Ralston 6,614; Mr. Savage 7,018; Mr. Schneider 1,333; Ms. Stevens 5,513; Mr. Ukropina 14,307; and Mr. Yearley 14,307. For 2007, each of Mrs. King, Ms. Stevens and Messrs. Aldridge, Archibald, Bennett, Ellis, Loy, Ralston, Savage, Ukropina, and Yearley were credited with 1,134 stock units with an aggregate grant date value of $110,000, and each of Messrs. McCorkindale and Schneider were credited with 567 units with an aggregate grant date value of $55,000. The grant date value is based on the closing price of our stock on January 16, 2007 ($97.00). The outstanding number of stock units credited to each director under the Directors’ Deferred Stock Plan as of December 31, 2007 was 1,164 for Mrs. King and Messrs. Murphy, Savage, Ukropina, and Yearley.

19

DIRECTORS’ COMPENSATION

(3)    Represents the amount recognized in accordance with FAS 123(R) (other than disregarding the estimate of forfeitures resulting from a failure to vest) in our

financial statements for the year ended December 31, 2007 for options granted to Messrs. McCorkindale, Murphy, and Schneider in 2006 and 2007. We recognize expense ratably in monthly increments over the one-year vesting period. The assumptions used in determining the fair value of the options is set forth in Note 11 to our financial statements contained in our Annual Reports on Form 10-K for the years ended December 31, 2007 and 2006. For 2007, we awarded each of Messrs. McCorkindale and Schneider 2,291 options with an aggregate grant date value of $54,984 and Mr. Murphy 4,583 options with an aggregate grant date value of $109,992. The grant date value for options granted in 2007 ($24.00 per share) is based on the closing price of our stock on January 16, 2007 ($97.00) and for options granted in 2006 ($16.55 per share) is based on the closing price of our stock on January 17, 2006 ($65.72). The outstanding number of stock options awarded to each director as of December 31, 2007 was Mr. McCorkindale 16,631; Mr. Murphy 43,430; and Mr. Schneider 5,590, all of which vested on January 17, 2008.

(4)    Column (e) deleted because we did not have a Non-Equity Incentive Plan in 2007.

(5)    Includes a portion of the interest earned in 2007 by Messrs. Bennett and Murphy, Mrs. King, and Ms. Stevens on cash retainer fees credited to the “prime rate” investment option under the Directors’ Deferred Compensation Plan. The amount shown is the amount in excess of 120% of the Applicable Federal Rate published by the Internal Revenue Service (“IRS”).

(6)    Includes the cost to the Corporation of providing Internet access, tax gross-up payments and the

incremental cost of a director’s personal use of corporate aircraft and spousal travel while accompanying a director on business travel.

(7)    Includes contributions made by the Corporation to eligible educational institutions in an amount matching the contribution of the director to that institution. Matching contributions in 2007 were made on behalf of Mr. Archibald $10,000; Mr. Bennett $5,000; Mr. Ellis $2,500; Mr. McCorkindale $6,000; Mr. Murphy $10,000; Mr. Schneider $10,000; Mr. Ukropina $2,000; and Mr. Yearley $10,000. The matching program is the same as the program available to all employees.

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

(9)    Variances in the amounts reported for each director in columns (b), (c), and (d) due to the inclusion of fees for service as a committee chairman and historical variations in equity grant elections and board tenure that result in differences in the amount expensed for each director in 2007. Numbers have been rounded to the nearest dollar.

(10)    Mr. Bennett participates in deferred compensation and other plans related to his service as a director of an acquired company (COMSAT Corporation) and his prior service as an officer of Martin Marietta Corporation and Lockheed Martin. None of the benefits under these plans were earned for service as a director of Lockheed Martin and they are not included in the table. The aggregate earnings with respect to his service as a director of COMSAT Corporation for 2007 were $18,867.

20

SECURITIES OWNED BY DIRECTORS, NOMINEES AND NAMED

EXECUTIVE OFFICERS

The following table shows the Lockheed Martin common stock beneficially owned and stock units credited to each NEO, director, nominee, and all directors, nominees and executive officers as a group as of February 1, 2008. Except as otherwise noted, the named individuals had sole voting and investment

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

Name of Individual or Identity of Group	Common Stock Beneficially Owned 1,2.3		Stock Units		Total
E. C. “Pete” Aldridge, Jr.	0		7,374	5	7,374
Nolan D. Archibald	0		8,909	5	8,909
Marcus C. Bennett	5,892		13,964	5	19,856
David B. Burritt	0		0		0
Robert B. Coutts	212,524		36,496	6,7,8	249,020
James O. Ellis, Jr.	200		5,089	5	5,289
Linda R. Gooden	42,195		17,380	7,8	59,575
Ralph D. Heath	136,252		30,032	6,7,8	166,284
Gwendolyn S. King	568	4	16,500	5,9	17,068
Christopher E. Kubasik	193,242		63,052	6,7,8	256,294
James M. Loy	0		4,108	5	4,108
Joanne M. Maguire	88,691		26,724	6,7,8	115,415
Douglas H. McCorkindale	16,631		15,527	5,10	32,158
Eugene F. Murphy	49,430		1,164	9	50,594
Joseph W. Ralston	0		7,644	5	7,644
Frank Savage	1		27,989	5,9,10,11	27,990
James M. Schneider	7,590		1,848	5	9,438
Anne Stevens	0		6,543	5	6,543
Robert J. Stevens	913,946		252,501	6,7,8	1,166,447
Bruce L. Tanner	39,509		10,961	6,7,8	50,470
James R. Ukropina	1,630		20,206	5,9,10,11	21,836
All directors, nominees and executive officers as a group 24 individuals including those named above)	1,779,300		607,442		2,386,742

NOTES TO TABLE:

(1)    Includes restricted stock awards (“RSAs”) for Messrs. Coutts, Heath, Kubasik, and Stevens, and Mss. Gooden and Maguire in the amount of 16,667; 10,000; 10,000; 33,334; 10,000; and 10,000, respectively.

(2)    Includes shares not currently owned but which could be acquired within 60 days following February 1, 2008 through the exercise of stock options for Messrs. Coutts, Heath, Kubasik, McCorkindale, Murphy, Schneider, Stevens, and Tanner, and Mss. Gooden and Maguire in the amount of 172,100; 121,033; 165,033; 16,631; 43,430; 5,590; 837,500; 37,966; 23,634; and 74,800 shares, respectively.

(3)    Includes shares attributable to the participant’s account in the Lockheed Martin Salaried Savings Plan

(“SSP”) for Messrs. Bennett, Coutts, Heath, Kubasik, Stevens, and Tanner, and Mss. Gooden and Maguire in the amount of 891; 23; 1,542; 1,065; 23; 1,543; 4,782; and 679, respectively. Participants have voting power and investment power over the shares.

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

(5)    Includes stock units under the Directors Equity Plan. Mrs. King, Ms. Stevens, and Messrs. Aldridge,

21

SECURITIES OWNED BY DIRECTORS, NOMINEES AND NAMED

EXECUTIVE OFFICERS

Archibald, Bennett, Ellis, Loy, McCorkindale, Ralston, Savage, Schneider, and Ukropina have been credited with 15,336; 6,543; 7,374; 8,909; 13,965; 5,089; 4,108; 5,749; 7,644; 8,047; 1,848; and 15,336 units, respectively. Units are distributed in the form of cash or stock as elected by the director. There are no voting rights associated with stock units.

(6)    Includes stock units attributable to the participant’s account under the Lockheed Martin Corporation Supplemental Savings Plan (“NQSSP”) for Messrs. Coutts, Heath, Kubasik, Stevens, and Tanner, and Ms. Maguire in the amount of 66; 1,907; 1,807; 447; 868; and 584, respectively. Amounts credited to a participant’s account in the NQSSP are distributed in cash following termination of employment. There are no voting rights associated with stock units.

(7)    Includes stock units attributable to the participant’s account under the Lockheed Martin Corporation Deferred Management Incentive Compensation Plan (“DMICP”) (including units credited under the LTIP program awards under the Lockheed Martin 1995 Omnibus Performance Award Plan (“Award Plan”) and the Lockheed Martin Corporation Amended and Restated 2003 Incentive Performance Award Plan (“IPA Plan”)) for Messrs. Coutts, Heath, Kubasik, Stevens, and Tanner, and Mss. Gooden and Maguire in the amount of 25,580; 15,574; 34,045; 59,554; 4,443; 7,180; and 16,341, respectively. Although most of the units will be distributed following termination or retirement in shares of stock, none of the units are convertible into shares of stock within 60 days of February 1, 2008. There are no voting rights associated with stock units.

(8)    Includes RSUs for Messrs. Coutts, Heath, Kubasik, Stevens, and Tanner, and Mss. Gooden and Maguire in the amount of 10,850; 12,550; 27,200; 192,500; 5,650; 10,200; and 9,800, respectively. The RSUs represent a contingent right to receive one share of common stock. There are no voting rights associated with RSUs.

(9)    Includes stock units under the Directors’ Deferred Stock Plan for Mrs. King and Messrs. Murphy, Savage, and Ukropina each in the amount of 1,164. There are no voting rights associated with stock units.

(10)    Includes stock units under the Directors’ Deferred Compensation Plan representing deferred cash compensation for Messrs. McCorkindale, Savage, and Ukropina in the amount of 9,778; 16,276; and 3,211, respectively. The stock units (including dividend equivalents credited as stock units) are distributed in the form of cash. There are no voting rights associated with stock units.

(11)    Includes shares held in trust under the former Deferred Compensation Plan for Directors of Lockheed Corporation. Deferred amounts are distributable after a participant ceases to be a director. In the event a participant’s status as a director is involuntarily terminated other than by death, common stock in the director’s trust account will be distributed within 15 days of termination. Messrs. Savage and Ukropina have been credited with 2,502 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 executive officers and directors (and persons who own more than 10% of our equity securities) file reports of ownership and changes in ownership with the

SEC, the NYSE and with us. Based solely on our review of copies of forms and written representations from reporting persons, we believe that all ownership filing requirements were timely met during 2007.

22

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

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

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

Name and Address of Beneficial Owner	Class of Stock	Amount and Nature of Beneficial Ownership	Percent of Class Owned
State Street Bank and Trust Company State Street Financial Center One Lincoln Street Boston, Massachusetts 02111	Common	76,269,829 1	18.6%
FMR LLC 82 Devonshire Street Boston, Massachusetts 02109	Common	24,548,079 2	5.9%
Marsico Capital Management, LLC 1200 17th Street, Suite 1600 Denver, Colorado 80202	Common	23,858,337 3	5.8%

NOTES TO TABLE:

(1)    As reported on a Schedule 13G filed on February 13, 2008 by State Street Bank and Trust Company (“State Street”), State Street had beneficial ownership of and shared dispositive power with respect to 76,269,829 shares of common stock, of which 64,318,045 shares of common stock were held by it as trustee for certain Lockheed Martin employee benefit plans. State Street also reported that it had sole voting power with respect to 14,188,940 shares, of which 2,237,156 shares of common stock it had sole voting power as trustee for certain Lockheed Martin employee benefit plans. State Street has expressly disclaimed beneficial ownership of the shares reported on its Schedule 13G.

(2)    As reported on a Schedule 13G/A filed on February 22, 2008 by FMR LLC (“FMR”), FMR had beneficial ownership of and sole dispositive power with respect to 24,548,079 shares of common stock. FMR has sole power to vote 2,854,026 shares and

shared voting or dispositive power for none of the shares. FMR’s Schedule 13G includes shares beneficially owned by Edward C. Johnson 3^rd (21,411,673 shares), Fidelity Management & Research Company (21,411,673 shares), Pyramis Global Advisors, LLC (559,200 shares), Pyramis Global Advisors Trust Company (1,121,208 shares), Strategic Advisers, Inc. (9,053 shares), and Fidelity International Limited (1,446,945 shares). FMR and Fidelity International Limited are of the view that they are not acting as a “group” for purposes of Section 13(d) and that they are not otherwise required to attribute to each other the beneficial ownership of securities beneficially owned by the other corporation.

(3)    As reported on a Schedule 13G filed on February 13, 2008 by Marsico Capital Management, LLC (“Marsico”), Marsico had beneficial ownership of and sole dispositive power over 23,858,337 shares and sole voting power over 19,745,394 shares.

23

EXECUTIVE COMPENSATION

Compensation Committee Report

The Management Development and Compensation Committee makes recommendations to the Board of Directors concerning the compensation of the Corporation’s executives. We have reviewed and discussed with management the Compensation Discussion and Analysis included in the Corporation’s Schedule 14A Proxy Statement, filed pursuant to Section 14(a) of the Securities Exchange Act of 1934,

as amended (the “Proxy”). Based on that review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Proxy and incorporated by reference in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2007. The Board has approved that recommendation.

Submitted on February 28, 2008 by the Management Development

and Compensation Committee:

Nolan D. Archibald, Chairman	Eugene F. Murphy
E. C. “Pete” Aldridge, Jr.	James M. Schneider
Douglas H. McCorkindale	Anne Stevens

Compensation Committee Interlocks and Insider Participation

There are no relationships required to be disclosed under this section.

24

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Executive Summary of Compensation Analysis

The goal of our compensation program is to attract talented people to work for us, motivate our key people, and keep them working for us. To do that, we look carefully at what our competitors and other large companies pay to see what our NEOs might be offered to go work for somebody else. We also consider the individual characteristics of our key people that may make them more or less vulnerable to recruitment by others or difficult to replace, such as level of experience, time in position, unique knowledge or skills, and leadership qualities. Relationships with customers and performance on particular programs may also play a role because they make somebody harder to replace.

We pay NEOs a base salary and we also put a significant portion of the executive’s compensation at risk by tying pay to specified levels of performance each year, and over longer periods of time. Tying pay to performance motivates people to perform and rewards those who respond by doing a great job. Our compensation program contains incentive opportunities that measure performance against key financial numbers and other metrics; it also contains qualitative standards that allow for the subjective judgments we believe are essential to evaluating individuals.

It is our intent to award superior pay for superior performance. Our compensation plans also authorize payment in some circumstances when objectives are not being achieved in order to provide a continuing incentive for strong performance.

We consider individual performance in base salary decisions and both individual and business performance in our annual bonus program. In contrast, the amounts paid out under our long-term incentive program are

based solely on the Corporation’s performance. We think that mix makes sense because it focuses on individual achievement, while also strongly encouraging those individuals to care how well the entire team does.

In 2007, our financial results exceeded our projections across the board and the price of our stock increased 14%. Since 2005, our stock price has increased 65% and since 2003, it has increased 105%. For the three-year period 2005-2007, our market capitalization increased by $19 billion. Those results came from outstanding individual work and team work. As a result, our key people have been highly compensated under both our short-term and long-term incentive plans. As we have designed our incentive plans, if our NEOs keep producing superior results, they will continue to be highly paid. If their achievements do not meet or exceed our goals, their pay will reflect that fact.

We provide more detail on our process, the information shared with the Committee, and 2007 pay decisions below. We have limited the discussion in this Compensation Discussion and Analysis (“CD&A”) to a description of how decisions were made for 2007. A discussion of the components of our executive compensation program precedes the compensation tables, beginning on page 40. References to “the Committee” in this CD&A mean the Management Development and Compensation Committee of our Board.

Discussion and Analysis

The following table lists the elements of our executive compensation program, the reason we use the element, and what the element rewards:

Element	Reason We Use It	What Is Rewarded
Base Salary	•        Fixed rate of pay is the form used in most U.S. companies for compensation	•        A sustained high level of performance •        Demonstrated success in meeting or exceeding key financial and other business objectives •        Highly developed skills and abilities critical to the success of the business unit or Corporation •        Experience and time in position

25

EXECUTIVE COMPENSATION

Element	Reason We Use It	What Is Rewarded
Annual Bonus (MICP)	•        Incentivize NEOs to meet or exceed stated business and individual goals by placing a substantial portion of a NEO’s annual compensation at risk	•        Organizational performance during the year against our publicly-disclosed forecast and other measures of performance •        Individual performance during the year measured against identified goals
Long-Term Incentives:
Stock Options	•        Link a NEO’s compensation to stockholder return •        Retain a NEO through vesting period	•        Increase in stock price •        Commitment to remain with the Corporation
RSUs	•        Retain a NEO through vesting period •        Link a NEO’s compensation to stockholder return	•        Commitment to remain with the Corporation •        Increase in stock price
LTIP Award	•        Represents performance-based compensation •        Link a NEO’s compensation to financial metrics that are important to stockholders	•        Performance relative to other companies as measured by Total Stockholder Return (“TSR”) •        Meeting or exceeding stated goal for increasing return on invested capital (“ROIC”) •        Meeting or exceeding stated goal for cash generation

The NEOs participate in the pension, savings, health care and other welfare benefit plans available to other employees and restoration pension and savings plans that maintain benefit levels for employees whose benefits otherwise would be reduced because of IRS limitations on benefits payable from tax-qualified plans. The NEOs also participate in a deferral plan (the DMICP) that permits the deferral of MICP bonuses and LTIP payments. We provide very limited perquisites and post-employment benefits to our NEOs.

Role of the Committee

All our NEOs are at-will employees and serve at the pleasure of our Board. The Committee is responsible for the compensation of the Corporation’s NEOs. It reviews and approves corporate goals and objectives

for the CEO and recommends the compensation for the CEO to the independent members of the Board which reviews and approves the compensation of the CEO and each of the other NEOs. The Committee reviews the recommendations of the CEO for the compensation of the other NEOs and approves the compensation of those officers.

Use of Data from Other Companies in 2007

In order to determine what other companies pay NEOs with comparable responsibilities, we asked Hewitt to collect compensation data from a group of publicly held companies (referred to as our “Comparator Group”) in the aerospace and defense industry and other companies of a size, complexity, and quality similar to ours. The following companies made up the

26

EXECUTIVE COMPENSATION

Comparator Group we used in 2007 for making compensation decisions:

• 3M Company

• Alcoa Inc.

• Altria Group, Inc.

• AT&T Inc.

• The Boeing Company

• Bristol-Myers Squibb Company

• ConAgra, Inc.

• The Dow Chemical Company

• Eastman Kodak Company

• E.I. du Pont de Nemours & Company

• FedEx Corporation

• General Dynamics Corporation

• Hewlett-Packard Company

• Honeywell International Inc.

• IBM Corporation

• International Paper Company

• Johnson & Johnson

• Merck & Co. Inc.

• Motorola, Inc.

• Northrop Grumman Corporation

• PepsiCo, Inc.

• The Procter & Gamble Company

• Raytheon Company

• United Technologies Corporation

• Valero Energy Corporation

To compare our compensation with compensation paid in other companies within the Comparator Group, Hewitt collected data for the compensation paid by the companies in 2006 and then made several adjustments. Among other things, Hewitt adjusted Comparator Group data to take into account that the companies in the Comparator Group were not the same size. For example, the 2005 sales of companies in our 2006 Comparator Group ranged from $11.6 billion to $91.1 billion. Our sales in 2005 were $37.2 billion. To create data that would provide a reference point for us, CEO and Chief Financial Officer (“CFO”) compensation was adjusted based on revenues, and business area Executive Vice President data were adjusted based on the revenues of their business areas. Hewitt also applied an aging factor to the Comparator Group data to establish a market value as of September 1, 2007. The purpose of these adjustments is to derive amounts that a corporation the same size as ours would pay its executives in comparable positions.

After these adjustments, Hewitt determined the 50^th percentile for each position for base pay, annual

incentive bonus opportunities, and aggregate long-term incentive compensation opportunities or targets. Hewitt derived the economic value for long-term incentive compensation from standard statistical measures, such as the Black-Scholes model for option pricing. We allocated the aggregate long-term incentive compensation economic value among individual components of long-term incentive compensation, such as stock options, RSUs, or long-term cash performance awards based on our desired mix of those elements. Information on total compensation came from combining Comparator Group data on individual elements of compensation.

For the short-term and long-term incentive pay components, we looked at targets and ranges of possible compensation but did not compare actual payments under our incentive programs to market data because it is not useful for benchmarking. Incentive compensation payouts are contingent upon a number of factors, including such things as market performance, vesting periods, deferrals, and how long the person held the stock or the options.

In 2007, consistent with historical practice, we did not designate a specific percentile as a target for the individual components or for total compensation. Information on market percentiles was provided as a reference point and as an item of information rather than as a target. Market data and performance metrics are important tools for analyzing compensation, but are not the only factors. Compensation decisions necessarily involve judgments about the best mix and balance of compensation elements needed to attract qualified employees, retain employees, and reward or recognize performance.

In making individual compensation decisions, management considered a number of factors together with the market data and made recommendations to the Committee with respect to each element of compensation after considering individual performance and other factors including a sustained high level of performance, 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, and experience and time in position. Individual compensation decisions are, in the end, based on review and assessment by the Committee and Mr. Stevens (with respect to the NEOs other than

27

EXECUTIVE COMPENSATION

himself) of these and other subjective factors. As a result, total compensation (or any particular part of it) was based on a combination of factors and may differ materially from the derived 50^th percentile of the Comparator Group.

Role of Compensation Consultants

Hewitt was retained by the Corporation in 2007 to serve as its compensation consultant to gather, among other things, Comparator Group data. In 2007, Hewitt also prepared reports using Comparator Group data on employment agreements and the mix of elements in long-term incentive compensation.

In addition to Hewitt, the Committee separately engaged its own compensation consultant, Watson Wyatt Worldwide, Inc. (“Watson Wyatt”), with whom it reviews selected matters, using the same Comparator Group. In 2007, Watson Wyatt provided information to the Committee on employment agreements, reported on 2007 proxy Comparator Group data, and prepared a total accumulated wealth analysis comparing the NEOs to the Comparator Group; the purpose of the total accumulated wealth analysis was to provide the Committee with a broad perspective on compensation.

Role of Management in Compensation Decisions

Our Chairman, President and CEO, with input from our Senior Vice President, Human Resources and data from Hewitt, provided the Committee with information on recommended base salary, annual bonuses, and long-term incentive grants for our NEOs (other than the CEO), along with the 50^th percentile of the Comparator Group data and historical data for each NEO. The Senior Vice President, Human Resources also calculated for the NEOs (other than the CEO) the resulting percentage above or below the market for varying levels of compensation and interpolated the potential market percentile for levels of compensation. For the CEO, the Senior Vice President, Human Resources did not recommend a specific amount of compensation. He presented a schedule with a range of possible payments to the CEO for each element of compensation in relationship to the 50^th and 75^th percentiles; for the CEO, the schedule also showed ranges of total cash compensation using the sum of base salary and MICP awards. The purpose of this schedule was to estimate what percentile of pay would result from different levels of payments.

The Executive Vice President and CFO developed internal financial goals within stockholder-approved metrics for our long-term incentive program and assessed organizational performance under those metrics and under the financial, operational and strategic goals set by the Committee for our short-term incentive program. The role of the officers in decisions relating to the specific elements of our program is described in more detail in the discussion of individual elements below.

Role of Industry Considerations in Compensation Decisions

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

As a government contractor, we are subject to the Federal Acquisition Regulation, which limits the reimbursement of costs by our government customers for senior executive compensation to a benchmark compensation cap established each year. The benchmark cap applies to the CEO and our four most highly compensated NEOs at our headquarters, plus the five most highly compensated employees in management positions. When comparing senior executive compensation to the benchmark cap, all wages, salary, bonuses, and deferred compensation for the year, whether paid, earned or otherwise accrued, must be included. For 2007, the benchmark compensation cap published in the Federal Register was $597,912. Any amounts over the cap were considered unallowable and therefore not recoverable under our government contracts.

We also have contracts that require that we provide a summary of contract performance to the Board or person having responsibility for setting the compensation of senior management annually so that performance can be considered in setting the

28

EXECUTIVE COMPENSATION

compensation of the contractor’s senior executives — defined as the five most highly compensated employees at the corporate level, to include the CEO.

Compensation Decisions in 2007

Timing of Compensation Decisions

The Committee made compensation decisions with respect to 2007 as follows:

January 2007	January 2008
•       Determined Merit Increases	•       Awarded MICP Bonuses For 2007 Performance
•       Awarded Long-Term Incentive Compensation, as follows:	•       Certified LTIP Payments For 2005-2007 cycle
¡       Stock Options ¡       RSUs ¡       LTIP – 2007-2009 Cycle Targets Established	•       Certified Performance for 2007 RSU Grants
•       Certified LTIP Payments for 2004-2006 cycle

Base Salary Determinations in 2007

CEO Merit Increase

At its January 2007 meeting, the Committee met separately with the Senior Vice President, Human Resources to prepare its recommendation for the Board as to all the elements of Mr. Stevens’ compensation, including a merit increase. At that time, the Committee reviewed compensation paid to Mr. Stevens in 2006 comprised of the 2005 MICP bonus paid in January 2006, his 2006 base salary, and economic values for long-term incentive compensation awarded to him in January 2006 consisting of stock options, RSUs and LTIP awards (exclusive of the additional RSU award made to him for retention purposes). The value of each element was assessed against data provided by Hewitt for the 50^th and 75^th percentile of the Comparator Group companies. The data showed that the economic value of the compensation Mr. Stevens received in 2006 (MICP bonus, base salary, options, LTIP and

RSUs, other than the retention grant) exceeded the 50^th percentile but was less than the 75^th percentile of our Comparator Group. For 2007, the Committee designated a merit increase that would place Mr. Stevens, using the data presented at the meeting, at the 75^th percentile for base salary. This decision was based on the Corporation’s record-breaking performance in 2006 in which the Corporation exceeded all of its publicly disclosed goals, as well as Mr. Stevens’ consistently high performance and acknowledged leadership in the industry and among corporate CEOs generally.

Merit Increases For Other NEOs

In addition to Comparator Group data on the other NEO positions, the Senior Vice President, Human Resources provided information to the Committee on our guidelines on merit increases generally, which links the size of a salary merit increase to whether the officer’s current salary fell above or below the 50^th percentile of the Comparator Group. For example, under the guidelines, smaller raises (as a percentage) are recommended for contributors whose salary already exceeds the 50^th percentile, while larger raises (as a percentage) were recommended for contributors whose salary falls below the 50^th percentile.

Our NEOs are high performers and receive raises reflecting that performance. Prior to the merit increase, the salaries of Mr. Heath and Mss. Gooden and Maguire were below the 50^th percentile derived from Comparator Group data for their positions. For Messrs. Kubasik and Coutts, salaries prior to the increase exceeded the 50^th percentile. For Mr. Kubasik, the Committee concluded that his exceptional performance in the prior year and public recognition as an outstanding chief financial officer made him an attractive candidate for recruitment by other companies, thereby warranting a larger merit increase. Mr. Coutts’ merit increase was based on Electronic Systems multi-year success in generating cash and winning key programs. Mr. Tanner received a raise in January 2007 when he was the Vice President of Finance and Business Operations in the Aeronautics Business Area and so was evaluated by management at the time by reference to his job within the business area. When he was promoted to Executive Vice President and CFO, his salary was raised to $500,000, which placed him well below the 50^th percentile for chief financial officers within the Comparator Group.

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EXECUTIVE COMPENSATION

At that time, the Committee considered that he would receive another merit increase in February 2008 to bring him closer to the 50^th percentile.

The following chart shows the salary of each NEO after the merit increase as a percentage of the 50^th percentile of our Comparator Group:

	Salary As A Percentage Of 50th Percentile (after raise in January 2007)
Mr. Stevens	107%
Mr. Tanner*	69%
Ms. Gooden	89%
Mr. Heath	98%
Mr. Kubasik	117%
Ms. Maguire	98%
Mr. Coutts	138%

* September 2007 salary increase

MICP Decisions For 2007 Performance

MICP is our annual bonus program. Each NEO is assigned a target percentage of base salary determined by the level of contribution and responsibility of the NEO’s position, and in a range comparable to annual incentive targets for similar positions in the Comparator Group. The target amounts are reported in the “Grants of Plan-Based Awards” table and range from 75% to 125% of salary. We calculate MICP bonuses as follows:

Annual Base
Salary X Target
Level X Corporate
Factor X Individual
Factor

The following chart shows the target percentages for each NEO:

	% of Base Pay Target
Mr. Stevens	125%
Other NEOs*	75%

* Mr. Tanner’s MICP bonus was based on his rate of pay in the first week of December 2007 but was prorated for four months at the 75% applicable to the CFO position and eight months at a target of 45%, the target applicable to him prior to promotion as Executive Vice President and CFO.

The amount ultimately paid to a NEO may range from 0% to 195% of the target percentage and is based on the Committee’s evaluation of business and individual performance during the year.

MICP award targets are reviewed periodically and were last updated in 2005. Recent survey information revealed that our NEO target awards lag the market. An assessment will be made in 2008 with respect to updating MICP award targets.

Corporate performance factors range from 0 to 1.5; individual performance factors range from 0 to 1.3, the target is a percentage of base salary as of the first pay period of December. The following table shows the performance level associated with each factor:

Factor	Corporate Performance
1.50	Far exceeded organizational objectives in all categories.
1.30	On balance, exceeded high performance expectations in most categories.
1.00	Achieved all objectives or on balance met high performance expectations.
0.75	Met most objectives. Overall performance was good, but not as high as possible or expected.
0.50	Met few objectives, but overall performance not as good as possible or expected.
0.00	Did not achieve sufficient overall performance level.

Factor	Individual Performance
1.20 – 1.30	Performance vastly superior to expectations and peers within the organization.
1.05 – 1.15	Consistently exceeds expected performance.
1.00	Consistently meets all requirements and expectations.
0.80 – 0.95	Performance meets most, but not all job requirements and expectations.
0.60 – 0.75	Performance meets some objectives, but overall performance below expected levels.
0.00	Performance fails to meet job requirements.

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EXECUTIVE COMPENSATION

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

MICP in 2007—Performance Objectives

In the first quarter of 2007, based on input from the Senior Vice President, Human Resources and Mr. Kubasik who was the Executive Vice President and CFO at that time, the Committee established quantitative and qualitative corporate objectives, which served as the corporate objectives for the NEOs and the individual objectives for the CEO. The objectives for financial performance included sales, cash, ROIC ¹, and operating margin in ranges consistent with our outlook for 2007 as publicly disclosed in connection with our release of earnings for the year ended December 31, 2006. The Corporation believes that setting objectives consistent with the ranges contained in our public forecast ties compensation to our effectiveness in meeting our public commitments to our stockholders.

The Committee also established operating, strategic and other qualitative objectives for a wide range of corporate initiatives, such as achieving mission success on ongoing programs, earning a high rate of available award fees, performance recovery on troubled programs, continuing efforts on our diversity initiative, developing new lines of business, deploying cash to increase value, increasing productivity, developing leaders under our “Full Spectrum Leadership” program, differentiating our Corporation from competitors, progress in staffing for strategic talent and reducing rate of escalation of employee health care costs through health and wellness programs.

Each of the NEOs (other than the CEO) established individual objectives in the first quarter of 2007. The individual objectives of the business area Executive

¹ We define ROIC in our 2007 Annual Report on Form 10-K as net earnings plus after-tax interest expense divided by average invested capital (stockholders’ equity plus debt), after adjusting stockholders’ equity by adding back amounts related to post-retirement benefit plans. See “Selected Financial Data,” Note (g), included in our 2007 Annual Report on Form 10-K, for further definition and calculation methodology.

Vice Presidents largely reflected the organizational goals for the business area for which the NEO is responsible. For functional area NEOs, individual objectives represent achievements important for that year for that functional area.

Organizational objectives are both quantitative and qualitative and provide a framework for reviewing performance. Meeting, exceeding, or falling short of an identified objective does not mandate a particular organizational rating, but is considered as one factor among many for evaluating the year’s performance. The weight given to each objective, and the overall organizational rating, are subject to the discretion of the Committee, which also has the discretion to consider other factors.

In January of 2008, the Executive Vice President and CFO in conjunction with the Senior Vice President, Human Resources prepared an assessment of our operational, strategic, and financial results and an initial recommendation for the annual MICP corporate rating. The recommendation was reviewed by the CEO. The CEO, with assistance from the Senior Vice President, Human Resources, assessed the performance of the individual NEOs (other than himself) and recommended individual ratings for the other NEOs to the Committee. The Committee assessed the performance of the CEO and determined the corporate rating and individual rating for the CEO.

The Committee assessed 2007 corporate performance at its January 2008 meeting as far exceeding organizational objectives, for a rating of 1.45. In making its determination, the Committee reviewed 2007 financial, operational and strategic performance.

2007 Financial performance:

The Committee considered financial performance against our 2007 performance objectives which were consistent with our forecast as disclosed publicly in January 2007, as well as our long range plan.

Performance exceeded the established objectives and was at record levels.

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EXECUTIVE COMPENSATION

	2007 Performance Objectives (Public Forecast)	2007 Results
Sales	$40.25 – 41.25B	$41.86B
Segment Operating Profit 2	$4.200 – 4.325B	$4.69B
Earnings Per Share (“EPS”)	$5.80 – 6.00	$7.10
Cash From Ops	³$3.9B	$4.2B
ROIC	>17.5%	21.4%
Segment Operating Margin	10.5%	11.2%

2007 Operational performance:

For operational performance, the Committee took into account:

• Our successful performance on 294 of 295 key events

• Successful consolidation of two business areas into the Information Systems and Global Services Business Area

• Continued reduction of program losses

• Continued improvement in our diversity maturity model score

• Implementation of our long-term health cost containment program

• Continued improvements in our safety-on-the-job program

2007 Strategic performance:

As to strategic results, the Committee noted:

• Our track record in maintaining existing business and winning new business

• Growth in key areas of our work force reflecting success in our efforts to

^¡ Attract and retain technical skills

² Segment Operating Profit represents the total earnings from our business segments before interest, taxes and unallocated corporate expense net. See “Note 15 – Information on Business Segments” to our financial statements included as part of our 2007 Annual Report on Form 10-K for a reconciliation of Segment Operating Profit to Consolidated Operating Profit.

^¡ Differentiate our workforce and corporate culture

^¡ Plan for leadership and knowledge succession

Among disappointments noted by the Committee were issues in some of our development contracts.

CEO MICP Bonus for 2007

In determining Mr. Stevens’ MICP bonus, the Committee considered our overall high level of corporate performance as well as Mr. Stevens’ total cash compensation in 2007 and his projected cash compensation for 2008. For his 2007 total cash compensation, the Committee reviewed the 2006 MICP bonus paid in January 2007, his 2007 base salary, and target amounts for long-term incentive compensation awarded to him in January 2007, consisting of stock options, RSUs and LTIP awards. Taking these items into account, Mr. Stevens’ total cash compensation for 2007 was estimated as placing him above the 50^th percentile of the Comparator Group but below the 75^th percentile. For 2008 total cash compensation, the Committee considered the various items to be awarded at the January 2008 meeting, including his 2008 base salary as adjusted for a merit increase, the MICP bonus for 2007 and the long-term incentive awards to be made at the January 2008 meeting. In light of our performance in 2007, the consistent and sustained track record of Mr. Stevens in the prior years and the 98.6% increase in our TSR for the 2005-2007 period, the Committee designated MICP and other elements of compensation equal to the 75^th percentile of the Comparator Group. This resulted in a MICP bonus for 2007 in the amount of $3,900,000, approximately equivalent to an individual factor of 1.3, the highest possible.

MICP for the Other NEOs in 2007

The Committee reviewed each of the other NEOs in the context of the strong overall performance of the Corporation and concluded that each performed in a manner vastly superior to expectations and peers within the organization, a conclusion meriting an

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EXECUTIVE COMPENSATION

individual factor of 1.20 – 1.30 under the terms of our MICP plan. For each of the Business Area Executive Vice Presidents, the Committee noted the following achievements:

	Performance Highlights
Ms. Gooden	•       Successful reorganization of IS&GS •       Growth in operating profit •       Growth in sales •       MSD and RLM acquisitions
Mr. Heath	•       Successful performance, in particular ¡       F-22 Collier Award ¡       F-35 STOVL (short take-off and vertical landing) roll-out •       Increase in new orders, notably ¡       C-130J for Canada and Norway ¡       F-16 for Turkey
Ms. Maguire	•       100% Mission Success •       120th consecutive Fleet Ballistic Missile test •       Growth in sales and profit •       Delivery of 4 commercial satellites

Due to her superior performance in the Space business area, Ms. Maguire was assessed at a 1.25 individual factor. The Committee concluded that Ms. Gooden warranted the highest possible individual factor of 1.3 based on the integration of two business areas into IS&GS in her first year as an Executive Vice President. The Committee also concluded that Aeronautics’ 21% increase in operating profit as well as its overall financial and operational performance should be acknowledged by awarding Messrs. Heath and Tanner, who served as Vice President of Finance and Business Operations of that business area, 1.3 individual factors. The Committee also considered Mr. Tanner’s transition to the position of corporate CFO in the last three months of 2007. The Committee assessed Mr. Kubasik at a 1.3 based on his significant role in achieving the Corporation’s overall financial objectives for 2007 and his transition to the role of Executive Vice President of a business area. Finally, the Committee assessed Mr. Coutts at 1.2, consistent with his Retirement Transition Agreement which required a minimum 1.2 rating.

As part of its review, the Committee considered the limitations in the MICP plan based on cash flow (0.3% of cash flow for the CEO and 0.2% for each of the other officers subject to the limitation). The Committee certified that none of the awards exceeded the percentage limits. These limitations were approved at our April 2006 Annual Meeting of Stockholders, and are intended to qualify MICP payments as “performance-based compensation,” exempt from the $1 million limit on deductibility under Internal Revenue Code Section 162(m).

For purposes of the MICP awards for 2007, “cash flow” means net cash flow from operations adjusted for:

• The aggregate difference between the amount forecasted in our long range plan to be contributed to our pension plans and the actual amounts contributed; and

• Any tax payments or benefits associated with the divestiture of business units.

Long-Term Incentive Program

In 2007, long-term incentive compensation awards consisted of stock options, RSUs, and a cash-based long-term incentive performance award. For the long-term incentive compensation program, the Senior Vice President, Human Resources advised the Committee of the economic value of long-term incentive compensation opportunities at the 50^th percentile of the Comparator Group and the recommended economic value for each NEO. Based on factors identified by the Senior Vice President, Human Resources as time in position, skill levels, and history of performance, the Committee approved adjustments to the economic value derived from the Comparator Group 50^th percentile to come up with a desired economic value for each NEO. For example, the desired economic value for long-term incentive compensation for a NEO new to his or her position generally falls below the 50^th percentile, while the desired economic value for more senior NEOs may, depending upon performance history and other factors, exceed the 50^th percentile. The following chart shows the relationship between the economic value of long-term incentive awards in 2007 for each NEO and economic value at the 50^th percentile

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EXECUTIVE COMPENSATION

for that position within our Comparator Group and the percentage of compensation that is at risk (MICP and long-term incentive compensation) for each NEO. In this chart, total compensation includes rate of base pay approved in January 2007, MICP target and the economic value of long-term incentive compensation.

	LTI as Percentage of 50th Percentile	Combined MICP and LTI as Percentage of Total Compensation
Mr. Stevens	122%	89%
Mr. Tanner	90%	56%
Ms. Gooden	83%	76%
Mr. Heath	100%	77%
Mr. Kubasik	109%	78%
Ms. Maguire	84%	75%
Mr. Coutts	111%	74%

We allocate that economic value according to our mix of long-term incentive compensation elements as shown below:

The Senior Vice President, Human Resources recommended this mix to the Committee based on its view that it reflects current long-term incentive compensation in the market. In 2007, the mix was reviewed by Hewitt. Based on the review, we concluded our mix of elements did not deviate significantly from the Comparator Group. For long-term incentive awards made to the CEO in January 2007, the Committee increased the weight given to RSUs so that the allocation to Mr. Stevens was 46%, in stock options, 27% LTIP and 27% in RSUs.

Option Grants in 2007

Grant sizes are calculated by multiplying the approximate 50% (46% for the CEO) weight we have given to stock options in our executive compensation

program by the desired economic value for long-term incentives for the NEO and dividing that result by the value of a single option as determined under the Black-Scholes methodology and based on assumptions used for recognizing expense in accordance with FAS 123(R). These assumptions are set out in Note 11 to our financial statements for the year ended December 31, 2007. Option grants made in January 2007 are included in the “Grants of Plan-Based Awards” table. The terms are more fully described in the “Narrative Description of Benefits and Compensation” beginning on page 40.

LTIP in 2007

Our LTIP is a cash-based long-term incentive program that measures corporate performance over a three-year cycle using performance criteria established by the Committee at the beginning of the performance period. The LTIP program is intended to qualify as “performance-based” compensation exempt from the $1 million limit on deductibility of compensation under Internal Revenue Code Section 162(m). LTIP represents approximately 30% of the economic value we intend to deliver through long-term incentives. For each cycle, we establish a dollar target for each NEO, reported for the 2007-2009 cycle in the “Grants of Plan-Based Awards” table. We discount the LTIP economic value to 75% of the target to account for performance risk and potential forfeiture. In other words, the economic value of the LTIP will be 75% of the target assigned to the NEO.

The LTIP is a performance-metric derived plan. Neither the Committee nor management has any authority to adjust LTIP payouts. Since its inception in 1999, payments under the LTIP have been as follows:

Performance       Cycle	Percent of Target Award Earned
1999-2000	0%
1999-2001	91%
2000-2002	200%
2001-2003	185%
2002-2004	70%
2003-2005	0%
2004-2006	180%

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EXECUTIVE COMPENSATION

Cycles prior to the 2006-2008 cycle measured performance on the basis of the relative ranking of our TSR (change in stock price plus reinvestment of dividends) through the performance cycle to the other companies that make up the S&P 500 Index. Beginning with the 2006-2008 cycle, we used the TSR of the S&P Industrials Index as an external metric for 50% of the LTIP and measured the change in ROIC from 2005 and cash from operations against our long range plan as internal metrics for the other 50%. We changed the metrics because the narrower scope of the S&P Industrials Index tests our performance more closely against companies like ours and internal metrics test our ability to predict our performance and provide transparent disclosure. We chose TSR, ROIC and cash because these metrics are standard measures of performance important to stockholders and provide insight into the quality of earnings.

LTIP Awards for the 2007-2009 Cycle

Our 2007-2009 LTIP measures corporate performance over a three-year cycle from January 1, 2007 through December 31, 2009. It rewards performance during this period against pre-established internal and external metrics and continued tenure.

The amount earned at the end of the 2007-2009 performance cycle will be assessed against an external performance metric and an internal performance metric.

• External Performance Factor - 50% of Award: The External Performance Factor compares our percentile ranking in three-year TSR to the TSR of each of the other original companies in the S&P Industrials Index at the beginning of the period in accordance with the table below. Interpolation between points in the table occurs on a straight-line basis.

The chart below shows the percentage assigned to the External Performance Factor for the 2007-2009 cycle.

Percentile Ranking	External Performance Factor
75th or higher	200%
60th	150%
50th	100% (target)
40th	50%
35th	25%
Below 35th	0%

• Internal Performance Factor—50% of Award: The Internal Performance Factor contains two internal performance metrics measured over the three-year period. Under the ROIC ³ component (25% of award), 100% of target is payable if we achieve our ROIC plan. Two hundred percent of target would be payable if ROIC exceeds our 2007 long-range plan by more than 40 basis points. No amount is payable if the change in ROIC is more than 40 basis points below our 2007 long-range plan. Under the cumulative Cash Flow ⁴ from operations component (25% of award), 100% of target is payable if we achieve our cumulative Cash Flow plan. Two hundred percent of target would be payable if cumulative Cash Flow from operations exceeds our 2007 long-range plan by $1 billion. No amount is payable if cumulative Cash Flow from operations is more than $1 billion below our plan.

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

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

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

⁴ Cash Flow during the performance period is defined as net cash flow from operations but not taking into account:

– The aggregate difference between the amount forecasted in our 2007 long-range plan to be contributed to our defined benefit pension plans during the performance period and the actual amounts we contribute during the performance period; and

– Any tax payments or benefits during the performance period associated with the divestiture of business units.

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EXECUTIVE COMPENSATION

Payment of LTIP Awards for the 2005-2007 Cycle

Each of the NEOs (other than Mr. Tanner) received LTIP target awards in 2005 for the 2005-2007 performance cycle. The Committee reviewed and certified performance for the 2005-2007 cycle at its January 2008 meeting; the amounts paid under the 2005-2007 LTIP are shown in column (g) of the “Summary Compensation Table.”

The 2005-2007 LTIP cycle measured performance by comparing our percentile ranking of TSR in the three-year performance period to the TSR of the other companies in the S&P 500 Index at the beginning of the cycle.

Percentile Ranking	External Performance Factor
85th or higher	200%
75th	150%
60th	100%
50th	70%
40th	25%
Below 40th	0%

During the 2005-2007 periods, the Corporation performed at the 88.5^th percentile, earning a payout under the LTIP of 200% of target. The 2005-2007 performance cycle did not contain an internal performance metric.

RSUs in 2007

We determined RSU grant sizes by multiplying the approximate 20% weight given RSUs (27% for the CEO) times the desired economic value for long-term incentives derived from Comparator Group data and dividing that amount by the estimated grant date value of one restricted share.

The RSUs granted in 2007 may be forfeited if the NEO does not continue to work for us for the entire three-year vesting period or if the value of the RSU grant for a NEO exceeded a specified percentage of cash flow in 2007. For the RSUs granted in 2007, a forfeiture would occur if the value of the RSUs on the date of grant exceeded 0.2% (for Mr. Stevens) and 0.04% (for each of the other NEOs) of 2007 corporate cash flow as defined in the RSU award agreement. If this were to occur, the NEO would forfeit a number of RSUs equal in value to the shortfall. Based on 2007 cash flow, no NEO

forfeited RSUs granted in January 2007 for performance reasons. This performance feature is intended to qualify the RSUs as “performance-based compensation” exempt from the $1 million limit on the deductibility of compensation under Internal Revenue Code Section 162(m). The 2007 RSU award agreement defines cash flow in the same manner as cash flow for the MICP awards as described on page 33.

Perquisites, Personal Benefits, and Other Executive Compensation

Perquisites and other personal benefits provided to the NEOs in 2007 are disclosed in the “Summary Compensation Table.” In order to ensure the security of our executives in uncertain times, the Committee has also adopted a resolution directing that Messrs. Stevens and Kubasik (and others on an as-advisable basis depending upon the circumstances) use corporate aircraft for business and personal travel.

Post-Employment, Change in Control, and Severance Benefits

Upon certain terminations of employment, including death, disability, retirement, layoff, divestiture or a change in control, the NEOs may become eligible for immediate payment of benefits previously earned or accelerated vesting of long-term incentives in full or on a pro-rata basis. The purpose of these provisions is to protect previously earned or granted benefits by making them available following the event. We view the vesting (or continued vesting) to be an important retention feature for senior level employees. Our plans do not provide for additional benefits or tax gross-ups. Because termination benefits consist of previously granted or earned benefits, we do not consider termination benefits as a separate item in compensation decisions.

In the event of a change in control, our plans provide for the acceleration of the payment of earned pension benefits and nonqualified deferred compensation and the vesting of previously granted long-term incentive awards. In the case of stock options and LTIP, vesting following a change in control is “single-trigger” and occurs upon the change in control. In the case of RSUs and RSAs, the vesting is double trigger and requires both a change in control and termination of employment.

RSAs and RSUs generally have been used to address retention issues. In that context, the double trigger

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EXECUTIVE COMPENSATION

encourages continued employment and retention. In contrast, stock options are made to a larger group of employees and are used for more traditional compensatory reasons; that is, they are intended to reward common stock appreciation and enable recipients to share in both the risk and rewards of stock ownership through stock depreciation or appreciation. Given the predominantly compensatory nature of the awards tied to stock appreciation, immediate vesting upon a change in control permits participants to participate in any price appreciation associated with a change in control or control premium, on a basis similar to that available to stockholders as a whole.

In 2007, we entered into a Retirement Transition Agreement with Mr. Coutts in order to accommodate his retirement while ensuring his availability to assist in an orderly transfer of management responsibilities.

The section of this Proxy Statement entitled “Potential Payments Upon Termination or Change In Control” provides further information on post-employment payments, including Mr. Coutts’ agreement.

Compensation Design Changes in 2007

Post-Retirement Death Benefit

In 2007, we terminated the Lockheed Martin Corporation Post-Retirement Death Benefit Plan for Elected Officers (“PRDB Plan”). The Committee had amended this plan previously to limit participation to employees who became elected officers prior to January 1, 2007. We terminated the PRDB Plan for several reasons, including our desire to eliminate a balance sheet liability and the two-tier benefit structure among elected officers. The actuarial present value of the benefit that would have been paid upon the death of an officer following retirement will be payable to each of the NEOs (other than Mr. Tanner) in March 2008. The amounts to be paid are in column (i) of the “Summary Compensation Table.”

Executive Severance Plan

Our NEOs do not have employment agreements. In 2007, the Committee reviewed whether employment agreements would serve a corporate purpose. Following the review, the Committee concluded they would not, but decided to review the possibility of adopting an executive severance plan. In January 2008, the Board approved the Lockheed Martin Corporation

Severance Benefit Plan For Certain Management Employees (“Executive Severance Plan”). Benefits are payable under this plan in the event of a company-initiated termination of employment other than for cause. All of the NEOs could become eligible for the new plan.

The Board adopted the plan in order to standardize the process by which company-initiated terminations are handled and to facilitate orderly succession planning. The benefit payable in the plan is one times the NEO’s base salary and the equivalent of one year’s target MICP bonus. For the CEO, the multiplier is 2.99 instead of 1. The Committee viewed a higher multiplier for the CEO to be competitive with prevailing market practices.

In addition, NEOs participating in the plan will receive a lump-sum payment to cover the cost of medical benefits for one year and outplacement and relocation services. In order to receive the full severance benefit, the NEO must execute a release of claims and an agreement containing post-employment non-compete and non-solicitation covenants comparable to those included in our 2008 stock option, RSU and LTIP award agreements.

Governance Considerations in Compensation Decisions

Independence of Compensation Consultant to Committee

The Committee has adopted a policy directing that its consultant be independent. The Committee intends to perform an annual independence assessment of the consultant, reviewing the nature and level of work performed for the Committee during the year, the nature of other services performed for the Corporation, and the amount of fees paid to the firm in relation to the firm’s total revenues. The consultant also provides an annual independence letter to the Committee.

Based on its review and standards, the Committee concluded Watson Wyatt was independent in 2007. As part of its review, the Committee pre-approved up to $2 million worth of work that Watson Wyatt could perform for the Corporation in 2007; the Committee further determined that the provision of other pre-approved services would not impair Watson Wyatt’s independence, so long as the total of such services does not exceed 2% of Watson Wyatt’s annual

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EXECUTIVE COMPENSATION

revenues. The Committee further authorized the Committee Chairman or any member of the Committee to pre-approve the performance of up to $500,000 in additional services by Watson Wyatt for the Committee, so long as that work was consistent with the work already approved.

Policy Regarding Timing of Option and Other Equity Grants

The Corporation has also adopted a corporate policy statement concerning the grant of equity awards which provides:

• The Committee is responsible for determining the grant date of all equity awards.

• No equity award may be backdated.

• The grant date will not be earlier than the date the Committee approves the equity award. A future date may be used. If the Committee’s action occurs in close proximity to the release of earnings or during a trading blackout period, the Committee’s practice has been to designate as the date of grant a future date at least 48 hours following the release of earnings or other material information.

• Equity awards are presented to the Committee in January of each year. Off-cycle awards may be considered in the Committee’s discretion in special circumstances, which may include hiring, retention or acquisition transactions.

The closing price for our stock on the NYSE on the date specified as the date of grant is the exercise price for an option award.

In January 2008, the Committee adopted a resolution containing a formula that would adjust the grants approved by the Committee if changes in the market result in the value of the long-term incentive plan awards increasing or decreasing by more than 10% between the time the recommendations are prepared and the date of the grant (approximately 11 business days). In that circumstance, the grants would be re-adjusted pursuant to the formula so that the grants provided the desired economic value. No adjustment was necessary for 2008 awards.

Clawback and Other Protective Provisions

In January 2008, the Board amended its Corporate Governance Guidelines to include what is commonly referred to as a clawback policy. Under the policy, if the Board determines that

• an officer’s intentional misconduct or gross negligence, or failure to report another person’s such acts, was a contributing factor to a requirement that we restate all or a portion of our financial statements; or

• an officer engaged in fraud, bribery, or other illegal act, or the officer’s intentional misconduct or gross negligence contributed to another person’s fraud, bribery or other illegal act (including a failure to report such an act),

that in either case adversely impacted the Corporation’s financial position or reputation, the Board shall take such action as it deems in the best interests of the Corporation and necessary to remedy the misconduct and prevent its recurrence. The policy notes that, among other things, the Board may seek to recover or require reimbursement of any amount awarded to the officer after January 1, 2008 in the form of an MICP bonus or long-term incentive award.

In order to implement the policy on clawbacks, to ensure that proprietary information is protected and to facilitate retention of key employees, the Committee amended the MICP and included provisions in the award agreements for the RSUs, stock options, and LTIP awarded in January 2008, setting forth our right to recapture amounts covered by the policy. The award agreements also contain post-employment restrictive covenants. These covenants include, in the case of the NEOs, an agreement:

• Not to accept employment or provide services to specified companies or solicit our employees or customers for two years following termination; and

• To protect our information, cooperate in investigations, and not disparage the Corporation.

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EXECUTIVE COMPENSATION

No award will be effective unless the NEO agrees to the restrictive covenants and the provision implementing the clawback policy.

Stock Ownership Guidelines

We expect the NEOs to maintain an ownership interest in the Corporation and have established Stock Ownership Guidelines for Key Employees, as follows:

• For the CEO: 5 times base salary; and

• For the other NEOs: 3 times base salary.

Guidelines may be satisfied with ownership of common stock in the following categories:

• Shares owned directly;

• Shares owned by a spouse or trust;

• Shares represented by monies invested in 401(k) Corporation common stock funds or comparable plans;

• Share equivalents as represented by income deferred to the Company Stock Investment Option of the DMICP; and

• Unvested restricted shares and RSUs.

The NEOs are asked to report on progress toward attainment of our stock ownership goals during the annual DMICP deferral election period, in increments of 25% of goal, and asked to indicate when they will achieve the next higher level toward their goal.

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EXECUTIVE COMPENSATION

Narrative Description of Benefits and Compensation

The “Summary Compensation Table” and accompanying tables below provide information concerning compensation paid to the CEO (Mr. Stevens), each employee serving as the CFO during 2007 (Messrs. Kubasik and Tanner), and the three most highly compensated executive officers (other than the CEO and the CFO) (Mr. Heath and Mss. Gooden and Maguire). The tables also include Mr. Coutts, a former executive officer, who would have been included in the three most highly compensated executives had he been a NEO at the end of the year.

In the narrative below and footnotes that accompany each table, we have provided information on the terms of the elements of our compensation program as follows:

Type of Compensation	Table	Page
Short-Term Incentive or Bonus	Summary Compensation Table	43
LTIP Awards	Summary Compensation Table	43
	Grants of Plan-Based Awards	46
Stock Options	Summary Compensation Table	43
	Grants of Plan-Based Awards	46
RSUs	Grants of Plan-Based Awards	46
	Summary Compensation Table	43
Deferred Compensation	Nonqualified Deferred Compensation	51
Pension Benefits	Pension Benefits	53
Benefits Payable Upon Termination, Resignation, Retirement, Change in Control, Disability, Death, Divestiture	Potential Payments Upon Termination or Change in Control	58

Short Term Incentive and Annual Bonus Plan

Our NEOs are eligible for bonuses under the MICP. Each NEO is assigned a target percentage of base salary determined by the level of contribution and responsibility of the NEO’s position, and in a range comparable to annual incentive targets for similar positions in the Comparator Group. The targets are listed in the “Grants of Plan-Based Awards” table.

Although the MICP considers performance against quantitative and qualitative goals, we disclosed MICP payments in 2007 as a bonus in column (d) of the “Summary Compensation Table” because of the discretionary features of the plan.

LTIP Awards

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

Awards are subject to forfeiture upon termination of employment prior to the end of the performance period (or second anniversary of the end of the performance period in the case of the deferred portion). In the case of retirement, death, disability, divestiture or change in control occurring prior to the end of the performance cycle, awards are prorated, or if the event occurs during the two-year mandatory deferral period, awards are paid out immediately. Termination payments are discussed in more detail in the “Potential Payments Upon Termination or Change in Control” section.

Column (g) of the “Summary Compensation Table” shows LTIP amounts paid in January 2008 for the 2005-2007 cycle. The “Grants of Plan-Based Awards” table shows the targets established by the Committee in January 2007 for LTIP based on performance in 2007-2009.

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EXECUTIVE COMPENSATION

Equity Awards

In 2007, NEOs received equity grants under the IPA Plan in the form of RSUs and stock options. The 2007 RSUs were subject to a three-year service-based vesting schedule. In order to have a nonforfeitable right to the RSUs, an award recipient must remain an employee for three years following the grant date, except in the case of death, disability, divestiture or change in control. If the employee retires or is laid off after January 29, 2008 but prior to the third anniversary of the grant, a pro rata portion of the RSUs becomes nonforfeitable. The RSUs were also forfeitable to the extent the value of the RSUs on January 29, 2007 was greater than .2% of 2007 cash flow in the case of Mr. Stevens or .04% of 2007 cash flow for the other executives. For 2007, no forfeiture was required.

Some of the NEOs received RSAs in 2003 and 2004, a portion of which vested in 2007 and 2006. All remaining RSAs will vest in 2008.

Under the 2007 option grant award agreements, options have a ten-year term and vest and become exercisable in three equal installments on the first, second and third anniversary dates following the grant. Options will expire 30 days following termination of employment, except in the case of death, disability, divestiture, layoff or retirement. In the event of death or disability, all outstanding options will vest immediately and expire ten years after the date of grant (i.e., the normal expiration date of the award). In cases of layoff, the term of any outstanding options will remain ten years and the options become exercisable on the date the options would have otherwise vested had the NEO remained our employee. In cases of divestiture, the options will become exercisable on the date the options would have otherwise vested and any outstanding options terminate five years from the effective date of the divestiture or on the option’s normal expiration date, whichever occurs first. In cases of retirement on or after the first vesting date, the term of any outstanding options will not change and the options will become exercisable on the date the options would have otherwise vested. Retirement before the first vesting date will result in forfeiture of the award. Upon a change in control, all options vest immediately.

Nonqualified Deferred Compensation Account Plans

Participants in our tax-qualified 401(k) plan may contribute up to 25% of base salary. Pre-tax contributions in excess of the Internal Revenue Code limitations are contributed to the NQSSP. In addition, we make a matching contribution equal to 50% of up to the first 8% of compensation contributed by the participant. Employee and company matching contributions to the 401(k) plan and the NQSSP are nonforfeitable at all times. NQSSP contributions are credited with earnings that match the performance of publicly available investment funds or our stock performance, as elected by the NEO. Each of the NQSSP investment options is available under our tax-qualified 401(k) plan for salaried employees. The NQSSP provides for payment following termination of employment in a lump sum or up to 20 annual installments at the NEO’s election. All amounts accumulated and unpaid under the NQSSP must be paid in a lump sum within 15 calendar days following a change in control.

The DMICP provides the opportunity to defer, until termination of employment or beyond, the receipt of all or a portion of bonuses earned under the MICP, LTIP awards and amounts paid in respect of the termination of the PRDB Plan. The DMICP provides that a NEO may choose between two alternatives for crediting earnings. 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. Fifty percent of any LTIP award is mandatorily deferred for two years to the Stock Investment Option and remains subject to the continued employment requirements of the award. All amounts accumulated under the DMICP must be paid in a lump sum within 15 days following a change in control.

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EXECUTIVE COMPENSATION

Retirement Plans

During 2007, the NEOs participated in the Lockheed Martin Corporation Salaried Employee Retirement Program (“LMRP”), which is a combination of the following prior plans for salaried employees with some protected benefits: Lockheed Martin Corporation Retirement Income Plan which covered former Martin Marietta employees; Lockheed Martin Corporation Retirement Income Plan III which covered former Loral Corporation employees; and Lockheed Martin Corporation Retirement Plan for Certain Salaried Employees which covered former Lockheed employees (collectively, the “Prior Plan”).

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. 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. A NEO who retires between ages 60 and 62 is eligible for payments ending at age 62 when eligibility for social security commences. Benefits are payable as a monthly annuity for the lifetime of the employee, as a joint and survivor annuity, as a life annuity with a five or ten year guarantee, or as a level income annuity.

The calculation of retirement benefits under the Prior Plan is based on a number of formulas, some of which take into account the participant’s years of credited service and pay over the career of the employee. Certain other formulas in the Prior Plan are based upon the final average compensation and credited service of the employee. Pay under certain formulas in the Prior Plan currently includes salary, commissions, overtime, shift differential, lump sum pay in lieu of a salary increase, MICP bonuses awarded that year, and 401(k) and pre-tax contributions. The Prior Plan also contains a Personal Retirement Provision which is an account balance based on past allocations. This account balance is available as a lump sum at termination or can be converted to an annuity. A portion of Mr. Stevens’ pension was earned under the Prior Plan.

The NEOs 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 nonqualified benefits are payable in the same form as benefits are paid under the LMRP, although lump-sum payments are available under some supplemental plans.

Messrs. Stevens, Coutts, and Heath qualify for early retirement under the LMRP, based upon having attained age 55 with at least five years of service. Messrs. Kubasik and Tanner, and Mss. Gooden and Maguire did not qualify for early retirement in 2007.

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EXECUTIVE COMPENSATION

The following table shows annual and long-term compensation awarded, earned or paid for services in all capacities to the NEOs for the fiscal year ended

December 31, 2007. Numbers have been rounded to the nearest dollar.

SUMMARY COMPENSATION TABLE
Name and Principal Position 1 (a)	Year (b)	Salary 2 ($) (c)	Bonus 3 ($) (d)	Stock Awards 4 ($) (e)	Option Awards 5 ($) (f)	Non-Equity Incentive Plan Compensation 6 ($) (g)	Change in Pension Value and Nonqualified Deferred Compensation Earnings 7 ($) (h)	All Other Compensation 8,9 ($) (i)	Total ($) (j)
Robert J. Stevens	2007	1,627,500	3,900,000	3,262,688	10,233,549	8,500,000	1,870,845	1,544,651	30,939,233
Chairman, President & Chief Executive Officer	2006	1,465,154	3,700,000	2,343,506	4,038,812	3,600,000	2,085,495	1,370,553	18,603,520
Bruce L. Tanner Executive Vice President & Chief Financial Officer	2007	398,492	517,500	67,327	149,057	0	350,134	165,607	1,648,117
Linda R. Gooden Executive Vice President Information Systems & Global Services	2007	519,711	742,200	306,855	426,115	700,000	819,481	608,182	4,122,544
Ralph D. Heath	2007	646,346	926,000	364,862	846,789	1,300,000	1,709,864	504,224	6,298,085
Executive Vice President Aeronautics	2006	572,885	884,800	304,394	641,120	585,000	1,382,850	333,321	4,704,370
Christopher E. Kubasik	2007	837,019	1,201,700	683,575	817,777	1,350,000	243,298	701,336	5,834,705
Executive Vice President Electronic Systems	2006	734,731	1,133,400	459,413	657,469	990,000	295,876	115,701	4,386,590
Joanne M. Maguire Executive Vice President Space Systems	2007	558,077	768,000	306,855	426,115	700,000	233,152	443,238	3,435,436
Robert B. Coutts	2007	891,346	1,174,500	493,462	928,185	1,700,000	1,056,975	669,811	6,914,278
Executive Vice President	2006	818,750	1,195,300	462,324	774,195	1,530,000	1,650,512	87,264	6,518,345

NOTES TO TABLE:

(1)    Our compensation tables include two principal financial officers for 2007. Mr. Kubasik served in that role as Executive Vice President and CFO until September 1, 2007 when Mr. Tanner was elected to that position. Mr. Coutts served as Executive Vice President, Electronic Systems until September 1, 2007. No information is provided for 2006 compensation for Mr. Tanner and Mss. Gooden and Maguire because none of them were NEOs in 2006.

(2)    Salary is paid weekly in arrears. In column (c), we reported salary based on the year in which it was paid.

(3)    The annual bonuses for performance in 2007 (paid in 2008) under the MICP are listed in column (d). MICP awards are based on both quantitative and subjective assessments of performance over a one-year period.

(4)    Represents the amount recognized in accordance with FAS 123(R) (other than disregarding the estimate of forfeitures relating to failure to vest) in our financial statements for the years ended December 31, 2007 and 2006 for RSUs granted to each of the listed NEOs in 2007 and 2006 and RSAs granted in 2004 to Messrs. Stevens, Coutts, and Heath, and Mss. Gooden and Maguire and in 2003 to Mr. Kubasik. The assumptions used in determining the fair value of the stock awards are set forth in Note 11 to our financial statements contained in our Annual Report on Form 10-K for the years ended December 31, 2007 and 2006. We recognize expense ratably over the three-year vesting period for the RSUs and the four-year vesting period for the RSAs.

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EXECUTIVE COMPENSATION

(5)    Of the $10,233,549 shown in column (f) for Mr. Stevens, $5,327,625 is attributable to accelerated expense resulting from becoming retirement eligible (attainment of age 55 with five years of service). Column (f) reports the amount recognized in accordance with FAS 123(R) (other than disregarding the estimate of forfeitures relating to failure to vest) in our financial statements for the years ended December 31, 2007 and 2006 for options granted to each of the NEOs in 2007 and options granted to Messrs. Stevens, Kubasik, and Tanner, and Mss. Gooden and Maguire in 2006, 2005, and 2004, and to Messrs. Coutts and Heath in 2006. The assumptions used in determining the fair value of the options are set forth in Note 11 to our financial statements contained in our Annual Report on Form 10-K for the years ended December 31, 2007 and 2006. We recognize

expense ratably in monthly increments over the three-year vesting period for active non-retirement eligible employees and over the initial one-year vesting period for active, retirement eligible employees. When an option holder becomes retirement eligible, we accelerate the recognition of any expense not previously recognized for options held for at least one year. Because of the varying ages of the NEOs, options granted at the same time are expensed over different time periods. Messrs. Stevens, Heath, and Coutts attained age 55 prior to 2007. Messrs. Kubasik and Tanner, and Mss. Gooden and Maguire had not attained age 55 by 2007. The following chart illustrates the portion of the three-year amortization that we expensed for each NEO for each grant for the year ending December 31, 2007 and the expense acceleration that occurred for Mr. Stevens during 2007:

	2007 Grant	2006 Grant	2005 Grant	2004 Grant
Mr. Stevens	11 months	25 months	13 months	1 month
Mr. Tanner	11 months	12 months	12 months	1 month
Ms. Gooden	11 months	12 months	12 months	1 month
Mr. Heath	11 months	1 month	Previously expensed	Previously expensed
Mr. Kubasik	11 months	12 months	12 months	1 month
Ms. Maguire	11 months	12 months	12 months	1 month
Mr. Coutts	11 months	1 month	Previously expensed	Previously expensed

Amounts expensed prior to January 1, 2006 were recognized as stock compensation expense in the pro forma disclosures in Note 1 to our financial statements in our Annual Report on Form 10-K for the year ended December 31, 2005, in accordance with FAS 123, Accounting for Stock-Based Compensation.

(6)    Represents amounts reported for LTIP awards in 2007 for the 2005-2007 performance cycle and for 2006 for the 2004-2006 performance cycle. Fifty percent of the amount shown is deferred by the Corporation for two years in the form of stock units. Any deferred amounts (whether mandatory deferrals by the Corporation or deferrals by the executive) are reported for the year earned and not when paid to the executive. See footnote (6) to “Nonqualified Deferred Compensation” table on page 52.

(7)    Amounts represent solely the aggregate change in the accumulated benefit under all defined benefit and

actuarial pension plans (including supplemental plans) for 2007 (from December 31, 2006 to December 31, 2007) and for 2006 (from December 31, 2005 to December 31, 2006). The amounts were computed using the same assumptions we used for financial statement reporting purposes under FAS 87, Employers’ Accounting for Pensions and described in Note 12 to our financial statements contained in our Annual Report on Form 10-K for the years ended December 31, 2007 and 2006, except that the amounts were calculated based on benefits commencing at age 60 for each of the NEOs. We used age 60 rather than the plans’ normal retirement age of 65 because an employee may commence receiving pension benefits at age 60 without any reduction for early commencement. A portion of Mr. Stevens’ and Mr. Heath’s benefit was earned under grandfathered plans that apply a reduction for early commencement at age 60. The amounts shown for Messrs. Stevens and Heath reflect the

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EXECUTIVE COMPENSATION

reduction. Amounts paid under our plans use assumptions contained in the plans and may be different than those used for financial statement reporting purposes.

(8)    Perquisites and other personal benefits provided to the NEOs in 2007 included: use of company aircraft for personal travel; home security systems and monitoring; annual executive physical; home office equipment and expenses; club membership initiation fee (grandfathered prior to elimination of the program), and relocation expenses. Some or all of the NEOs also received the following perquisites, none of which individually exceeded $1,000 for any executive: personal liability insurance, accidental death and dismemberment insurance, accompanying spousal travel expenses, corporate logo items, and occasional meals. Not all of the listed perquisites or personal benefits were provided to each NEO. The cost of any category of the listed perquisites and personal benefits did not exceed the greater of $25,000 or 10% of total perquisites and personal benefits for any NEO, except as noted: Mr. Stevens (home security - $160,263); Mr. Tanner (relocation expense - $70,777); and Ms. Gooden (relocation expense - $152,239). The

incremental cost of use of company aircraft for personal travel was calculated based on the total personal travel flight hours multiplied by the estimated hourly aircraft operating costs for 2007 (including fuel, maintenance and other variable costs, but excluding fixed capital costs for the aircraft, hangar facilities and staff salaries). The home security and relocation expense amounts noted above represent the aggregate payments made by the Corporation for such services, products or reimbursements provided in 2007. Column (i) includes a post-retirement death benefit lump sum amount to be paid out on March 14, 2008 to the following NEOs pursuant to the PRDB Plan:

Mr. Stevens	$	1,040,000	Mr. Kubasik	$	571,000
Ms. Gooden	$	360,000	Ms. Maguire	$	386,000
Mr. Heath	$	420,000	Mr. Coutts	$	570,000

The PRDB Plan was terminated in 2007.

(9)    In addition to the perquisites and PRDB benefit described in footnote (8) for 2007, column (i) contains other items of compensation listed in the chart below.* All items in the chart below are paid under employee-wide programs except the tax gross-ups and the NQSSP match.

* Chart for footnote 9

	Tax Gross-Ups ($)	Company Matching Contribution to SSP (401(k) Plan) ($)	Company Matching Contribution to NQSSP (nonqualified 401(k) Plan) ($)	Group Life Insurance ($)	Vacation Payout (excess of 400 hours) ($)	Company Matching Contribution to Gifts for Colleges & Universities Program ($)
Mr. Stevens	227,074	2,480	62,520	10,062	35,135	0
Mr. Tanner	63,454	2,480	13,331	1,109	12,821	0
Ms. Gooden	70,259	9,000	0	2,341	11,558	0
Mr. Heath	9,953	6,207	19,609	5,971	38,127	0
Mr. Kubasik	57,706	5,636	27,787	2,663	0	10,000
Ms. Maguire	22,377	7,750	14,542	0	0	0
Mr. Coutts	31,669	2,480	33,136	8,256	11,459	10,000

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EXECUTIVE COMPENSATION

GRANTS OF PLAN-BASED AWARDS
Name (a)	Grant Date (b)			Estimated Future Payouts Under Non-Equity Incentive Plan Awards 1			Estimated Future Payouts Under Equity Incentive Plan Awards 2			All Other Option Awards: Number of Securities Underlying Options 5 (#) (j)	Exercise or Base Price of Option Awards ($/Sh) (k)	Grant Date Fair Value of Stock and Option Awards 6 ($) (l)
				Threshold 3 ($) (c)	Target ($) (d)	Maximum 4 ($) (e)	Threshold (#) (f)	Target (#) (g)	Maximum (#) (h)
Robert J. Stevens
Chairman, President & Chief Executive Officer	1/29/2007	LTIP		1,075,000	4,300,000	8,600,000	0	32,500	32,500	-	-	3,121,950
	1/29/2007			-	-	-	-	-	-	225,000	96.06	5,397,750
Bruce L. Tanner
Executive Vice President & Chief Financial Officer	1/29/2007	LTIP		37,500	150,000	300,000	0	750	750	-	-	72,045
	1/29/2007			-	-	-	-	-	-	7,400	96.06	177,526
Linda R. Gooden
Executive Vice President Information Systems & Global Services	1/29/2007	LTIP		131,250	525,000	1,050,000	0	2,600	2,600	-	-	249,756
	1/29/2007			-	-	-	-	-	-	26,400	96.06	633,336
Ralph D. Heath
Executive Vice President Aeronautics	1/29/2007	LTIP		175,000	700,000	1,400,000	0	3,650	3,650	-	-	350,619
	1/29/2007			-	-	-	-	-	-	36,100	96.06	866,039
Christopher E. Kubasik
Executive Vice President Electronic Systems	1/29/2007	LTIP		231,250	925,000	1,850,000	0	4,700	4,700	-	-	451,482
	1/29/2007			-	-	-	-	-	-	48,100	96.06	1,153,919
Joanne M. Maguire
Executive Vice President Space Systems	1/29/2007	LTIP		131,250	525,000	1,050,000	0	2,600	2,600	-	-	249,756
	1/29/2007			-	-	-	-	-	-	26,400	96.06	633,336
Robert B. Coutts Executive Vice President		LTIP	7
	1/29/2007			187,500	750,000	1,500,000	0	3,850	3,850	-	-	369,831
	1/29/2007			-	-	-	-	-	-	39,300	96.06	942,807

NOTES TO TABLE:

(1)     Includes LTIP awards for the 2007-2009 cycle.

(2)    Shows the number of RSUs granted under the IPA Plan by the Compensation Committee on January 29, 2007. RSUs were subject to forfeiture to the extent the value of the RSUs on January 29, 2007 was greater than .2% of 2007 cash from operations in the case of Mr. Stevens or .04% of 2007 cash from operations for the other NEOs. None of the RSUs were forfeited. The RSUs vest on the third anniversary of grant, except that vesting may occur earlier as described in the “Narrative of Compensation and

Benefits” beginning on page 40. Column (i) deleted because there were no other stock awards in 2007. We showed the RSUs in columns (f) through (h) because of the potential for forfeiture based on a performance metric using 2007 cash flow from operations.

(3)    The threshold is the minimum amount payable for a certain level of performance stated in the LTIP award agreement. If performance falls below the stated level of performance, no amount would be paid. Assuming any payment is earned, the minimum amount payable under the LTIP is 25% of the target.

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EXECUTIVE COMPENSATION

(4)    The maximum award payable under the LTIP is 200% of target.

(5)    Includes the number of stock options granted under the IPA Plan by the Compensation Committee on January 29, 2007.

(6)    The assumptions used for determining the grant date fair value are set forth in Note 11 to our financial

statements contained in our Annual Report on Form 10-K for the year ended December 31, 2007. The grant date fair value for the January 29, 2007 equity awards was $23.99 for each option and $96.06 for each RSU granted on January 29, 2007.

(7)    Because of Mr. Coutts’ retirement in the first half of 2008, the amount payable under LTIP will be prorated.

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EXECUTIVE COMPENSATION

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
	OPTION AWARDS					STOCK AWARDS
Name	Number of Securities Underlying Unexercised Options	Number of Securities Underlying Unexercised Options 1		Option Exercise Price	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested	Market Value of Shares or Units of Stock That Have Not Vested 2,3
	(#) Exercisable	(#) Unexercisable		($)		(#)	($)
(a)	(b)	(c)		(e)	(f)	(g)	(h)
Robert J. Stevens Chairman, President & Chief Executive Officer	0	225,000	4	96.06	1/29/2017	32,500 5	3,420,950
	100,000	200,000	6	67.97	2/01/2016	92,000 7	9,683,920
	200,000	100,000	8	57.81	1/31/2015	40,000 9	4,210,400
	175,000	0		49.27	1/29/2014	33,334 10	3,508,737
	87,500	0		51.10	1/28/2013	-	-
Bruce L. Tanner Executive Vice President & Chief Financial Officer	0	7,400	4	96.06	1/29/2017	750 5	78,945
	2,000	4,000	6	67.97	2/01/2016	2,000 9	210,520
	7,666	3,834	8	57.81	1/31/2015	-	-
	12,000	0		49.27	1/29/2014	-	-
	8,000	0		51.10	1/28/2013	-	-
Linda R. Gooden Executive Vice President Information Systems & Global Services	0	26,400	4	96.06	1/29/2017	2,600 5	273,676
	0	12,000	6	67.97	2/01/2016	4,300 9	452,618
	333	8,334	8	57.81	1/31/2015	10,000 10	1,052,600
	167	0		49.27	1/29/2014	-	-
Ralph D. Heath Executive Vice President Aeronautics	0	36,100	4	96.06	1/29/2017	3,650 5	384,199
	12,000	24,000	6	67.97	2/01/2016	5,500 9	578,930
	33,333	16,667	8	57.81	1/31/2015	10,000 10	1,052,600
	20,000	0		49.27	1/29/2014	-	-
	15,000	0		51.10	1/28/2013	-	-
Christopher E. Kubasik Executive Vice President Electronic Systems	0	48,100	4	96.06	1/29/2017	4,700 5	494,722
	12,000	24,000	6	67.97	2/01/2016	17,500 9,11	1,842,050
	33,333	16,667	8	57.81	1/31/2015	10,000 12	1,052,600
	40,000	0		49.27	1/29/2014	-	-
	35,000	0		51.10	1/28/2013	-	-
Joanne M. Maguire Executive Vice President Space Systems	0	26,400	4	96.06	1/29/2017	2,600 5	273,676
	6,000	12,000	6	67.97	2/01/2016	4,300 9	452,618
	16,666	8,334	8	57.81	1/31/2015	10,000 10	1,052,600
	20,000	0		49.27	1/29/2014	-	-
	9,000	0		45.36	4/17/2013	-	-
Robert B. Coutts Executive Vice President	0	39,300	4	96.06	1/29/2017	3,850 5	405,251
	14,500	29,000	6	67.97	2/01/2016	7,000 9	736,820
	40,000	20,000	8	57.81	1/31/2015	16,667 10	1,754,368
	70,000	0		49.27	1/29/2014	-	-

NOTES TO TABLE:

(1)    Column (d) omitted because none of the NEOs held options that qualified as equity incentive plan awards at 2007 year end. We reported RSUs granted in January 2007 as equity incentive awards in columns (f) through (h) of the “Grants of Plan-Based Awards” table. The performance feature of the RSU grants was satisfied at the end of 2007.

(2)    Columns (i) and (j) omitted because none of the NEOs held stock awards that qualified as equity incentive plan awards at 2007 year end.

(3)    Column (h) based on December 31, 2007 closing price for our stock ($105.26).

(4)    Stock options granted on January 29, 2007, vest in three equal annual installments on January 29, 2008, January 29, 2009, and January 29, 2010, except

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EXECUTIVE COMPENSATION

that vesting may occur earlier as described in the “Narrative Description of Benefits and Compensation” beginning on page 40.

(5)    RSUs granted on January 29, 2007 vest on January 29, 2010, except that vesting may occur earlier as described in the “Narrative Description of Benefits and Compensation” beginning on page 40.

(6)    Stock options granted on February 1, 2006, vest in three equal annual installments on February 1, 2007, February 1, 2008, and February 1, 2009, except that vesting may occur earlier as described in the “Narrative Description of Benefits and Compensation” beginning on page 40.

(7)    The February 1, 2006 RSU award to Mr. Stevens includes extended vesting terms for a portion of the RSUs (92,000 RSUs). The purpose of the extended vesting was to retain Mr. Stevens to age 60 and beyond. The grant vests gradually as he reaches specified ages ranging from 60 to 65 as shown in the table below.

Vesting Date	Age	Number of RSUs Vesting
September 8, 2011	60	55,200
September 8, 2012	61	7,360
September 8, 2013	62	7,360
September 8, 2014	63	7,360
September 8, 2015	64	7,360
September 8, 2016	65	7,360
Total		92,000

(8)    Stock options granted on January 31, 2005, vest in three equal annual installments on January 31, 2006, January 31, 2007, and January 31, 2008, except that vesting may occur earlier as described in the “Narrative Description of Benefits and Compensation” beginning on page 40.

(9)    RSUs granted on February 1, 2006 vest on February 1, 2009, except that vesting may occur earlier as described in the “Narrative Description of Benefits and Compensation” beginning on page 40.

(10)    One-third of the RSAs granted on March 31, 2004, vested on March 31, 2007 and two-thirds vest on March 31, 2008. Restrictions will terminate prior to the normal vesting date upon the death, disability, layoff, divestiture or retirement (following the attainment of age 65) of the NEO. In addition, restrictions will lapse upon a change in control, which results in the termination of employment of the NEO for good cause. Any shares on which restrictions have not lapsed will be forfeited in the event that the NEO terminates employment with us for any other reason. Until the restrictions lapse, the NEOs have the right to receive cash dividends on the restricted stock and the right to vote the restricted stock, and will generally have the rights and privileges of a stockholder, except that they may not sell, transfer, assign, pledge, use as collateral or otherwise dispose of or encumber the restricted stock. The grant was conditioned on execution by the NEO of an agreement not to compete.

(11)    Mr. Kubasik received an award of 8,500 RSUs on February 1, 2006 and an award of 9,000 RSUs on September 28, 2006. The award terms for Mr. Kubasik’s second award are the same as the terms contained in the February 2006 grants, except the performance goal was based on 2007 cash flow and the vesting date is September 28, 2009.

(12)    RSAs granted on June 25, 2003. Restrictions on 15,000 shares of Mr. Kubasik’s award lapsed on June 25, 2006 and will lapse on the remaining 10,000 shares on June 25, 2008. Restrictions will terminate prior to the normal vesting date upon death or disability. In addition, restrictions will lapse upon a change in control, which results in termination of employment for good cause. Any shares on which restrictions have not lapsed will be forfeited in the event that Mr. Kubasik terminates employment with the Corporation for any other reason. Until the restrictions lapse, Mr. Kubasik has the right to receive cash dividends on the restricted stock and the right to vote the restricted stock, and will generally have the rights and privileges of a stockholder, except that he may not sell, transfer, assign, pledge, use as collateral or otherwise dispose of or encumber the restricted stock.

49

EXECUTIVE COMPENSATION

OPTION EXERCISES AND STOCK VESTED
	OPTION AWARDS		STOCK AWARDS
Name	Number of Shares Acquired on Exercise (#)	Value Realized on Exercise 1 ($)	Number of Shares Acquired on Vesting (#)	Value Realized on Vesting 2 ($)
(a)	(b)	(c)	(d)	(e)
Robert J. Stevens Chairman, President & Chief Executive Officer	387,500	19,374,688	16,666 3	1,616,935
Bruce L. Tanner Executive Vice President & Chief Financial Officer	8,000	394,000	0	0
Linda R. Gooden Executive Vice President Information Systems & Global Services	20,500	797,062	5,000 4	485,100
Ralph D. Heath Executive Vice President Aeronautics	20,000	1,157,334	5,000 4	485,100
Christopher E. Kubasik Executive Vice President Electronic Systems	50,000	2,804,499	0	0
Joanne M. Maguire Executive Vice President Space Systems	0	0	5,000 4	485,100
Robert B. Coutts Executive Vice President	84,000	4,048,651	8,333 5	808,468

NOTES TO TABLE:

(1)    Value realized calculated based on the difference between the aggregate exercise price of the option and the sale price per share.

(2)    Value realized calculated based on the number of shares multiplied by the closing market price of our stock on the date of vesting.

(3)    Partial vesting on March 31, 2007 of RSAs granted on March 31, 2004. The original award was 50,000 RSAs, of which 16,666 shares vested on March 31, 2007.

(4)    Partial vesting on March 31, 2007 of RSAs granted on March 31, 2004. The original award was 15,000 RSAs, of which 5,000 shares vested on March 31, 2007.

(5)    Partial vesting on March 31, 2007 of RSAs granted on March 31, 2004. The original award was 25,000 RSAs, of which 8,333 shares vested on March 31, 2007.

50

EXECUTIVE COMPENSATION

NONQUALIFIED DEFERRED COMPENSATION 1
Name		Executive Contributions in Last FY 2 ($)	Registrant Contributions in Last FY 3 ($)	Aggregate Earnings in Last FY ($)	Aggregate Withdrawals/ Distributions 4 ($)	Aggregate Balance at Last FYE 5,6 ($)
	(a)	(b)	(c)	(d)	(e)	(f)
Robert J. Stevens Chairman, President & Chief Executive Officer
	NQSSP	390,750	62,520	122,814	0	2,309,856
	DMICP Bonus	0	0	3,024	0	21,901
	DMICP LTIP1 (Mandatory)	0	1,773,900	284,467	1,181,016	2,058,367
	DMICP LTIP2 (Voluntary)	0	0	0	0	0
	TOTAL	390,750	1,836,420	410,305	1,181,016	4,390,124
Bruce L. Tanner Executive Vice President & Chief Financial Officer
	NQSSP	83,320	13,331	23,033	0	416,052
	DMICP Bonus	140,138	0	74,404	0	710,591
	DMICP LTIP1(Mandatory)	0	0	0	0	0
	DMICP LTIP2 (Voluntary)	0	0	0	0	0
	TOTAL	223,458	13,331	97,437	0	1,126,643
Linda R. Gooden Executive Vice President Information Systems & Global Services
	NQSSP	0	0	0	0	0
	DMICP Bonus	4,928	0	8,063	0	101,286
	DMICP LTIP1 (Mandatory)	0	266,085	42,670	162,390	308,755
	DMICP LTIP2 (Voluntary)	4,928	0	16,830	0	218,464
	TOTAL	9,856	266,085	67,563	162,390	628,505
Ralph D. Heath Executive Vice President Aeronautics
	NQSSP	122,553	19,609	33,264	0	850,818
	DMICP Bonus	217,993	0	144,761	0	1,929,746
	DMICP LTIP1 (Mandatory)	0	288,259	46,226	0	334,485
	DMICP LTIP2 (Voluntary)	0	0	0	0	0
	TOTAL	340,546	307,868	224,251	0	3,115,049
Christopher E. Kubasik Executive Vice President Electronic Systems
	NQSSP	76,414	27,787	44,764	0	546,090
	DMICP Bonus	279,192	0	206,067	0	1,730,047
	DMICP LTIP1 (Mandatory)	0	487,823	78,228	354,305	566,051
	DMICP LTIP2 (Voluntary)	283,705	0	84,150	0	781,900
	TOTAL	639,311	515,610	413,209	354,305	3,624,088
Joanne M. Maguire Executive Vice President Space Systems
	NQSSP	29,085	14,542	10,423	0	155,557
	DMICP Bonus	0	0	119,235	0	987,606
	DMICP LTIP1 (Mandatory)	0	288,259	46,226	0	334,485
	DMICP LTIP2 (Voluntary)	288,259	0	28,866	0	317,125
	TOTAL	317,344	302,801	204,750	0	1,794,773
Robert B. Coutts Executive Vice President
	NQSSP	207,096	33,136	122,752	0	1,473,229
	DMICP Bonus	0	0	321,728	0	3,137,912
	DMICP LTIP1 (Mandatory)	0	753,908	120,898	560,982	874,806
	DMICP LTIP2 (Voluntary)	0	0	0	0	0
	TOTAL	207,096	787,044	565,378	560,982	5,485,947

NOTES TO TABLE:

(1)    This table reports compensation deferred under our NQSSP and DMICP. The NQSSP is a non-qualified 401(k) plan with an employer match on a portion of the salary deferral. Three types of compensation could be deferred into the DMICP:

• Bonuses payable under our MICP Plan (“DMICP Bonus”).

• Amounts earned under our LTIP program but mandatorily deferred for two years (and

51

EXECUTIVE COMPENSATION

subject to forfeiture) (“DMICP LTIP1 (Mandatory)”).

• Amounts payable under our LTIP program and voluntarily deferred (“DMICP LTIP2 (Voluntary)”).

(2)    Includes 2007 salary deferrals to NQSSP, MICP bonus paid in 2007 for 2006 performance deferred to DMICP, and voluntary deferrals of LTIP for 2002-2004 cycle and the 2004-2006 cycle to DMICP. The table reflects the year in which the deferral is credited to the NEO’s account (2007) and not the year in which it was earned (2006).

(3)    Includes 2007 match to NQSSP. The NQSSP match is also included in column (i) of the “Summary Compensation Table.”

(4)    Includes distributions of mandatory LTIP deferral from 2002-2004 cycle in January 2007 following end of two-year deferral period.

(5)    Of the amounts shown in column (f), the following table* lists the aggregate contributions made by the NEO since commencement of participation in the respective plan:

* Chart for footnote 5

	Amount Reported in Column (f)	NQSSP	DMICP (MICP Bonus)	DMICP (LTIP2)	Total
	($)	($)	($)	($)	($)
Mr. Stevens	4,390,124	1,552,344	7,884	0	1,560,228
Mr. Tanner	1,126,643	262,642	458,031	0	720,673
Ms. Gooden	628,505	0	54,203	71,017	125,220
Mr. Heath	3,115,049	524,971	1,460,676	0	1,985,647
Mr. Kubasik	3,624,088	277,466	1,057,047	327,063	1,661,576
Ms. Maguire	1,794,773	85,370	587,457	288,259	961,086
Mr. Coutts	5,485,947	832,833	1,613,166	0	2,445,999

(6)    The following table** lists the amounts reported as executive or registrant contributions in columns (b) and (c) of this table that are also reported as compensation in the “Summary Compensation Table” for 2007. These contributions consist of NEO and corporation matching contributions made to the NQSSP for service in 2007. The following table also lists the amounts reported in column (f) as part of the aggregate balance at last fiscal year (2007) that is reported as compensation for 2006 in the “Summary Compensation Table.” These amounts consist of NEO

and corporation matching contributions made to the NQSSP for service in 2006. These amounts also include deferred MICP awarded for performance in 2006 but which amounts were not credited to accounts until 2007 and deferred voluntary and mandatory LTIP awarded for performance in 2004-2006 but which amounts were not credited to accounts until 2007. No amounts reported as earnings in this table were reported as earnings in the “Summary Compensation Table” for either 2006 or 2007.

** Chart for footnote 6

		Of Amount Reported in Column (f)
	Amount Reported in Column (f) ($)	NEO and Company Contributions Reported in “Summary Compensation Table” for 2007 ($)	Amount Reported in “Summary Compensation Table” for 2006 ($)
Mr. Stevens	4,390,124	453,270	2,184,064
Mr. Tanner	1,126,643	96,652	-
Ms. Gooden	628,505	0	-
Mr. Heath	3,115,049	142,162	655,894
Mr. Kubasik	3,624,088	104,200	1,053,298
Ms. Maguire	1,794,773	43,627	-
Mr. Coutts	5,485,947	240,232	975,505

52

EXECUTIVE COMPENSATION        

PENSION BENEFITS
Name	Plan Name 1	Number of Years Credited Service	Present Value of Accumulated Benefit 2,3	Payments During Last Fiscal Year
		(#)	($)	($)
(a)	(b)	(c)	(d)	(e)
Robert J. Stevens Chairman, President & Chief Executive Officer	Lockheed Martin Corporation Salaried Employee Retirement Program	20.6	472,786	0
	Lockheed Martin Corporation Supplemental Retirement Plan	-	9,241,252	0
Bruce L. Tanner Executive Vice President & Chief Financial Officer	Lockheed Martin Corporation Salaried Employee Retirement Program	25.1	439,912	0
	Lockheed Martin Corporation Supplemental Retirement Plan	-	973,475	0
Linda R. Gooden Executive Vice President Information Systems & Global Services	Lockheed Martin Corporation Salaried Employee Retirement Program	27.5	747,664	0
	Lockheed Martin Corporation Supplemental Retirement Plan	-	2,859,566	0
Ralph D. Heath Executive Vice President Aeronautics	Lockheed Martin Corporation Salaried Employee Retirement Program	31.6	1,083,223	0
	Lockheed Martin Corporation Supplemental Retirement Plan	-	5,505,472	0
Christopher E. Kubasik Executive Vice President Electronic Systems	Lockheed Martin Corporation Salaried Employee Retirement Program	8.2	128,983	0
	Lockheed Martin Corporation Supplemental Retirement Plan	-	1,043,030	0
Joanne M. Maguire Executive Vice President Space Systems	Lockheed Martin Corporation Salaried Employee Retirement Program	4.9	125,413	0
	Lockheed Martin Corporation Supplemental Retirement Plan	-	571,973	0
Robert B. Coutts 4 Executive Vice President	Lockheed Martin Corporation Salaried Employee Retirement Program	35.4	1,117,372	0
	Lockheed Martin Corporation Supplemental Retirement Plan	-	9,644,343	0
	Lockheed Martin Supplementary Pension Plan for Transferred Employees of GE Operations	-	1,232,931	0

NOTES TO TABLE:

(1)    The Lockheed Martin Corporation Supplemental Retirement Plan (“Supplemental Retirement Plan”) and the Lockheed Martin Supplementary Pension Plan for Transferred Employees of GE Operations (collectively, the “SERPS”) provide benefits in excess of the benefit payable under our tax-qualified plans. All service recognized under the tax-qualified plans is recognized under the SERPs although a benefit would be earned under the SERPs only in years when the employee’s total accrued benefit would exceed the benefit accrued under the qualified plans.

(2)    The amounts in column (d) were computed using the same assumptions we used for financial statement reporting purposes under FAS 87 and described in Note 12 to our financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2007, except that the amounts were calculated based on benefits commencing at age 60. We used age 60 rather than the plans’ normal retirement age of 65 because an employee may commence receiving pension benefits at age 60 without any reduction for early commencement.

53

EXECUTIVE COMPENSATION        

A portion of Messrs. Stevens’ and Heath’s benefit was earned under grandfathered plans that apply a reduction for early commencement at age 60. The amounts shown for Messrs. Stevens and Heath reflect the reduction for early commencement of the benefit. Amounts paid under our plans use assumptions contained in the plans and may be different than those used for financial statement reporting purposes.

(3)    Only the benefit payable under the Supplemental Retirement Plan is payable in the form of a lump sum. If an executive elected a lump sum payment, the amount of the lump sum would be based on plan assumptions and not the assumptions used for financial statement reporting purposes. As a result, the actual lump sum payment would be an amount different than what is reported in this table. Because the discount rate used for financial statement purposes (6.375%) was higher than the plan rate of 4% on December 31, 2007 (Pension Benefit Guaranty Corporation (or PBGC) rate for terminating pension plans plus 1%), the lump sum payment would be larger than the amount shown in this table. The age of the executive at retirement would also impact the size of the lump sum payment. The amount using plan assumptions is shown on the “Potential Payments Upon Termination or Change in Control” table.

(4)    Mr. Coutts participated in a plan that, prior to 1995, required employee contributions as a condition to participation. In addition, employees could elect to contribute amounts in addition to the required amounts. The employee contributions for the period after 1988 are accounted for separately and may be paid in the form of an annuity or lump sum following retirement. Interest in 2007 on the required portion of the contributions (the “PPA”) was credited at the lesser of the Plan Rate or 120% of the Applicable Federal Rate in January 2006 (4.24%). Interest in 2007 for the voluntary portion of the contributions (the “VPA”) was credited at the greater of the Plan Rate or 120% Applicable Federal Rate in January 2007. The Plan Rate was determined at the beginning of 2007 and was equal to the 3-year average of the annual 10-year constant maturity yield (semi-annual basis) on U.S. Treasury Securities for the preceding three years (5.39%). The amounts payable are as follows:

Name	12/31/06 Monthly Annuity		12/31/07 Monthly Annuity		12/31/06 Lump Sum Payable		12/31/07 Lump Sum Payable
Mr. Coutts	$	282.73	$	302.82	$	49,476.36	$	51,930.96

54

EXECUTIVE COMPENSATION

POTENTIAL PAYMENTS UPON TERMINATION OR

CHANGE IN CONTROL

On August 10, 2007, we announced that Mr. Coutts would be retiring in April 2008. In connection with his planned retirement, we entered into a Retirement Transition Agreement with Mr. Coutts to assure an orderly transition of management responsibilities. Some of the key terms of the agreement with Mr. Coutts include:

• Continued employment with us as an Executive Vice President until his retirement;

• A cash payment, payable on October 1, 2008, equal to his current annual salary and an amount in respect of what would have been paid to him as MICP for 2008 in the amount of $1,053,000;

• A cash payment of $500,000 in April 2010 in respect of certain equity awards in which he will not vest as a result of his retirement; and

• Continued participation in our compensation and benefit programs until his retirement with the result that he received an MICP bonus for 2007, a payment for the 2005-2007 LTIP cycle (and to the extent payments are made under the 2006-2008, 2007-2009 LTIP, payments prorated to reflect his period of employment during those cycles), continued vesting in options and RSUs granted in 2006

and 2007, vesting in RSAs granted in 2004, and coverage under our employee benefit programs generally.

As consideration for those payments, Mr. Coutts agreed to maintain the confidentiality of proprietary information obtained while an executive officer, cooperate with any investigations or litigation related to the Corporation, and not work for certain competing businesses or solicit employees for employment for an agreed upon period.

The chart below summarizes the benefits that become payable to a NEO at, following, or in connection with any termination, including without limitation resignation, severance, retirement or a constructive termination of a NEO, or a change in control of the registrant under the terms of our benefit plans. Our plans do not contain specific provisions regarding termination for cause. Provisions unique to RSU and RSA grants to Messrs. Stevens and Kubasik are described in footnotes 7, 11, and 12 to the “Outstanding Equity Awards at Fiscal Year End” table on page 48.

The chart is limited to executive benefits and does not include benefits available generally to salaried employees such as 401(k) and other defined contribution plans, severance or retiree medical benefits.

SUMMARY OF PAYMENT TRIGGERS
Plan	Retirement	Change In Control	Death/Disability/ Layoff	Divestiture 1	Termination/ Resignation
Pension 2	Payable on a reduced basis at age 55; payable on a non-reduced basis at age 60; steeper reduction for early commence-ment at age 55 for terminations prior to age 55 than for terminations after age 55.		Spousal benefit as required by law in event of death unless waived by participant; no provision for disability. Layoff between age 53 and 55 or before age 55 with 25 years of service is eligible for the more favorable actuarial reductions for participants terminating at age 55.	No provisions; absent a negotiated transfer of liability to buyer, treated as retirement or termination.	Payable on a reduced basis at age 55; payable on a non-reduced basis at age 60; steeper reduction for early commencement at age 55 for terminations prior to age 55 than for terminations after age 55.

55

EXECUTIVE COMPENSATION

SUMMARY OF PAYMENT TRIGGERS
Plan	Retirement	Change In Control	Death/Disability/ Layoff	Divestiture 1	Termination/ Resignation
•    Qualified Pension	Annuity form only.	No acceleration.	Annuity form only.	No acceleration.	Annuity form only.
•    SERP Pension 2	Annuity or lump sum.	Lump sum.	Annuity or lump sum.		Annuity or lump sum.
LTIP	Prorated payment at the end of the three year performance period for retirement during that period. Payment for retirement during two year mandatory deferral period based on closing price for our stock.	Immediate prorated payment following change in control for event occurring during performance period. Immediate payment for change in control during two year mandatory deferral period based on closing price for our stock.	Prorated payment at the end of the three year performance period for death, disability or layoff during that period. Payment in event of death, disability or layoff during two year mandatory deferral period based on closing price for our stock.	Prorated payment at the end of the three year performance period for divestiture during that period. Payment for divestiture during two year mandatory deferral period based on closing price for our stock.	Forfeit if termination occurs prior to age 55; termination on or after age 55 treated as retirement.
Options	Forfeit unvested options if retirement occurs prior to 1 year anniversary of date of grant. If retirement occurs after 1 year anniversary, 10 yr. term of options unaffected and unvested options become exercisable on date the options would have otherwise vested.	Immediate vesting.	Immediate vesting in event of death/ disability. In the case of layoff, unvested options become exercisable on date the options would have otherwise vested. 10 yr. term of options unaffected.	Term of options limited to 5 years; options become exercisable on date the options would have otherwise vested.	Vested options expire 30 days after termination or resignation. Forfeit unvested options if termination occurs prior to age 55; resignation on or after 55 treated as retirement.
RSUs	Forfeit RSUs if retirement occurs prior to 1 year anniversary of date of grant; otherwise vest in one-third increments for each full year of service following date of grant.	Immediate vesting following termination.	Immediate vesting, following death or disability. Forfeit RSUs if layoff occurs prior to one year anniversary of date of grant; otherwise vest in one-third increments for each full year of service following date of grant.	Immediate vesting.	Forfeit unvested RSUs if termination occurs prior to age 55; termination on or after 55 treated as retirement.

56

EXECUTIVE COMPENSATION

SUMMARY OF PAYMENT TRIGGERS
Plan	Retirement	Change In Control	Death/Disability/ Layoff	Divestiture 1	Termination/ Resignation
RSAs	Immediate vesting if retirement occurs after age 65.	Double trigger vesting; following change in control, vesting occurs following termination by executive for good cause within two years.	Immediate vesting.	Immediate vesting.	Forfeit unvested RSAs if termination occurs prior to age 65.
MICP 3	Full year payment.	No provision.	No provision for death; practice is to prorate for death after 6/30. May prorate for disability or layoff after 6/30.	No provision.	Full year payment.
DMICP 4	Lump sum or installment payment in accordance with participant elections.	Immediate lump sum payment.	Lump sum or installment payment in accordance with participant elections, except lump sum only for layoff prior to age 55.	Follows termination provisions.	Lump sum if termination is prior to age 55; after age 55, lump sum or installment payment in accordance with participant elections.
NQSSP 5	Lump sum or installment payment in accordance with participant elections.	Immediate lump sum payment.	Lump sum for death; for disability or layoff, lump sum or installment payment in accordance with participant elections.	Lump sum or installment payment in accordance with participant elections.	Lump sum or installment payment in accordance with participant elections.
PRDB 6	Payment of present value in March 2008.	Benefit forfeited.	Benefit forfeited except for death.	Benefit forfeited.	Benefit forfeited unless age 55.

NOTES TO TABLE:

(1)    Divestiture is defined as a transaction which results in the transfer of control of a business operation to any person, corporation, association, partnership, joint venture or other business entity of which less than 50% of the voting stock or other equity interests (in the case of entities other than corporations) is owned or controlled directly or indirectly, by us, one or more of our subsidiaries or by a combination thereof following the transaction.

(2)    See “Pension Benefits” table for present value of accumulated benefit.

(3)    See “Grants of Plan-Based Awards” table for quantification.

(4)    See “Nonqualified Deferred Compensation” table for amount.

(5)    See “Nonqualified Deferred Compensation” table for amount.

(6)    The PRDB Plan as in effect prior to June 1, 2007, provided a death benefit for retired elected officers at a level of 1.5 times the officer’s base salary at the time of retirement. The PRDB Plan was terminated in 2007 and the lump sum present value was paid to elected officers in our employ on March 14, 2008. An employee who terminated prior to that date forfeited the benefit unless the employee was 55.

57

EXECUTIVE COMPENSATION

The following charts quantify the payments under executive compensation plans as a result of a change in vesting provisions in stock options, RSUs, RSAs and LTIP awards and the lump sum payable under supplemental pension plans that would be made assuming a termination event occurred on December 31, 2007. Payments under other plans do not change as a result of the termination event and

quantification of those payments are found elsewhere in this proxy or are paid under plans available generally to salaried employees. The table also does not include payments under the Executive Severance Plan because it was not in effect on December 31, 2007. In the charts below, a zero indicates a forfeiture and a dash (—) indicates no provision covers the event or the NEO is ineligible for a payment.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Name		Retirement	Change In Control	Death/ Disability	Layoff	Divestiture	Termination/ Resignation 1
		($)	($)	($)	($)	($)	($)
Robert J. Stevens Chairman, President & Chief Executive Officer	Pension SERP 2	12,257,254	12,257,254	12,257,254	12,257,254	12,257,254	12,257,254
	LTIP 07-09 3	2,777,886	1,360,305	2,777,886	2,777,886	2,777,886	2,777,886
	LTIP 06-08 4	4,044,021	5,736,200	4,044,021	4,044,021	4,044,021	4,044,021
	LTIP 05-07 5	4,250,000	4,250,000	4,250,000	4,250,000	4,250,000	4,250,000
	LTIP 04-06	2,058,367	2,058,367	2,058,367	2,058,367	2,058,367	2,058,367
	Options 1/07	0	2,070,000	2,070,000	2,070,000	2,070,000	0
	Options 2/06 6	7,458,000	7,458,000	7,458,000	7,458,000	7,458,000	7,458,000
	Options 1/05	4,745,000	4,745,000	4,745,000	4,745,000	4,745,000	4,745,000
	RSUs 1/07	0	3,420,950	3,420,950	0	3,420,950	0
	RSUs 2/06 7	1,403,432	13,894,320	13,894,320	—	—	1,403,432
	RSAs 7	0	3,508,772	3,508,772	3,508,772	3,508,772	0
	Post-Ret. Death Ben.8	1,040,000	0	1,040,000	1,040,000	1,040,000	1,040,000
	TOTAL	40,033,960	60,759,168	61,524,570	44,209,300	47,630,250	40,033,960
Bruce L. Tanner 9 Executive Vice President & Chief Financial Officer	Pension SERP 2	—	901,983	—	—	—	—
	LTIP 07-09 3	—	47,453	96,903	96,903	96,903	—
	LTIP 06-08 4	—	—	—	—	—	—
	LTIP 05-07 5	—	—	—	—	—	—
	LTIP 04-06	—	—	—	—	—	—
	Options 1/07	—	68,080	68,080	68,080	68,080	0
	Options 2/06 6	—	149,160	149,160	149,160	149,160	0
	Options 1/05	—	181,939	181,939	181,939	181,939	0
	RSUs 1/07	—	78,945	78,945	0	78,945	0
	RSUs 2/06 7	—	210,520	210,520	70,173	210,520	0
	RSAs	—	—	—	—	—	—
	Post-Ret. Death Ben.8	—	—	—	—	—	—
	TOTAL	—	1,638,080	785,547	566,255	785,547	—
Linda R. Gooden 9 Executive Vice President Information Systems & Global Services	Pension SERP 2	—	2,854,215	—	—	—	—
	LTIP 07-09 3	—	166,084	339,161	339,161	339,161	0
	LTIP 06-08 4	—	466,900	329,165	329,165	329,165	0
	LTIP 05-07 5	—	350,000	350,000	350,000	350,000	0
	LTIP 04-06	—	308,755	308,755	308,755	308,755	0
	Options 1/07	—	242,880	242,880	242,880	242,880	0
	Options 2/06 6	—	447,480	447,480	447,480	447,480	0
	Options 1/05	—	395,464	395,464	395,464	395,464	0
	RSUs 1/07	—	273,676	273,676	0	273,676	0
	RSUs 2/06 7	—	452,618	452,618	150,873	452,618	0
	RSAs 7	—	1,052,600	1,052,600	1,052,600	1,052,600	0
	Post-Ret. Death Ben.8	—	0	0	0	0	0
	TOTAL	—	7,010,672	4,191,799	3,616,378	4,191,799	—

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EXECUTIVE COMPENSATION

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Name		Retirement	Change In Control	Death/ Disability	Layoff	Divestiture	Termination/ Resignation 1
		($)	($)	($)	($)	($)	($)
Ralph D. Heath Executive Vice President Aeronautics	Pension SERP 2	6,229,832	6,229,832	6,229,832	6,229,832	6,229,832	6,229,832
	LTIP 07-09 3	452,214	221,445	452,214	452,214	452,214	452,214
	LTIP 06-08 4	611,306	867,100	611,306	611,306	611,306	611,306
	LTIP 05-07 5	650,000	650,000	650,000	650,000	650,000	650,000
	LTIP 04-06	334,485	334,485	334,485	334,485	334,485	334,485
	Options 1/07	0	332,120	332,120	332,120	332,120	0
	Options 2/06 6	894,960	894,960	894,960	894,960	894,960	894,960
	Options 1/05	790,833	790,833	790,833	790,833	790,833	790,833
	RSUs 1/07	0	384,199	384,199	0	384,199	0
	RSUs 2/06 7	192,942	578,930	578,930	192,942	578,930	192,942
	RSAs 7	0	1,052,600	1,052,600	1,052,600	1,052,600	0
	Post-Ret. Death Ben. 8	420,000	0	420,000	420,000	420,000	420,000
	TOTAL	10,576,572	12,336,504	12,731,479	11,961,292	12,731,479	10,576,572
Christopher E. Kubasik 9 Executive Vice President Electronic Systems	Pension SERP 2	—	1,005,251	—	—	—	—
	LTIP 07-09 3	—	292,624	597,569	597,569	597,569	0
	LTIP 06-08 4	—	933,800	658,329	658,329	658,329	0
	LTIP 05-07 5	—	675,000	675,000	675,000	675,000	0
	LTIP 04-06	—	566,051	566,051	566,051	566,051	0
	Options 1/07	—	442,520	442,520	442,520	442,520	0
	Options 2/06 6	—	894,960	894,960	894,960	894,960	0
	Options 1/05	—	790,833	790,833	790,833	790,833	0
	RSUs 1/07	—	494,722	494,722	0	494,722	0
	RSUs 2/06 7	—	894,710	894,710	298,237	894,710	0
	RSUs 9/06	—	947,340	947,340	315,780	947,340	0
	RSAs 7	—	1,052,600	1,052,600	—	—	0
	Post-Ret. Death Ben.8	—	0	0	0	0	0
	TOTAL	—	8,990,411	8,014,634	5,239,279	6,962,034	-
Joanne M. Maguire 9 Executive Vice President Space Systems	Pension SERP 2	—	588,604	0	0	0	0
	LTIP 07-09 3	—	166,084	339,161	339,161	339,161	0
	LTIP 06-08 4	—	433,550	305,653	305,653	305,653	0
	LTIP 05-07 5	—	350,000	350,000	350,000	350,000	0
	LTIP 04-06	—	334,485	334,485	334,485	334,485	0
	Options 1/07	—	242,880	242,880	242,880	242,880	0
	Options 2/06 6	—	447,480	447,480	447,480	447,480	0
	Options 1/05	—	395,464	395,464	395,464	395,464	0
	RSUs 1/07	—	273,676	273,676	0	273,676	0
	RSUs 2/06 7	—	452,618	452,618	150,873	452,618	0
	RSAs 7	—	1,052,600	1,052,600	1,052,600	1,052,600	0
	Post-Ret. Death Ben.8	—	0	0	0	0	0
	TOTAL	—	4,737,441	4,194,017	3,618,596	4,194,017	0
Robert B. Coutts Executive Vice President	Pension SERP 2	12,306,838	12,306,838	12,306,838	12,306,838	12,306,838	12,306,838
	LTIP 07-09 3	484,515	237,263	484,515	484,515	484,515	484,515
	LTIP 06-08 4	799,400	1,133,900	799,400	799,400	799,400	799,400
	LTIP 05-07 5	850,000	850,000	850,000	850,000	850,000	850,000
	LTIP 04-06	874,806	874,806	874,806	874,806	874,806	874,806
	Options 1/07	0	361,560	361,560	361,560	361,560	0
	Options 2/06 6	1,081,410	1,081,410	1,081,410	1,081,410	1,081,410	1,081,410
	Options 1/05	949,000	949,000	949,000	949,000	949,000	949,000
	RSUs 1/07	0	405,251	405,251	0	405,251	0
	RSUs 2/06 7	245,572	736,820	736,820	245,572	736,820	245,572
	RSAs 7	0	1,754,333	1,754,333	1,754,333	1,754,333	0
	Post-Ret. Death Ben.8	570,000	0	570,000	570,000	570,000	570,000
	TOTAL	18,161,541	20,691,181	21,173,933	20,277,434	21,173,933	18,161,541

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EXECUTIVE COMPENSATION

NOTES TO TABLE:

(1)    Resignation by executives who are eligible for retirement, for purposes of this chart, is treated as retirement.

(2)    The SERP lump sum value was calculated using plan assumptions and age of executive as of December 31, 2007. Payments under the SERP do not commence prior to age 55 except in the case of a change in control. Messrs. Kubasik and Tanner, and Mss. Gooden and Maguire had not attained age 55 by December 31, 2007 and would only be eligible for an immediate lump sum for a December 31, 2007 termination in the event of a change in control. The lump sum payable to each of them upon change in control has been reduced to reflect early payment. The Plan assumptions in effect for December 31, 2007 are: 4.0% discount rate and 1983 Group Annuity Mortality table. In the event of any other termination, Messrs. Kubasik and Tanner and Ms. Gooden’s accrued pension benefit would be payable at age 55. Ms. Maguire was not vested in the SERP.

(3)    Mss. Gooden and Maguire, and Messrs. Tanner and Kubasik would receive a payment in the event of death, disability, layoff or change in control; each of these four NEOs would forfeit the award for any other termination. Except for change in control, the amount shown for LTIP 2007-2009 performance cycle is an estimate based on our performance as of December 31, 2007 measured using the metrics contained in the award agreement, prorated by a factor of .333. The amount shown would not be paid until the conclusion of the three-year performance cycle (December 31, 2009) and could be more or less than the amount in the table, depending upon actual performance. The payment shown for a change in control is based on the formula in the award agreement and would be payable immediately following the change in control.

(4)    Mss. Gooden and Maguire, and Mr. Kubasik would receive a payment in the event of death, disability, layoff or change in control; each of these three NEOs would forfeit the award for any other termination. Except for change in control, the amount shown for LTIP 2006-2008 performance cycle is an estimate based on our performance as of December 31, 2007 measured using the metrics contained in the award agreement, prorated by a factor of .667. The actual amount would not be paid until the conclusion of the

three-year performance cycle (December 31, 2008) and could be more or less than the amount in the table, depending upon actual performance. The payment shown for a change in control is based on the formula in the award agreement and would be payable immediately following the change in control. Mr. Tanner did not receive a LTIP grant for the 2006-2008 cycle.

(5)    Mss. Gooden and Maguire, and Mr. Kubasik would receive a payment in the event of death, disability, layoff or change in control; each of these three NEOs would forfeit the award for any other termination. For the LTIP 2005-2007 cycle, the amount shown in the table is one-half of the amount shown in column (g) of the “Summary Compensation Table” and represents the portion of the award that is mandatorily deferred as of December 31, 2007 (the end of the 2005-2007 performance cycle). In the event of retirement, layoff, change in control, death, disability or divestiture, the mandatorily deferred portion would be paid in a lump sum. Mr. Tanner did not receive a LTIP grant for the 2005-2007 cycle.

(6)    The value attributable to the vesting of stock options was based upon the number of unvested stock options multiplied by the difference between the closing price for our stock on December 31, 2007 ($105.26) and the option exercise price. See “Outstanding Equity Awards at Fiscal Year End” table for terms of option grants. For the three NEOs eligible to retire (Messrs. Stevens, Heath, and Coutts), options are treated as vesting 100% in the event of all terminations.

(7)    The value attributable to the vesting of RSUs or RSAs was based upon the closing price of our stock on December 31, 2007 ($105.26). See “Outstanding Equity Awards at Fiscal Year End” table for terms of RSUs and RSAs. All 2007 RSUs would be forfeited for a layoff occurring on December 31, 2007. RSUs granted in 2006 vest on a prorated basis for a layoff occurring on December 31, 2007. Neither Mr. Stevens’ 2006 RSU agreement nor Mr. Kubasik’s RSA agreement contain vesting provisions for divestiture or layoff. RSAs and RSUs have a double trigger in the event of a change in control (termination following the change in control); the table assumes both elements of the double trigger occurred. Mr. Tanner did not receive a grant of RSAs.

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EXECUTIVE COMPENSATION

(8)    On June 28, 2007, the Board adopted an amendment terminating the Plan and providing for a one-time termination cash payment based on the projected future death benefit. The amounts will be payable in March 2008 (or may be deferred to the DMICP). All such amounts are included in the “Summary Compensation Table” (see footnote 8 in the

“Summary Compensation Table”). Employees

terminating on December 31, 2007 would forfeit the benefit unless age 55. Mr. Tanner was not eligible for this Plan.

(9)    Messrs. Kubasik and Tanner, and Mss. Gooden and Maguire were not eligible for retirement on December 31, 2007.

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EXECUTIVE COMPENSATION

The following table provides information about the Corporation’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, 2007.

EQUITY COMPENSATION PLAN INFORMATION
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(#)	($)	(#)
	(a)	(b)	(c)
Equity compensation plans approved by security holders 1, 2, 3	22,486,294	59.99	12,391,751
Equity compensation plans not approved by security holders 4	1,764,594	—	3,235,406
Total2,3,4	24,250,888	59.99	15,627,157

NOTES TO TABLE:

(1)    As of December 31, 2007 there were 11,502,100 shares available for grant under the IPA Plan as options, stock appreciation rights (“SARs”), RSAs or RSUs; 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% of shares authorized under the IPA Plan (9,660,000 shares) may be issued as RSAs. As of December 31, 2007, 2,421,002 shares have been granted as restricted stock under the IPA Plan (300,001 as RSAs and 2,121,001 as RSUs). Of the 11,502,100 shares available for grant on December 31, 2007, 3,559,065 and 879,908 shares are issuable pursuant to grants on January 28, 2008 of options and RSUs, respectively. Amounts in column (c) also include 889,651 shares that may be issued under the Directors Equity Plan and 5,820 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 IPA Plan, former Award Plan or other plans sponsored by the Corporation are not included in the

table. For RSAs, shares are issued at the date of grant but remain subject to forfeiture; for RSUs, shares are issued once the restricted period ends and the shares are no longer forfeitable.

(2)    At December 31, 2007 a total of 294,253 shares of Lockheed Martin common stock were issuable upon the exercise of the options assumed by the Corporation in connection with the COMSAT Corporation acquisition. The weighted average exercise price of those outstanding options was $24.22 per share. The amounts 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.

(3)    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 IPA Plan in any calendar year is 1.6% of the Corporation’s outstanding shares of stock on December 31 of the calendar year immediately preceding the date of grant

62

EXECUTIVE COMPENSATION

of the award, calculated in a manner consistent with the method used for calculating outstanding shares for reporting in the Annual Report.

(4)    Employees may defer MICP and LTIP amounts earned and payable to them to the DMICP. At the election of the employee, deferred amounts are credited as stock units at the closing price of our stock on the date the deferral is effective. Amounts equal to our

dividend are credited as stock units at the time we pay a dividend. Following termination of employment, a number of shares of stock equal to the number of stock units credited to the employee’s DMICP account are distributed to the employee. There is no discount or value transfer on the stock distributed. As a result, the phantom stock units also were not considered in calculating the total weighted-average exercise price in column (b).

PROPOSALS YOU MAY VOTE ON

ELECTION OF DIRECTORS

(Proposal 1 on Proxy Card)

There are 13 nominees for election to the Board this year, and their biographical information is provided below. Each nominee is currently serving as a director (except Mr. Burritt who is a nominee for the first time).

Directors and nominees are expected to attend the Annual Meeting. All directors nominated for election at the 2007 Annual Meeting attended the 2007 Annual Meeting. All nominees are elected to a one-year annual term that will end at the 2009 Annual Meeting. If any of the nominees are unable to stand for reelection at the 2008 Annual Meeting (an event which is not

anticipated), the Board may reduce its size or designate a substitute. If a substitute is designated, proxy holders 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 2008 Annual Meeting.

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

Nominees

	E. C. “Pete” Aldridge, Jr. Director since June 2003 Age 69 Under Secretary of Defense (Acquisition, Technology, and Logistics) since May 2001 until his retirement in May 2003. President and Chief Executive Officer of The Aerospace Corporation from March 1992 to May 2001; President of the McDonnell Douglas Electronic Systems
Company from December 1988 to March 1992; Secretary of the Air Force from June 1986 to December 1988; Under Secretary of the Air Force from 1981 to 1986; director of Global Crossing Ltd. and Alion Science and Technology Corporation.

	Nolan D. Archibald Director since April 2002 Age 64 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.

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PROPOSALS YOU MAY VOTE ON

	David B. Burritt Director Nominee for 2008 Age 52 Vice President and Chief Financial Officer of Caterpillar Inc. since 2004; Corporate Controller and Chief Accounting Officer of Caterpillar from 2002 to 2004; various positions of increasing
responsibility for Caterpillar in finance, tax, accounting and international operations for Caterpillar from 1978 to 2002; and director of Factory Mutual Insurance Company (FM Global).

	James O. Ellis, Jr. Director since November 2004 Age 60 President and Chief Executive Officer, Institute of Nuclear Power Operations since May 2005. Retired from active duty in July 2004; Admiral and Commander, United States Strategic Command, Offutt Air Force Base, Nebraska from October 2002 to July 2004; Commander in
Chief, United States Strategic Command from November 2001 to September 2002; Commander in Chief, U.S. Naval Forces, Europe and Commander in Chief, Allied Forces from October 1998 to September 2000; Deputy Chief of Naval Operations (Plans, Policy and Operations) from November 1996 to September 1998; director of Level 3 Communications, Inc. and Inmarsat plc.

	Gwendolyn S. King Director since March 1995 Age 67 President of Podium Prose, a Washington, D.C. speaker’s bureau and speechwriting service, since 2000. Founding Partner, The Directors’ Council, a corporate board search firm, from October 2003 to June 2005; Senior Vice President of Corporate and Public Affairs of PECO
Energy Company (formerly Philadelphia Electric Company) from October 1992 until her retirement in February 1998; Commissioner of the Social Security Administration from August 1989 to September 1992; director of Pharmacia from 1999 to 2003; director of Countrywide Financial Corporation from 2001 to 2004; director of Monsanto Company and Marsh & McLennan Companies, Inc.

	James M. Loy Director since August 2005 Age 65 Senior Counselor, The Cohen Group since 2005. Deputy Secretary of Homeland Security from 2003 to 2005; Administrator, Transportation Security Administration from 2002 to 2003; Commandant, U.S. Coast Guard from 1998 to 2002; Coast Guard Chief of Staff from 1996 to
1998; Commander of the Coast Guard’s Atlantic Area from 1994 to 1996; director of L-1 Identity Solutions, Inc.

	Douglas H. McCorkindale Director since April 2001 Age 68 Chairman of Gannett Co., Inc. (“Gannett”) since 2001 until his retirement in June 2006. Chief Executive Officer of Gannett from June 2000 to 2005, President of Gannett from 1997 to 2005, Vice Chairman of Gannett from 1984 to January 2001, Chief Financial Officer of Gannett from
1979 to 1997, Chief Administrative Officer of Gannett from 1985 to 1997; director of Continental Airlines, Inc. and a director or trustee of numerous Mutual Funds in the Prudential Group of Newark, NJ. The Board has determined that Mr. McCorkindale meets the SEC’s criteria of an audit committee financial expert.

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PROPOSALS YOU MAY VOTE ON

	Joseph W. Ralston Director since April 2003 Age 64 Vice Chairman of The Cohen Group, Washington, D.C. since March 2003. Retired from active duty on March 1, 2003. Commander, U.S. European Command and Supreme Allied Commander Europe, NATO, Mons, Belgium from May 2000 to January 2003; Vice Chairman, Joint Chiefs
of Staff, Washington, D.C. from March 1996 to April 2000; director of The Timken Company and URS Corporation.

Frank Savage Director since March 1995 Age 69 Chief Executive Officer of Savage Holdings LLC since August 2001. Chairman of Alliance Capital Management International, a division of Alliance Capital Management LP, an investment management company from 1993 to July 31, 2001; Senior Vice President of The

Equitable Life Assurance Society of the United States from 1987 to 1996; Chairman of the Board of Equitable Capital Management Corporation from 1992 to 1993, Vice Chairman of the Board of Equitable Capital Management Corporation from 1986 to 1992; Trustee Emeritus of Johns Hopkins University; former Chairman and Trustee Emeritus of the Board of Trustees of Howard University; director of Enron Corporation from 1999 to 2002; director of Alliance Capital Management L.P. from 1993 to 2004 and Qualcomm Inc. from 1996 to 2004.

	James M. Schneider Director since December 2005 Age 55 Chairman, Frontier Bancshares, Inc. since February 2007. Senior Vice President, Dell Inc. from 2000 to February 3, 2007, Chief Financial Officer, Dell Inc. from 2000 to December 2006, Chief Information Officer on an interim basis from 1999 to 2000; Senior Vice President of Finance,
MCI Communications Corp. from 1993 until joining Dell in 1996; Partner with Price Waterhouse from 1983-1993; held various management positions with Price Waterhouse from 1974 to 1983; director of The Gap, Inc. and General Communication, Inc. The Board has determined that Mr. Schneider meets the SEC’s criteria of an audit committee financial expert.

Anne Stevens Director since September 2002 Age 59 Chairman, President and Chief Executive Officer of Carpenter Technology Corporation since November 1, 2006. Executive Vice President, Ford Motor Company and Chief Operating Officer, The Americas, from November 2005 until her retirement in October 2006; Group Vice

President, Canada, Mexico and South America, Ford Motor Company from October 2003 to October 2005, Vice President, North America Vehicle Operations of Ford Motor Company from August 2001 to October 2003, Vice President, North America Assembly Operations of Ford Motor Company from April 2001 to August 2001. Held various management positions at Ford Motor Company from 1990, including executive director in Vehicle Operations in North America. Held various engineering, manufacturing and marketing positions at Exxon Chemical Co. before joining Ford. Member of the National Academy of Engineering and Trustee of Drexel University.

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PROPOSALS YOU MAY VOTE ON

Robert J. Stevens Director since October 2000 Age 56 Chairman of Lockheed Martin since April 2005. Chief Executive Officer of Lockheed Martin since August 2004, President of Lockheed Martin since October 23, 2000, Chief Operating Officer of Lockheed Martin from October 2000 to August 2004, Executive Vice President and

Chief Financial Officer of Lockheed Martin from October 1999 to March 2001, Vice President of Strategic Development of Lockheed Martin from November 1998 to October 1999; President and Chief Operating Officer of the former Lockheed Martin Energy and Environment Sector from January 1998 to June 1999; President of Lockheed Martin Air Traffic Management Division from June 1996 through January 1998; Executive Vice President and Senior Vice President and Chief Financial Officer of Air Traffic Management from December 1993 to May 1996; General Manager of Loral Systems Manufacturing Company from 1987 to 1993; director of Monsanto Company.

	James R. Ukropina Director since March 1995 Age 70 Chief Executive Officer, Directions, LLC, since 2002. Partner of O’Melveny & Myers LLP from 1992 to 2000; member of the Board of Trustees of Stanford University from 1990 to 2000; director of Trust Company of the West, Pacific Life Insurance Company, Central Natural
Resources, Inc. and Internet Brands.

Your Board unanimously recommends that you vote FOR the election of each of the director nominees.

RATIFICATION OF APPOINTMENT OF

INDEPENDENT AUDITORS

(Proposal 2 on Proxy Card)

The Audit Committee ( the “Committee”) has appointed Ernst & Young LLP, an independent registered public accounting firm, as the independent auditors to audit our books, records and accounts for the year ending December 31, 2008. Ernst & Young LLP served as our independent public accountants in 2007. The services provided to the Corporation by Ernst & Young LLP for the last fiscal year are described under the caption “Fees Paid to Independent Auditors” below. Stockholder approval of the appointment is not required. The Board believes that obtaining stockholder ratification of the appointment is a sound governance practice. If the stockholders do not vote on an advisory basis in favor of Ernst & Young

LLP, the Committee will reconsider whether to hire the firm and may retain Ernst & Young LLP or hire another firm without resubmitting the matter for stockholders to approve. The Committee retains the discretion at any time to appoint a different independent auditor.

Representatives of Ernst & Young LLP are expected to be available at the Annual Meeting to respond to appropriate questions and to make a statement if they desire.

Your Board unanimously recommends a vote FOR the ratification of appointment of Ernst & Young LLP as independent auditors in 2008.

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PROPOSALS YOU MAY VOTE ON

Pre-Approval of Audit Services

The Committee pre-approves all audits, audit-related, tax and other services performed by the independent auditor. The Committee pre-approves specific categories of services up to pre-established fee thresholds. Unless the type of service has been pre-approved, the Committee must approve that specific service before the independent auditor may

perform it. In addition, separate approval is required if

the amount of fees for any pre-approved category of service exceeds the fee thresholds established by the Committee. The Committee may delegate to one or more of its members pre-approval authority with respect to permitted services provided that the member must report any pre-approval decisions to the Committee at its next scheduled meeting.

Fees Paid to Independent Auditors

The following table presents the fees billed by Ernst & Young LLP, an independent registered public accounting firm, for audit, audit-related services, tax

services and all other services rendered for 2007 and 2006.

Ernst & Young Fees	2007	2006
Audit Fees 1	$16,300,000	$15,800,000
Audit-Related Fees 2	$1,000,000	$100,000
Tax Fees 3	$2,700,000	$3,300,000
All Other Fees 4	$200,000	$200,000

NOTES TO TABLE:

(1)    Audit fees principally include those for services related to the integrated annual audit of the consolidated financial statements, including the audit of internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, statutory audits of foreign subsidiaries, SEC registration statements and other filings, and consultation on accounting matters.

(2)    Audit-related fees principally include those for services related to employee benefit plan audits and acquisitions and divestitures. The amount for 2007 includes the fees for the independent audit firm which performs the annual audits of our employee benefit plans. That firm became an affiliate of Ernst & Young in the fourth quarter of 2006.

(3)    Tax fees principally include domestic tax advisory services related to state and local tax services, export sales, and other tax matters, and tax compliance services for foreign subsidiaries.

(4)    All other fees principally include those for government contracting services.

All fees were pre-approved in accordance with the Committee’s pre-approval policy. The Committee considered and concluded that the provision of those services by Ernst & Young LLP was compatible with the maintenance of the auditor’s independence in conducting its auditing functions.

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PROPOSALS YOU MAY VOTE ON

MANAGEMENT PROPOSAL—TO AMEND THE CHARTER

TO PROVIDE FOR “SIMPLE” MAJORITY VOTING

(Proposal 3 on Proxy Card)

We are proposing to amend our Charter to modify the provisions relating to the vote required of our stockholders to take actions generally and in connection with the election of directors. The changes we are proposing are consistent with the so called “simple” majority voting provisions adopted by many other publicly traded corporations over the last several years. We believe that the proposed changes to the Charter, together with the related amendments to the Corporation’s Bylaws and Corporate Governance Guidelines that the Board has approved, subject to approval of the amendment of the Charter at the Annual Meeting, reflect the current consensus of best practices for the election of directors. The principal features of the proposed amendment and the related changes to our Bylaws and Corporate Governance Guidelines include:

• Implementation of a uniform “simple” majority vote standard for all matters requiring the approval of stockholders, other than those matters for which Maryland law requires a higher vote;

• Miscellaneous non-substantive and clarifying amendments to conform the director removal language in our Charter to the language included in the Maryland General Corporation Law;

• Amendments to the Bylaws of the Corporation, which will become effective without stockholder approval upon approval of the amendment to our Charter by the stockholders, to provide for a “simple” majority vote in uncontested elections of directors, with a default to a “plurality” vote standard in contested director elections; and

• Amendments to our Corporate Governance Guidelines, which already have been approved by the Board and will be effective without stockholder approval upon amendment of the Charter, to provide that a director who does not receive the required vote of stockholders in an uncontested election must submit his or her resignation to the Board for its review and consideration following the stockholder

meeting at which the director fails to receive the required “simple” majority vote.

This summary does not contain all the information that may be important to you. The complete text of the proposed Charter amendment and the relevant changes to the Bylaws and our Corporate Governance Guidelines that have been approved by the Board subject to approval of the Charter amendment is included in Appendix B to this Proxy Statement. The following summary is qualified in its entirety by reference to Appendix B. Stockholders are not being asked to vote on the amendments to the Bylaws or the Corporate Governance Guidelines. You are urged to read Appendix B in its entirety.

Full implementation of a uniform “simple” majority vote standard for all matters requiring the approval of stockholders, other than those matters for which Maryland law requires a higher vote, is subject to approval of Proposal 4 to amend the Charter to delete Article XIII, discussed on pages 71 through 72. If Proposal 4 is not approved by stockholders by the requisite vote, the voting requirements set forth in Article XIII of the Charter would continue to apply.

Majority Vote Standard

Our Charter currently requires that, with the exception of actions that as a matter of Maryland law or as a result of specific provisions in our Charter require a higher vote, all actions taken or authorized by the stockholders be approved by the affirmative vote of a majority of all votes entitled to be cast on the matter. As we have disclosed in connection with prior meetings of our stockholders, this current Charter provision effectively means that an abstention by a stockholder or the failure of a stockholder to cast a vote at a stockholders meeting (including by not returning a properly executed proxy for shares owned by the stockholder) has the same effect as an affirmative vote against a proposal presented at a stockholder meeting or, in the case of the election of directors, the same effect as a “withhold authority” vote.

The proposed amendment would not change the majority of the votes entitled to be cast standard for extraordinary corporate actions, such as Charter

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PROPOSALS YOU MAY VOTE ON

amendments, mergers, consolidations, share exchanges, sales of all or substantially all of the assets of the Corporation and dissolution, that otherwise require a higher vote under Maryland law. As a result of other provisions of Maryland law, however, the proposed amendment and the related amendments to the Bylaws discussed below, would have the effect of reducing the vote required for all other matters submitted to stockholders for a vote to a “simple” majority of all votes cast on the matter at a meeting at which a quorum is present in person or by proxy. If the proposed amendment is approved, stockholder proposals considered at future meetings as well as management proposals relating to, among other things, the approval of equity incentive arrangements and the ratification of the selection of auditors, would only require this “simple” majority vote. As a result, it may be easier for stockholder proposals and these ordinary management proposals to achieve the vote required for their passage.

With respect to the election of directors, Maryland law provides that, unless the charter or bylaws of a Maryland corporation provide otherwise, directors are elected by a plurality vote. A plurality vote standard was adopted in most modern corporate statutes to ensure that a sufficient number of directors are elected each year and that vacancies are not created on a board of directors simply because stockholders do not respond to proxy solicitations or, in the case of contested elections, no directors receive a majority vote. This plurality standard, however, literally means that if there are three directors to be elected at a stockholders meeting, the three director candidates who receive the most number of affirmative votes, regardless of how many votes that might be, are elected. Some commentators have observed that this plurality voting standard means that in an uncontested election, a director who received only one vote could be elected to a board of directors. Although this observation may be true, in the context of publicly traded companies, this result is highly unlikely. It is also true, however, that in a situation in which there is significant stockholder opposition to a particular director or group of directors, under a plurality vote standard a director of a publicly traded company could be reelected even though more votes were “withheld” from the director than were cast “for” the director.

Our proposed Charter amendment does not specifically address the election of directors. Instead, we have elected to implement “simple” majority voting for the

election of directors in the same way that the overwhelming number of Maryland corporations and corporations incorporated in Delaware and other jurisdictions have implemented majority voting for directors; namely, by including the director voting provisions in our Bylaws. Appendix B includes the text of the amendment to Article I, Section 1.07 of our Bylaws as it would be amended. This amendment to our Bylaws has been approved by the directors and will be effective, without further action of our directors, upon approval of the proposed Charter amendment. Under the amended provisions of our Bylaws, the following votes would apply for the election of directors:

• Uncontested elections – for a director nominee to be elected, more votes would have to be cast “for” the nominee than are cast “against” the nominee; and

• Contested elections – to ensure that the required numbers of directors are elected at the meeting, we would apply a plurality vote standard for the election of directors.

In proposing the amendment to our Charter and approving the amendment to our Bylaws contemplated above, the Board recognizes that a majority voting standard for the election of directors in an uncontested election (whether it is the current majority of the votes entitled to be cast standard in our Charter or the majority of the votes cast standard contemplated by the foregoing amendments) could result in vacancies on the board if the nominees do not receive the required vote. In such a situation, we believe that under current Maryland law any nominees who were serving as directors of the Corporation at the time of the meeting and were seeking reelection would continue to serve on our board as “holdover” directors. Unlike Delaware, which has adopted