Lockheed Martin Corporation
6801 Rockledge Drive Bethesda, MD 20817

Vance D. Coffman
Chairman

Dear Fellow Stockholder:

     On behalf of our Board of Directors, I cordially invite you to attend Lockheed Martin Corporation’s 2005 Annual Meeting of Stockholders on Thursday, April 28, 2005, at 10:30 a.m. Mountain time, at the Sheraton Albuquerque Uptown Hotel, 2600 Louisiana Boulevard NE, Albuquerque, New Mexico. You are also invited to join the Board of Directors and representatives of senior management at a reception beginning at 10:00 a.m. If you are unable to join us in person, you can listen to the Annual Meeting, which will be webcast through the Lockheed Martin website, http://www.lockheedmartin.com/investor.

     The Annual Meeting will begin with a report on your company’s 2004 performance followed by discussion and voting on matters set forth in the accompanying Notice of Annual Meeting and Proxy Statement.

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

     I look forward to seeing you in Albuquerque.

		Sincerely,
		Vance D. Coffman

LOCKHEED MARTIN CORPORATION

6801 Rockledge Drive
Bethesda, Maryland 20817

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

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

March 18, 2005

TABLE OF CONTENTS

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GENERAL INFORMATION

Lockheed Martin Corporation is furnishing this Proxy Statement to solicit proxies on behalf of the Board of Directors of the Corporation for the Annual Meeting of Stockholders (“Annual Meeting”) to be held on Thursday, April 28, 2005 at 10:30 a.m. Mountain time at the Sheraton Albuquerque Uptown Hotel, 2600 Louisiana Boulevard NE, Albuquerque, New Mexico, and at any adjournment or postponement thereof. Please refer to the directions to the meeting location that appear at the back of this Proxy Statement. Our principal executive office is located at 6801 Rockledge Drive, Bethesda, Maryland 20817. The Notice of the Annual Meeting, this Proxy Statement, the Proxy Solicitation/Voting Instruction Card and the enclosed Annual Report for 2004 will be sent to our stockholders commencing March 18, 2005.

Annual Meeting Admission

An admission ticket or proof of ownership (such as a recent brokerage statement or letter from your broker) and a form of photo identification are required for admission to the meeting. A detachable admission ticket is attached to your Proxy Solicitation/Voting Instruction Card. Internet voters will be guided to a site where they will be able to print an admission ticket.

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

“Householding” of Documents

We send only one Annual Report and Proxy Statement to eligible stockholders who share a single address, unless we have received instructions to the contrary from any stockholder at that address. This practice, known as “householding,” is designed to reduce our printing and postage costs. If a registered stockholder residing at an address with other registered stockholders wishes to receive a separate Annual Report or Proxy Statement in the future, he or she may contact EquiServe Trust Company, N.A., Shareholder Relations, P.O. Box 43023, Providence, RI 02940-3023 or call 1-877-498-8861. If you own shares through a bank, broker, or other nominee, you should contact the nominee concerning householding procedures.

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

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

Requests for Written Copies of 2004 Annual Report

We will provide, without charge, a copy of our Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Securities and Exchange Commission (“SEC”) upon the written request of any registered or beneficial owner of common stock entitled to vote at the Annual Meeting. Requests should be made by mailing Investor Relations, Lockheed Martin Corporation, 6801 Rockledge Drive, Bethesda, Maryland 20817, by calling Lockheed Martin Shareholder Direct at 1-800-568-9758 or by accessing the Lockheed Martin website at http://www.lockheedmartin.com/investor. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information regarding registrants including Lockheed Martin.

2006 Annual Meeting and Stockholder Proposals

Under the SEC’s Rule 14a-8, proposals of stockholders to be presented at our 2006 Annual Meeting must be received by the Secretary of the Corporation no later than November 18, 2005 to be included in the Proxy Statement and on the Proxy Solicitation/Voting Instruction

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GENERAL INFORMATION

Card that will be solicited by the Board of Directors. The inclusion of any proposal will be subject to applicable rules of the SEC.

Our bylaws require advance notice of any proposal by a stockholder intended to be presented at the Annual Meeting that is not included in our notice of meeting and proxy statement or made by or at the direction of the Board of Directors, including any proposal for the nomination for election of a director. A notice of a stockholder proposal must contain specified information concerning the matter to be brought before the meeting and concerning the stockholder proponent. Any waiver by us of these requirements relating to a particular stockholder proposal will not constitute a waiver of any other stockholder proposal nor will it obligate us to waive these requirements regarding future submissions of that or any other stockholder proposal. To be properly brought before the 2006 Annual Meeting, written notice of nominations for directors or other business to be introduced by a stockholder must be received between the dates of November 18, 2005 and December 18, 2005, inclusive. A complete list of the information required to be included in a stockholder proposal may be found in Section 1.11 of our bylaws on our website at http://www.lockheedmartin.com/investor.

Corporate Governance Information

Stockholders will find information about our corporate governance practices on Lockheed Martin’s website at http://www.lockheedmartin.com/investor. Our website contains information about our Board of Directors, Board committees, copies of our bylaws and charter, Code of Ethics and Business Conduct and Corporate Governance Guidelines. Information about our insider transactions is also available on our website. Stockholders may obtain, without charge, hard copies of the above documents by writing to Lockheed Martin Investor Relations, 6801 Rockledge Drive, Bethesda, MD 20817.

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

The Nominating and Corporate Governance Committee of the Lockheed Martin Board of Directors has created a process by which parties may communicate confidentially with the presiding director or with the non-management directors as a group. If you wish to raise a question or concern to the presiding director or the non-management directors as a group, you may do so by contacting:

Mr. James R. Ukropina
Chairman, Nominating and Corporate
Governance Committee
or
Nominating and Corporate Governance
Committee
Lockheed Martin Corporation
6801 Rockledge Drive, MP 200-10
Bethesda, MD 20817

All correspondence is reviewed by the Secretary of the Corporation. At the direction of the Board, correspondence regarding routine stockholder matters and services (e.g., stock transfer, dividends, etc.) will be resolved by the Secretary of the Corporation. Concerns relating to accounting, internal controls or auditing matters are immediately brought to the attention of the Corporation’s Ethics and Business Conduct department and handled in accordance with procedures established by the Audit and Ethics Committee with respect to such matters. All other correspondence is forwarded to the Chairman of the Nominating and Corporate Governance Committee who will determine whether full Board attention is required. Any director may at any time review a log of all correspondence received by the Corporation that is addressed to the Board and request copies of such correspondence.

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VOTING INFORMATION

We are soliciting your vote on the election of directors, ratification of the appointment of the independent auditors, a management proposal to amend the 2003 Incentive Performance Award Plan and four stockholder proposals. Stockholders as of the close of business on the record date, March 1, 2005, are entitled to vote at the Annual Meeting. On March 1, 2005 there were 442,568,622 shares outstanding of Lockheed Martin’s common stock, $1.00 par value per share. Each share outstanding on the record date (including shares held through Direct Invest, our dividend reinvestment and stock purchase plan or through our employee benefit plans) is entitled to one vote on each proposal presented at the Annual Meeting. The number of shares held in your account(s) is shown on the Proxy Solicitation/Voting Instruction Card sent to you.

How to Vote

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

How to Revoke a Vote

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

Voting Representation and Tabulation

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

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

Under the rules of the New York Stock Exchange (“NYSE”), if your shares are held by

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VOTING INFORMATION

a broker, you must give specific voting instructions to the broker on how you wish to vote with regard to the election of directors and the ratification of the appointment of independent auditors described later in this Proxy Statement, or the broker may vote your shares at his or her discretion. Conversely, the NYSE rules do not allow your broker to use his or her discretion to vote on the management proposal to amend the 2003 Incentive Performance Award Plan and the four stockholder proposals. Without specific instructions from you on how you wish to vote, a “broker non-vote” may result, which has the effect of a negative vote on these proposals.

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

Solicitation of Proxies

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

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GOVERNANCE MATTERS

Nominating and Corporate Governance Committee

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

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

Identifying and Evaluating Nominees for Directors

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

Stockholder Nominees

Stockholder proposals for nominations to the Board should be submitted to the Nominating and Corporate Governance Committee, care of the Secretary of the Corporation at our principal executive office, 6801 Rockledge Drive, Bethesda, Maryland 20817. To be considered by the Board for nomination at the next succeeding annual meeting, nominations must be delivered to the Secretary not less than 90 days nor more than 120 days prior to the first anniversary of the mailing of the notice of the preceding year’s Annual Meeting. For the 2006 Annual Meeting, written notice of nominations by a stockholder must be received between the dates of November 18, 2005 and December 18, 2005, inclusive. The information requirements for any stockholder proposal or nomination can be found in Section 1.11 of our bylaws, available at http://www.lockheedmartin.com/investor. A summary of the requirements can be found in the General Information section of this Proxy Statement under the heading “2006 Annual Meeting and Stockholder Proposals” on page 1. Self-nominations will not be considered. Proposed stockholder nominees will be presented to the Chairman of the Nominating and Corporate Governance Committee, who will decide if further consideration should be given to the nomination by the full Nominating and Corporate Governance Committee.

Director Qualifications

The Committee annually reviews the criteria for selection of director nominees. The Board seeks a diverse group of candidates who at a minimum possess the background, skills, expertise and time to make a significant contribution to the Board, to the Corporation and its stockholders. Criteria against which the slate of nominees have been measured include the following:

5

GOVERNANCE MATTERS

During 2004, particular emphasis has been placed on identifying candidates with government or aerospace industry experience and/or active CEOs.

Director Independence

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

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

A director is not independent if:

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

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

6

GOVERNANCE MATTERS

Martin that is required to be consolidated under generally accepted accounting principles in the U.S. (GAAP).

Nominees for Election at 2005 Annual Meeting

There are 13 nominees for election to the Board of Directors in April 2005, and their biographical information is provided on page 39. Each nominee currently serves as a director. Except for Dr. Coffman and Mr. Stevens, the Nominating and Corporate Governance Committee has determined that all of the current directors and nominees are independent under the listing standards of the NYSE.

Certain Relationships and Related Transactions

The Nominating and Corporate Governance Committee and the Board of Directors considered the following relationships:

The Board determined that Mr. Stevens, an employee of the Corporation, is not independent. Similarly, Dr. Coffman is not considered independent because he retired as an employee in 2004.

The Board considered the Corporation’s provision to Mr. Augustine of office space at a location unrelated to the corporate office and an executive assistant, which were provided to him as a former Chairman and CEO of the Corporation. The Board concluded that these items do not constitute direct compensation to Mr. Augustine that would affect his independence.

The Board determined that Mr. Ralston’s employment as Vice Chairman of The Cohen Group, a consulting business that performs services to the Corporation, does not affect Mr. Ralston’s independence. In 2004, the Corporation paid The Cohen Group approximately $500,000, an amount constituting less than the greater of $1 million or two percent of The Cohen Group’s revenues in 2004.

The Board determined that Mr. Ukropina’s status as Of Counsel to O’Melveny and Myers, a law firm used by the Corporation, does not affect his independence. Mr. Ukropina, who retired from the firm in 2000, is not a partner, member or officer of the firm, nor does he provide legal services to the Corporation. The Board is further satisfied that, because Mr. Ukropina is retired and provides no active services to O’Melveny and Myers, he is independent for purposes of serving on the Audit and Ethics Committee.

The Corporation currently employs over 130,000 employees and has an active recruitment program for soliciting job applications from qualified candidates. The Corporation seeks to hire the most qualified candidates and consequently does not preclude the hiring of family members. The employment of various family members of current directors and executive officers is described below. These relationships (and 2004 cash compensation including stock options granted in 2004, where applicable) include Dr. Coffman’s son-in-law, Greg Sallee, Administrative Representative Senior ($75,000); Mr. Bennett’s son-in-law, Jeffrey D. MacLauchlan, Vice President, Financial Strategies ($273,000 in base salary and MICP and stock option awards of $197,900 and 12,000 shares, respectively); Mr. Ralston’s brother-in-law, Mark E. Dougherty, Director, Business Development Analysis ($132,800); Michael F. Camardo’s two sons-in-law, Robert Rynkar, Financial Analyst ($51,000) and John Foley, Cost Estimation Director ($128,000 and stock option award of 500 shares); and G. Thomas Marsh’s (an executive officer) brother-in-law, Larry Roubidoux, Engineering Planning Senior Manager ($131,000). In addition, Mr. Savage’s son, Mark Savage, is a Financial Analyst-Staff ($95,000 in 2005). The compensation of each family member was established in accordance with the Corporation’s employment and compensation practices applicable to employees with equivalent qualifications, experience and responsibilities. None of these individuals served as executive officers during 2004.

7

GOVERNANCE MATTERS

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

The Committee reviewed each director-nominee’s other affiliations and relationships and found none that would affect the findings of independence in each case.

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

Corporate Governance Guidelines

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

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COMMITTEES OF THE BOARD OF DIRECTORS

Board Committee Membership Roster

9

COMMITTEES OF THE BOARD OF DIRECTORS

Functions of Committees

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

Audit and Ethics Committee:

Executive Committee:

Management Development and Compensation Committee:

10

COMMITTEES OF THE BOARD OF DIRECTORS

Stock Option Subcommittee:

Nominating and Corporate Governance Committee:

Strategic Affairs and Finance Committee:

11

COMMITTEES OF THE BOARD OF DIRECTORS

Audit and Ethics Committee Report

We oversee Lockheed Martin’s financial reporting process and monitor compliance with its Code of Ethics and Business Conduct on behalf of the Board of Directors. All members of the Committee meet the independence requirements of the SEC and NYSE. We operate under a written charter approved by the Board of Directors, consistent with the corporate governance rules issued by the SEC and the NYSE. Our charter is available on the Corporation’s website at http://www.lockheedmartin.com/investor.

Lockheed Martin’s management is responsible for the financial reporting process and preparation of the quarterly and annual consolidated financial statements, including maintaining a system of internal controls over financial reporting and disclosure controls and procedures. We are directly responsible for the appointment, compensation, retention, oversight and termination of the Corporation’s outside or external auditors, Ernst & Young LLP, an independent registered public accounting firm. The independent auditors are responsible for auditing management’s assessment of the effectiveness of the Corporation’s internal controls over financial reporting and for expressing their opinion about the effectiveness of those controls, in addition to auditing the annual consolidated financial statements and expressing an opinion on the conformity of those financial statements with GAAP. The Committee reviews the performance of the Corporation’s internal audit function and the qualifications of its audit personnel. We do not prepare financial statements or conduct audits.

In connection with the December 31, 2004 audited consolidated financial statements, we have:

Based on the reviews and discussions above, we recommended to the Board of Directors that the audited consolidated financial statements for 2004 be included in Lockheed Martin’s Annual Report on Form 10-K for the year ended December 31, 2004, which is filed with the Securities and Exchange Commission. The Board approved our recommendation.

Submitted on February 23, 2005 by the Audit and Ethics Committee:

Compensation Committee Interlocks and Insider Participation

Mr. Savage is a member of the Management Development and Compensation Committee. Mark Savage, Mr. Savage’s son, serves as Financial Analyst – Staff for the Corporation, at a 2005 cash compensation level of $95,000.

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DIRECTORS’ COMPENSATION

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

During 2004, the Board held 15 meetings, and all incumbent directors attended at least 75 percent of scheduled Board of Directors and committee meetings.

The following table summarizes the compensation of our directors during 2004. Mr. Stevens and Dr. Coffman (prior to his retirement as CEO) were not compensated separately for their service as directors:

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DIRECTORS’ COMPENSATION

14

SECURITIES OWNED BY DIRECTORS, NOMINEES AND NAMED
EXECUTIVE OFFICERS

The following table shows the Lockheed Martin common stock beneficially owned by and stock units credited to each named executive officer, director nominee, and all directors and executive officers as a group as of January 31, 2005. The stock beneficially owned by each director and executive officer represented less than 1 percent of the common stock outstanding. Individuals have sole voting and investment power over the stock unless otherwise indicated in the notes to this table.

15

SECURITIES OWNED BY DIRECTORS, NOMINEES AND NAMED
EXECUTIVE OFFICERS

16

SECURITIES OWNED BY DIRECTORS, NOMINEES AND NAMED
EXECUTIVE OFFICERS

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires that our officers and directors (and persons who own more than 10 percent of our equity securities) file reports of ownership and changes in ownership with the SEC, the NYSE and with us. Based solely on our review of copies of forms we have received or written representations from reporting persons, we believe that all ownership filing requirements were timely met during 2004, except for one Form 4 filing for each of Dr. Coffman and Mr. Marsh that was filed late to report vesting of a restricted stock grant and a DMICP deferral transaction, respectively, in each case due to an unintentional administrative oversight.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table shows information regarding each person known to be a “beneficial owner” of more than five percent of our common stock. For purposes of this table, beneficial ownership of securities generally means the power to vote or dispose of securities, regardless of any economic interest in the securities. All information shown is based on information reported on Schedule 13G filed with the SEC on the dates indicated in the notes to this table.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

19

STOCK PRICE PERFORMANCE GRAPH

COMPARISON OF CUMULATIVE TOTAL RETURN THROUGH 2004¹
LOCKHEED MARTIN, S&P 500 INDEX AND
S&P AEROSPACE & DEFENSE INDEX²

20

EXECUTIVE COMPENSATION

Compensation Committee Report on Executive Compensation

Overview

Philosophy

Lockheed Martin’s executive compensation program has four primary goals:

The Management Development and Compensation Committee and Stock Option Subcommittee

The Management Development and Compensation Committee and the Stock Option Subcommittee (together the “Committee”) oversee and review our executive compensation policies and programs and recommend the form and amount of compensation to be paid to executive officers. The Committee is independent and consists entirely of Board members who are neither officers nor employees of Lockheed Martin or its subsidiaries and who are independent under the listing standards of the NYSE. The Stock Option Subcommittee is responsible for approving performance-based compensation (such as employee stock options) intended to be eligible for full tax deductibility under the Internal Revenue Code (“IRC”) Section 162(m). The purposes and responsibilities of the Committee are set forth in its charter which is a part of the Corporation’s bylaws. The charter was reviewed in 2004, and is available on our website at http://www.lockheedmartin.com/investor.

During 2004, the independent members of the Board reviewed and approved the recommendations of the Committee involving the compensation of the named executive officers.

Methodology

In order to assess the competitiveness of the compensation program, the Committee reviews survey data gathered by one or more nationally recognized, independent consulting firm(s) specializing in executive compensation. Each year we examine compensation information from a group of 25 publicly held companies (referred to as the “Comparator Group”) of a size, complexity and quality similar to that of the Corporation. We make comparisons to the median compensation level of the Comparator Group using figures that have been weighted to reflect the relative size of the businesses. We use the survey data to identify competitive levels of compensation. Our process in making compensation awards to executives is subjective and we retain discretion over compensation decisions. Accordingly, the actual compensation (or any particular component of compensation) received by an executive may differ materially from the median of the Comparator Group.

The Committee retained an independent executive compensation consultant to review the executive compensation program including total direct compensation in the context of the 2004 awards. In addition, the Committee requested the independent executive compensation consultant to analyze whether the executive pay package was appropriate and within the market range (particularly as it relates to the CEO and Chief Operating Officer (“COO”)) in light of the Company’s performance. The review was based on the Comparator Group and an aerospace peer group of six large public companies consisting of The Boeing Company, General Dynamics Corporation, Honeywell International Inc., Northrop Grumman Corporation, Raytheon Company and United Technologies Corporation. The review included analysis of Long-Term

21

EXECUTIVE COMPENSATION

Incentive Performance (LTIP) awards and the use of restricted stock. The independent executive compensation consultant concluded that the 2004 executive pay package (relative to CEO and COO competitiveness) was appropriate and within a competitive range in light of the Corporation’s performance.

Compensation Structure

Our executive compensation structure consists of:

Each element is described below.

Annual Compensation – Base Salary. Using Comparator Group information, we evaluate each individual executive’s base salary by reference to the median for base salary of comparable executive positions in the Comparator Group. Our senior executive base salary philosophy permits the adjustment of an individual executive’s actual base salary above or below the median of the Comparator Group upon consideration of the following:

Annual Compensation – Incentive. The Lockheed Martin Management Incentive Compensation Plan (“MICP”) provides an opportunity for executives to earn additional cash compensation based on the Committee’s assessment of performance measured against individual and business unit (or corporate) goals.

Each of the named executive officers is assigned a targeted percentage (ranging from 55 percent to 100 percent) of base salary determined by the level of importance and responsibility of the participant’s position in the Corporation. The target percentages are in a range that is comparable to annual incentive targets for similar positions in the Comparator Group. The amount of incentive compensation generated by the target percentage is adjusted upwards or downwards after assessment of business area and/or corporate performance, as well as an individual’s contribution to that performance. Following adjustment for business area and/or corporate and individual performance, bonuses payable under the MICP for the named executive officers can range from 0 percent to approximately 195 percent of the target bonus amount.

Business area and corporate performance is evaluated in part by comparison to the Corporation’s or business area’s long-range plan, as established at the end of the prior year. This evaluation looks at standard measures of financial performance such as orders, sales, earnings, and cash generation. In addition, contract performance, percentage of contract award fees earned, rate and dollar value of new business won, backlog, achievement of cost savings under the LM21 Program, level of profit margin and inter-company sales and earnings may also be taken into account. Non-financial performance factors such as mission success, workforce diversity and strategic initiatives are also considered. Management’s assessment of performance relative to identified criteria is reviewed with the Committee; the CEO, subject to our review and approval, recommends corresponding adjustments. Selection of criteria and weighting of the various criteria in determining adjustments is within our discretion and may vary from year to year.

22

EXECUTIVE COMPENSATION

In determining the adjustment for individual performance, we consider subjective criteria such as the accomplishment of individual performance goals and contributions to operational performance as well as the individual’s implementation of and adherence to our policy on ethics and standards of conduct, customer satisfaction, teamwork, and retention and development of key personnel. We retain discretion to determine the amount of actual awards, if any, and based on our assessment of performance actual awards may fall above or below the Comparator Group median.

Long-term Compensation. The Incentive Performance Award Plan (“Award Plan”) provides for stock-based or cash-based incentive awards, the ultimate value of which is based on the Corporation’s performance under specified criteria. During 2004, the Committee granted nonqualified stock options, restricted stock and LTIP Award program awards.

In making long-term compensation awards, we look at the current economic value provided under long-term awards made by members of the Comparator Group, using standard statistical valuation techniques such as the Black-Scholes methodology. Long-term compensation awards are intended to provide the recipient the opportunity to receive a competitive level of long-term compensation where the actual amount received is linked to the performance of the Corporation. Stock options link compensation to the future return of the Corporation’s stock on an absolute basis; our LTIP Award program links compensation to stockholder return on a comparative basis with the stockholder return of the Standard & Poor’s 500 Index (“S&P 500 Index”).

Stock Awards

Stock options were awarded to executive officers and a group of approximately 2,750 key personnel in 2004. All options awarded to executive officers have an exercise price equal to the closing market price of our common stock on the date of grant and are subject to a three-year vesting schedule. Information concerning the terms of stock option awards is shown in the footnotes to the table at page 30.

The competitive level of economic value determined by the Committee for the stock option component of long-term compensation is expressed as a multiple of base salary. Nevertheless, the Committee has discretion with regard to the number of options awarded to any individual executive and may adjust stock option awards to reflect performance or other factors.

To secure the commitment and retention of the key management team, the Committee awarded restricted stock grants to certain key members of management (including all of the named executive officers except Dr. Coffman, who retired on September 1, 2004). The awards, which ranged from 15,000 shares for the named Executive Officers to 50,000 shares for the former COO (currently President and CEO), generally vest over a four-year period. The grants were conditioned upon a recipient’s commitment to a non-competition agreement. Information concerning the terms of restricted stock awards is shown in the footnote to the table at page 29.

Long-Term Incentive Performance Award Program

Under the LTIP Award program, a dollar target amount (the “Target Award”) is identified for each recipient, the amount of which is within our discretion. As in the case of stock options, the competitive level of economic value for this component of long-term compensation is expressed as a multiple of base salary. At the end of a specified performance period, the actual cash award a participant would be eligible to receive may be larger or smaller than the Target Award, or no award at all, depending on the relative ranking at the end of that period of our total stockholder return to the total stockholder return of the companies in the S&P 500 Index of companies at the beginning of the performance period. Award payments may range from 0 percent to 200 percent of the Target Award. To the extent any payment is made at the end of the performance period, 50 percent is payable in

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EXECUTIVE COMPENSATION

cash and 50 percent is deferred automatically as stock units that track the performance of the Corporation’s common stock for a period of two years. The allocation between the percent paid in cash and the percent deferred may be adjusted to satisfy Plan limitations. Information concerning additional terms of previous LTIP awards is shown in the footnotes to the table at page 32.

Relationship of Corporate Performance to Compensation

The Corporation achieved record performance in 2004:

The Corporation continued to demonstrate a high level of customer satisfaction and successful performance in operational results on existing business. The Corporation successfully competed for 13 of 15 corporate focus programs. Other operational achievements include the return to profitability on the C-130J transport aircraft, successful launch of the 74^th consecutive Atlas mission, rapid integration of businesses acquired in late-2003, initiation of a new safety program resulting in a 14 percent decline in OSHA incidents and a high level of customer satisfaction as measured by award fee and mission success metrics.

The Corporation continued to make strategic progress to implement its disciplined growth philosophy through acquiring several small companies to fill strategic niches. The Corporation won prime contractor roles in ship-building and military communications domains which are new product areas for the Corporation. In addition, through its focused deployment of cash, the Corporation reduced debt by $1.1 billion, repurchased 14.7 million common shares, and announced a 14 percent increase to the dividend rate.

Lockheed Martin recorded a total stockholder return of 10 percent in 2004, compared to 11 percent for the S&P 500 Index and 16 percent for the S&P Aerospace & Defense Index. On a three-year basis, Lockheed Martin provided an average annual return of 7 percent, compared to 4 percent for the S&P 500 Index and 11 percent for the S&P Aerospace Index. Longer- term return data was more favorable. Over the past five years, Lockheed Martin’s average annual return was 22 percent, compared to –2 percent for the S&P 500 Index and 7 percent for the S&P Aerospace Index.

The Committee also considered the year’s disappointments, including loss of a significant Homeland Security contract opportunity, performance on international simulation and training contracts, an anomaly during return of the Genesis spacecraft, and litigation results.

Compensation in 2004

Consistent with its charter responsibilities, the Committee reviewed and approved Corporate goals and objectives during 2004 relevant to the CEO’s compensation. During 2004, two individuals served as CEO. Dr. Coffman stepped down as CEO on August 5, 2004 and retired as an employee on September 1, 2004. He was succeeded by Mr. Stevens, formerly President and COO. The 2004 Corporate goals and objectives, which related to the performance of both Dr. Coffman and Mr. Stevens, were tied to the achievement of the following:

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EXECUTIVE COMPENSATION

During 2004, Dr. Coffman’s base salary did not change; the Committee awarded Dr. Coffman a bonus of $2,300,000, representing a prorated award to reflect his service prior to September 1. The award recognizes Dr. Coffman’s role in the achievement of the successful financial, operational and strategic performance of the Corporation during the year 2004 as well as completion of key corporate objectives relevant to CEO’s compensation approved by the Committee in February 2004. The Committee also credited Dr. Coffman’s management skills for effecting a seamless transition during 2004 of the CEO’s responsibility and function to Mr. Stevens.

Dr. Coffman’s long-term compensation consisted of 375,000 stock options and an LTIP award with a target of $5,100,000 (with any LTIP payout prorated to reflect his service prior to September 1). The Committee made the stock option award and LTIP award at the beginning of 2004; these awards link Dr. Coffman’s future compensation directly with the future return on the Corporation’s stock. In June 2004, following the historical precedent associated with the previous retirements of the two predecessor CEOs and in anticipation of Dr. Coffman’s continued tenure as Chairman of the Board, the Committee amended Dr. Coffman’s 2004 stock option award to permit the continued vesting of the award pursuant to the original award terms following his retirement. The Committee also authorized through April 2005 continuing home computer connectivity and home security for two homes, continued access to the Corporate aircraft for business and personal use, administrative clerical support and a country club membership in addition to relocation expense reimbursement up to $50,000 for a household goods move. Following his retirement from the Board, Dr. Coffman will be entitled to receive office space and secretarial support, computer connectivity and technical support for his home offices and security for his residences.

Dr. Coffman also received a payout of $3,173,373 as the award due under the LTIP award granted in January 2002 (covering the performance period January 1, 2002 – December 31, 2004). The payment is 70 percent of the Target Award granted to Dr. Coffman for the 2002—2004 performance cycle (prorated to reflect his service prior to September 1) and represents a ranking of the Corporation’s performance in the 50^th percentile of companies comprising the S&P 500 Index on January 1, 2002 based on total stockholder return during the performance cycle. The payout includes the amounts that otherwise would have been deferred had he not retired.

At the recommendation of the Strategic Affairs and Finance Committee, the Board recognized and honored Dr. Coffman’s career accomplishments through the designation of a $1.5 million grant to Iowa State University for an endowed chair in Dr. Coffman’s name.

Dr. Coffman’s total compensation, consisting of annual cash compensation and long-term compensation awarded, is expected to be at the higher level of the range of total compensation with respect to 2004 for companies included in the Comparator Group. His compensation is consistent with our philosophy (described earlier in this report), which rewards executives for sustained short-term and long-term performance, as well as taking into account experience and time in position.

During 2004, Mr. Stevens earned a base salary increase of 26 percent and a bonus of $2,300,000. The base salary increase reflects his promotion from President and COO to President and CEO. Since his promotion on August 5 to CEO, Mr. Stevens has effected the transition to his new responsibilities seamlessly. Throughout the year, he successfully led the efforts to identify senior management candidates for

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EXECUTIVE COMPENSATION

certain key management assignments. The Committee credits Mr. Stevens, along with Dr. Coffman, for leading the critical execution of strategic, financial and operational objectives that resulted in record performance in 2004 (described in pages 24 through 26 of this report), most notably balanced deployment of cash, acquisitions to fill strategic niches and expansion into new and adjacent markets.

Mr. Stevens’ long-term compensation consisted of 175,000 stock options, an LTIP award with a target of $2,000,000 and a restricted stock award of 50,000 shares. These awards link Mr. Stevens’ future compensation directly with the future return on the Corporation’s stock.

Mr. Stevens also received a payout of $1,400,000 (of which $700,000 was payable in January 2005; the remaining $700,000 is not payable until January 2007) as the award due under the LTIP granted in January 2002 (covering the performance period January 1, 2002 – December 31, 2004). The payment is 70 percent of the Target Award granted to Mr. Stevens for the 2002 – 2004 performance cycle and represents a ranking of the Corporation’s performance in the 50th percentile of companies comprising the S&P 500 Index on January 1, 2002 based on total stockholder return during the performance cycle.

Mr. Stevens’ total compensation, consisting of annual cash compensation and long-term compensation awarded is expected to be at the median of the range of total compensation with respect to 2004 for companies included in the Comparator Group. His compensation is consistent with our philosophy (described earlier in this report), which rewards executives for sustained short-term and long-term performance and for total return to stockholders, as well as taking into account experience and time in position.

The Corporation continues to maintain a position as an industry leader among major aerospace and defense contractors. Key to this standing has been Dr. Coffman’s and Mr. Stevens’ leadership and demonstrated ability to effectively leverage and manage the Corporation’s sophisticated engineering, scientific and systems integration capabilities.

Both Dr. Coffman and Mr. Stevens have continued to make progress on leadership development and diversity initiatives. These programs enhance the Corporation’s ability to attract the best and the brightest talent, foster an inclusive work environment and remain an industry leader for the long term.

For purposes of determining awards for the other named executive officers, the Committee measured the Corporation’s or business area’s performance against the various financial, operational and strategic factors discussed above, with operational and financial performance as the two most significant criteria. During 2004, for purposes of awarding bonuses under the MICP, particular emphasis was placed on orders, sales, cash-flow generation, earnings per share, the record of the business area or unit in performing on existing contracts and securing new business during 2004. The total compensation for the named executive officers, consisting of annual cash compensation and long-term compensation, is expected to be at the upper level of the Comparator Group range with respect to 2004.

Executive Compensation – Tax Deductibility

For Federal income tax purposes, publicly held corporations are not permitted to deduct compensation paid to any named executive in excess of $1 million unless it is performance-based. As discussed previously, our stock option grants and LTIP awards are intended to meet the requirements for deductible performance-based compensation. We believe that the tax savings that would result from further action to reduce exposure to the $1 million limitation is of insufficient magnitude to warrant alteration to the present compensation system, which we believe is achieving our

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EXECUTIVE COMPENSATION

compensation objectives and which retains our flexibility to exercise subjective judgment in assessing an executive’s performance. The Committee has concluded that approximately $3 million of the compensation that would otherwise be deductible in 2004 is not deductible on account of the $1 million limitation.

Submitted by the Management Development and Compensation Committee

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EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table shows annual and long-term compensation awarded, earned or paid for services in all capacities to the named executive officers for the fiscal year ended December 31, 2004. Information in the “Option/SAR Grants in Last Fiscal Year” and “Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Values” relate to stock options and stock appreciation rights (SARs) with respect to our Corporation.

(1)       Amounts reported under the column generally represent amounts reimbursed for the payment of taxes, financial counseling fees, perquisites and other payments as explained in the footnotes accompanying certain named executive officers. In 2004, the named executive officers received perquisites including the personal use of the corporate aircraft, executive physicals, memberships, club dues, first class travel (airfare or rail), home office costs (internet/fax), excess liability and accidental death and dismemberment insurance, personal use of company car and driver, and home security systems. The cost of the perquisites furnished to each named executive officer, with the exception of Dr. Coffman, did not exceed the lesser of $50,000 or 10 percent of the total annual salary and bonus of that executive officer as reported in the table above. Amounts reported in 2004 for Dr. Coffman include $54,375 for the personal use of the corporate aircraft. Amounts in 2004 for corporate aircraft represent the aggregate incremental cost to the Corporation for personal use of company aircraft.

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EXECUTIVE COMPENSATION

Amounts for 2003 and 2002 were previously reported and calculated in accordance with IRS guidelines for imputed income for personal use of the corporate aircraft.

(2)       On March 31, 2004 the Corporation granted shares of restricted stock to various named executive officers. The awards generally vest over a period of four years and were conditioned upon the recipient’s execution of a non-competition agreement. Restrictions on one-third of the shares will lapse on March 31, 2007 and restrictions on the remaining two-thirds will lapse on March 31, 2008. Restrictions will terminate prior to the normal vesting date upon the death, disability, layoff or retirement (following the attainment of age 65) of the named executive officer as described in the award agreement. In addition, restrictions will lapse upon a divestiture of a business operation, or a change in control, which results in the termination of employment of the named executive officer with the Corporation. Any shares on which restrictions have not lapsed will be forfeited in the event that the named executive officer terminates their employment with the Corporation for any other reason. As of December 31, 2004, the shares that remain restricted and subject to forfeiture for Messrs. Stevens, Hancock, Coutts, Menaker and Camardo have a value of $2,777,500; $1,388,750; $1,388,750; $833,250; and $1,388,750, respectively. Until the restrictions lapse, the individuals have the right to receive cash dividends on the restricted stock, 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.

(3)       LTIP payouts include amounts payable in cash to participants at the end of the performance period and amounts mandatorily deferred for an additional two years, in the form of phantom stock units, which remain forfeitable upon termination of employment prior to the end of the two year deferral period, except in the case of death, disability, divestiture, or layoff or change in control. Generally, the cash and deferred portions each represent 50 percent of the 2002—2004 LTIP payout except in the case of Dr. Coffman and Mr. Smith, whose amounts were paid out entirely in cash due to their retirements. The phantom stock units are reported at the time of the LTIP payout and not at the time of vesting. The cash portion of the LTIP payout for Messrs. Stevens, Hancock, Coutts, Menaker and Camardo for the 2002 – 2004 performance period was $700,000; $332,500; $332,500; $280,000; and $297,500, respectively. The value as of December 31, 2004 for the portion of the LTIP payout mandatorily deferred as phantom stock units for the 2002 – 2004 performance period for Messrs. Stevens, Hancock, Coutts, Menaker and Camardo was $700,000; $332,500; $332,500; $280,000; and $297,500, respectively and represents 12,419; 5,899; 5,899; 4,967; and 5,278 phantom stock units, respectively. LTIP participants have the opportunity to elect further deferral of all or a part of the cash portion of the LTIP payment or the phantom stock units under the DMICP until termination of service or beyond.

(4)       Amounts include the Corporation’s 2004 contributions under the Salaried Savings Plan for Dr. Coffman and Messrs. Stevens, Hancock, Coutts, Menaker, Camardo and Smith of $6,500; $3,714; $6,500; $4,000; $3,714; $6,500; and $8,200, respectively, and the Corporation’s 2004 contributions under the Supplemental Plan for Dr. Coffman and Messrs. Stevens, Hancock, Coutts, Menaker, Camardo and Smith of $45,285; $38,951; $22,019; $24,519; $25,922; $18,331; and $19,931, respectively. Payment in 2004 of accrued and unused vacation consistent with Corporate policy for each of Dr. Coffman and Messrs. Stevens, Hancock, Coutts, Camardo and Smith totaled $279,415; $55,133; $47,464; $23,898; $8,368; and $35,853, respectively.

(5)       Dr. Coffman served as CEO until August 5, 2004. Following his retirement as an employee on September 1, 2004, Dr. Coffman was entitled to a non-employee Chairman retainer in the amount of $500,000 on an annualized basis and a non-employee director retainer in the amount of $75,000 on an annualized basis. During 2004, Dr. Coffman received in cash $166,667 for the Chairman’s retainer and $25,000 for the director retainer, which are reflected in the column “Other Annual Compensation.”

(6)       In connection with Mr. Hancock’s retirement, we entered into a personal services agreement with Mr. Hancock pursuant to which Mr. Hancock agreed to provide us with 45 days of consulting work for one year. We will pay him $370,000 on or about April 1, 2005 for his agreement to provide these services, which is reflected in the column “All Other Compensation.”

(7)       Mr. Smith served as Executive Vice President, Integrated Systems & Solutions from January 1, 2004 – June 1, 2004. Mr. Smith retired on February 1, 2005. Mr. Smith’s amounts, in the column “All Other Compensation,” include a termination payment of $345,000 paid in February 2005 in connection with a retirement agreement.

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EXECUTIVE COMPENSATION

OPTION/SAR GRANTS IN LAST FISCAL YEAR ¹

The following table presents additional information concerning the option awards shown in the Summary Compensation Table for fiscal year 2004. These options to purchase our common stock were granted to the named executive officers under the 2003 Incentive Performance Award Plan².

(1)       No SARs were granted in 2004 and none are outstanding.

(2)       Awards are granted at the discretion of the Stock Option Subcommittee, an independent subcommittee of the Board of Directors made up of non-employee directors, upon the recommendation of management. Under the January 2004 grant award agreements, options vest and become exercisable in three equal installments on the first, second and third anniversary dates following the grant. Options expire 30 days following termination of employment, except in instances following death, disability, divestiture, layoff or retirement. In the event of death or disability, all outstanding options vest immediately and will expire ten years after the date of grant (i.e., the normal expiration date of the grant). In cases of layoff, the vesting dates and term of all outstanding options is unaffected. In cases of divestiture, the vesting schedule of any unvested options will be unaffected and all outstanding options will 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 vesting dates and term of all outstanding options will be unaffected by retirement. Generally, retirement before the first vesting date results in forfeiture of the award. Dr. Coffman’s 2004 award was amended to permit continued vesting under the original award terms after his retirement as CEO. In the event of a change in control, all options vest.

(3)       The present value for these options was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate – 3.19 percent; dividend yield – 1.50 percent; volatility – 0.365; and expected option life – 5 years.

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EXECUTIVE COMPENSATION

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

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

(i) exercise of stock options during 2004 and

(ii) the number and values of unexercised stock options as of December 31, 2004.

(1) There are no outstanding SARs.

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EXECUTIVE COMPENSATION

LONG-TERM INCENTIVE PLANS – AWARDS IN LAST FISCAL YEAR

This table shows grants to the named executives of LTIP Awards awarded during 2004 pursuant to the Lockheed Martin Corporation 2003 Incentive Performance Award Plan¹.

(1)       Awards are granted at the discretion of the Stock Option Subcommittee, an independent subcommittee of the Board of Directors made up of non-employee directors, upon the recommendation of management. Under the January 2004 grant award agreements, each award recipient was assigned a dollar target. The amount earned at the end of the three-year performance period may be more or less than the target, depending upon the Corporation’s Total Stockholder Return (“TSR”) relative to the TSR of each of the other corporations in the S&P 500 Index at the beginning of the period which continue to trade through the end of the period. At the end of the performance period, a percent (generally 50 percent) of the amount earned is payable; payment of the remaining portion of the award is deferred for two years and treated during that period as if it were invested in the Corporation’s common stock. Amounts deferred become payable on the second anniversary date of the end of the performance period. Awards are forfeited following 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), except in instances following death, divestiture, disability, retirement or layoff, in which case the award shall be prorated accordingly. In the event of a change in control during the performance period, the performance period shall terminate and a pro-rated portion of an award shall be paid to the participant. If a change in control occurs after the end of the performance period but before the second anniversary of the end of the performance period, the remaining portion of the award will be payable.

(2)       Assuming any payment is earned, the minimum amount payable under the plan is 25 percent of the target, payable if the Corporation’s TSR relative to the TSR performance of other corporations (adjusted to reflect the effects of company mergers during the period) in the S&P 500 Index is equal to or exceeds the 40^th percentile ranking. If the Corporation’s TSR performance is below the 40^th percentile ranking, the amount payable is zero.

(3)       The target award is payable under the plan if the Corporation’s TSR relative to the TSR performance of other corporations (adjusted to reflect the effects of company mergers during the period) in the S&P 500 Index is equal to or exceeds the 60^th percentile ranking.

(4)       The maximum award of 200 percent of target is payable under the plan if the Corporation’s TSR relative to the TSR performance of other corporations (adjusted to reflect the effects of company mergers during the period) in the S&P 500 Index is equal to or exceeds the 85^th percentile ranking.

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EXECUTIVE COMPENSATION

(5)       Any potential payment will be prorated to cover the period of service prior to Dr. Coffman’s retirement on September 1, 2004.

(6)       Any potential payment will be prorated to cover the period of service prior to Mr. Hancock’s retirement on April 1, 2005.

(7)       Any potential payment will be prorated to cover the period of service prior to Mr. Smith’s retirement on February 1, 2005.

Other Benefits

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

Deferred Management Incentive Compensation Plan

The DMICP provides certain key management employees the opportunity to elect annually to defer, until termination of service or beyond, the receipt of all or a portion of incentive compensation awards under the MICP and any amounts payable as LTIP Awards. The DMICP provides that a participant may choose, at the time the MICP deferral election is made, between two accounts (the “Interest Investment Option” or the “Stock Investment Option”). Under the Stock Investment Option, earnings on deferred amounts will accrue at a rate that tracks the performance of our common stock (including reinvestment of dividends). Under the Interest Investment Option, earnings on deferred amounts will accrue at a rate equivalent to the then published rate for computing the present value of future benefits under Cost Accounting Standard No. 415, Deferred Compensation. The Plan was amended in 2004 to provide that amounts attributable to the Stock Investment Option will be paid in shares of our common stock. All amounts accumulated under the plan must be paid in a lump sum within 15 days following a change in control.

In October 2004, Congress passed the American Jobs Creation Act of 2004, which will affect our director and executive nonqualified deferred compensation plans. This year is a transition year for implementing the new rules, and the scope of the new law and its impact on our plans will be defined in regulatory guidance expected later this year. While much uncertainty surrounds the law, it is our intent to administer our plans in a manner that will comply with the requirements of the new law. This may mean that, in some instances involving benefits that are earned or vested after December 31, 2004, the plans will have to be administered differently from the terms of the plans pending final regulatory guidance.

Defined Contribution Plans

We sponsor a number of different defined contribution plans which cover nearly all our employees. During 2004, the Salaried Savings Plan covered the named executive officers.

The Salaried Savings Plan permits eligible employees (including the named executive officers) to make regular savings contributions on a pre-tax or after-tax basis. For the year ended December 31, 2004, participants could contribute up to 17 percent of their current base salary (maximum of 16 percent on a pre-tax basis) subject to Internal Revenue Code limitations. Employees who are at least 50 years of age are allowed to make “Catch-up Contributions” in accordance with the Internal Revenue Code. In addition, we made a matching contribution to each participant’s

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EXECUTIVE COMPENSATION

account equal to 50 percent of up to the first 8 percent of compensation contributed by the participant.

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

Participants in the Salaried Savings Plan may direct the investment of employee contributions among 14 different investment options including unitized funds invested in our common stock and a self-managed brokerage account. All of our matching contribution is invested in the ESOP Stock Fund, which is in part funded by an employee stock ownership feature of the plan.

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

Pension Plans

We sponsor a number of pension plans for employees. During 2004, the named executive officers participated in the Lockheed Martin Retirement Program (“LMRP”), which is made up of a number of component pension plans, including the:

The calculation of retirement benefits under the LMRP is determined by a formula which takes into account the participant’s years of credited service and average compensation for the highest three years of the last ten years of employment with the Corporation preceding retirement. Average compensation includes the employee’s normal rate of pay (without overtime), bonuses earned under the MICP and lump sum payments in lieu of a salary increase. Normal retirement age is 65; however, benefits are payable as early as age 55 at a reduced amount or without reduction at age 60. Certain employees who retire between ages 60 and 62 are eligible for supplemental payments ending at age 62.

Participants in the Lockheed or the Martin Plan will receive a pension calculated in accordance with the formula used in the LMRP for all service or if the pension benefit would be greater, in accordance with the heritage plan formula for service through June 30, 2002, plus the LMRP formula for service after that date.

The heritage plan formula for calculating pension benefits under the Lockheed Plan is similar to that used in the LMRP except that average compensation is based on the highest five consecutive years of the last ten years of employment. In addition, if an employee’s age and years of credited service equal or exceed 85, a participant can retire as early as age 55 without

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EXECUTIVE COMPENSATION

reduction to the portion of the pension benefit attributable to service through June 30, 2002.

The formula for calculating pension benefits under the Martin Plan is similar to that used in the LMRP. In addition, the Martin Plan also contains Personal Pension Accounts (PPA) and Voluntary Pension Accounts (VPA) for employees who became employees of Martin Marietta as a result of the GE Aerospace business combination. These account balances are available as a lump sum at termination or can be converted to an annuity.

Certain salaried employees (including the named executive officers) also participate in nonqualified supplemental retirement plans. These supplemental plans pay benefits in excess of Internal Revenue Code limits on qualified plan benefits or in some instances in accordance with a grandfathered or special pension formula. The supplemental plans generally pay benefits at the same time and in the same form as benefits are paid under the LMRP, although lump sum payments are available under some supplemental plans. The supplemental Plans provide that the actuarial equivalent of a participant’s accrued benefit be paid in a lump sum within 15 days following a change in control.

As of December 31, 2004, the estimated annual benefits payable upon retirement at age 65 for the individuals named in the compensation table (except Dr. Coffman), based on continued employment at current compensation, are as follows: Mr. Stevens $1,200,297; Mr. Hancock $828,279; Mr. Coutts $1,103,484; Mr. Camardo $884,133; Mr. Menaker $802,009; and Mr. Smith $618,117. These amounts (as do the amounts shown on the tables) include benefits payable under the supplemental plans. Dr. Coffman’s accrued annual benefit as of his retirement date, including benefits payable under the supplemental plans, was $2,591,856. The years of credited service as of December 31, 2004 for Dr. Coffman and Messrs. Stevens, Hancock, Coutts, Camardo, Menaker and Smith were 37 years, 17 years, 37 years, 32 years, 40 years, 33 years and 17 years, respectively.

For Messrs. Stevens, Hancock, Coutts, Camardo and Smith, the LMRP formula for all service yields the greater projected benefit. For Dr. Coffman, the LMRP formula for all service also yielded the greater benefit. In addition to the LMRP determined benefit, Mr. Coutts and Mr. Camardo will receive the value of contributions they made prior to January 1, 1995 in the form of a lump sum or a five year certain life annuity. Based on current interest rates, the annual payment under the five-year certain life annuity beginning at age 65 is projected to be $5,867 for Mr. Coutts and $5,138 for Mr. Camardo. For Mr. Menaker, the greater projected benefit would be based on a special grandfathered formula under the Martin Plan for all service.

As of his expected retirement in March 2005, Mr. Hancock will have an estimated accrued annual benefit of $749,580 payable as a single life annuity, including an estimated accrued annual qualified benefit of $105,750 and an estimated accrued annual nonqualified benefit, including benefits accrued after December 31, 2004, of $643,830. Mr. Hancock has elected to receive the qualified benefit in the form of a monthly annuity that would continue to be paid to his spouse as a joint annuitant in the event he predeceases his spouse. The estimated qualified annuity payable to Mr. Hancock, in the form of a 100 percent joint and survivor annuity effective April 1, 2005, is $83,436 annually. Mr. Hancock elected to receive a portion of the nonqualified benefit as a one-time lump-sum payment. The amount of this lump-sum payment, payable on October 1, 2005, is $2,000,000. The remaining nonqualified benefit will be paid to Mr. Hancock in the form of a 100 percent joint and survivor annuity, effective April 1, 2005. The estimated remaining annual nonqualified benefit payable to Mr. Hancock, after reduction due to the aforementioned lump-sum payment, is $377,545. The interest rate used to calculate the estimated payment amounts was 4.0 percent. The actual interest rate in effect at the time of his retirement will be used in the final calculation of the benefit payable to Mr. Hancock.

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EXECUTIVE COMPENSATION

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

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

Maximum Annual Benefit Payable Upon Normal Retirement
Lockheed Martin Retirement Program¹

(1)       All figures listed in the chart above are benefits payable under the greater of the Lockheed Martin Retirement Program, the Lockheed Martin Retirement Income Plan, or the Lockheed Martin Retirement Plan for Certain Salaried Employees.

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EXECUTIVE COMPENSATION

Other Nonqualified Benefits Payable to Chairman and Former
Chief Executive Officer In Connection With Retirement

As a result of his retirement on September 1, 2004, certain non-qualified benefits became payable to Dr. Coffman. With respect to pension benefits, Dr. Coffman had an accrued annual benefit as of his retirement date, of $2,591,856 payable as a single life annuity, including an accrued annual benefit of $110,940 under the qualified pension plan and an accrued annual benefit from the supplemental non-qualified plan of $2,480,916. Dr. Coffman elected to receive the qualified benefit in the form of a monthly annuity that would continue to be paid to his spouse as a joint annuitant in the event he predeceases his spouse. The qualified annuity payable to Dr. Coffman, in the form of a 100 percent joint and survivor annuity effective September 1, 2004, is $87,187 annually. Dr. Coffman elected to receive the supplemental non-qualified benefit as a one-time lump-sum payment. The amount of this lump-sum payment, paid on March 1, 2005, is $31,510,117. The interest rate used to calculate the lump-sum payment to Dr. Coffman was 4.5 percent.

Dr. Coffman received a payment of his account balance in the DMICP in accordance with plan terms following retirement in the amount of $31,571,060. This represents bonus and LTIP payments voluntarily and mandatorily deferred in prior years plus the amount accrued as earnings on deferred amounts. During his tenure as a named executive officer, the deferred bonus amounts and LTIP amounts credited to his DMICP balance previously were included under the “Bonus” and “LTIP Payouts” columns, respectively, of the Summary Compensation Table in the proxy for the year the bonus or LTIP were earned and deferred. He also received the first annual installment of his account balance in the Non-qualified Supplemental Savings Plan following retirement in accordance with the terms of that plan. The balance in this plan at his retirement was $1,761,144 and will be paid out in five annual installments. This represents salary deferred and company match from periods prior to retirement plus earnings. The deferred salary and match also were included during his tenure as a named executive officer in the proxy statement for the year the salary and match were earned and deferred (including in 2004) under the “Salary” and “All Other Compensation” columns, respectively, of the Summary Compensation Table. If LTIP payments are made with respect to the performance periods ranging from 1/1/2003 – 12/31/2005 and 1/1/2004 – 12/31/2006, he will be eligible for prorated payments, the amount of which cannot be predicted at this time.

Upon his retirement as a director on April 28, 2005, Dr. Coffman will become eligible to receive in the form of ten annual cash installments his account balance of $163,339 as of January 31, 2005 in the Directors’ Deferred Compensation Plan. This balance is attributable to an amount credited to him following the termination of the Lockheed Martin Directors’ Retirement Plan and directors’ death benefit in 1999. Dr. Coffman’s account balance, which earns interest at the prime rate, is subject to the same investment and distribution choices as are available for other cash compensation deferred under the Directors’ Deferred Compensation Plan.

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EXECUTIVE COMPENSATION

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information about Lockheed Martin’s equity compensation plans that authorize the issuance of shares of Lockheed Martin common stock to employees and directors. The information is provided as of December 31, 2004.

(1)       Amounts include the Award Plan, the former Omnibus Plan and the Directors’ Equity Plan, all of which have been approved by the stockholders of the Corporation. Management has proposed amendments to the Award Plan which, if adopted, would change the information provided in the table above and the footnotes to the table.

(2)       As of December 31, 2004 there were 14,737,500 shares available for grant under the Award Plan as options, stock appreciation rights, restricted stock or stock units; there are no restrictions on the number of the available shares that may be issued in respect of stock appreciation rights or stock units. As currently in effect, no more than 18 percent of shares authorized under the Award Plan (4,050,000 shares) may be issued as restricted stock. As of December 31, 2004, 615,000 shares have been granted as restricted stock under the Award Plan. Of the 14,737,500 shares available for grant on December 31, 2004, 6,404,650 shares are issuable pursuant to options granted on January 31, 2005. Amounts in column (c) also include 919,483 shares that may be issued under the Directors’ Equity Plan and 5,975 shares that may be issued under the Directors’ Deferred Stock Plan, a plan that was approved by the stockholders in 1995; effective May 1, 1999 no additional shares may be awarded under the Directors’ Deferred Stock Plan. Stock units payable in cash only under the Award Plan, former Omnibus Plan or other plans sponsored by Lockheed Martin are not included in the table.

(3)       Under the Directors’ Equity Plan, each director may elect to receive stock units, options or a combination of stock units and options with a fair market value on January 15 equal to $75,000.

(4)       Amounts exclude options granted under equity compensation plans that were subsequently assumed by the Corporation. Options issued by COMSAT Corporation were assumed as part of the completion of the Corporation’s acquisition of COMSAT in 2000. At December 31, 2004 a total of 602,351 shares of Lockheed Martin common stock were issuable upon the exercise of the assumed options that remain outstanding. The weighted average exercise price of those outstanding options was $23.90 per share. The amounts also exclude 5,353 stock grants held in a trust pursuant to the Deferred Compensation Plan for Directors of Lockheed Corporation. No further grants may be made under the assumed plans.

(5)       The DMICP was approved by the stockholders in 1996. As adopted originally, phantom stock units were credited to a participant’s account and paid in cash upon termination or retirement. The DMICP was amended by the Board of Directors in 2004 to provide for the payment of phantom stock units in

38

EXECUTIVE COMPENSATION

stock upon termination or retirement. Since the phantom stock units settle in stock upon termination or retirement, there is no weighted average exercise price for the units. As a result, the phantom stock units also were not considered in calculating the total weighted-average exercise price in column (b).

(6)       The maximum number of shares of stock that may be subject to stock options, stock appreciation rights, restricted stock and stock units granted or issued under the Award Plan in any calendar year is 1.9 percent of the Corporation’s outstanding shares of stock on December 31 of the calendar year immediately preceding the date of grant of the award, calculated in a manner consistent with the method for calculating outstanding shares for reporting the Corporation’s Annual Report on Form 10-K.

PROPOSALS YOU MAY VOTE ON

There are 13 nominees for election to the Board of Directors this year, and their biographical information is provided below. Each nominee is currently serving as a director.

Dr. Coffman and Mr. Augustine will retire from the Board effective April 28, 2005.

Directors are expected to attend the Annual Meeting. All directors nominated for election at the 2004 Annual Meeting attended the 2004 Annual Meeting. Mr. Ellis was elected to the Board in November 2004. All directors are elected to a one-year annual term that will end at the 2006 Annual Meeting. If any of the nominees are unable to stand for reelection at the 2005 Annual Meeting (an event which is not anticipated), the Board may reduce its size or designate a substitute. If a substitute is designated, proxies may vote for the substitute nominee or refrain from voting for any other nominee at their discretion. If any other matters come before the stockholders at the Annual Meeting, the persons holding the proxies will vote in their discretion the shares represented by proxy. Directors’ ages are as of the 2005 Annual Meeting.

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

Nominees

E. C. “Pete” Aldridge, Jr.
Director since June 2003
Age 66

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

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PROPOSALS YOU MAY VOTE ON

Nolan D. Archibald
Director since April 2002
Age 61

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 and Brunswick Corporation.

Marcus C. Bennett
Director since March 1995
Age 69

Executive Vice President and Chief Financial Officer of Lockheed Martin from July 1996 until his retirement in January 1999, Senior Vice President and Chief Financial Officer of Lockheed Martin from March 1995 to July 1996; Vice President and Chief Financial Officer of Martin Marietta from 1988 to 1995; director of Martin Marietta from 1993 to 1995; director of Carpenter Technology, Inc. from 1998 to 2001; director of Martin Marietta Materials, Inc.

James O. Ellis, Jr.
Director since November 2004
Age 57

Retired from active duty in July 2004. Admiral and Commander, United States Strategic Command, Offut Air Force Base, Nebraska from October 2002 until 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 America First Companies since January 2005.

Gwendolyn S. King
Director since March 1995
Age 64

President of Podium Prose, a Washington, D.C. speaker’s bureau and speechwriting service. Founding Partner, The Directors’ Council, a corporate board search firm, since October 2003; 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 Martin Marietta from 1992 to 1995; director of Pharmacia from 1999 to 2003; director of Monsanto Company and Marsh and McLennan Companies, Inc.

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PROPOSALS YOU MAY VOTE ON

Douglas H. McCorkindale
Director since April 2001
Age 65

Chairman of Gannett Co., Inc. (“Gannett”) since February 1, 2001, Chief Executive Officer of Gannett since June 1, 2000, President of Gannett since 1997, Vice Chairman of Gannett from 1984 to January 31, 2001, Chief Financial Officer of Gannett from 1979 to 1997, Chief Administrative Officer of Gannett from 1985 to 1997; director of Global Crossing Ltd. from 1997 to 2001; director of Gannett, Continental Airlines, Inc. and a director or trustee of numerous Mutual Funds in the Prudential Group of Newark, NJ.

Eugene F. Murphy
Director since March 1995
Age 69

Vice Chairman and Executive Officer of General Electric Company from September 1997 until his retirement in July 1999, President and Chief Executive Officer of GE Aircraft Engines from 1993 to September 1997, President and Chief Executive Officer of GE Aerospace from 1992 to 1993, Senior Vice President of GE Communications & Services from 1986 to 1992; director of Martin Marietta from 1993 to 1995; director of General Electric Company from 1997 to 1999; director of BellSouth Corporation from 1999 to 2004.

Joseph W. Ralston
Director since April 2003
Age 61

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 until January 2003. Vice Chairman, Joint Chiefs of Staff, Washington, D.C. from March 1996 – April 2000; since 1965, served in operational command at squadron, wing, numbered air force and major command, as well as various staff and management positions at every level of the Air Force; director of The Timken Company and URS Corporation.

Frank Savage
Director since March 1995
Age 66

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 of Johns Hopkins University; former trustee and Chairman of the Board of Trustees of Howard University; director of Lockheed Corporation from 1990 to 1995; director of Enron Corporation from 1999 to 2002; former director of Alliance Capital Management L.P. and Qualcomm Inc.

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PROPOSALS YOU MAY VOTE ON

Anne Stevens
Director since September 2002
Age 56

Group Vice President, Canada, Mexico and South America, Ford Motor Company since October 2003, 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 up to the present, 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.

Robert J. Stevens
Director since October 2000
Age 53

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 67

Chief Executive Officer, Directions, LLC; Partner of O’Melveny & Myers LLP from 1992 – 2000; member of the Board of Trustees of Stanford University from 1990 to 2000; director of Lockheed from 1988 to 1995; director of Pacific Life Insurance Company and Indymac Bancorp, Inc.

Douglas C. Yearley
Director since March 1995
Age 69

Chairman Emeritus of the Board of Phelps Dodge Corporation (“Phelps Dodge”), Chairman of the Board of Phelps Dodge from 1989 until his retirement in May 2000, Chief Executive Officer of Phelps Dodge from 1989 to 1999, President of Phelps Dodge from 1991 to 1997, Executive Vice President of Phelps Dodge from 1987 to 1989, President of Phelps Dodge Industries, a division of Phelps Dodge, from 1988 to 1990, Senior Vice President of Phelps Dodge from 1982 to 1986; director of Phelps Dodge Corporation from 1986 to 2000; director of Lockheed from 1990 to 1995, J.P. Morgan & Co. Incorporated, Morgan Guaranty Trust Company of New York from 1993 to

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PROPOSALS YOU MAY VOTE ON

2000, Southern Peru Copper Corporation from 1991 to 2000, USX Corporation from 1992 to 2001; director of United States Steel Corporation, Marathon Oil Corporation and Heidrick and Struggles International, Inc. The Board of Directors has determined that Mr. Yearley meets the SEC’s criteria of an “audit committee financial expert.”

We recommend that you vote FOR the election of these directors.

RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
(Proposal #2 on Proxy Card)

The Audit and Ethics 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, 2005. Ernst & Young LLP served as our independent public accountants in 2004. 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.

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.

The Board unanimously recommends a vote FOR the ratification of appointment of Ernst & Young LLP as independent auditors in 2005.

Pre-Approval of Audit Services

The Audit and Ethics Committee pre-approves all audit, 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.

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PROPOSALS YOU MAY VOTE ON

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 2004 and 2003.

(1) Audit fees principally include the annual audit of the consolidated financial statements, audit of internal controls 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 employee benefit plan audits and services related to acquisitions and divestitures.

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

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

All fees were pre-approved in accordance with the Audit and Ethics Committee pre-approval policy. The Audit and Ethics 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 – AMENDMENTS TO
2003 INCENTIVE PERFORMANCE AWARD PLAN
(Proposal #3 on Proxy Card)

Share-based and cash-based incentive awards have been a significant component of Lockheed Martin’s management compensation since 1995. In 2003, the Board of Directors adopted and our stockholders approved the Lockheed Martin Corporation 2003 Incentive Performance Award Plan (“IPA Plan” or “Plan”).

We are proposing to amend the IPA Plan for a number of reasons. These reasons include our desire to: