The Audit Committee is responsible for assisting the Board in fulfilling its oversight responsibilities relating to the financial condition of the Corporation, the integrity of the Corporation’s financial statements and the Corporation’s compliance with legal and regulatory requirements. In addition, the Audit Committee has oversight of the Corporation’s internal audit organization, including ~~enterprise~~Enterprise risk management processes. It is directly responsible for the appointment, compensation, retention, oversight and termination of the Corporation’s independent auditors. The Audit Committee also is responsible for reviewing the allocation of resources, the Corporation’s financial condition and capital structure and policies regarding derivatives and capital expenditures. The Audit Committee meets privately with the Senior Vice President, Internal Audit, Ethics and Sustainability, and the Corporation’s independent auditors, Ernst & Young LLP. The functions of the Audit Committee are further described under the heading “Audit Committee Report” on page ~~21.~~26.

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

The Board has determined that Mr. Falk, Chairman of the Audit Committee, Mr. Akerson, ~~and~~ Mr. Burritt and Ms. Gordon are qualified audit committee financial experts within the meaning of applicable SEC regulations. All members of the Audit Committee have accounting and related financial management expertise sufficient to be considered financially literate within the meaning of the NYSE listing standards.

The ~~Classified Business and Security~~CBS Committee ~~(the CBS Committee)~~ assists the Board in fulfilling its oversight responsibilities relating to the Corporation’s classified business activities and the security of personnel, facilities and data ~~and facilities.~~(including classified cybersecurity matters). The CBS Committee consists of three or more directors who meet the independence requirements of the NYSE listing standards and who possess the appropriate security clearance credentials, at ~~leastone~~least one of ~~whom must~~whommust be a member of the Audit Committee, and none of whom are officers or employees of the Corporation and are free from any relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment as a member of the CBS Committee. All members of the CBS Committee hold high-level security clearances.

The purpose of the Ethics and Sustainability Committee is to assist the Board in fulfilling its oversight ~~responsibilities relating to the Corporation’s~~efforts in corporate responsibility, human rights, environmental stewardship, political contributions, ethical ~~conduct,~~business practices, community outreach, philanthropy, diversity and inclusion and equal opportunity, sustainability, ~~environmental stewardship~~ and employee safety and health. The Ethics ~~and Sustainability~~andSustainability Committee monitors compliance and recommends changes to our Code of Conduct. It reviews our policies, procedures and compliance with respect to sustainability, including corporate responsibility, human rights, environmental stewardship, employeesafety and health, ethical business practices, community outreach, philanthropy, diversity, inclusion and equal opportunity. It oversees matters pertaining to community and public relations, including government relations, political contributions and expenditures and charitable contributions. The Ethics and Sustainability Committee meets privately with the Senior Vice President, Internal Audit, Ethics and Sustainability and the Senior Vice President, General Counsel and Corporate ~~Secretary and General Counsel.~~Secretary.

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

The Compensation Committee reviews and approves the corporate goals and objectives relevant to the compensation of the CEO and other elected officers, evaluates the performance of the CEO and, either as a committee or together with the other independent members of the Board, determines and approves the compensation philosophy and levels for the CEO and other ~~members of senior management.~~executive officers.

Additional information regarding the role of the Compensation Committee and our compensation practices and procedures is provided under the captions “Compensation Committee Report”on page ~~32,~~31, “Compensation Discussion and Analysis (CD&A)” beginning on page 3231 and “Other ~~Corporate Governance Considerations in Compensation”~~Compensation Matters” on page ~~51.~~45.

All members of the Compensation Committee are independent within the meaning of the NYSE listing standards, applicable SEC regulations and our Governance Guidelines.

The Governance Committee is responsible for developing and implementing policies and practices relating to corporate governance, including our Governance Guidelines. The Governance Committee assists the Board by selecting candidates to be nominated to the Board, making recommendations concerning the composition of Board committees and overseeing the evaluation of the Board and its committees.

The Governance Committee reviews and recommends to the Board the compensation of directors. Our executive officers ~~generally~~ do not play a role in determining director pay other than to gather publicly available information.

All members of the Governance Committee are independent within the meaning of the NYSE listing standards, applicable SEC regulations and our Governance Guidelines.

The Strategic Affairs Committee reviews ~~and recommends to the Board~~ management’s long-term strategy for the Corporation and reviews risks and opportunities to the strategy as identified by the Corporation’s Enterprise Risk Management processes. The Strategic Affairs Committee reviews and recommends to the ~~Boardcertain~~Board certain significant strategic decisions regarding exit from and entry into lines of business, material acquisitions, joint ventures, investments or dispositions of businesses and assets and the financing of related transactions.

Effective immediately following the Annual Meeting, the Nominating and Corporate Governance Committee and the Ethics and Sustainability Committee will be consolidated into one committee under the name Nominating and Corporate Governance Committee. The committee restructuring is aimed at making meetings more efficient, eliminating redundancies and providing more time for discussion. In making this decision, the Board considered survey data which showed that Lockheed Martin had three committees in addition to the three committees required by the NYSE listing standards whereas most public companies had at most one committee in addition to the three required committees. The consolidation of the committees will not result in any less coverage of items within the jurisdiction of either of the two committees. The Board will continue to review ways to improve the governance of the Board and consideration is being given to further committee consolidation or reorganization.

There are 11 director-nominees for election to the Board at the Annual Meeting. Each director-nominee currently serves as a director and was recommended for nomination by the Governance Committee. The Governance Committee ~~Report~~has determined that all the director-nominees, except for Ms. Hewson, Chairman, President and CEO, are independent under the listing standards of the NYSE and our Governance Guidelines. The Board ratified the slate of director-nominees and recommends that our stockholders vote for the election of all the individuals nominated by the Board.

The Board has fixed the number of directors at 11. Mr. Loy will retire from the Board at the Annual Meeting. The Governance Committee and the Board will continue to review and assessadditional candidates for the Board. Any candidates identified after the Annual Meeting will be considered by the Board as candidates to serve until the 2019 annual meeting. All director-nominees are expected to attend the Annual Meeting.

All director-nominees who are elected will serve a one-year term that will end at the 2019 annual meeting. If any of the director-nominees are unable or unwilling to stand for election at the Annual Meeting (an event which is not anticipated), the Board may reduce its size or designate a substitute. If a substitute is designated, proxy holders may vote for the substitute nominee or refrain from voting for any other director-nominee at their discretion. Directors’ ages are reported in this Proxy Statement as of the date of the Annual Meeting.

In 2017, the Board met a total of nine times. All directors on the Board during 2017 attended more than 75 percent of the total Board and committee meetings to which they were assigned and attended the 2017 annual meeting, except Ms. Stevens, who resigned in November 2017. Mr. Johnson and Mr. Taiclet joined the Board in January 2018.

We have no agreements obligating the Corporation to nominate a particular candidate as a director, and none of our directors represents a special interest or a particular stockholder or group of stockholders.

At Lockheed Martin, we recognize diversity and inclusion as a business imperative. We believe that our business accomplishments are a result of the efforts of our employees around the world, and that a diverse employee population will result in a better understanding of our customers’ needs. Our success with a diverse workforce also informs our views about the value of a board of directors that has persons of diverse skills, experiences and backgrounds. To this end, the Board seeks to identify candidates with areas of knowledge or experience that will expand or complement the Board’s existing expertise in overseeing a technologically advanced global security and aerospace company. Diversity in skills and backgrounds ensures that the widest range of options and viewpoints are expressed in the boardroom.

Consistent with the Governance Guidelines, the Board desires a diverse group of candidates who possess the background, skills, expertise and time to make a significant contribution to the Board, the Corporation and its stockholders. The Governance Committee makes recommendations to the Board concerning the composition of the Board and its committees, including size and qualifications for membership. The Governance Committee evaluates prospective nominees against the standards and qualifications set forth in the Corporation’s Governance Guidelines, as well as other relevant factors it deems appropriate.

In 2017, two of our directors (Rosalind G. Brewer and Anne Stevens) resigned from our Board to take on full-time executive leadership responsibilities at other publicly-traded companies. We will continue our commitment to building a Board with diverse backgrounds and talents.

Listed below are the skills and experience that we have considered important for our directors to have in light of our current business and structure. The directors’ biographies that follow note each director’s relevant experience, skills and qualifications relative to this list.

The Audit Committee has appointed Ernst & Young LLP (Ernst & Young), an independent registered public accounting firm, as the independent auditors to perform an integrated audit of the Corporation’s consolidated financial statements and internal control over financial reporting for the year ending December 31, 2018. The services provided to the Corporation by Ernst & Young for the last two fiscal years are described under the caption “Fees Paid to Independent Auditors” on page 25.

Ernst & Young has served as the Corporation’s independent auditors since 1994. The Audit Committee reviews the engagement of Ernst & Young annually following completion of Ernst & Young’s audit of the prior year’s financial statements. The Audit Committee also conducts a mid-year assessment of the quality of Ernst & Young’s work. As part of its annual and mid-year assessment of Ernst & Young, the Audit Committee has considered:

Stockholder approval of the appointment is not required. However, the Board believes that obtaining stockholder ratification of the appointment is a sound corporate governance practice. If the stockholders do not vote on an advisory basis in favor of Ernst & Young, the Audit Committee will reconsider whether to hire the firm and may retain Ernst & Young or hire another firm without resubmitting the matter for stockholders’ approval. The Audit Committee retains the discretion at any time to appoint a different independent auditor.

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

The Audit Committee pre-approves all audit, audit-related, tax and other services performed by the independent auditors. The Audit Committee pre-approves specific categories of services up to pre-established fee thresholds. Unless the type of service had previously been pre-approved, the Audit Committee must approve that specific service before the independent auditors may perform such service. 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 Audit Committee. The Audit Committee also has delegated to the Committee Chairman or any member pre-approval authority with respect to permitted services up to $500,000, provided that the Committee Chairman or any member must report any pre-approval decisions to the Audit Committee at its next scheduled meeting.

The following table sets forth the fees billed by Ernst & Young, the Corporation’s independent auditors, for audit, audit-related services, tax services and all other services rendered for 2017 and 2016. All fees were pre-approved in accordance with the Audit Committee’s pre-approval policy. The Audit Committee considered and concluded that the provision of these services by Ernst & Young was compatible with the maintenance of the auditor’s independence. The decrease in audit-related fees from prior years is in connection with:

(a) Audit fees for 2017 and 2016 are for services related to the annual audit of the Corporation’s consolidated financial statements, including the audit of internal control over financial reporting, the interim reviews of the Corporation’s quarterly financial statements, statutory audits of the Corporation’s foreign subsidiaries, consultations on accounting matters and registration statements and other documents filed by the Corporation with the SEC. The audit fees for 2017 include fees related to the Corporation’s adoption of Accounting Standard Update (ASU) No. 2014-09,Revenue from Contracts with Customers, as amended, which the Corporation adopted on January 1, 2018. Audit fees for 2016 include fees related to the accounting for the acquisition of Sikorsky.

(b) Audit-related fees for 2017 and 2016 are related to audits of the Corporation’s employee benefit plans and transaction due diligence services. Additionally, audit-related fees for 2016 include carve-out audits of IS&GS.

(d) All other fees for 2017 and 2016 are primarily for subscriptions to Ernst & Young’s online research tools and training courses for professional qualifications.

There are 11 director-nominees for election to the Board at the Annual Meeting. Each director-nominee currently serves as a director and was recommended for nomination by the Governance Committee. The Governance Committee has determined that all the director-nominees, except for Marillyn A. Hewson, Chairman, President and CEO, are independent under the listing standards of the NYSE and our Governance Guidelines. The Board ratified the slate of director-nominees and recommends that our stockholders vote for the election of all the individuals nominated by the Board.

The Board has fixed the number of directors to 11 at the present time. The Governance Committee and the Board will continue to review and assess additional candidates for the Board from time to time. Any candidates identified after the 2016 Annual Meeting willbe considered by the Board as candidates to serve until the 2017 Annual Meeting.

The director-nominees are expected to attend the 2016 Annual Meeting. All director-nominees who are elected will serve a one-year term that will end at the 2017 Annual Meeting. If any of the director-nominees are unable or unwilling to stand for election at the 2016 Annual Meeting (an event which is not anticipated), the Board may reduce its size or designate a substitute. If a substitute is designated, proxy holders may vote for the substitute nominee or refrain from voting for any other director-nominee at their discretion. Directors’ ages are reported as of the date of 2016 Annual Meeting.

PROPOSAL 3: MANAGEMENT PROPOSAL TO APPROVE THE LOCKHEED MARTIN CORPORATION AMENDED AND RESTATED DIRECTORS EQUITY PLAN

The Corporation currently maintains the Lockheed Martin Corporation 2009 Directors Equity Plan (as amended to date, the Existing Plan), which was approved by stockholders on April 24, 2008, and was effective on January 1, 2009. Absent action by the stockholders, the Existing Plan will expire by its terms on December 31, 2018. The Corporation proposes to amend and restate the Existing Plan and extend the term until December 31, 2028.

To that end, on February 22, 2018, the Board unanimously approved and adopted, subject to the approval of our stockholders at the Annual Meeting, ~~Attendance~~

~~In 2015, the Board met a total~~the Lockheed Martin Corporation Amended and Restated Directors Equity Plan (the Restated Plan). As was the case with the Existing Plan, the purpose of the Restated Plan is to align the economic interests of 10 times. All directors attended more than 75 percent of the total Board and committee meetings to which they were assigned. All incumbent directors attended the 2015 Annual Meeting, except for Mr. Carlson who joined the Board in July 2015.

We believe that our business accomplishments are a result of the efforts of our employees around the world, and that a diverse employee population will result in a better understanding of our customers’ needs. Our success with a diverse workforce also informs our views about the value of a board of directors that has persons of diverse skills, experiences and backgrounds. To this end, the Board seeks to identify candidates with areas of knowledge or experience that will expand or complement the Board’s existing expertise in overseeing a technologically advanced global security and aerospace company.

●

~~Financial Expertise.~~Knowledge of financial markets, financing and funding operations and accounting and financial reporting processes is important because it assists our directors in understanding, advising and overseeing the Corporation’s ~~capital structure, financing~~non-employee directors with the interests of stockholders by including equity as a component of director pay and ~~investment activities, financial reporting~~to attract, motivate and ~~internal control~~retain experienced and knowledgeable directors.

At the Corporation’s 2008 annual meeting, stockholders authorized 600,000 shares for grant under the Existing Plan. As of the date of this Proxy Statement, there were 408,811 shares available for awards under the Existing Plan. As part of the amendment and restatement, the remaining shares will continue to be available for awards during the extended term of the Restated Plan.

If approved by our stockholders at the Annual Meeting, the Restated Plan will be effective as of the date of such ~~activities.~~approval (April 26, 2018), and will permit the continued grant of equity awards to our non-employee directors. Until that time, equity awards will continue to be available to directors under the Existing Plan.

The principal features of the Restated Plan are summarized below. This summary does not contain all the information that may be important to you. A copy of the complete text of the Restated Plan, marked to show changes from the Existing Plan, is included in Appendix A to this Proxy Statement. The following description is qualified in its entirety by reference to the full text of the Restated Plan. You are encouraged to read the Restated Plan in its entirety.

Highlights of the Restated Plan

●	The material terms of the Restated Plan are generally the same as the Existing Plan, except that:

–	the term has been extended until December 31, 2028;

–	the dates on which payments will be made when a director terminates service have been clarified to use consistent valuation dates; and

–	a provision explicitly prohibiting repricing of options has been added.

●	~~Public Company Board Experience.~~~~Directors who have served on other public company boards can offer advice and insights~~

●	The Board is not requesting an increase in the number of shares authorized for issuance. The aggregate number of shares authorized for issuance under the Existing Plan and the Restated Plan will remain at 600,000 shares (with 408,811 shares remaining available for awards as of the date of this Proxy Statement).

●	The Restated Plan allows the Board to set the portion of the annual retainer that is to be paid in equity. The percentage has been 50% of the director’s annual retainer since the Existing Plan was approved by the stockholders in 2008, and will remain at that level, unless subsequently changed by the Board.

●	The Restated Plan authorizes payment in the form of stock units or options, although only stock units have been used since June 2014. The Restated Plan would require a further resolution of the Board to once again provide for options as all or a portion of the equity component of director compensation.

●	The equity portion of the retainer generally vests over the course of the year following the grant.

Consistent with ~~regard~~the terms of an amendment to the ~~dynamics~~Existing Plan approved by the Board in September 2017, from and ~~operation~~after January 1, 2018, a director who has satisfied the Board’s Stock Ownership Guidelines may elect to have vested stock units awarded after that date to be paid in a lump sum on the March 31 following the one-year anniversary of the grant rather than following termination of Board service. Our practice of not counting stock units paid in cash against the total number of shares of common stock available for awards has been incorporated into the Restated Plan.

Summary of the Restated Plan

Equity awards are an important component of director compensation. The Restated Plan continues the equity component of our directors’ compensation program that has been in place since 1999. Approval of the Restated Plan by the stockholders at the Annual Meeting would extend the equity compensation arrangements for directors until December 31, 2028.

If approved, compensation awarded under the Restated Plan will constitute a portion of each eligible director’s annual retainer, with the remaining portion of the retainer payable in cash. The designated percentage of the retainer that is subject to equity awards currently is 50%. As was the case with the Existing Plan, under the Restated Plan, the percentage can be increased or decreased by the Board from time to time. In the case of a ~~board~~director who will be eligible for retirement at the annual meeting immediately following the grant of an equity award under the Restated Plan, the award will equal one-third of the amount the director otherwise would have been entitled to receive at that time.

2018 Proxy Statement

Table of Contents

Proposal 3

The Restated Plan will apply to directors who are not officers or employees of the ~~relationship between a board and~~Corporation or its subsidiaries. All of the ~~CEO and~~directors proposed for election at the Annual Meeting, other ~~management personnel,~~than Ms. Hewson, will be eligible to participate in the ~~importance of particular agenda items and oversight of a changing mix of strategic, operational and compliance matters.~~

●

~~Government and Military Expertise.~~Directors who have served in government or in senior military positions provide experience and insight into working constructively with our core customers and governments around the world and addressing significant public policy issues, particularly in areas related to the Corporation’s business and operations. Directors with military, homeland security or intelligence experience and security clearance credentials have unique skillsRestated Plan if they are continuing to serve ~~on our CBS Committee.~~

●	~~Global Expertise.~~Because we are a global organization with increasing revenue coming from sales outside the United States, directors with global expertise can provide useful business and cultural perspectives regarding many significant aspects of our business.

●	~~Senior Leadership Experience.~~ Directors who have served in senior leadership positions bring experience and perspective in analyzing, shaping, and overseeing the execution of important operational and policy issues at a senior level. These directors’ insights and guidance, and their ability to assess and respond to situations encountered in serving on our Board, may be enhanced if their leadership experience was developed at businesses or organizations that operated on a global scale or involved technology or other rapidly evolving business models.

●	~~Interpersonal Skills and Diversity.~~~~Directors with different backgrounds and skills help build diversity on~~ the Board, ~~and maximize group dynamics~~each eligible director may elect to receive the equity portion of the annual retainer approved by the Governance Committee of the Board in ~~terms of function, experience thought, gender, race and age.~~

Vice Chairman of The Carlyle Group from March 2014 to December 2015. Mr. Akerson was Chairman of the Board of Directors and Chief Executive Officer of General Motors Company from January 2011 until his retirement in January 2014. He was elected to the Board of Directors of General Motors Company in 2009 and was Chief Executive Officer from September 2010 to December 2010. Prior to joining General Motors Company, he was a Managing Director of The Carlyle Group, serving as the Head of Global Buyout from July 2009 to August 2010 and as Co-Head of U.S. Buyout from June 2003 to June 2009. Mr. Akerson formerly served as a director of American Express Company from April 1995 to April 2012 and currently serves as Chairman of the United States Naval Academy Foundation and Chairman of LDiscovery, LLC, an information services company.

Executive Chairman of the Board of Stanley Black & Decker, Inc. from March 2010 until his retirement in April 2013. Previously, Mr. Archibald was Chairman of the Board and Chief Executive Officer of The Black & Decker Corporation from 1986 to March 2010; President of The Black & Decker Corporation from 1985 to 2010; and Chief Operating Officer of The Black & Decker Corporation from 1985 to 1986. Mr. Archibald currently serves as a director of Brunswick Corporation and Huntsman Corporation.

President and Chief Executive Officer of Sam’s Club, a division of Walmart, since February 2012. Previously, Mrs. Brewer was Executive Vice President and President of Walmart’s East Business Unit from February 2011 to January 2012; Executive Vice President and President of Walmart South from February 2010 to February 2011; Senior Vice President and Division President of Southeast Operating Division from March 2007 to January 2010; and Regional General Manager, Georgia Operations, from 2006 to February 2007. Previously, Mrs. Brewer was President of Global Nonwovens Division for Kimberly-Clark Corporation from 2004 to 2006 and held various management positions of increasing responsibility at Kimberly-Clark Corporation from 1984 to 2006. Mrs. Brewer formerly served as a director of Molson Coors Brewing Company from 2006 to 2011 and currently serves on the Board of Trustees of Spelman College.

Executive Vice President and Chief Financial Officer of United States Steel Corporation since September 2013. Previously, Mr. Burritt was Vice President and Chief Financial Officer of Caterpillar Inc. from 2004 to June 2010; Corporate Controller and Chief Accounting Officer of Caterpillar Inc. from 2002 to 2004; held various positions of increasing responsibility at Caterpillar Inc. in finance, tax, accounting and international operations from 1978 to 2002. Mr. Burritt formerly served as a director of Aperam from December 2010 to May 2013 and Global Brass & Copper Holdings, Inc. from 2011 until June 2014.

~~Retired U.S. Air Force General, Mr. Carlson has been Chairman of the Board of Advisors of Utah State’s Space Dynamics Laboratory since June 2013. Previously, Mr. Carlson served as the 17~~^th Director of the National Reconnaissance Office from July 2009 until July 2012. He retired from the U.S. Air Force in January 2009 after over 37 years of service. During his Air Force career, Carlson served as Commander, Air Force Materiel Command at Wright-Patterson AFB, Ohio from August 2005 to November 2008; Commander, Eighth Air Force at Barksdale AFB, Louisiana from May 2003 to August 2005; Director for Force Structure, Resources and Assessment (J-8) for the Joint Staff from January 2000 to May 2003; Director of Operational Requirements at U.S. Air Force Headquarters from August 1996 to January 2000; and Commander, 49^th~~Fighter Wing (the Air Force’s first stealth fighter wing) at Holloman AFB, New Mexico from February 1995 to August 1996.~~

~~President and Chief Executive Officer~~units (along with any accumulated dividend equivalents) be paid in a lump sum on the first business day of the month following the earlier of termination of Institute of Nuclear Power Operations from May 2005 until his retirement in May 2012. Mr. Ellis retired from active duty in July 2004 after serving as Admiral and Commander, United States Strategic Command, Offutt Air Force Base, Nebraska from October 2002 to July 2004; Commander in Chief, United States Strategic Command from November 2001 to September 2002; Commander in Chief, United States 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. He formerly served as a director of Inmarsat plc from June 2005 to March 2014 and currently serves as a director of Level 3 Communications, Inc., Dominion Resources, Inc. and Draper Laboratory. In February 2013, Mr. Ellis was elected to the National Academy of Engineering. He currently serves as an Annenberg Distinguished Fellow of the Hoover Institution at Stanford University.

Chairman of the Board and Chief Executive Officer of Kimberly-Clark Corporation since 2003; Chief Executive Officer from 2002 and President and Chief Operating Officer from 1999 to 2002; held various senior management positions since joining Kimberly-Clark Corporation in 1983. Mr. Falk currently serves as a director of the nonprofit organizations, Catalyst, Inc., the University of Wisconsin Foundation and The Consumer Goods Forum and serves as a governor of the Boys & Girls Clubs of America.

Chairman, President and Chief Executive Officer of Lockheed Martin since January 2014. Having served 33 years at Lockheed Martin in roles of increasing responsibility, she held the positions of Chief Executive Officer and President from January 2013 to December 2013; President and Chief Operating Officer from November 2012 to December 2012; Executive Vice President – Electronic Systems from January 2010 to November 2012; President, Systems Integration – Owego from September 2008 to December 2009; and Executive Vice President – Global Sustainment for Aeronautics from February 2007 to August 2008. She previously served as Chairman of the Board of Directors of Sandia Corporation from 2010 to July 2013. Ms. Hewson currently serves on the Board of Directors of E. I. du Pont de Nemours and Company (DuPont); the University of Alabama’s Culverhouse College of Commerce and Business Administration Board of Visitors; the Board of Governors of the USO; Chairman of the Board of Governors of the Aerospace Industries Association; the Board of Directors of the Congressional Medal of Honor Foundation; the Board of the National Geographic Education Foundation; the Board of Directors of Catalyst, Inc.; the International Advisory Board of the Atlantic Council and as a Vice Chair of the Business Roundtable. In September 2013, Ms. Hewson was appointed by President Barack Obama to the President’s Export Council, the principal national advisory committee on international trade.

Senior Counselor of The Cohen Group since 2005. Deputy Secretary of Homeland Security from 2003 to 2005; Administrator, Transportation Security Administration from 2002 to 2003; Commandant, U.S. Coast Guard from 1998 to 2002; Coast Guard Chief of Staff from 1996 to 1998; Commander of the Coast Guard’s Atlantic Area from 1994 to 1996. Mr. Loy formerly served as a director of L-1 Identity Solutions, Inc. from 2006 to 2011, Board of Trustees of RAND Corporation, a nonprofit organization, from 2012 until November 2014 and currently serves as a director of Rivada Networks, LLC.

Vice Chairman of The Cohen Group since March 2003. Retired from active duty in March 2003. Commander, U.S. European Command and Supreme Allied Commander Europe, NATO, Mons, Belgium from May 2000 to January 2003; Vice Chairman, Joint Chiefs of Staff, Washington, D.C. from March 1996 to April 2000. Mr. Ralston formerly served as a director of URS Corporation from 2003 to October 2014 and currently serves as a director of The Timken Company.

Chairman and Principal of SA IT Services from June 2011 until her retirement in December 2014. Previously, Ms. Stevens was Chairman, President and Chief Executive Officer of Carpenter Technology Corporation from November 2006 to October 2009; Executive Vice President, Ford Motor Company and Chief Operating Officer, The Americas, from November 2005 to October 2006; Group Vice President, Canada, Mexico and South America, Ford Motor Company from October 2003 to October 2005; Vice President, North America Vehicle Operations of Ford Motor Company from August 2001 to October 2003; and Vice President, North America Assembly Operations of Ford Motor Company from April 2001 to August 2001. Ms. Stevens is a member of the National Academy of Engineering and currently serves as a director of Anglo American plc and XL Group.

The Audit Committee has appointed Ernst & Young, an independent registered public accounting firm, as the independent auditors to perform an integrated audit of the Corporation’s consolidated financial statements and internal control over financial reporting for the year ending December 31, 2016. Ernst & Young served as our independent auditors in 2015 and 2014. The services provided to the Corporation by Ernst & Young for the last two fiscal years are described under the caption “Fees Paid to Independent Auditors” below.

The Audit Committee is directly responsible for the appointment, compensation, retention, oversight and termination of the Corporation’s independent auditors in accordance with the NYSE listing standards. The Audit Committee also is responsible for the audit fee negotiations associated with the retention of Ernst & Young. The Audit Committee has discussed the advantages and disadvantages of external audit firm rotation. Further, in conjunction with the periodic mandated rotation of the audit firm’s lead engagement partner, the Audit Committee and its chairman are directly involved in the selection of Ernst & Young’s new lead engagement partner. The members of the Audit Committee and the Board believe that the continued retention of Ernst & Young to serve as the Corporation’s independent external auditors is in the best interest of our stockholders.

The Audit Committee reviews the engagement of Ernst & Young annually following completion of Ernst & Young’s audit of the prior year’s financial statements. The Audit Committee also conducts a mid-year assessment of the quality of Ernst & Young’s work. As part of its annual and mid-year assessment of Ernst & Young, the Audit Committee considers the materials on independence provided by Ernst & Young, work quality, management’s level of satisfaction with their services, the adequacy of Ernst & Young’s staffing, the breadth of knowledge, support and expertise of its national office, familiarity with the Corporation’s account, level of expertise in accounting issues relating to government contracts and Ernst & Young’s role in providing independent analysis of management positions. The Audit Committee also meets with Ernst & Young without management present at every meeting of the Audit Committee in which financial statements are reviewed.

Stockholder approval of the appointment is not required. However, the Board believes that obtaining stockholder ratification of the appointment is a sound corporate governance practice. If the stockholders do not vote on an advisory basis in favor of Ernst & Young, the Audit Committee will reconsider whether to hire the firm and may retain Ernst & Young or hire another firm without resubmitting the matter for stockholders approval. The Audit Committee retains the discretion at any time to appoint a different independent auditor.

The Audit Committee pre-approves all audit, audit-related, tax and other services performed by the independent auditors. The Audit Committee pre-approves specific categories of services up to pre-established fee thresholds. Unless the type of service had previously been pre-approved, the Audit Committee must approve that specific service before the independent auditors may perform such service. 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 Audit Committee. The Audit Committee also has delegated to the Committee Chairman or any member pre-approval authority with respect to permitted services, provided that the Committee Chairman or any member must report any pre-approval decisions to the Audit Committee at its next scheduled meeting.our named executive officers (NEOs) as described in detail in the Compensation Discussion and Analysis (CD&A) and the accompanying tables in the Executive Compensation section beginning on page 31. This vote is commonly known as Say-on-Pay.

The following table sets forth the fees billed by Ernst & Young, the Corporation’s independent auditors, for audit, audit-related services, tax services and all other services rendered for 2015 and 2014. All fees were pre-approved in accordance with the Audit Committee’s pre-approval policy. The Audit Committee considered and concluded that the provision of these services by Ernst & Young was compatible with the maintenance of the auditor’s independence.link pay to performance. Accordingly, the Board recommends that stockholders approve the compensation of our NEOs by approving the following Say-on-Pay resolution:

The increase in fees from prior years is the result of support provided in connection with the acquisition of Sikorsky Aircraft Corporation and the strategic review of our government information technology and technical services businesses that we announced in July 2015.

(a) Audit fees for 2015 and 2014 are for services related to the annual audit of the Corporation’s consolidated financial statements, including the audit of internal control over financial reporting, the interim reviews of the Corporation’s quarterly financial statements, statutory audits of the Corporation’s foreign subsidiaries, consultations on accounting matters, and registration statements and other documents filed by the Corporation with the SEC.

(b) Audit-related fees for 2015 and 2014 are related to carve-out audits of a business unit’s financial statements, due diligence services in connection with acquisitions and audits of the Corporation’s employee benefit plans. Additionally, audit-related fees for 2014 include amounts for reviews of information technology systems and financial models related to customer proposals.

(c) Tax fees for 2015 and 2014 are for domestic and international tax compliance and advisory services. Additionally, tax fees for 2015 include amounts for due diligence services in connection with an acquisition.

~~(d) All other fees for 2015 and 2014 are primarily for advisory work related to our Conflict Minerals Report.~~

~~PROPOSAL 3: ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS (SAY-ON-PAY)~~

We ask our stockholders to vote annually to approve, on an advisory (non-binding) basis, the compensation of our named executive officers (NEOs) as described in detail in the Compensation Discussion and Analysis (CD&A) and the accompanying tables in the Executive Compensation section beginning on page 32. This vote is commonly known as “Say-on-Pay.”

~~Stockholders should review the entire Proxy Statement and, in particular, the CD&A for information on our executive compensation programs and other important items.~~

We believe that the information provided in this Proxy Statement demonstrates that our executive compensation programs are designed to link pay to performance. Accordingly, the Board recommends that stockholders approve the compensation of our NEOs by approving the following Say-on-Pay resolution:

RESOLVED, that the stockholders of Lockheed Martin Corporation approve, on an advisory basis, the compensation of the named executive officers identified in the “Summary Compensation Table,” as disclosed in the Lockheed Martin Corporation 2016RESOLVED, that the stockholders of Lockheed Martin Corporation approve, on an advisory basis, the compensation of the named executive officers identified in the “Summary Compensation Table,” as disclosed in the Lockheed Martin Corporation 2018 Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and the accompanying footnotes and narratives.

This vote is not intended to address any specific item of compensation, but rather our overall compensation policies and procedures related to the NEOs. Although the results of the Say-on-Pay vote do not bind the Corporation, the Board will, as it does each year, continue to review the results carefully and plans to continue to seek the views of our stockholders year-round.

~~The Management Development and Compensation Committee makes recommendations to the Board of Directors concerning the compensation of the Corporation’s executives.~~
The Management Development and Compensation Committee makes recommendations to the Board of Directors concerning the compensation of the Corporation’s NEOs. We have reviewed and discussed with management the Compensation Discussion and Analysis that will be included in the Corporation’s Schedule 14A Proxy Statement, filed pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended. Based on that review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Proxy Statement. The Board approved our recommendation.
Daniel F. Akerson,Chairman
Nolan D. Archibald David B. Burritt Thomas J. Falk

Compensation Discussion and Analysis ~~which will be included~~(CD&A)

This CD&A discusses the compensation decisions for the NEOs listed in the ~~Corporation’s Schedule 14A Proxy Statement, filed pursuant to Section 14(a)~~Summary Compensation Table on page 48. The NEOs are:

NEO	Title	Years in Position At End of 2017 (rounded)	Years of Service At End of 2017 (rounded)
Marillyn A. Hewson	Chairman of the Board, President and Chief Executive Officer	5	35
Bruce L. Tanner	Executive Vice President and Chief Financial Officer	10	36
Dale P. Bennett	Executive Vice President, Rotary and Mission Systems	5	36
Orlando P. Carvalho	Executive Vice President, Aeronautics	5	38
Maryanne R. Lavan	Senior Vice President, General Counsel and Corporate Secretary	8	28

To assist stockholders in finding important information, this CD&A is organized as follows:

		Page
Executive Summary		32
Summary of Compensation Approach		34
2017 Named Executive Officers’ Compensation		37
2018 Compensation Decisions		44
Other Compensation Matters		45

2017 Say-on-Pay and Say-on-Pay Frequency Votes

At our 2017 annual meeting, more than 94% of the ~~Securities Exchange Act~~votes cast by our stockholders approved our Say-on-Pay proposal. We meet with our key investors throughout the year to understand the topics that matter most to them as they relate to executive compensation. We consider the input of ~~1934,~~our stockholders, along with emerging best practices, to ensure alignment with our executive pay programs. Most investors with whom we engaged in 2017 reacted positively to our pay governance and executive compensation programs. We welcome feedback regarding our executive compensation programs and will continue to engage with our stockholders in 2018. Consistent with the recommendation of our Board and the preference of our stockholders as ~~amended. Based on that review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included~~reflected in the non-binding advisory vote on the frequency of future Say-on-Pay votes that we conducted last year, we will continue to hold an annual Say-on-Pay vote.

2018 Proxy Statement

Table of Contents

Executive Compensation

Executive Summary

Our 2017 Performance

In 2017, the Corporation achieved new records for sales, orders, and Cash from Operations. Lockheed Martin’s net sales in 2017 were $51 billion versus $47 billion in 2016, an increase of eight percent and a record-setting amount for the Corporation. We also set a record for Cash from Operations of $6.5 billion in 2017, up from $5.2 billion in 2016. In addition, we ended 2017 with record orders of $54 billion, driving a strong backlog of approximately $100 billion.

During 2017, we delivered 66 F-35s for the year, meeting our target for the year. This was an increase of more than 40 percent over 2016. To date, we have delivered over 265 F-35s to U.S. and international customers, and the F-35 fleet has flown a total of 120,000 hours. We also delivered F-35 Full Mission Simulators to the Israeli, Italian, Japanese, and Norwegian Air Forces – the first-ever deliveries to international F-35 operators.

The fourth Space Based Infrared System (SBIRS) satellite was delivered successfully to Cape Canaveral Air Force Station in Florida last October in advance of its recent successful launch aboard a United Launch Alliance Atlas V rocket on January 19, 2018.

We continued our efforts to return cash to stockholders through dividends and share repurchases. During 2017, we returned over $4.2 billion of our $6.5 billion in Cash from Operations to our stockholders, with $2 billion in share repurchases and $2.2 billion paid in cash dividends.

Through these operational and financial accomplishments, Lockheed Martin delivered strong one-year and three-year total stockholder returns (TSR). On a relative basis, Lockheed Martin’s three-year TSR significantly outperformed NASDAQ, the Dow Jones Industrial, S&P 500, S&P Industrials, and S&P Aerospace & Defense (S&P Aerospace) indices for the period ended December 31, ~~2015. The Board approved our recommendation.~~2017.

~~Submitted on February 26, 2016, by the Management Development and Compensation Committee:~~

~~Daniel F. Akerson,~~~~Chairman~~	~~David B. Burritt~~
~~Nolan D. Archibald~~	~~Thomas J. Falk~~
~~Rosalind G. Brewer~~

	1-YEAR TSR	3-YEAR TSR

32 www.lockheedmartin.com/investor

Table of Contents~~Compensation Discussion and Analysis (CD&A)~~

~~This CD&A discusses the compensation decisions for the NEOs listed in the Summary Compensation Table on page 54. The NEOs are:~~

NEO Title in 2015 Years in Position
At End of 2015
(rounded) Years of Service
At End of 2015
(rounded)
Marillyn A. Hewson Chairman of the Board, President and Chief Executive Officer 3 33
Bruce L. Tanner Executive Vice President and Chief Financial Officer 8 34
Dale P. Bennett Executive Vice President, Mission Systems and Training 3 34
Orlando P. Carvalho Executive Vice President, Aeronautics 3 36
Maryanne R. Lavan Senior Vice President, General Counsel and Corporate Secretary 6 26

~~To assist stockholders in finding important information, this CD&A is organized as follows:~~

		~~Page~~
~~Executive Summary~~		33
~~Summary of Compensation Approach~~		36
~~2015 Named Executive Officers’ Compensation~~		39
~~2016 Compensation Decisions~~		49
~~Other Corporate Governance Considerations in Compensation~~		51

32~~www.lockheedmartin.com/investor~~

~~Table of Contents~~

Executive Compensation

~~Executive Summary~~

~~Our 2015 Performance~~

In 2015, Lockheed Martin achieved record levels of financial performance, and successfully performed on our contracts while undertaking two portfolio-shaping initiatives – the Sikorsky Aircraft Corporation (Sikorsky) acquisition and strategic review of our government information technology (IT) and technical services work in Information Systems & Global Solutions (IS&GS) businesses - that will influence the Corporation’s business for years to come.

Net sales for the year were $46.1 billion, compared to $45.6 billion in 2014. Net earnings in 2015 were $3.6 billion, or $11.46 per share, compared to $3.6 billion, or $11.21 per share, in 2014. Cash from Operations in 2015 was $5.1 billion, compared to Cash from Operations in 2014 of $3.9 billion after pension contributions of $2.0 billion.

During 2015, we accomplished numerous strategic and operational milestones. The Marine Corps declared Initial Operational Capability (IOC) for the F-35B, a historic event for the program, and we met our 2015 production commitment for the F-35 program by delivering 45 aircraft to the Department of Defense. We were awarded a $5.3 billion multi-year contract to deliver 78 C-130J Super Hercules to the U.S. Air Force, Marine Corps and Coast Guard through 2020. We launched the ninth Littoral Combat Ship (LCS) – the future USS Little Rock – and delivered LCS Five – the USS Milwaukee. We were awarded a contract to produce and deliver PAC-3 missiles and PAC-3 Missile Segment Enhancements to the U.S. and allied military forces. We also had great success expanding our international business during 2015, which represented 21% of our sales.

On November 6, 2015, we completed our purchase of Sikorsky. Sikorsky is a world leader in the design, manufacture and support of military and commercial helicopters. On July 20, 2015, we announced a strategic review of our government IT services work in IS&GS and our technical services business in Missiles and Fire Control. In January 2016, Lockheed Martin entered into a definitive agreement to combine our IT and technical services business at the realigned IS&GS with Leidos Holdings, Inc., in a tax-efficient Reverse Morris Trust transaction. The transaction is expected to close in the third or fourth quarter of 2016.

Through these accomplishments, Lockheed Martin delivered exceptional one-year and three-year total stockholder returns (TSR) that significantly exceeded the Dow Jones Industrial, S&P 500, S&P Industrials, NASDAQ, and S&P Aerospace & Defense (S&P Aerospace) indices for the one- and three-year periods ended December 31, 2015.

Compensation Overview

~~1-Year TSR~~Our executive compensation programs covering our NEOs are designed to attract and retain critical executive talent, to motivate behaviors that align with stockholders’ interests and to pay for performance. The majority of our NEOs’ pay is variable and contingent on performance, and approximately two-thirds, on average, is in the form of long-term incentives (LTI). To ensure pay is competitive with market practices, we conduct benchmarking analyses each year when establishing base salary, annual incentive target opportunities and LTI target opportunities. Each element of compensation is evaluated against the 50^thpercentile, which we refer to as “market rate,” of our comparator group of companies, as shown on page 36. For executives new to their role, we generally target pay below the market rate (50^thpercentile) and then increase pay closer to 100% of the market rate over time based on a variety of factors, including individual performance, internal pay equity, time in position and critical skills. Although target incentive opportunities are set by reference to the market rate, incentive plan terms provide for actual payouts to be based upon actual performance that can result in payouts above or below targeted levels. Based on actual results relative to our pre-established metrics and goals under our incentive programs, the 2017 annual incentive program paid out at 171% of target and the 2015-2017 LTIP paid out at 144.9% of target for all NEOs. We also provide retirement programs and perquisites that are competitive in our industry and security that is appropriate for the business in which we operate.

~~3-Year TSR~~2017 CEO Compensation

Base Salary.

~~Compensation Overview~~

Our executive compensation programs covering our NEOs are designed to attract and retain critical executive talent, to motivate behaviors that align with stockholders’ interest, and to pay for performance. The majority of our NEOs’ pay is variable and contingent on performance, and approximately 70%, on average, is in the form of long-term incentives (LTI).

To ensure pay is competitive with market practices, we conduct benchmarking analyses each year when establishing base salary, annual incentive target opportunities and LTI target opportunities. Each element of compensation is benchmarked against the 50^th ~~percentile, which we refer to as “market rate,” of a comparator group of companies, as shown on page 38. For executives new to their role, we may consider targeting pay below the market rate (50~~^th ~~percentile) and then increase pay closer to 100% of the market rate over a time period based on a variety of factors,~~In 2017, Ms. Hewson’s base salary was set at $1,695,000.

2017 Annual Incentive.Ms. Hewson’s target annual incentive amount for 2017 was $2,966,250 (175% of salary).

2017-2019 Long-Term Incentives.In 2017, Ms. Hewson was granted an LTI award of approximately $11.88 million, which was allocated 50% in Performance Share Units (PSUs), 30% in Restricted Stock Units (RSUs), and 20% in the cash-based Long-Term Incentive Performance award (LTIP). RSUs will cliff-vest after three years, while the vesting of PSUs and LTIP will be based upon our results relative to the three-year performance goals that were established in the beginning of 2017.

Benefit and Retirement Plans.Ms. Hewson is eligible for benefit and retirement programs, similar to other employees. None of our NEOs received additional years of service credits or other forms of formula enhancements under our benefit or retirement plans. Our pension formula is based on years of service and pension eligible compensation, which is similar to the formula offered by other companies with defined benefit plans. Effective January 1, 2016, ~~Proxy Statement~~the compensation element of the pension calculation was frozen and, on January 1, 2020, the service element of the pension calculation will be frozen.

2017 CEO Target Pay Mix.

~~Table of Contents~~

~~Executive Compensation~~

including individual performance, experience, time in position and critical skills. Although target incentive opportunities are set by reference to the market rate, incentive plan terms provide for actual payouts to be based upon actual results. In light of the Corporation’s performance, payouts under the 2015 annual incentive and 2013-2015 performance-based LTI programs were well above target levels.

~~We also provide retirement programs and perquisites that are competitive in our industry and security that is appropriate for the business in which we operate.~~

~~2015 Say-on-Pay Vote~~

At our 2015 Annual Meeting, more than 94% of the votes cast by our stockholders approved our Say-on-Pay proposal. We meet with our key investors throughout the year to understand the issues that matter most to them as it relates to executive compensation. We considered the input of our stockholders and emerging best practices in adopting our executive pay programs. During 2015, we engaged with representatives of stockholders owning approximately 40% of our outstanding shares. Most investors with whom we met reacted positively to our pay governance and executive compensation programs. We welcome feedback regarding our executive compensation programs and will continue to engage with our stockholders in 2016.

~~2015 Chairman, President & CEO Compensation~~

~~Base Salary.~~ ~~Three years into her role as CEO, Ms. Hewson’s 2015 base salary of $1,565,000 was set at 100% of the market rate (50~~^th~~percentile of CEOs’ base salaries in our size-adjusted comparator group of companies).~~

~~2015 Annual Incentive.~~ Ms. Hewson’s target annual incentive amount for 2015 was $2,738,750 (175% of salary). Based on our results, Ms. Hewson was awarded 200% of her target or $5,477,500 under the annual incentive plan for 2015 performance.

~~2013-2015 Long-Term Incentives.~~In 2013, Ms. Hewson was granted an LTI award of $10.2 million, which was 85% of the market rate at that time given that she was new to her role. The LTI award was allocated 50% in Performance Share Units (PSUs), 30% in Restricted Stock Units (RSUs) and 20% in the cash-based Long-Term Incentive Award Plan (LTIP).

Ms. Hewson’s 2013-2015 PSU target award of $5,106,745 was multiplied by the weighting assigned to each PSU component (50% to Relative TSR, 25% to ROIC and, 25% to Performance Cash). She received 200% of her target Relative TSR PSUs, 197.3% of her target Performance Cash PSUs and 112.5% of her target ROIC PSUs, or a total of 127,693 shares based on actual results relative to the three-year performance goals that were established in the beginning of 2013.

~~Ms. Hewson was granted 34,289 RSUs based on the grant date fair value of $3,059,950 in January 2013. These RSUs vested in company shares in January 2016.~~

Ms. Hewson’s 2013-2015 LTIP target award was set at $2,040,000. She received a payout of 177.4% of target, or $3,618,960 in cash, based on our results relative to the three-year performance goals that were established in the beginning of 2013.

~~The PSU and LTIP performance payout factors for Ms. Hewson are the same for all participants in these plans.~~

~~Benefit and Retirement Plans.~~Ms. Hewson is eligible for benefit and retirement programs similar to other employees. None of our executives received additional years of service credits or other forms of formula enhancements under our benefit or retirement plans. Like the retirement benefits offered by other companies with defined benefit plans, our pension formula is based on years of service and pension eligible compensation. In light of Ms. Hewson’s 33 years of service, her salary and incentive compensation since becoming CEO in 2013 and the effect of changes in standard mortality tables and interest rates in recent years, the value of Ms. Hewson’s pension benefits increased significantly in recent years.

34~~www.lockheedmartin.com/investor~~

~~Table of Contents~~

~~Executive Compensation~~

~~2015 Target Pay Mix.~~We believe that, to the maximum extent possible, the compensation opportunities of our CEO should be variable and the variable elements of the compensation package should tie to the Corporation’s long-term success and the achievement of sustainable long-term total returnWe believe that, to the maximum extent possible, the compensation opportunities of our CEO should be variable, and the variable elements of the compensation package should tie to the Corporation’s long-term success and the achievement of sustainable long-term total returns to our stockholders. As shown in the chart below, a significant portion of our CEO’s target compensation is variable and in the form of LTI and more than half of total target pay is in the form of equity incentives.

CEO TARGET OPPORTUNITY MIX*

*Fixed vs. variable and cash vs. equity components are designated in the Core Compensation Elements table on page 39. We consider base salary and annual incentives as short-term pay and performance stock units, LTIP, and restricted stock units as long-term pay. We do not include retirement or other compensation components in the chart.
*Fixed vs. variable and cash vs. equity components are designated in the Core Compensation Elements table on page 37. We consider base salary and annual incentives as short-term pay and PSUs, LTIP, and RSUs as long-term pay. Cash represents base salary, annual incentive target and LTIP target. We do not include retirement or other compensation components in the chart.

~~Our Compensation Programs Incorporate Best Practices~~
Executive Compensation
2018 Proxy Statement
~~Best Practices in Our Program~~
      33

✓Table of Contents
Summary of Compensation Approach
Guiding Pay ~~for~~Principles
● Attract, motivate and retain executive talent
● Use the market 50^thpercentile to target all compensation elements
● Link executive pay to Enterprise performance
● Provide an appropriate mix of short-term vs. long-term pay and fixed vs. variable pay
● Align to stockholder interests and long-term company value
✓ ~~Active stockholder engagement program~~
✓ ~~Market-based approach for determining NEO target pay~~
✓ ~~LTI based on Relative TSR and value-driving financial metrics~~
✓ ~~Caps on annual and long-term incentives~~
✓ ~~Lower cap for performance stock units (PSUs) when TSR is negative~~
✓ ~~Perquisites limited to those that are business-related~~
✓ ~~Severance provisions at or below market~~
✓ ~~Clawback policy on all variable pay~~
✓ ~~Double-trigger provisions for change in control~~
✓ ~~Consideration by~~
Our Decision-Making Process
The Compensation Committee seeks input from our CEO and other members of ~~stockholder dilution~~our management team as well as input and ~~burn rate in equity grant~~advice from the independent compensation consultant to ensure the Corporation’s compensation philosophy and information relevant to individual compensation decisions
✓ ~~Stock ownership requirements~~
✓ ~~Annual comparator group review~~
✓ ~~Policy prohibiting hedging or pledging of company stock by directors, officers and employees~~
✓ ~~Plan design and administration used to minimize incentives for imprudent risk taking~~
✓ are taken into account.
Independent ~~consultant reports directly to the Compensation Committee~~Pay Governance
Independent Board Members Independent
~~Practices We Do Not Engage In or Allow~~Compensation Consultant
Independent
Compensation Committee Stockholders &
Other Key Stakeholders
✗ ~~No employment agreements (other than exit transitions)~~
✗ ~~No option backdating, cash out of underwater options or repricing~~
✗ ~~No excise tax assistance upon a change in control~~
✗ ~~No individual change in control agreements~~
✗ ~~No automatic acceleration of unvested incentive awards in the event of termination~~
✗ ~~No enhanced retirement formula or inclusion of LTI in pensions~~
✗ ~~No enhanced death benefits for executives~~
~~2016 Proxy Statement~~
Review and approve compensation of the CEO and review and ratify compensation of other NEOs. Review with management, at least annually, the succession plan for the CEO and other senior positions.
35
Provides advice on executive pay programs, pay levels and best practices. Provides design advice for annual LTI vehicles and other compensation and benefit programs.
Reviews and approves incentive goals relevant to NEO compensation. Reviews and approves the compensation for each NEO. Recommends CEO compensation to the independent members of the Board.
Provide feedback on various executive pay practices and governance during periodic meetings with management which then is reviewed by and discussed with our independent Board members.

Role Chairman,
President &
CEO Management Management
Compensation
Consultant¹ Independent
Compensation
Consultant² Compensation
Committee³ Independent
Board
Members
Peer Group / External Market Data and Best Practices for Compensation Design and Decisions Reviews Reviews Develops Develops/
Reviews Reviews —
Annual NEO Target Compensation Recommends — — Reviews Approves Ratify
Annual CEO Target Compensation — — — Advises Recommends Approve
Annual and Long-Term Incentive Measures, Performance Targets and Performance Results Reviews Develops — Reviews Approves Ratify
Long-Term Incentive Grants, Dilution,
Burn Rate Reviews Develops — Reviews Approves Ratify
Risk Assessment of Incentive Plans Reviews Reviews — Develops Reviews —
Succession Plans Reviews Develops — — — Review

(1) Aon Hewitt & Willis Towers Watson.
(2) Meridian Compensation Partners, LLC (Meridian).
(3) Daniel F. Akerson (Chairman), Nolan D. Archibald, David B. Burritt, Thomas J. Falk. Rosalind G. Brewer was a member until October 1, 2017.
34     www.lockheedmartin.com/investor
Table of Contents
Executive Compensation
~~Summary of~~
How We Determine Market Rate Compensation ~~Approach~~

~~Our Decision-Making Process~~
The Compensation Committee seeks input from our CEO and other members of our management team as well as input and advice from the independent compensation consultant to ensure the Corporation’s compensation philosophy and all information relevant to individual compensation decisions are taken into account.
~~Independent Pay Governance~~
~~Independent Board Members~~
~~Independent Compensation Committee~~
~~Review and approve the compensation~~As a starting point, for each of the ~~CEO and~~principal elements of executive compensation we define the ~~NEOs. Reviews with management, at least annually, the succession plan for the CEO and other senior positions as well~~“market rate” as the ~~executive talent pool.~~
~~Reviews~~size-adjusted 50^thpercentile of our comparator group of companies. Size-adjusted market rates are calculated for us by Aon Hewitt using regression analysis. This statistical technique accounts for revenue size differences within the peer group and approves corporate objectives relevant to NEO compensation. Evaluates the performance of the CEO and each NEO. Recommends to the independent members of the Board the compensation of the CEO and each NEO.
~~Independent Compensation Consultant~~
~~Stockholders & Other Key Stakeholders~~
~~Provides advice on executive pay programs and best practices. Provides design advice for annual and LTI vehicles and other compensation and benefit programs.~~
~~Provide feedback on various executive pay practices and governance during periodic meetings with management which then is reviewed by and discussed with our independent Board members.~~
~~The following summary sets forth the responsibilities of various parties~~results in ~~connection with the implementation of our compensation programs.~~
~~Role~~ ~~Responsibilities~~
~~Independent Compensation~~
~~Committee:~~
~~Daniel F. Akerson, Chairman~~
~~Nolan D. Archibald~~
~~Rosalind G. Brewer~~
~~David B. Burritt~~
~~Thomas J. Falk~~ ●      ~~Reviews and approves corporate objectives relevant to NEO compensation.~~
● ~~Evaluates and approves the performance of the CEO and each NEO.~~
● ~~Recommends to the independent members of the Board the compensation of the CEO and each NEO.~~
● ~~Approves Enterprise and Business Segment performance measures, weightings and goals for the annual and LTI compensation plans.~~
● ~~Reviews proposed candidates for senior executive positions and recommends their compensation to the Board.~~
● Approves equity and other LTI grants. This authority resides solely in the Compensation Committee (subject to ratification by the independent members of the Board) and has not been delegated to any member of management.
~~Independent Members of Board~~
~~of Directors~~ ● ~~Reviews and approves the compensation of the CEO and the NEOs.~~
● ~~Reviews with management, at least annually, the succession plan for the CEO and other senior positions as well as the executive talent pool.~~
~~Independent Compensation~~
~~Consultant: Meridian~~
~~Compensation Partners, LLC~~
~~(Meridian)~~ ● Provides input to the Compensation Committee’s decision-making on executive compensation matters in light of the Corporation’s business strategy, pay philosophy, prevailing market practices, stockholder interests and relevant regulatory mandates.
● ~~Provides advice on executive pay philosophy and relevant peer groups.~~
● ~~Provides design advice for short-term and LTI vehicles and other compensation and benefit programs.~~
● ~~Provides input to and interprets the results of, or conducts, competitive market studies as background against which the Compensation Committee can consider CEO and senior management compensation.~~
● Reviews and provides an independent assessment of the data and materials presented by management to the Compensation Committee, including data provided by the regular compensation consultant of the Corporation.
● ~~Participates in Compensation Committee meetings as requested and communicates with the Chairman of the Compensation Committee between meetings.~~
● ~~Advises the Compensation Committee about emerging best practices and changes in the regulatory and corporate governance environment.~~
● ~~Reviews the CD&A and provides input to the Compensation Committee.~~

36~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Executive Compensation~~
~~Role~~ ~~Responsibilities~~
~~Management~~ ●     ~~The CEO reviews and approves corporate goals and objectives and provides feedback to the Compensation Committee on compensation and performance of the other NEOs and other senior management.~~
● ~~The EVP and CFO develops internal financial goals for both our annual and LTI programs, which are reviewed by the CEO before presentation to the Compensation Committee for consideration and approval.~~
● ~~The Senior Vice President, Human Resources (SVP HR) presents a schedule with~~ a market rate for ~~each~~all compensation ~~element (base salary, annual incentive, and LTI)~~elements consistent with our revenue relationship to our peers. We also may adjust the market rate to reflect differences in an executive’s job scope relative to the industry or the comparator group of companies, as appropriate.
Because market data can change year-over-year, the Compensation Committee considers the current market data in combination with other internal factors when setting annual target pay levels. Our incentive plans are designed so that actual performance in excess of established performance targets results in payouts above target and ~~consults with~~actual performance below established performance targets results in payouts below target or no payout.
How We Select the ~~CEO on recommended compensation~~Comparator Group for ~~senior executives. The SVP HR does not recommend~~Market Rate Purposes
We regularly review our comparator group to maintain relevancy and to ensure the availability of data, while seeking to avoid significant annual changes in the group to ensure a ~~specific amount~~level of consistency.
To establish the market rate for each of the principal elements of compensation, ~~for~~we select a group of publicly-traded companies (our comparator group) to identify market rates. Because the ~~CEO.~~
~~Corporation’s Compensation~~
~~Consultants: Aon Hewitt & Willis~~
~~Towers Watson~~ ● ~~Provides management~~number of comparable companies with ~~market data and compensation practices from~~our revenue level is not extensive, we include companies in our comparator ~~group.~~group based on a number of factors, including:
● similarity in size (a high correlative factor in determining pay), generally based on annual revenues;
● participation in the Aon Hewitt executive compensation survey (our primary source for data in making market comparisons), which enables us to obtain reliable data for market comparisons that otherwise may not be publicly available;
● industrial companies and, to the extent possible, companies that compete in the aerospace and defense industry, which enables comparison with companies that face similar overall labor costs, economic factors and market fluctuations;
● companies that are included in the executive talent pool we consider when recruiting outside talent, as competitive conditions and a limited number of comparably sized aerospace and defense companies require us to recruit outside the core aerospace and defense companies for a broad range of disciplines (e.g., finance, human resources, legal, supply chain management) to obtain individuals with a broad range of skills that are transferable across industries; and
● companies with comparable executive officer positions or management structures, which enables more appropriate compensation comparisons.
● ~~Performs~~
We do not consider market ~~research~~capitalization in selecting our comparator group because market capitalization can change quickly as industries and ~~other analyses~~companies go in and out of favor as investments and as companies restructure.
The data presented to ~~assist management in making plan design recommendations to~~and considered by the Compensation Committee ~~and~~regarding the ~~Board.~~

~~How We Determine Market Rate Compensation~~
~~As a starting point, for each~~level of compensation at the Corporation’s comparator group of peer companies was developed from the proprietary results of ~~the principal elements of executive compensation we define the “market rate” as the size-adjusted 50~~^th percentile of the comparator group of companies we have identified for compensation purposes. Size-adjusted market rates are calculated for us by Aon Hewitt using regression analysis. This statistical technique accounts for revenue size differences within the peer group and results in a market rate for all compensation elements consistent with our revenue relationship to our peers. We also may adjust the market rate to reflect differences in an executive’s job scope relative to the industry or the comparator group of companies, as appropriate.
Actual annual and long-term incentive compensation earned by executives may be above or below the target level we set for each executive based on our performance against pre-established metrics and goals. Our incentive plans are designed so that actual performance in excess of established performance targets results in payouts above target and actual performance below established performance targets results in payouts below target or no payout.
~~How We Select the Comparator Group for Market Rate and Performance Purposes~~
~~Companies Selected for Market Rate Determination~~
~~We regularly review our comparator group to maintain relevancy and to ensure the availability of data, while seeking to avoid significant annual changes in the group to ensure a level of consistency.~~
To establish the market rate for each of the principal elements of compensation, we select a group of publicly-traded companies (our comparator group) to identify market rates for all pay elements. Because the number of comparable companies with our revenue level is not extensive, we include companies in our comparator group based on a number of factors, including:
●
~~Similarity in size (a high correlative factor in determining pay), generally between one-half and two times our annual revenue.~~
●
~~Participation in~~ the Aon Hewitt executive compensation survey, ~~(our primary source~~subject to review by Meridian. All of the 2017 comparator group companies participated in the Aon Hewitt survey.
During 2017, the Compensation Committee reviewed our comparator group considering certain business combinations that occurred within our peer group. The Compensation Committee approved a revised comparator group for ~~data~~2018, which eliminated Johnson Controls International plc considering its business combination with Tyco International and International Paper Company because it is no longer similar in ~~making market comparisons); this enables~~size to us ~~to obtain reliable data for market comparisons that otherwise may not be publicly available.~~
●
~~Industrial~~in terms of its annual revenues. General Electric Company and International Business Machines Corporation were added as new comparator companies ~~and,~~given their similarity to the ~~extent possible,~~Corporation in terms of size, industry and geographic presence. In addition, these newly added companies ~~that~~ compete ~~in the aerospace and defense industry; this enables comparison~~ with ~~companies that face similar overall labor costs and market fluctuations.~~
●
~~Companies that are included in the executive~~us for key talent pool we consider when recruiting outside talent. Competitive conditions and a limited number of comparably sized aerospace and defense companies require us to recruit outside the core aerospace and defense companies for a broad range of disciplines (e.g., finance, human resources, supply chain management) to obtain individuals with a broad range of skills that are transferable across industries.
●
~~Companies~~ with comparable executive officer positions ~~or management structures, which enables more appropriate~~in terms of breadth, complexity and scope of responsibilities. The new comparator group will be used for 2018 executive compensation ~~comparisons.~~decisions.
We do not consider market capitalization in selecting our comparator group because market capitalization can change quickly as industries and companies go in and out of favor as investments and as companies restructure. Market capitalization may be more reflective of expectations about a particular company’s growth potential rather than its actual financial performance or the complexity of its operations.
The data presented to and considered by the Compensation Committee regarding the level of compensation at the Corporation’s comparator group of peer companies was developed from the proprietary results of the Aon Hewitt executive compensation survey, subject to review by Meridian. All of the comparator group companies participate in the Aon Hewitt survey.
~~2016~~
2018 Proxy Statement
      35

37Table of Contents
Executive Compensation
For 2017, we used the following companies as our comparator group for purposes of establishing market rate compensation for each of the principal elements of our compensation programs. The comparator group did not change from 2016 and our 2017 revenues represented the 65th percentile of the comparator group.
2017 Comparator Group Companies
3M Company E. I. du Pont de Nemours and Company** Johnson Controls International plc**
The Boeing Company* FedEx Corporation Northrop Grumman Corporation*
Caterpillar Inc. General Dynamics Corporation* Raytheon Company*
Cisco Systems, Inc. Honeywell International Inc.* United Parcel Service, Inc.
Deere & Company Intel Corporation United Technologies Corporation*
The Dow Chemical Company** International Paper Company

* Aerospace & Defense Industry
** E. I. du Pont de Nemours and Company and The Dow Chemical Company merged during 2017. Johnson Controls Inc. and Tyco International plc merged during 2016.
Consideration of Internal Pay Equity
Consistent with past practice, the Compensation Committee reviewed the pay relationship of the CEO to the other NEOs as part of its annual compensation review in 2017 and 2018. This material was presented to the Compensation Committee by Meridian in its capacity as the Committee’s independent compensation consultant.
Compensation and Risk
The Corporation’s executive and broad-based compensation programs are intended to promote decision-making that supports a pay for performance philosophy while mitigating risk by utilizing the following design features:
●Mix of fixed and variable pay opportunities
●Multiple performance measures, multiple time periods and capped payouts under incentive plans
●Stock ownership requirements
●Oversight by Board committees
●Set incentive goals at the Enterprise or business segment level
●Moderate severance program and post-employment restrictive covenants
●Institutional focus on ethical behavior
●Annual risk review
●Compensation Committee oversight of equity burn rate and dilution
●Clawback policy
At the Compensation Committee’s request, Meridian reviewed all executive and broad-based incentive compensation programs in 2017 and concluded that risks arising from our incentive compensation programs are not reasonably likely to have a material adverse effect on the Corporation.
36     www.lockheedmartin.com/investor
Table of Contents
Executive Compensation
At
2017 Named Executive Officers’ Compensation
2017 Target Compensation
Our NEOs’ target compensation for 2017 is shown below, which is closely aligned to the market rate. Because market data is volatile year-over-year due to changes in incumbent data within our peer group, the beginning of 2015, based on the objectives and criteria summarized above, we selected the following companies as our comparator group for purposes of establishing market rate compensation for each of the principal elements of our compensation programs. Our 2015 revenue represented the 53^rd ~~percentile of our comparator group.~~
~~Comparator Group Rationale~~
~~Company~~ ~~A&D~~
~~Industry~~ ~~Similarity (size, revenue,~~
~~geographic presence~~
~~or business model)~~ ~~Comparable Executive~~
~~Officer Positions~~
~~(scope, responsibilities)~~ ~~Participation in Executive~~
~~Compensation Survey~~
~~3M Company~~ ✓ ✓ ✓
~~The Boeing Company~~ ✓ ✓ ✓ ✓
~~Caterpillar Inc.~~ ✓ ✓ ✓
~~Cisco Systems, Inc.~~ ✓ ✓ ✓
~~Deere & Company~~ ✓ ✓ ✓
~~The Dow Chemical Company~~ ✓ ✓ ✓
~~E. I. du Pont de Nemours & Company~~ ✓ ✓ ✓
~~FedEx Corporation~~ ✓ ✓ ✓
~~General Dynamics Corporation~~ ✓ ✓ ✓ ✓
~~Honeywell International Inc.~~ ✓ ✓ ✓ ✓
~~Intel Corporation~~ ✓ ✓ ✓
~~International Paper Company~~ ✓ ✓ ✓
~~Johnson Controls, Inc.~~ ✓ ✓ ✓
~~Northrop Grumman Corporation~~ ✓ ✓ ✓ ✓
~~Raytheon Company~~ ✓ ✓ ✓ ✓
~~United Parcel Service, Inc.~~ ✓ ✓ ✓
~~United Technologies Corporation~~ ✓ ✓ ✓ ✓

~~Consideration of Internal Pay Equity~~
Consistent with past practice, the Compensation Committee reviewed the pay relationship of the CEO to the other NEOs as part of the January 2015 and January 2016 meetings. This material was presented to the Compensation Committee by Meridian in its capacity as the Committee’s independent compensation consultant.
~~Compensation and Risk~~
The Corporation’s executive and broad-based compensation programs are intended to promote decision-making that supports a pay for performance philosophy while mitigating risk by utilizing the following design features:
●~~Mix of fixed and variable pay opportunities~~
●~~Multiple performance measures, multiple time periods and capped payouts under incentive plans~~
●~~Stock ownership requirements~~
●~~Oversight by Board committees~~
●~~Moderate severance program and post-employment restrictive covenants~~
●~~Institutional focus on ethical behavior~~
●~~Annual risk review~~
●Compensation Committee ~~oversight of~~considers current market data in combination with other factors, including previous pay levels, internal pay equity, ~~run rate~~individual performance and ~~overhang~~
●~~Clawback policy~~

At the Compensation Committee’s request, Meridian reviewed all executive and broad-based incentive compensation programs in 2015 and determined that risks arising from our incentive compensation programs are not reasonably likely to have a material adverse effect on the Corporation as a whole.
38~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Executive Compensation~~
~~2015 Named Executive Officers’ Compensation~~

~~Guiding Pay Principles~~
●
~~Attract, motivate and retain executive talent~~
●
~~Use the market 50~~^th ~~percentile to~~critical skills, when determining target ~~all compensation elements~~
●
~~Link~~ pay ~~to performance~~
●
~~Provide an appropriate mix of short-term vs. long-term pay and fixed vs. variable pay~~
●
~~Align to stockholder interests and long-term company value~~
~~2015 Core Compensation Elements~~
Our compensation programs are designed to provide a mix of short- and long-term compensation, fixed and variable pay and cash and equity-based compensation, as well as to reflect our philosophy of providing pay for ~~performance. Retirement or “all other compensation” programs are not included in our core compensation elements below (additional information about these programs can be found on page 48).~~
~~WHAT?~~
~~Cash~~
~~Cash~~
~~Equity~~
~~Cash~~
~~Equity~~
~~WHEN?~~
~~Annual~~
~~Annual~~
~~3-year~~
~~Performance Cycle~~
~~3-year~~
~~Performance Cycle~~
~~3-year~~
~~Cliff Vesting~~
~~HOW?~~
~~Measures,~~
~~Weightings &~~
~~Payouts~~
~~Individual~~
~~performance,~~
~~experience, time in~~
~~position, and critical~~
~~skills~~
~~Enterprise Performance~~
~~(60% Financial, 20% Strategic,~~
~~20% Operational)~~
X
~~Business Segment~~
~~Performance~~
~~(60% Financial, 20% Strategic,~~
~~20% Operational)~~
X
~~Individual Performance~~

~~Payout: 0-200% of target~~
Relative TSR*
ROIC**
Performance Cash** ~~(50%)~~
~~(25%)~~
~~(25%)~~
~~Value delivered~~
~~through~~
~~Long-Term Stock~~
~~Price Performance~~
●~~Award 0-200% of target # of shares~~
●~~Relative TSR measure capped at 100% if TSR is negative~~
●~~Up to 400% of stock price on date of grant X shares earned~~
●~~Payout: 0-200% of target~~
●~~Relative TSR measure capped at 100% if TSR is negative~~
~~WHY?~~
~~Provides competitivelevels of fixed pay to attract and retainexecutives~~
~~Attracts and motivatesexecutives by linking annual company, BusinessSegment and individualperformance to an annual cash incentive~~
Creates strong alignment with stockholderinterests by linking long-term pay to key performance metrics and stock price.Provides a balance of internal and marketbased measures to assess long-term performance
~~Promotes retention of key talent andaligns executive andstockholder interests~~

* ~~Relative TSR performance is measured against~~ our ~~industry peers in the S&P Aerospace Index.~~
**   ~~See Appendix A for explanation of non-GAAP terms.~~

~~2016 Proxy Statement~~
NEOs.
39

~~Table of Contents~~
~~Executive Compensation~~
~~2015 Target Compensation~~
~~Consistent with our pay philosophy to consider moving executives to the market rate (50~~^th percentile) over time if and when they perform effectively in their new roles, all NEOs were closely aligned to the market rate given that they have performed effectively in their respective roles for multiple years.
Base
Salary
($) Annual Incentive 2015
LTI Grant
($) Total Target Direct
Compensation
($)
NEO               Target
%        Target Amount
($)
Ms. Hewson 1,565,000 175 2,738,750 11,202,915 15,506,665
Mr. Tanner 925,000 105 971,250 4,016,033 5,912,283
Mr. Bennett* 790,000 95/90 717,715 2,500,641 4,008,356
Mr. Carvalho 790,000 95 750,500 3,000,882 4,541,382
Ms. Lavan 735,000 95 698,250 2,600,765 4,034,015

*  Mr. Bennett’s Target % was increased to reflect the change in the scope of his role after the acquisition of Sikorsky.
~~Base Salary~~
Base salaries are reviewed annually and may be increased to reflect the executive’s individual performance and/or adjusted to align more appropriately with the market rate (50th percentile). In establishing the base salary for each NEO, we determined the market rate using comparator group company data and evaluated whether the market rate should be adjusted up or down based on differences in the scope of the NEO’s position as compared to the industry and the comparator group companies.
The Compensation Committee establishes an executive’s base salary relative to the market rate with consideration for the executive’s individual performance, experience, time in position and critical skills.
Annual Incentive
NEO Base
Salary
($) Target
% Target
Amount
($) 2017
LTI Grant
($) Total Target
Direct
Compensation
($)
Ms. Hewson 1,695,000 175 2,966,250 11,880,252 16,541,502
Mr. Tanner 1,000,000 110 1,100,000 4,200,120 6,300,120
Mr. Bennett 855,000 95 812,250 3,350,257 5,017,507
Mr. Carvalho 855,000 95 812,250 3,350,257 5,017,507
Ms. Lavan 795,000 95 755,250 2,700,161 4,250,411
2017 Core Compensation Elements
Our compensation programs are designed to provide a mix of short- and long-term compensation, fixed and variable pay and cash and equity-based compensation, as well as to reflect our philosophy of providing pay for performance. Retirement programs or “all other compensation” are not included in our core compensation elements below (additional information about these programs can be found on page 46).
WHAT?
Cash
Cash
Equity
Cash
Equity
WHEN?
Annual
Annual
3-year
Performance Cycle
3-year
Performance Cycle
3-year
Cliff Vesting
HOW?
~~The~~Measures,
Weightings &
Payouts
Market rate, as well as individual performance, internal pay equity, experience and critical skills
70% Financial
(20% Sales,
40% Segment Operating Profit,**
40% Cash from Operations)
+
30% Strategic & Operational
(Key Metrics: Focus Programs,
Mission Success®, Program
Performance, PortfolioShaping
Initiatives, Innovation,
Talent Management)
Payout: 0-200% of target
Relative TSR*
ROIC**
Performance Cash** (50%)
(25%)
(25%)
Value delivered through long-term stock price performance
●Award 0-200% of target # of shares
●Relative TSR measure capped at 100% if TSR is negative
●Up to 400% of stock price on date of grant times shares earned
●Payout: 0-200% of target
●Relative TSR measure capped at 100% if TSR is negative
WHY?
Provides
competitive levels
of fixed pay to attract
and retain executives.
Attracts and motivates
executives by linking annual ~~incentive for 2015 uses~~
company performance to an
annual cash incentive.
Creates strong alignment with stockholder
interests by linking long-term pay to
key performance metrics and stock price.
Provides a ~~“multiplicative approach”~~balance of internal and market based
measures to ~~determine bonuses based on Enterprise, Business Segment and Individual performance factors as follows:~~assess long-term performance.
~~Target Award~~ X ~~Enterprise~~
~~Performance Factor~~ X ~~Business Segment~~
~~Performance Factor~~ X ~~Individual~~
~~Performance Factor~~ = ~~Payout~~
Promotes retention of key talent andaligns executive andstockholder interests.
~~- Financial (60%)~~ ~~- Financial (60%)~~
~~- Strategic (20%)~~ ~~- Strategic (20%)~~

~~- Operational (20%)~~ ~~- Operational (20%)~~ *
Relative TSR performance is measured against our industry peers in the S&P Aerospace & Defense Index.

**
~~Because we multiply the Enterprise, Business Segment and Individual performance factors together, a zero rating on any factor results in no payout. Under the terms~~Refer to Appendix B for an explanation of ~~our 2015 annual incentive plan, the CEO’s bonus may not exceed 0.3% of Performance Cash (see Appendix A for~~ non-GAAP ~~definition) and the bonus for each of the other NEOs cannot exceed 0.2% of Performance Cash. Annual incentive payouts may not exceed 200% of the target award.~~
The Compensation Committee adopted these parameters to establish the structure around which annual incentive decisions would be made, to align participants to the performance of the overall Enterprise and to use financial performance as a core element of the rating. Although the annual incentive plan uses a formulaic approach, the Compensation Committee retains discretion, which includes choosing and approving metrics, assessing strategic, operational and individual performance of our NEOs and approving the final ratings for each factor based on performance results. The Business Segment factor applied to the corporate officers (Ms. Hewson, Mr. Tanner, and Ms. Lavan) is the average of all Business Segment performance factors, which can be adjusted up or down (maximum 0.05) based on the Compensation Committee’s assessment. In accordance with the annual incentive plan, factors are determined in .05 increments.
40~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Executive Compensation~~
~~2015 Goals for Enterprise Performance Factor~~
At its January 2015 meeting, the Compensation Committee approved enterprise-wide objectives for 2015 reflecting financial, strategic, and operational goals. These objectives serve as the corporate organizational goals for all participantsterms as well as ~~the individual~~our disclosure regarding forward-looking statements concerning future performance or goals ~~of the CEO. The Compensation Committee used the guidance we disclosed publicly at the beginning of the year~~ for our financial metrics as disclosed in the 2015 proxy statement. We believe this approach to setting the financial metrics for annual bonus purposes appropriately links compensation to our effectiveness in meeting our public commitments to our stockholders.
~~Financial Commitments:~~Our financial commitments are established at the completion of our annual long-range planning process and are consistent with our long-range plan commitments. The long-range planning process includes reviews of the assumptions used by the Business Segments in generating their financial projections, such as industry trends and competitive assessments, current and future ~~projected program performance levels and the risks and opportunities surrounding these baseline assumptions. Business Segment financial projections also are compared against historical patterns of~~ performance. The long-range plan on which our financial goals are based is tied to the business environment in which we operate, which can vary year over year. In recent years, the U.S. Government, representing 78% of our net revenues for 2015, has faced significant deficit reduction pressures that are likely to continue.
Our long-range plan values for Orders, Sales, Segment Operating Profit (see Appendix A for definition of non-GAAP terms) and Cash from Operations represent the target level (1.0 rating) for each of these metrics. We established maximum (1.30 rating for Enterprise, 1.25 rating for Business Segments) and threshold payout levels (0.50 rating) around these targets based on a review of historical performance against long-range plan commitments for each of the four annual incentive goal metrics. We used straight-line interpolation between target and both maximum and minimum historical performance levels. In all cases, payouts deteriorate more rapidly as we move from target level to the minimum payout level compared to the level of increase as we move from target level to maximum payout level. This asymmetry reflects the importance we place on meeting our financial goals.
~~Strategic and Operational Commitments:~~Our strategic and operational performance assessments are inherently different than financial performance assessments. For the 2015 performance year, objective metrics were set for each of our strategic and operational commitments at the beginning of the year. The Compensation Committee used these metrics as a reference point for its assessment along with past levels of performance to identify the top and bottom of the performance rating range and the expected target level. The Compensation Committee also took into account qualitative considerations that could not be forecasted reliably and used discretion where appropriate to evaluate the level of performance. For example, because some strategic goals, such as having “no Red Programs” are aspirational in nature, achieving the goal represents the maximum rating rather than the target rating (we designate a program as a “Red Program” when it has a value over $100 million and exhibits significant cost, schedule, technical or quality challenges).
~~Performance Ratings~~
~~Performance ratings for 2015 were determined using the scales below. The higher maximum rating for the Enterprise performance factor reflects the importance we place on company-wide results.~~
● ~~Enterprise performance (0.00 rating or 0.50 – 1.30 rating)~~
● ~~Business Segment performance (0.00 rating or 0.50 – 1.25 rating)~~
● ~~Individual performance (0.00 rating or 0.50 – 1.25 rating)~~
~~Enterprise Performance~~
~~Enterprise Financial Assessment (60% of Enterprise Performance)~~
~~We exceeded the target ranges established at the beginning of the year for all of the financial measures and set records for Orders and Cash from Operations.~~
~~2015 Financial Measures~~ ~~Weighting~~
% ~~2015 Goals~~
~~($)~~ ~~Reported Results~~
~~($)~~ ~~2015~~
~~Assessment~~
~~Orders~~ 20 ~~43,500M – 45,000M~~ ~~50,229M~~ ~~Significantly Exceeded~~
~~Sales~~ 20 ~~43,500M – 45,000M~~ ~~46,132M~~ ~~Significantly Exceeded~~
Segment Operating Profit* 30 ~~5,100M – 5,250M~~ ~~5,486M~~ ~~Significantly Exceeded~~
~~Cash from Operations~~ 30 ≥ ~~5,000M~~ ~~5,101M~~ ~~Exceeded~~

2018 Proxy Statement
      37

Table of Contents
Executive Compensation
Base Salary
Base salaries are reviewed annually and may be increased to align more appropriately with the market rate (50th percentile), taking into account the executive’s individual performance and internal pay equity. In establishing the base salary for each NEO, we determined the market rate using comparator group company data and evaluated whether the market rate should be adjusted up or down based on differences in the scope of the NEO’s position as compared to the industry and the comparator group companies.
2017 Annual Incentive
As was the case for 2016, the 2017 annual incentive plan for our CEO, other NEOs and all other officers elected by the Board, was based 70% on financial goals and 30% on strategic and operational goals measured at the Enterprise level, as illustrated in the graphic below. Although the annual incentive plan uses a formulaic approach, the Compensation Committee retains discretion, which includes choosing and approving goals, assessing strategic and operational results and modifying payouts for all officers elected by the Board, including the NEOs.
Target
Award x 100%
Enterprise
Component = Payout
Amount
70%
Financial
30%
Strategic &
Operational

    0%
Payout Range
200%
Under the terms of our annual incentive plan, the CEO’s bonus cannot exceed 0.3% of Performance Cash (see Appendix B for non-GAAP definition) and the bonus for each of the other NEOs cannot exceed 0.2% of Performance Cash. Annual incentive payouts range from 0% to 200% of target.
2017 Annual Incentive Goals and Results
At its January 2017 meeting, the Compensation Committee approved Enterprise-wide objectives for 2017 reflecting financial and strategic and operational goals. These goals are used as the Enterprise Component for all executives in the Corporation and serve as the only goals for the CEO, other NEOs and all other officers elected by the Board.
Financial Assessment (70% Weight).The financial targets utilized under the annual incentive plan align with the guidance we disclosed publicly at the beginning of 2017. We believe this approach to setting the financial metrics for annual incentive purposes appropriately links compensation to our effectiveness in meeting our public commitments to our stockholders.
Our financial commitments are established at the completion of our annual long-range planning process and are consistent with our long-range plan commitments. The long-range planning process includes reviews of the assumptions used by the business segments in generating their financial projections, such as industry trends and competitive assessments, current and future projected program performance levels and the risks and opportunities surrounding these baseline assumptions. The long-range plan on which our financial goals are based is tied to the business environment in which we operate and can vary year-over-year.
Our long-range plan values for Sales, Segment Operating Profit (see Appendix B for definition of non-GAAP terms) and Cash from Operations are set forth in the 2017 guidance we provided publicly to investors in January 2017 and represent the target level (100% performance rating) for each of these metrics. We established maximum (200% performance rating) and threshold payout levels (50% performance rating) around these targets based on a review of historical performance against long range plan commitments for each of the three annual incentive goal metrics, which ensures the appropriate level of rigor on each of the threshold, target and maximum goals. We used straight-line interpolation between target and both maximum and minimum historical performance levels. In all cases, payouts deteriorate more rapidly as we move from target level to the minimum payout level compared to the level of increase as we move from target level to maximum payout level. This asymmetry reflects the importance we place on meeting our financial goals. The Compensation Committee reviewed the methodology and the targets established as part of its annual process during 2017.
38     www.lockheedmartin.com/investor
Table of Contents
Executive Compensation
2017 Financial Measures Weight       2017
Goals
($)       Reported
Results
($)       Calculated
Payout       Weighted
Payout
Sales 20% 49,400 – 50,600M 51,048M 146% 29%
Segment Operating Profit* 40% 5,015 – 5,135M 5,115M 124% 50%
Cash from Operations 40% ≥ 5,700M 6,476M 200% 80%
Financial Payout Factor 159%

*
See Appendix AB for definition of non-GAAP terms.
~~Performance Rating (Financial)~~ ~~1.20~~
Strategic & Operational Assessment (30% Weight).Our strategic and operational performance assessments are inherently different than financial performance assessments. For the 2017 performance year, a broad set of goals were established for our strategic and operational commitments at the beginning of the year. The strategic and operational performance goals are not specific because some are aspirational, cannot be forecasted reliably or are qualitative in nature. When determining the overall payout factor, the Compensation Committee considers both quantitative and qualitative results and applies discretion when evaluating performance in totality.
The strategic and operational performance goals and results are set forth below.
2017 Strategic & Operational Goals Summary Assessment Summary Highlights

~~2016 Proxy Statement~~
Focus Programs:Secure Key Focus and Keep Sold Program wins
●73% win rate on programs throughout the year
●Record orders of $54 billion with backlog at year-end of approximately $100 billion
Mission Success®:Achieve Mission Success® milestones
●Continued operational excellence with 100% Mission Success® in targeted events
●Key program milestones achieved throughout the Corporation, including on F-35
Program Performance:Execute programs to achieve customer satisfaction and increase stockholder value
●Robust domestic and international customer engagements
●Returned $4.2 billion of our $6.5 billion in Cash from Operations to our stockholders through dividends and share repurchases
Portfolio Shaping / Enterprise Initiatives:Review portfolio on an ongoing basis; streamline operations and implement other Enterprise-wide initiatives to create long-term value
●Increased breadth and diversification in addressable markets
●Significant progress made in key international countries; international sales grew to 30% of total sales
●Industry Leader in Sustainability - only U.S. aerospace and defense company to receive Gold Class distinction from RobecoSAM for excellence in sustainability performance
Innovation:Execute technology strategy, ensuring robust innovation, collaboration and strategic partnering
●Significant developments in directed energy and hypersonics
●Large strategic investments made in research and development
Talent Management:Attract, develop and retain the workforce needed to deliver commitments to customers and stockholders
●Achieved high retention rate of top performers
●Completed key rotations in executive leadership positions
●Successfully executed diversity and inclusion initiatives
Strategic & Operational Payout Factor
200%
The Compensation Committee reviewed these accomplishments and recommended this factor to recognize the Corporation’s exceptional performance in a highly competitive environment while undertaking major strategic initiatives.
41
2018 Proxy Statement
      39

~~Table of Contents~~
~~Executive Compensation~~
~~Enterprise Strategic Assessment (20% of Enterprise Performance)~~
The Enterprise strategic performance goals were set to further develop focus around growth of the core businesses, sustaining return in new businesses, maximizing international and adjacent business opportunities and talent management. We exceeded the target for each goal in this category.
~~2015 Strategic Measures~~ ~~Weighting~~
% ~~Assessment Summary~~ ~~2015~~
~~Assessment~~
Meet all Enterprise Focus Program objectives for 2015 and drive new Enterprise performance through winning new business, maintaining all critical programs core to our business and adjacent market opportunities. 60
●~~Business capture and retention of existing business significantly exceeded target level.~~
~~Significantly~~
~~Exceeded~~
~~Identify growth areas internationally and position the Corporation for successful entry and sustainable returns in these areas.~~ 20
●~~Continued expansion, increased orders and exceeded sales goals in international markets.~~
~~Significantly~~
~~Exceeded~~
Embed our workforce planning strategies to define the capabilities needed for today and tomorrow, delivering an integrated talent management strategy that reinforces our culture of leadership and performance. 20
●~~Exceeded workforce goals through retention, merit increase differentiation and placement of high performers in critical positions.~~
~~Exceeded~~

~~Performance Rating (Strategic)~~
Table of Contents
~~1.20~~
~~Enterprise Operational Assessment (20% of Enterprise Performance)~~
~~The operational performance targets were set with a focus on achieving Mission Success~~^® ~~and no Red Programs. We exceeded the target for Mission Success~~^® (based on a list of identified critical client events or deliverables). Additionally, given the difficulty of achieving an aspirational goal of no Red Programs (considering there are over 200 programs that are valued over $100 million), the maximum assessment applies only if the goal was accomplished.
~~2015 Operational Measures~~ ~~Weighting~~
% ~~Assessment Summary~~ ~~2015~~
~~Assessment~~
~~Achieve Mission Success~~^® ~~on identified critical events.~~ 50
●~~Continued operational excellence with 98% Mission Success~~^® ~~in targeted events.~~
~~Significantly Exceeded~~
~~No Red Programs.~~ 50
●~~Continued low rate of Red Programs.~~
~~Exceeded~~
Executive Compensation
Summary of Annual Incentive Payout Calculations
No changes were made to annual incentive target percentages for any of the NEOs for 2017. The final payout factor and payout amounts for each of our NEOs, as determined by the Board, are shown below:
Summary of 2017 Enterprise Performance & Overall Payout Factor
Weight       2017 Factors       Weighted Payout
Financial 70% 159% 111%
Strategic & Operational 30% 200% 60%
Overall Payout Factor 171%

~~Performance Rating (Operational)~~ ~~1.25~~

~~Overall Enterprise Performance Factor~~
~~Based on the results discussed above, the calculated 2015 Enterprise Performance Factor was 1.20. In assessing this rating, the~~
NEO Base Salary
($) Target % of Salary
(%) Target Award
($) X Overall Payout
Factor = Payout
($)
Ms. Hewson 1,695,000       175       2,966,250                     5,072,300
Mr. Tanner 1,000,000 110 1,100,000 1,881,000
Mr. Bennett 855,000 95 812,250    171%    1,388,900
Mr. Carvalho 855,000 95 812,250 1,388,900
Ms. Lavan 795,000 95 755,250 1,291,500
2017 Long-Term Incentive Compensation Committee considered a variety of factors in addition to the calculated score to determine the final Enterprise Performance Factor. The Compensation Committee reviewed the outstanding financial, strategic and operational results while also considering the efforts taken in reshaping the Corporation’s portfolio for future growth, which included the acquisition of Sikorsky and the realignment of the IS&GS businesses. The Compensation Committee recognized that these initiatives have far-reaching consequences, but are difficult to forecast, do not readily lend themselves to an advance goal setting structure and fall outside the normal formulaic assessment of achievements. The Compensation Committee also considered other achievements in 2015 that were not part of the forecasted metrics, including our record backlog in 2015, management’s execution of strategic priorities without disruption to existing businesses, international growth and affordability improvements. The Compensation Committee increased the Enterprise Factor because they viewed the Corporation’s 2015 successes as the result of a coordinated Corporate-wide effort.
42~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Executive Compensation~~
In light of these accomplishments in tandem with our exceptional performance in 2015 against its pre-set goals, the Compensation Committee approved a discretionary increase of 0.10. The Enterprise Factor that is used to calculate annual incentive payouts is applied to all Executives of the Corporation (not just the NEOs).
Goal       Performance Rating       Weighting       Result
Financial 1.20 X .60 .72
Strategic 1.20 X .20 .24
Operational 1.25 X .20 .25
Calculated Enterprise Factor (Rounded to nearest .05) 1.20
Discretionary Factor 0.10

~~Final Enterprise Factor~~ ~~1.30~~

~~Business Segment Performance~~
At the January 2015 meeting, the Compensation Committee approved key financial, strategic and operational performance commitments that would be used to evaluate each Business Segment’s performance. At its January 2016 meeting, the Compensation Committee assessed financial, strategic and operational goals specific to each Business Segment to determine the performance factors. The following chart describes indicative accomplishments of each Business Segment among a wide range of measures and performance results that were reviewed.
Business Segment     Measure     Weight
%     Indicative Financial, Strategic, and Operational Accomplishments     Performance
Factor
Aeronautics Financial 60
●Exceeded Orders, Sales and Segment Operating Profit goals.
1.25
Strategic 20
●Stabilized F-35 production profitability and received C-130J multi-year contract.
Operational 20
●Outgoing product quality improved by 52%.
Information Systems &
Global Solutions Financial 60
●Exceeded all financial goals with strong Cash from Operations.
1.20
Strategic 20
●Strong performance without major business disruption due to strategic review businesses.
Operational 20
●100% Mission Success^®.
Missiles & Fire
Control (MFC) Financial 60
●Exceeded financial goals with record Orders and Cash from Operations.
1.25
●Secured key franchise programs and expanded internationally.
Strategic 20
●100% Mission Success^®. No Red Programs.
Operational 20
Mission Systems &
Training (MST) Financial 60
●Exceeded all financial goals with record Orders and Backlog.
1.25
●Successfully executed acquisition and integration of Sikorsky.
Strategic 20
●100% Mission Success^®. No Red Programs.
Operational 20
Space Systems Financial
Strategic 60
20
●Exceeded all financial goals with strong Sales, Segment Operating Profit and Cash from Operations.
1.25
Operational 20
●Exceptional program performance and successful growth in protected markets.
●100% Mission Success^®. No Red Programs.
LM International* Financial 60
●Exceeded all financial goals, setting a record high in international Sales and having the highest Orders in 15 years.
1.25
Strategic 20
●Improved customer relationships and strategies in key markets.
Operational 20
●Facilitated enterprise-wide collaboration with international customers.
EO Business Segment Factor (Rounded Average) 1.25

* LM International supports each of the other Business Segments named above in our strategy to grow our international sales. Our international operating results are included within each of the other Business Segments’ operating results as presented in our 2015 Annual Report on Form 10-K.

~~2016 Proxy Statement~~
43

~~Table of Contents~~
~~Executive Compensation~~
~~Individual Performance~~
~~For 2015, the following individual performance definitions were used, which align with the Corporation’s individual performance management system:~~
~~Factor~~ ~~Performance Definitions~~
~~1.15 – 1.25~~ ~~Significantly exceeded all or majority of commitments and met or exceeded all behavioral expectations.~~
~~1.00 – 1.15~~ ~~Exceeded all or majority of commitments and met or exceeded behavioral expectations.~~
~~0.75 – 1.00~~ ~~Achieved all or majority of commitments and met all or majority of behavioral expectations.~~
~~0.00 or 0.50 – 0.75~~ ~~Did not achieve majority of commitments and/or did not meet majority of behavioral expectations.~~

In January 2016, the Compensation Committee approved a factor for each NEO based on achievement of individual performance goals established at the beginning of 2015. The individual goals and assessments take into account both the Enterprise and/or Business Segment results, as well as the individual’s impact on the overall organization, the difficulty of their roles and their leadership contributions. The Compensation Committee evaluated the performance of each of our NEOs and assigned an individualperformance factor for their 2015 awards. The Compensation Committee concluded that the performance of each of the NEOs exceeded his or her commitments for the year and warranted an individual performance factor above the 1.0 target level. In making that determination, the Compensation Committee took a wide range of accomplishments into account including but not limited to the following:
~~NEO~~ ~~Performance Considerations~~ ~~Performance~~
~~Factor~~
~~Ms. Hewson~~
●~~Significantly exceeded Enterprise financial, strategic and operational goals and achieved record Backlog.~~
~~1.25~~
●~~Led the reshaping of the Corporation’s portfolio for future growth through the acquisition of Sikorsky and realignment of the IS&GS business.~~
●~~Drove international business growth through the implementation of strategic initiatives, key wins and strong operational performance.~~
~~Mr. Tanner~~
●~~Significantly exceeded Enterprise financial goals.~~
~~1.25~~
●~~Successfully closed Sikorsky acquisition, including obtaining temporary and long-term financing at favorable rates.~~
●~~Provided financial leadership to align corporate costs to the new organization after completion of strategic actions.~~
~~Mr. Bennett~~
●~~Significantly exceeded MST’s financial goals.~~
~~1.25~~
●~~Successfully executed portfolio shaping initiatives with the Sikorsky acquisition.~~
●~~Successfully executed MST’s growth strategy, resulting in record Orders and Backlog.~~
~~Mr. Carvalho~~
●~~Exceeded Aeronautics Orders, Sales, and Segment Operating Profit goals.~~
~~1.25~~
●~~Achieved F-35 operational goals, including F-35 United States Marine Corps Initial Operating Capability.~~
●~~Ensured key aircraft deliveries were achieved across the portfolio while continuing to make significant progress in outgoing product quality and production cost performance.~~
~~Ms. Lavan~~
●~~Successful litigation management reducing corporate risk profile.~~
~~1.20~~
●~~Executed cost-management initiatives.~~
●~~Cross functional leadership and collaboration in portfolio shaping activities.~~
~~Summary of Annual Incentive Payout Calculations~~
NEO       Base
Salary
($)       Target %
of Salary
(%)       Target
Award
($)     X        Enterprise
Factor     X     Business
Segment
Factor     X     Individual
Factor        =     Payout*
($)
Ms. Hewson 1,565,000 175 2,738,750 1.30 1.25 1.25 5,477,500
Mr. Tanner 925,000 105 971,250 1.30 1.25 1.25 1,942,500
Mr. Bennett* 790,000 95/90 717,715 1.30 1.25 1.25 1,435,430
Mr. Carvalho 790,000 95 750,500 1.30 1.25 1.25 1,501,000
Ms. Lavan 735,000 95 698,250 1.30 1.25 1.20 1,361,600

* ~~Mr. Bennett’s Target % was increased during the performance year to reflect the change in the scope of his role after the acquisition of Sikorsky.~~

44~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Executive Compensation~~
~~2015 Long-Term Incentive Compensation~~
~~The following summary shows the 2015~~
The following summary shows the 2017 LTI compensation mix for the CEO, EVPs and Senior Vice Presidents (SVPs) and other principal terms of the awards.
~~% of Target LTI~~ ~~Form~~ ~~Principal Terms of Awards~~
~~PSUs~~ 50 ~~Equity~~ ~~Minimum, target and maximum award levels based on three-year:~~
●~~Relative TSR (50%)~~
●~~ROIC (25%)~~
●~~Performance Cash (25%)~~
●~~PSU awards are subject to the following caps:~~
– ~~200% of target shares~~
– ~~Up to 400% of stock price on date of grant times shares earned~~
– ~~Relative TSR measure capped at 100% if the Corporation’s TSR is negative~~
~~LTIP~~ 20 ~~Cash~~ ~~Minimum, target and maximum award levels based on three-year:~~
●~~Relative TSR (50%)~~
●~~ROIC (25%)~~
●~~Performance Cash (25%)~~
●~~LTIP payout is subject to the following caps:~~
– ~~200% of target amount~~
– ~~Relative TSR measure capped at 100% if the Corporation’s TSR is negative~~
~~RSUs~~ 30 ~~Equity~~ ~~RSUs vest 100% three years after the grant date.~~
~~Forfeiture to extent grant date value exceeds:~~
●~~CEO – 0.2% of actual 2015 Performance Cash~~
●~~Other Elected Officers – 0.1% of actual 2015 Performance Cash~~

In determining the appropriate level of equity grants for 2017, the Compensation Committee took into consideration the long-term incentive market rate (50th percentile) along with a variety of other factors, including the number of awards outstanding and shares remaining available for issuance under the Corporation’s equityincentive plans, the number of shares that would be issued under contemplated awards over the range of potential performance achievement, the total number of the Corporation’s outstanding shares, the resulting implications for stockholder dilution and the number of shares granted to our executives year-over-year.
40     www.lockheedmartin.com/investor
Table of Contents
Executive Compensation
PSU Awards (50% of the LTI award)
PSU awards are calculated by multiplying the overall target LTI award value by the weighting assigned to the PSU element. The total PSU value is then multiplied by the weighting assigned to each PSU component (50% to Relative TSR, 25% to ROIC, 25% to Performance Cash). The number of PSUs granted is based on the grant date fair market value of each PSU element using the Monte Carlo simulation method for the Relative TSR component and the grant date fair market value discounted to reflect the deferral of dividends for ROIC and Performance Cash components.
Each NEO’s PSU target number of shares is determined at the beginning of the three-year performance period and the actual number of shares earned at the end of the period is calculated based on our performance measured against the three financial metrics.
The number of shares granted at the end of the cycle can range from 0% to 200% of the applicable target number of shares. If TSR is negative at the end of the performance cycle, the rating for 2015, the Compensation Committee took into consideration a variety of factors, including the number of awards outstanding and shares remaining available for issuance under the Corporation’s equity incentive plans, the number of shares that would be issued under contemplated awards over the range of potential performance achievement, the total number of the Corporation’s outstanding shares, the resulting implications for stockholder dilution and the number of shares granted to our executives year over year.
~~PSU Awards (50% of the LTI award)~~
PSU awards are calculated by multiplying the overall target LTI award value by the weighting assigned to the PSU element. The total PSU value is then multiplied by the weighting assigned to each PSU component (50% to Relative TSR, 25% to ROIC, 25% to Performance Cash). The number of PSUs granted is based on the fair value of each PSU element on the date of grant using the Monte Carlo simulation method for the Relative TSR component and the fair value on the date of grant discounted to reflect the deferral of dividends for ROIC and Performance Cash components.
Each NEO’s PSU target number of shares is determined at the beginning of the three-year performance period and the actual number of shares earned at the end of the period is calculated based on our performance measured against the three financial metrics: Relative TSR, ROIC and Performance Cash.
~~The number of shares granted at the end of the cycle can range from 0% to 200% of the applicable target number of shares. If TSR is negative at the end of the performance cycle, the ratingfor~~ the Relative TSR measure is capped at 100%. In addition, the maximum value that can be earned under a PSU award is 400% of the stock price on the date of grant times the shares earned. The award calculation is formulaic and no adjustment can be made to the final number of shares granted. Participants also receive deferred dividend equivalents on the shares earned, which are only paid following vesting of the underlying shares.
~~LTIP Awards (20% of the LTI award)~~
~~LTIP awards are cash-based and are calculated by multiplying the overall target LTI award value by the weighting assigned to the LTIP element.~~
Each NEO’s LTIP target is determined at the beginning of the three-year performance period and the actual award earned at the end of the period is calculated based on the same performance measures as those used for the PSUs: Relative TSR, ROIC and Performance Cash. Payouts can range from 0% to 200% of the applicable target. The award calculation is formulaic and no adjustment can be made to the final payout factor.
~~For the 2015-2017 LTIP grants, any amount payable to a single participant in excess of $10 million will be forfeited.~~
~~RSU Awards (30% of LTI award)~~
~~RSU awards are calculated by multiplying the overall target LTI award value by the weighting assigned to the RSU element. The number of RSUs granted is determined by the fair value~~ on the date of grant times the shares earned. The award calculation is formulaic pursuant to the provisions defined in the award agreement and no adjustment can be made to the final number of shares granted, which is determined based on the performance outcomes relative to our pre-set metrics and goals. Participants also accrue dividend equivalents on the shares earned, which are paid in cash following vesting of the underlying shares.
LTIP Awards (20% of the LTI award)
LTIP awards are cash-based and are calculated by multiplying the overall target LTI award value by the weighting assigned to the LTIP element.
Each NEO’s LTIP target is determined at the beginning of the three-year performance period and the actual award earned at the end of the period is calculated based on the same performance measures as those used for the PSUs: Relative TSR, ROIC and Performance Cash. Payouts can range from 0% to 200% of the applicable target. The award calculation is formulaic pursuant to the provisions defined in the award agreement and no adjustment can be made to the final payout factor, which is determined based on the performance outcomes relative to our pre-set metrics and goals.
For the 2017-2019 LTIP grants, any amount payable to a single participant in excess of $10 million will be forfeited.
RSU Awards (30% of LTI award)
RSU awards are calculated by multiplying the overall target LTI award value by the weighting assigned to the RSU element. The number of RSUs granted is determined by the grant date fair market value discounted to reflect deferral of dividends.
~~2016 Proxy Statement~~
45

~~Table of Contents~~
~~Executive Compensation~~
All RSUs awarded to NEOs in 2015 were subject to forfeiture to the extent the grant date value of the RSUs exceeded 0.2% of 2015 Performance Cash in the case of the CEO and 0.1% of 2015 Performance Cash in the case of each of the other NEOs. These performance requirements were satisfied and no forfeitures occurred. Deferred dividend equivalents are accrued during the vesting period and paid following vesting of the underlying shares.
~~Selection of Performance Measures~~
The LTI performance metrics approved by the Compensation Committee are measures that we believe most effectively support our long-term business and strategic goals and directly tie the long-term goals of our executive leadership team to the interests of our stockholders. The measurements used for the financial component of our 2015 annual incentive plan (Orders, Sales,
All RSUs awarded to NEOs in 2017 were subject to forfeiture to the extent the grant date value of the RSUs exceeded 0.2% of 2017 Performance Cash in the case of the CEO and 0.1% of 2017 Performance Cash in the case of each of the other NEOs. These performance requirements were satisfied and no forfeitures occurred. Deferred dividend equivalents are accrued during the vesting period and paid in cash following the vesting of the underlying shares.
Selection of LTI Performance Measures
The LTI performance metrics approved by the Compensation Committee are measures that we believe most effectively support our long-term business and strategic goals and directly tie the long-term goals of our executive leadership team to the interests of our stockholders. The measurements used for the financial component of our 2017 annual incentive plan (Sales, Segment Operating Profit and Cash from Operations) also serve as the foundation for achieving our long-term goals such that we must consistently achieve or exceed the Corporation’s annual goals in order to achieve our LTI goals.
The selected LTI performance metrics consist of Relative TSR (50% weight), ROIC (25% weight) and Performance Cash (25%weight). We chose these three metrics because we believe they represent the best measures of value creation for the Corporation over a long-term period. We also applied equal weighting to the market-based measure of value creation, TSR, to what we believe are the best internal measures of value creation, Performance Cash and ROIC.
We selected Relative TSR to measure our performance against our industry peers in the S&P Aerospace Index. Because every industry faces different challenges and opportunities, we believe that comparing our TSR against peers facing a similar business environment is preferred to those outside our industry. While the S&P Aerospace Index is, in our judgment, the best index against which to compare our Relative TSR, we recognize that it does not perfectly correlate to the environment in which Lockheed Martin operates since some firms in the index are almost entirely in the commercial aerospace business, some are entirely government contractors and some have a mixture of the two businesses.
2018 Proxy Statement
      41

Table of Contents
Executive Compensation
Because the Relative TSR index is not perfectly aligned with the businesses in which Lockheed Martin operates and because any number of macro-economic factors that could affect market performance are beyond the control of the Corporation, we use ROIC and Performance Cash as internal measures that can be directly affected by management’s decisions. ROIC measures how effectively we employ our capital over time, while our Performance Cash provides the means for investment or value creation. By including a cash measure in both our annual and long-term incentive plans, the plans also mitigate the risk of short-term cash strategies that do not create long-term value.
In tandem, we believe that these metrics drive the behaviors of our management team in ways that are intended to create the most value for our stockholders.
Setting Goals for LTI (PSUs and LTIP)
Our long-range planning process is used to establish the target (100% level of payment) for the Performance Cash and ROIC metrics in the PSU and LTIP grants. In setting minimum and maximum levels of payment, we reviewed historical levels of performance against long range plan commitments, and conducted sensitivity analyses on alternative outcomes focused on identifying likely minimum and maximum boundary performance levels. Levels between 100% and the minimum and maximum levels were derived using linear interpolation between the performance hurdles. As with our annual incentive performance goals, PSU and LTIP payouts deteriorate more rapidly as we move from target level to the minimum payout level than they increase as we move from target level to maximum payout level. This asymmetry reflects the importance we place on meeting our financial commitments.
The specific Performance Cash and ROIC target values for the 2017-2019 PSU and LTIP plans are not publicly disclosed at the time of grant due to the proprietary nature and competitive sensitivity of the information. However, the method used to calculate the awards will be based on actual performance compared to the Corporation’s 2017-2019 targets, which use straight-line interpolation between points. The individual award agreements require the adjustment of goals to ensure that the ultimate payouts are not impacted to the benefit or detriment of management by specified events, such as unplanned pension contributions, changes in accounting (GAAP) standards or impact of an acquisition or divestiture valued at more than $1 billion. The Compensation Committee does not have discretion to adjust the results of the PSU and LTIP awards beyond the adjustments specified in the award agreements.
2017-2019 Performance Goals
Relative TSR (50%)* Performance Cash (25%) ROIC (25%)
Relative
TSR
Percentile Payout
Factor       Performance
Cash
Metric Payout
Factor       ROIC
Performance
Metric Payout
Factor
75th – 100^th 200% Plan + ≥ $2.0B 200% Plan + ≥ 160 bps 200%
60^th 150% Plan + $1.5B 175% Plan + 120 bps 175%
50^th 100% (Target) Plan + $1.0B 150% Plan + 80 bps 150%
40^th 50% Plan + $0.5B 125% Plan + 40 bps 125%
35^th 25% Plan 100% Plan 100%
< 35^th 0% Plan - $0.2B 75% Plan - 10 bps 75%

* Relative TSR performance is measured against our industry peers in the S&P Aerospace Index.
Plan - $0.5B 50% Plan - 20 bps 50%
Plan - $0.7B 25% Plan - 30 bps 25%
Below Plan - $0.7B 0% Below Plan - 30 bps 0%
42     www.lockheedmartin.com/investor
Table of Contents
Executive Compensation
2015-2017 LTIP and PSU Awards
The cash-based LTIP and share-based PSU payouts for the three-year performance period ended December 31, 2017, were calculated by comparing actual corporate performance for each metric for the period January 1, 2015 through December 31, 2017, against a table of payment levels from 0% to 200% (with the 100% payout level being considered target) established at the beginning of the performance period in January 2015.
For the three-year performance period ended December 31, 2017, actual results were above targeted levels for Relative TSR (weighted 50%) and Performance Cash (weighted 25%) metrics, which resulted in 200% and 179.6% payout factors, respectively. For the same period, actual ROIC (weighted 25%) was 17.1% compared to our pre-established target of 17.7% and generated a 0.0% payout factor, which pursuant to the formulaic nature of our plan, was negatively impacted by the debt issuance associated with our acquisition of Sikorsky. The awards are calculated pursuant to the provisions provided in the award agreements. The Compensation Committee cannot make any adjustments to the final payout factor.
Measure       Performance
Target       Performance
Result       Weighting       Payout Factor
Relative TSR 50^thPercentile 78^thPercentile 50% 200.0%
Performance Cash* $15.3B $16.893B 25% 179.6%
ROIC* 17.7% 17.1% 25% 0.0%
2015-2017 LTIP Payouts
Based on a weighted payout factor of144.9%, the following table shows the payouts under the 2015-2017 LTIP made in January 2018.
2015–2017 LTIP
NEO Target
($)       Payout
($)
Ms. Hewson 2,240,000 3,245,760
Mr. Tanner 803,000 1,163,547
Mr. Bennett 500,000 724,500
Mr. Carvalho 600,000 869,400
Ms. Lavan 520,000 753,480
2015-2017 PSU Awards
The 2015-2017 target PSU award value was allocated to each performance measure based on the pre-defined weightings, namely 50% to Relative TSR, 25% to ROIC, and 25% to Performance Cash. The number of PSUs granted for each element is based on the grant date fair market value using Monte Carlo simulation method for the Relative TSR component and the grant date fair market value discounted to reflect the deferral of dividends for ROIC and Performance Cash components. PSU awards earned are calculated by multiplying the payout factor for each performance metric by the target number of units for each performance metric. The actual value realized by the NEOs at vesting also depends on our stock price, which may be higher or lower than the grant date fair market value.
2015-2017 Target PSUs (#) Total Shares
NEO       Relative TSR Performance Cash* ROIC* Distributed/Earned
Ms. Hewson 14,834       7,281       7,281       42,745
Mr. Tanner 5,318 2,610 2,610 15,324
Mr. Bennett 3,311 1,625 1,626 9,541
Mr. Carvalho 3,974 1,950 1,951 11,451
Ms. Lavan 3,444 1,690 1,691 9,924

*
See Appendix B for definition of macro-economic factors that could affect market performance are beyond the control of the Corporation, we use ROIC and Performance Cash as internal measures that can be directly affected by management’s decisions. ROIC measures how effectively we employ our capital over time, while our Performance Cash over time provides the means for value creation through capital deployment. By including a cash measure in both our annual and long-term incentive plans, the plans also mitigate the risk of short-term cash strategies that do not provide long-term value.non-GAAP terms.

~~In tandem, we believe that these metrics drive the behaviors of our management team in ways that are intended to create the most value for our stockholders.~~2018 Proxy Statement
~~Setting Goals for LTI (PSUs and LTIP)~~      43
Our long-range planning process is used to establish the target (100% level of payment) for the Performance Cash and ROIC metrics in the PSU and LTIP grants. In setting minimum and maximum levels of payment, we reviewed historical levels of performance against long-range plan commitments, and conducted sensitivity analyses on alternative outcomes focused on identifying likely minimum and maximum boundary performance levels. Levels between 100% and the minimum and maximum levels were derived using linear interpolation between the performance hurdles. As with our annual incentive performance goals, PSU and LTIP payouts deteriorate more rapidly as we move from target level to the minimum payout level than they increase as we move from target level to maximum payout level. This asymmetry reflects the importance we place on meeting our financial commitments.
The specific Performance Cash and ROIC target values for the 2015-2017 PSU and LTIP plans are not publicly disclosed at the time of grant due to the proprietary nature and competitive sensitivity of the information. However, the method used to calculate the awards will be based on actual performance compared to the Corporation’s 2015-2017 targets as shown below, which use straight-line interpolation between points. The Compensation Committee does not have discretion to adjust the results of the PSU and LTIP awards.
46~~www.lockheedmartin.com/investor~~

Table of Contents
Executive Compensation
2018 Compensation Decisions
2018 Base Salary
The Compensation Committee approved the following 2018 salary increases based on the market rate, along with other factors such as the executive’s performance and internal pay equity.
NEO 2017 Base Salary
($) 2018 Base Salary
($) Increase
Ms. Hewson 1,695,000 1,745,000 3%
Mr. Tanner 1,000,000 1,030,000 3%
Mr. Bennett 855,000 880,000 3%
Mr. Carvalho        855,000        880,000        3%
Ms. Lavan 795,000 820,000 3%
2018 Annual Incentive Metrics and Goals
There were no changes to our annual incentive plan design for the 2018 performance year.
The Compensation Committee approved the key corporate commitments set forth below for purposes of assessing performance in 2018. Although the annual incentive plan uses a formulaic approach to determine payout, the Compensation Committee retains discretion to modify the payouts for the CEO, other NEOs and all other officers elected by the Board.
2018 Financial Goals (Weight 70%)
The financial commitments are consistent with our long-range plan commitments, and are the same ranges we provided as public guidance in January 2018 in our year-end earnings release and in accordance with the new revenue recognition standard. Our Cash from Operations goal for 2018 is lower than our 2017 goal because the Corporation is accelerating future pension contributions of $3.4 billion to 2018 in order to preserve the benefit of the associated tax deduction at the higher statutory rate in 2017. These commitments for 2018 are set forth below.
2018 Commitments Weighting 2018 Goal
($)
Sales 20% 50,000 – 51,500M
Segment Operating Profit 40% 5,200 – 5,350M
Cash from Operations 40%       ≥ 3,000M
For the purposes of assessing performance under our annual incentive program, results may be adjusted from reported amounts for the incremental benefits or impacts associated with non-recurring items, such as acquisitions or divestitures. Cash from Operations results have been adjusted in prior years for unplanned pension contributions so that the impact on incentive compensation is not a factor in the decision to make the additional pension contribution.
2018 Strategic and Operational Goals (Weight 30%)
The strategic and operational commitments for 2018 are set forth below:
●
~~2015-2017 Performance Goals~~Focus Programs:Secure Key Focus Program wins and achieve Keep Sold Program milestones
Relative TSR (50%)*       Performance Cash (25%)       ROIC (25%)
Relative
TSR
Percentile Payout
Factor Performance
Cash
Metric Payout
Factor       ROIC
Performance
Metric Payout
Factor
75^th– 100^th 200% Plan + ≥ $2.0B 200% Plan + ≥ 160 bps 200%
60^th 150% Plan + $1.5B 175% Plan + 120 bps 175%
50^th 100% (Target) Plan + $1.0B 150% Plan + 80 bps 150%
40^th 50% Plan + $0.5B 125% Plan + 40 bps 125%
35^th 25% Plan * 100% Plan 100%
<35^th 0% Plan - $0.2B 75% Plan - 10 bps 75%

* Relative TSR performance is measured against our industry peers in the S&P Aerospace Index. Plan - $0.5B 50% Plan - 20 bps 50%
Plan - $0.7B 25% Plan - 30 bps 25%
  Below Plan - $0.7B   0%   Below Plan - 30 bps   0%

●
~~2013-2015 LTIP~~Mission Success®:Achieve Mission Success® milestones
●
Program Performance:Execute programs to achieve customer satisfaction and ~~PSU Awards~~increase stockholder value
The cash-based LTIP and share-based PSU payouts for the three-year performance period ended December 31, 2015, were calculated by comparing actual corporate performance for each metric for the period January 1, 2013 through December 31, 2015, against a table of payment levels from 0% to 200% (with the 100%payout level being considered target) established at the beginning of the performance period in January 2013. The award calculation is formulaic and no adjustment can be made to the final payout factor. The S&P Aerospace Index was used for the 2013-2015 Relative TSR goal, since that Index was specified at the time the awards were made.
Measure       Performance
Target       Performance
Result       Weighting       Payout Factor
Relative TSR 50^thPercentile 90^thPercentile 50% 200.0%
Performance Cash $13.00B $14.95B 25% 197.3%
ROIC 15.7% 15.9% 25% 112.5%

●
~~2013-2015 LTIP Payouts~~Portfolio Shaping / Enterprise Initiatives:
~~Based~~Assess the company portfolio on ~~a weighted payout factor of 177.4%, the following table shows the payouts under the 2013-2015 LTIP.~~
2013–2015 LTIP
NEO Target
($)       Payout
($)
Ms. Hewson $ 2,040,000 $ 3,618,960
Mr. Tanner $ 738,000 $ 1,309,212
Mr. Bennett $ 450,000 $ 798,300
Mr. Carvalho¹ $ 479,000 $ 849,746
Ms. Lavan¹ $ 965,000 $ 1,711,910

~~(1)~~   ~~Mr. Carvalho’s and Ms. Lavan’s LTIP target awards represented 40% of their 2013 long-term incentive grant.~~

~~2016 Proxy Statement~~an ongoing basis to maximize stockholder value, including M&A activity, streamlining operations and other Enterprise-wide initiatives
47

●
Innovation:Execute technology strategy, ensuring robust innovation, collaboration and strategic partnering
●
Talent Management:Attract, develop and retain the workforce needed to deliver commitments to customers and stockholders
2018 Long-Term Incentive Award Opportunities
The Compensation Committee approved 2018 LTI award opportunities for all NEOs relative to their respective 2018 LTI market rate, the executive’s performance and internal pay equity.
For 2018, the LTI award opportunity for the CEO and the other NEOs is allocated 50% toward PSUs, 20% toward LTIP and 30% toward RSUs, unchanged from the 2017 equity pay mix.
The measures and terms of the 2018-2020 PSUs and LTIP awards are similar to the 2017-2019 awards (see pages 40-42). For the 2018-2020 LTIP grants, any amount payable to a single participant in excess of $10 million will be forfeited. RSU grants will no longer be subject to a one-year performance metric in light of the repeal of the exemption to the $1 million cap on deductibility under section 162(m) of the Internal Revenue Code.
44     www.lockheedmartin.com/investor

Table of Contents
Executive Compensation
~~2013-2015 PSU Awards~~
Other Compensation Matters
Our Use of Independent Compensation Consultants
The independent compensation consultant provides important information about market practices, the types and amounts of compensation offered to executives generally and the role of corporate governance considerations in making compensation decisions. The Compensation Committee’s charter authorizes it to retain outside advisors that it believes are appropriate to assist in evaluating executive compensation.
For 2017, the Compensation Committee continued to retain Meridian as an independent compensation consultant. In connection with its retention of Meridian, the Compensation Committee considered the following factors in assessing Meridian’s independence:
The 2013-2015 target PSU award value was allocated to each performance measure based on the pre-defined weightings, namely 50% to Relative TSR, 25% to ROIC, and 25% to Performance Cash. The number of PSUs granted for each element is based on the fair value on the date of grant using Monte Carlo simulationmethod
● Meridian’s services for the ~~Relative TSR component~~Corporation are limited to executive and director compensation.
●
The compensation paid to Meridian is less than 1% of Meridian’s revenues.
●
Meridian has business ethics and insider trading and stock ownership policies, which are designed to avoid conflicts of interest.
●
Meridian employees supporting the ~~fair value on~~engagement do not own Lockheed Martin securities.
●
Meridian employees supporting the ~~date~~engagement have no business or personal relationships with members of ~~grant discounted to reflect~~ the ~~deferral of dividends~~Compensation Committee or with any Lockheed Martin executive officer.
At its February 2018 meeting, the Compensation Committee renewed the engagement of Meridian. At that time, Meridian confirmed the continuing validity of each of the factors described above.
The nature and scope of Meridian’s engagement was determined by the Compensation Committee and not limited in any way by management. During 2017, Meridian also provided consultative services to the Governance Committee regarding the compensation of the Corporation’s independent directors. A description of the services provided by Meridian can be found on pages 34 and 65.
Policy Regarding Timing of Equity Grants
We have a corporate policy statement concerning the grant of equity awards. Under that policy:
●
The Compensation Committee is responsible for ROIC and Performance Cash components. PSU awards earned are calculated by multiplying the payout factor for each performance metric by the target number of units granted. The actual value realized by the NEO also depends on the price of our stock which may be higher or lower thandetermining the grant date ~~fair value.~~

2013-2015 Target PSUs (#) Total Shares
Distributed/
Earned
NEO Relative TSR       Performance Cash       ROIC
Ms. Hewson 41,715 14,287 14,288       127,693
Mr. Tanner 15,083 5,166 5,166 46,171
Ms. Bennett 9,200 3,151 3,151 28,162
Mr. Carvalho¹ 983 336 337 3,009
Ms. Lavan¹ 1,972 675 675 6,036

~~(1)~~   ~~Mr. Carvalho’s and Ms. Lavan’s PSU target awards represented 10% of their 2013 long-term incentive grant.~~
~~Benefit, Retirement and Perquisite Programs~~
~~In addition to base salary and annual and long-term incentive compensation, we offer a number~~ of other compensatory arrangements to our executive officers. These indirect elements of executive compensation are not performance-based. The purpose for offering these benefits is to provide an overall total rewards package that ensures security of executives, are for business-related purposes, and are competitive with the other companies with which we compete for talent. Set forth below is a summary of the benefit, retirement and perquisite programs available to our NEOs.
~~Element~~ ~~Description~~
~~Health, Welfare and Retirement~~
~~Benefits~~
Our NEOs are eligible for savings, pension, medical and life insurance benefits under the plans available to salaried, non-union employees. We also make available supplemental pension and savings plans to employees (including the NEOs) to make up for benefits that otherwise would be unavailable due to Internal Revenue Service (IRS) limits on qualified plans. These plans are restorative and do not provide an enhanced benefit. We also offer a plan for the deferral of short-term and certain long-term incentive compensation, which allows our executives to defer all or a portion of their incentive compensation as part of their overall financial planning. All NEOs are eligible for four weeks of vacation annually.
In 2014, we announced that accruals for all employees (including the NEOs) under our defined benefit plan will be frozen in two steps, with compensation accruals frozen on January 1, 2016, and service accruals frozen on January 1, 2020. Thereafter, retirement benefits will be earned through defined contribution plans.
~~Perquisites and Security~~
We provide limited perquisites as a retention and recruiting tool to provide for the health, safety and business needs of our key executives. The perquisites provided to NEOs for 2015 are described in footnotes to the Summary Compensation Table on page 56. For security reasons, our Board has directed our CEO to use the corporate aircraft for personal travel. As an additional element of our security program, we provide home security to certain executives. We believe this approach is consistent with security generally provided to corporate executives in public companies in our industry.
Given the nature of our business, additional security may be provided for travel in high-risk areas or to address particular situations. The Board believes it is important to provide this protection due to the nature of our defense business and because it believes that an employee should not be placed at personal risk due to his or her association with the Corporation’s business. In the event of a threat to an executive officer, the Classified Business and Security Committee reviews and approves the security recommended by our Chief Security Officer. We believe that providing personal security in response to threats arising out of employment by the Corporation is business-related.all equity awards.

●
48~~www.lockheedmartin.com/investor~~

~~Table~~No equity award may be backdated. A future date may be used if, among other reasons, the Compensation Committee’s action occurs in proximity to the release of ~~Contents~~
~~Executive Compensation~~
~~Element~~
~~Description~~
~~Tax Assistance~~
We do not have agreements or severance arrangements that provide tax gross-ups (tax assistance) for excise taxes imposed as a result of a change in control. In 2015, we provided tax assistance for taxable business association expenses, security expenses and travel expenses for a family member accompanying a NEO for a business reason. In addition, we paid an amount estimated to cover the income tax imposed on employees (including the NEOs) who traveled out of their home state for business and became subject to income tax in another state due to the business travel. These items are reported in the “All Other Compensation” column of our Summary Compensation Table on page 54 and are further identified in the chart included in the footnote to that table on page 57. The IRS requires that the executive pay income tax for these items even though the executive receives no cash in connection with the item. Tax assistance for these perquisites took the form of additional payments and was made for the purposes of ensuring that these perquisites and the associated tax assistance were economically neutral to the NEOs. We believe the items for which we provide tax assistance are business-related and the associated tax liability imposed on the executive would not have been incurred unless business reasons required the items to be provided.earnings or during a trading blackout period.

~~2016 Compensation Decisions~~

●
~~2016 Base Salary~~
~~The Compensation Committee approved the following 2016 salary increases based on the executive’s performance, time in position and movement in the market rate.~~
NEO 2015 Base Salary
($) 2016 Base Salary
($) %
Increase
Ms. Hewson         1,565,000         1,645,000         5%
Mr. Tanner 925,000 970,000 5%
Mr. Bennett 790,000 830,000 5%
Mr. Carvalho 790,000 830,000 5%
Ms. Lavan 735,000 770,000 5%

~~2016 Annual Incentive Plan~~
~~Following various conversations with our stockholders, Board members and plan participants concerning the complexity in design features of our annual incentive program,~~Proposed equity awards are presented to the Compensation Committee ~~engaged Meridian~~in January of each year and ~~management engaged Willis Towers Watson to review~~starting in 2018, will be presented in February of each year given a shift in the ~~design of our annual incentive plan to better align with market best practice and reduce complexity.~~
We also sought stockholder input on the proposed design changes as part of our ongoing stockholder outreach program. Our stockholders were supportive of the new design. In particular, the simplified plan designBoard meeting calendar. Off-cycle awards may be considered in ~~tandem with the enhanced weighting on financial criteria, was viewed positively by our institutional stockholders.~~
~~In the September 2015 meeting,~~ the Compensation Committee approved amendments to the annual incentive plan, effective for 2016 annual incentives, to (i) eliminate the Business Segment and Individual performance factors for the CEO and her direct reports (including the NEOs); (ii) increase the weighting of the Financialcomponent from 60% to 70%Committee’s discretion in special circumstances, which may include hiring, retention or acquisition transactions.
In addition, our existing incentive performance award plan prohibits repricing of stock options or paying cash for underwater stock options.
Clawback and Other Protective Provisions
The Governance Guidelines include a clawback policy. If the Board determines that an officer’s intentional misconduct, gross negligence or failure to report such acts by another person was a contributing factor in requiring us to restate any of our financial statements or constituted fraud, bribery or another illegal act (or contributed to another person’s fraud, bribery or other illegal act) which adversely impacted our financial position or reputation, then the Board shall take such action as it deems in the best interest of the Corporation and necessary to remedy the misconduct and prevent its recurrence. Among other actions, the Board may seek to recover or require reimbursement of any amount awarded to the officer after January 1, 2008, in the form of an annual incentive bonus or LTI award.
The clawback policy is included in our annual incentive plan and in the award agreements for the RSUs, stock options, PSUs and LTIP. There were no events requiring Board consideration of a clawback action during 2017.
In the event the Board recoups incentive compensation under the Enterprise Performance factor, with the remaining 30% of the Enterprise Performance factor to be based on key strategic and operational goals; and (iii) remove Orders from the financial metric under the Enterprise component given the timing issues surrounding Orders in our industry and because they are considered under strategic and operational goals, as manifested in key new business won or retained.
The Compensation Committee, in collaboration with the executive leadership team, will continue to set pre-established measures at the beginning of the performance cycle, which will be disclosed to stockholders prospectively, similar to our current practice.
~~The new design is intended to:~~
●
~~Align with stockholder interests given the emphasis on key metrics that drive performance at the enterprise level;~~
●
~~Support a more collaborative team approach among the CEO’s direct reports, including our NEOs; and~~
●
~~Enhance line of sight and goal congruence through a simplified design for plan participants.~~

~~2016 Proxy Statement~~
49

~~Table of Contents~~
~~Executive Compensation~~
~~The change in the annual incentive formula and the weightings underlying the Enterprise component for NEOs are shown below:~~
~~Previous Design~~
~~Enterprise~~
~~Component~~ x ~~Business~~
~~Area~~
~~Component~~ x ~~Individual~~
~~Component~~
~~60%~~
~~FINANCIAL~~
~~20%~~
~~STRATEGIC~~
~~20%~~
~~OPERATIONAL~~
~~New Design~~
~~100%~~
~~Enterprise Component~~
~~70%~~
~~FINANCIAL~~ ~~30%~~
~~STRATEGIC &~~
~~OPERATIONAL~~

~~The Board or Compensation Committee may adjust a NEO’s payout at their discretion.~~
As in prior years, the Compensation Committee retains discretion in setting target levels for participants, choosing and approving metrics, assigning weighting to the metrics and assessing performance.
Under the terms of the annual incentive program, as amended, the CEO’s bonus still may not exceed 0.3% of Performance Cash from operations for the plan year and the bonus for each of the other NEOs may not exceed 0.2% of Performance Cash from operations for the plan year. These caps were not modified and remain consistent with the prior plan features. Similarly, annual incentive payouts for any participant may not exceed 200% of the target award.
No changes were made to annual incentive target percentages for any of the NEOs for 2016 other than for our EVP & CFO, which was increased to 110% of his base salary to better align with the 2016 market rate (50^th ~~percentile).~~
~~2016 Annual Incentive Metrics and Goals~~
~~The Compensation Committee approved the key corporate commitments set forth below for purposes of assessing performance in 2016.~~
~~2016 Enterprise Financial Goals (Weighted 70%)~~
The financial commitments for the Enterprise Performance Factor are consistent with our long-range plan commitments, and are the same ranges we provided as public guidance in January 2016 in our year-end earnings release. These commitments for 2016 are set forth below.
~~2016 Commitments~~ ~~Weighting~~ ~~2016 Goal~~
~~($M)~~
~~Sales~~ ~~20%~~ ~~49,500 – 51,000~~
~~Segment Operating Profit~~ ~~40%~~ ~~4,900 – 5,050~~
~~Cash from Operations~~ ~~40%~~ ≥~~5,300~~

For the purposes of assessing performance under our annual incentive program, results may be adjusted from reported amounts for the incremental benefits or impacts associated with non-recurring items, such as acquisitions or divestitures. Our 2016 public guidance assumed a full year of operations of our IS&GS business segment. The Leidos transaction is expected to be completed in the third or fourth quarter of 2016 and an adjustment could be made to take into account the completion of the transaction. Cash from Operations results have been adjusted in prior years for unplanned pension contributions so that the impact on incentive compensation is not a factor in the decision to make the additional pension contribution.
50~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Executive Compensation~~
~~2016 Enterprise Strategic and Operational Goals (Weighted 30%)~~
~~The strategic and operational commitments for the Enterprise Performance Factor for 2016 are set forth below:~~
●
~~Secure key Focus and Keep Sold Program wins.~~
●
~~Achieve Mission Success® milestones.~~
●
~~Execute programs to achieve customer satisfaction and increase stockholder value.~~
●
Review portfolio on an ongoing basis to maximize stockholder value, to include mergers and acquisition activity, execution of the strategic review and appropriate technology and other enterprise investments.
●
~~Attract, develop and retain the workforce needed to deliver commitments to customers and stockholders.~~
~~2016 Long-Term Incentive Award Opportunities~~
~~The Compensation Committee approved 2016 LTI award opportunities for all executive officers commensurate with their respective 2016 LTI market rate, the executive’s performance and time in position.~~
~~For 2016, the LTI award opportunity for the CEO and the other NEOs is allocated 50% toward PSUs, 20% toward LTIP and 30% toward RSUs.~~
~~The terms of the 2016-2018 RSU grants are the same as for the 2015-2017 RSUs awards (see page 45), other than the following changes:~~
●
The grants will vest on a pro-rata basis in the event of a divestiture (rather than accelerated vesting), unless the other party to the divestiture assumes the awards fully and continues the awards on the same terms.
●
~~The awards will be forfeited if the executive is terminated for misconduct, even if retirement eligible.~~
~~The same measures and approach used for the 2015-2017 PSU and LTIP awards (see page 45) will be used to determine the 2016-2018 PSU and LTIP awards, other than the following:~~
●
The targets for Performance Cash and ROIC will be adjusted to exclude the impact of an acquisition or divestiture valued at more than $1 billion. (Note: this provision does not apply to the 2014-2016 or 2015-2017 awards.)
●
~~The awards will be forfeited if the executive is terminated for misconduct, even if retirement eligible.~~
~~For the 2016-2018 LTIP grants, any amount payable to a single participant in excess of $10 million will be forfeited.~~
~~Other Corporate Governance Considerations in Compensation~~

~~Our Use of Independent Compensation Consultants~~
The independent compensation consultant provides important information about market practices, the types and amounts of compensation offered to executives generally and the role of corporate governance considerations in making compensation decisions. The Compensation Committee’s charter authorizes it to retain outside advisors that it believes are appropriate to assist in evaluating executive compensation.
For 2015, the Compensation Committee continued to retain Meridian as an independent compensation consultant. In connection with its retention of Meridian, the Compensation Committee considered the following factors in assessing Meridian’s independence:
●
~~Meridian does not perform other services for the Corporation.~~
●
~~The compensation paid to Meridian is less than 1% of Meridian’s revenues.~~
●
~~Meridian has business ethics and insider trading and stock ownership policies, which are designed to avoid conflicts of interest.~~
●
~~Meridian employees supporting the engagement do not own Lockheed Martin securities.~~
●
~~Meridian employees supporting the engagement have no business or personal relationships with members of the Compensation Committee or with any Lockheed Martin executive officer.~~

~~2016 Proxy Statement~~
51

~~Table of Contents~~
~~Executive Compensation~~
~~At its February 2016 meeting, the Compensation Committee renewed the engagement of Meridian. At that time, Meridian confirmed the continuing validity of each of the factors described above.~~
The nature and scope of Meridian’s engagement was determined by the Compensation Committee and not limited in any way by management. A description of the services provided by Meridian can be found on page 36.
~~Policy Regarding Timing of Equity Grants~~
~~We have a corporate policy statement concerning the grant of equity awards. Under that policy:~~
●
~~The Compensation Committee is responsible for determining the grant date of all equity awards.~~
●
No equity award may be backdated. A future date may be used if, among other reasons, the Compensation Committee’s action occurs in proximity to the release of earnings or during a trading blackout period.
●
Proposed equity awards are presented to the Compensation Committee in January of each year. Off-cycle awards may be considered in the Compensation Committee’s discretion in special circumstances, which may include hiring, retention or acquisition transactions.
~~In addition, our existing incentive performance award plan prohibits repricing of stock options or paying cash for underwater stock options.~~
~~Clawback and Other Protective Provisions~~
The Governance Guidelines include a clawback policy. Under the policy (as incorporated in our award agreements), if the Board determines that an officer’s intentional misconduct, gross negligence or failure to report such acts by another person:
●
~~was a contributing factor in requiring us to restate any of our financial statements; or~~
●
~~constituted fraud, bribery or another illegal act, or contributed to another person’s fraud, bribery or other illegal act, which adversely impacted our financial position or reputation;~~
the Board shall take such action as it deems in the best interests of the Corporation and necessary to remedy the misconduct and prevent its recurrence. Among other actions, the Board may seek to recover or require reimbursement of any amount awarded to the officer after January 1, 2008, in the form of an annual incentive bonus or LTI award.
~~The clawback policy is included in our annual incentive plan and in the award agreements for the RSUs, stock options, PSUs and LTIP.~~
~~In the event the Board recoups incentive compensation under our~~ policy, management intends to disclose the aggregate amount of incentive compensation recovered, so long as the underlying event has already been publicly disclosed in our filings with the SEC. This disclosure would appear in the proxy statement following any such Board action and would provide the aggregate amount of recovery for each event if there is more than one applicable event.
The award agreements for the NEOs also contain post-employment restrictive covenants. The post-employment restrictions were incorporated into all executive level award agreements beginning in 2011.
~~There were no clawback actions taken by the Board during 2015.~~2018 Proxy Statement
      45

Table of Contents
Executive Compensation
Anti-Hedging and Pledging Policy
Our policies prohibit hedging and pledging of Lockheed Martin stock by all directors, officers and employees.
Stock Ownership Requirements for Key Employees
To better align their interests with the long-term interests of our stockholders, we expect our officers (including the NEOs) and other members of management to maintain an ownership interest in the Corporation based on the following guidelines:
Title Annual Base
Salary Multiple
Chairman, President and CEO 6 times
Chief Financial Officer 4 times
Executive Vice Presidents 3 times
Senior Vice Presidents 2 times
NEOs are required to achieve ownership levels within five years of assuming their role and must hold net shares from vested RSUs and PSUs and net shares from options exercised until the value of the shares equals the specified multiple of base salary. The securities counted toward their respective target threshold include common stock, unvested RSUs, and stock units under our 401(k) plans and other deferral plans. Unvested PSUs at target are not counted towards ownership levels. Each of our NEOs has exceeded their respective ownership requirements.
Benefit, Retirement and Perquisite Programs
We offer other compensatory arrangements to our NEOs. The purpose for these benefits is to ensure security of executives, provide assistance with business-related expenses, and be competitive with the other companies in our industry. Below is a summary of programs available to our NEOs. Further details are described in footnotes to the Summary Compensation Table on page 51.
Health, Welfare and Retirement Benefits.Our NEOs are eligible for savings, pension, medical, disability, and life insurance benefits under the plans available to salaried, non-union employees. We offer supplemental pension and savings plans to make up for benefits that otherwise would be unavailable due to Internal Revenue Service (IRS) limits on qualified plans. These plans are restorative and do not provide an enhanced benefit. We also offer a plan for the deferral of short-term and certain long-term cash incentive compensation. All NEOs are eligible for four weeks of vacation annually.
Perquisites and Security.We provide limited perquisites, including executive physicals and personal travel on the corporate aircraft, as well as home and personal security as needed to address security concerns arising out of our business. We believe security is necessary and generally provided to executives within our industry given the nature of our business. In the event of a threat to an executive officer, the CBS Committee reviews and approves the security recommended by our Chief Security Officer. Furthermore, our Board has directed our CEO to use corporate aircraft for security reasons while on personal travel. Other NEOs may use the corporate aircraft for personal travel dependent upon circumstances and availability.
Tax Assistance.We do not have agreements or severance arrangements that provide tax gross-ups for excise taxes imposed as a result of a change in control. In 2017, we provided tax assistance for taxable security expenses, business association expenses and travel expenses for a family member accompanying a NEO for a business reason. We pay an amount estimated to cover the income tax imposed on employees who became subject to income tax in another state due to business travel. Tax assistance was provided for these items because the associated tax liability imposed on the executive would not have been incurred unless business reasons required the items to be provided.
Post-Employment, Change in Control, Divestiture and Severance Benefits
Our NEOs do not have employment agreements but participate in the Lockheed Martin Corporation Executive Severance Plan. Benefits are payable under this plan in the event of a company-initiated termination of employment other than for cause. All of the NEOs are covered under the plan.
The benefit payable in a lump sum under the plan is two weeks of basic severance plus a supplemental payment of one times the NEO’s base salary and the equivalent of one year’s target annual incentive bonus. For the CEO, the multiplier is 2.99 instead of one.
NEOs participating in the plan also receive a lump sum payment to cover the cost of medical benefits for one year in addition to outplacement and relocation services. To receive the supplemental severance benefit, the NEO must execute a release of claims and an agreement containing post-employment, non-compete and non-solicitation covenants comparable to those included in our NEOs’ LTI award agreements.
With respect to LTI, upon certain terminations of employment, including death, disability, retirement, layoff, divestiture or a change in control, the NEOs may be eligible for continued vesting on the normal schedule, immediate payment of benefits previously earned or accelerated vesting of LTI in full or on a pro rata basis.
46     www.lockheedmartin.com/investor
Table of Contents
Executive Compensation
The type of event and the nature of the benefit determine which of these approaches will apply. The purpose of these provisions is to protect previously earned or granted benefits by making them available following the specified event. We view the vesting (or continued vesting) to be an important retention feature for senior-level employees. Because benefits paid at termination consist of previously granted or earned benefits, we do not consider termination benefits as a separate item in compensation decisions. Our LTI awards do not provide for tax assistance.
In the event of a change in control, our plans provide for the acceleration of the payment of the nonqualified portion of earned pension benefits and nonqualified deferred compensation. All LTI awards require a “double trigger” for vesting to accelerate (both a change in control and a qualifying termination of employment), unless the successor does not assume or continue the awards or provide substitute awards.
Tax Deductibility of Executive Compensation
We designed our annual incentive and LTI programs for NEOs to quality as performance-based compensation exempt from the $1 million cap on deductibility under Section 162(m) of the Internal Revenue Code. The exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017. As a result, compensation paid to our NEOs after December 31, 2017 in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain binding contracts in place as of November 2, 2017 and which were not materially modified after that date. It appears that the transition relief was not intended to apply to programs with a discretionary component such as our annual incentive plan which would mean that annual incentive payments made to our NEOs in 2018 for service in 2017 would not be deductible. We do not view our long-term incentive plans as having a discretionary component and will seek to qualify the 2015, 2016 and 2017 grants as covered by the transition relief. Until there is further guidance, there is no assurance we will be successful. The Compensation Committee reserves the right to modify compensation that was initially intended to be exempt from Section 162(m) or to grant executive compensation that is not performance-based if the Committee determines that such modifications or grants are permissible and consistent with our executive compensation philosophy.
2018 Proxy Statement
      47

Table of Contents
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 NEOs for the fiscal year ended December 31, 2017 and, where applicable, the prior fiscal years. Numbers have been rounded to the nearest dollar.
Name and Principal
Position Year Salary Stock
Awards Non-Equity
Incentive Plan
Compensation Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings All Other
Compensation Total    Total
Without
Change In
Pension
Value*
($) ($) ($) ($) ($) ($) ($)
(a) (b) (c) (e) (g) (h) (i) (j)
Marillyn A. Hewson
Chairman, President andChief Executive Officer
2017 1,688,269 9,504,252 8,318,060 2,687,391 668,871 22,866,843 20,179,452
2016 1,634,231 9,228,211 8,159,848 1,151,615 399,828 20,573,733 19,422,118
2015 1,603,221 8,962,915 9,096,460 8,402,875 500,573 28,566,044 20,163,169
Bruce L. Tanner
Executive Vice President andChief Financial Officer
2017 995,962 3,360,121 3,044,547 2,293,379 115,791 9,809,800 7,516,421
2016 963,942 3,212,032 3,005,020 1,528,251 91,363 8,800,608 7,272,357
2015 937,436 3,213,033 3,251,712 2,004,331 63,043 9,469,555 7,465,224
Dale P. Bennett
Executive Vice PresidentRotary and Mission Systems
2017 851,635 2,680,257 2,113,400 800,854 223,124 6,669,270 5,868,416
2016 824,615 2,656,116 2,074,286 1,131,770 108,949 6,795,736 5,663,966
2015 717,720 2,000,641 2,233,730 2,980,085 69,117 8,001,293 5,021,208
Orlando P. Carvalho
Executive Vice President Aeronautics 2017 851,635 2,680,257 2,258,300 1,907,070 178,538 7,875,800 5,968,730
2016 824,615 2,656,116 2,224,358 1,258,922 112,641 7,076,652 5,817,730
2015 795,370 2,400,882 2,350,746 3,033,253 59,180 8,639,431 5,606,178
Maryanne R. Lavan
Senior Vice President, General Counsel and Corporate Secretary 2017 791,635 2,160,161 2,044,980 1,574,612 73,965 6,645,353 5,070,741
2016 765,288 2,128,100 2,025,960 1,059,605 71,590 6,050,543 4,990,938
2015 744,704 2,080,765 3,073,510 1,475,058 53,873 7,427,910 5,952,852

*
See explanation of Total Without Change In Pension Value on page 51.

Salary (Column (c))
Salary is paid weekly in arrears. The amount of salary reported may vary from the approved annual rate of pay because the salary reported in the table is based on the actual number of weekly pay periods in a year.
48     www.lockheedmartin.com/investor
Table of Contents
Executive Compensation
Stock Awards (Column (e))
Represents the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 (ASC 718), for RSUs granted in 2017, 2016 and 2015, and PSUs granted in 2017, 2016 and 2015, disregarding potential forfeitures based on service requirements.
2017 Aggregate
Grant Date
Fair Value RSUs
($)        2017 Aggregate
Grant Date
Fair Value PSUs
($)
Ms. Hewson 3,563,904 5,940,349
Mr. Tanner 1,259,825 2,100,296
Mr. Bennett 1,004,805 1,675,452
Mr. Carvalho 1,004,805 1,675,452
Ms. Lavan 809,851 1,350,310
The ASC 718 grant date fair value of one 2017 RSU ($254.51), 2016 RSU ($206.37), and one 2015 RSU ($192.28), is the closing price of one share of our stock on the date of grant, discounted to take into account the deferred dividend equivalents that are accrued until vesting.
Values for the PSUs, which are subject to performance conditions, are based on the probable outcome on the grant date of three separate performance conditions (approximately 50% of the target shares are earned based upon Relative TSR, approximately 25% of the target shares are earned based upon Performance Cash, and approximately 25% of the target shares are earned based upon ROIC).
The grant date fair value of $266.41 for 2017, $212.37 for 2016, and $188.96 for 2015 for the Relative TSR portion of the PSU award was determined using a Monte Carlo simulation model. The value was determined using the historical stock price volatilities of the companies in our comparator group over the most recent 2.93-year period for 2017 and 2016 and 2.92-year period for 2015, assuming dividends for each company are reinvested on a continuous basis and a risk-free rate of interest of 1.47% for 2017, 1.03% for 2016, and 0.81% for 2015 and that deferred dividend equivalents accrued on shares earned will be paid in cash upon vesting. The grant date fair value of $254.51 for 2017, $206.37 for 2016, and $192.28 for 2015 for the Performance Cash and ROIC portions of the awards is based on the closing price of our stock on the date of grant, discounted to take into account the deferred dividend equivalents that are accrued until vesting. In addition to the level of performance achieved, the value of the PSUs earned will be determined by the price of our stock which may be more or less than the grant date fair value.
The maximum grant date fair values of the 2017 PSU awards, assuming a 200% maximum payout on all three metrics are as follows: Ms. Hewson: $11,880,697; Mr. Tanner: $4,200,593; Mr. Bennett: $3,350,904; Mr. Carvalho: $3,350,904 and Ms. Lavan: $2,700,620.
The maximum grant date fair values of the 2016 PSU awards, assuming a 200% maximum payout on all three metrics are as follows: Ms. Hewson: $11,535,598; Mr. Tanner: $4,015,313; Mr. Bennett: $3,320,349; Mr. Carvalho: $3,320,349 and Ms. Lavan: $2,660,547.
The maximum grant date fair values of the 2015 PSU awards, assuming a 200% maximum payout on all three metrics are as follows: Ms. Hewson: $11,206,028; Mr. Tanner: $4,017,182; Mr. Bennett: $2,501,498; Mr. Carvalho: $3,002,023; and Ms. Lavan: $2,601,754.
Non-Equity Incentive Plan Compensation (Column (g))
Includes the amount paid for annual incentive bonuses. The Compensation Committee will continue to use discretion to assess performance against objectives established at the beginning of the year. We also report amounts earned under our LTIP cash awards in the three-year period ending on December 31 of the year reported in Column (g) of the table.
The table below shows the respective 2017 annual incentive bonus and amount earned under the 2015-2017 LTIP and reported for each NEO:
2017 Annual Incentive Payout
($) 2015-2017 LTIP Payout
($)
Ms. Hewson 5,072,300 3,245,760
Mr. Tanner 1,881,000        1,163,547
Mr. Bennett 1,388,900 724,500
Mr. Carvalho 1,388,900 869,400
Ms. Lavan 1,291,500 753,480

2018 Proxy Statement
      49

Table of Contents
Change in Pension Value and Nonqualified Deferred Compensation Earnings (Column (h))
Reports the present value of the change in pension benefit for the NEO for the year reported (for example, from December 31, 2016 to December 31, 2017) and is not the amount that will be paid to the NEO.
The disclosure is based on the Corporation’s final average compensation formula in its defined benefit plan which multiplies a percentage (1.25% of compensation below the social security wage base and 1.5% above that level) times years of service times the average of the employee’s highest three years of compensation in the last ten years ending with 2015. This is the same formula used for all participants accruing a pension benefit in 2017; none of the NEOs (including Ms. Hewson) has been credited with any extra years of service or provided a benefit from a special or enhanced formula. Under a three-year final average compensation formula, increasing service, age and compensation will result in an increase in the earned benefit. Prior to 2016, when an employee received a compensation increase, the three-year average compensation that went into the formula would likewise increase. In the past, the impact of that increase in the average would have been greater with a longer service employee because the pension formula multiplies the now-higher average compensation by years of service. Effective January 1, 2016, the pay element of the pension calculation was frozen. With pay no longer a factor, any increase in a NEO’s pension benefit is based on service alone. The year-over-year value is also affected by the changes in interest rate and life expectancy (longevity) assumptions.
The Summary Compensation Table uses the same interest rate and longevity assumptions that we use to report pension liabilities for all pension plan participants in our financial statements. These assumptions are updated annually for the year-end measurements of our pension plans. The amounts reported for 2017, 2016 and 2015 used a discount rate of 3.625%, 4.125% and 4.375%, respectively, as the interest rate. In October 2017, 2016, and 2015, the Society of Actuaries published revised longevity assumptions that refined its publication beginning in 2014. We used the revised assumptions indicating a shortened longevity compared with each prior year.
All Other Compensation (Column (i))
Perquisites and other personal benefits provided to the NEOs in 2017 included: security; annual executive physicals; business association expenses; use of corporate aircraft for personal travel; and travel for a family member accompanying the NEO while on business travel. Not all of the listed perquisites or personal benefits were provided to each NEO. In addition, the Corporation made available event tickets and a company-provided car and driver for personal commuting to some of the NEOs, but required the NEOs to reimburse the Corporation for the incremental cost to the Corporation in 2017 of such items. The cost of any category of the listed perquisites and personal benefits did not exceed the greater of $25,000 or 10% of total perquisites and personal benefits for any NEO, except for: (i) security for Ms. Hewson ($138,731); (ii) personal use of the corporate aircraft for Ms. Hewson ($300,326); for Mr. Tanner ($35,272); for Mr. Bennett ($142,404); and for Mr. Carvalho ($47,720); and (iii) travel for a family member accompanying the NEO while on business travel for Mr. Carvalho ($32,268). The incremental cost for use of corporate aircraft for personal travel was calculated based on the total personal travel flight hours multiplied by the estimated hourly aircraft operating costs for 2017 (including fuel, maintenance, staff travel expenses, and other variable costs, but excluding fixed capital costs for the aircraft, hangar facilities, and staff salaries).
The incremental cost for personal security is calculated based on billings for services and equipment from third parties and for overtime and related expenses where the services are provided by the Corporation’s personnel. Given the nature of our business, additional security may be provided for travel in high-risk areas or to address particular situations. We believe that providing personal security in response to concerns arising out of employment by the Corporation is business-related.
In addition to perquisites, column (i) also contains items of compensation listed in the following table. All items are paid under broad-based programs for U.S. salaried employees except for the tax assistance and the Lockheed Martin Corporation Supplemental Savings Plan (NQSSP) and the Lockheed Martin Corporation Non-qualified Capital Accumulation Plan (NCAP) (together, the Nonqualified Defined Contribution Plans) match or Corporation contributions. Items include matching contributions made to eligible universities, colleges and other non-profit organizations under the Corporation’s matching gift programs available to all employees. Listed amounts may include contributions made in 2018 to match 2017 executive contributions.
50     www.lockheedmartin.com/investor
Table of Contents
Executive Compensation
Other Items of Compensation Included in “All Other Compensation” Column (i)
Name Tax Assistance for
Business-Related Items
($)     Corporation Contributions
to Qualified Defined
Contribution Plans
($)     Corporation Contributions
to Nonqualified Defined
Contribution Plans
($)     Group Life
Insurance
($)     Matching Gift
Programs
($)
Ms. Hewson 88,546 9,189 94,005 15,438 1,600
Mr. Tanner 4,277 9,190 51,688 9,749 1,000
Mr. Bennett 3,561 9,189 42,866 12,747 10,000
Mr. Carvalho 38,255 11,400 40,017 8,305 0
Ms. Lavan 2,570 9,635 38,751 7,685 11,600
In 2017, the Corporation provided tax assistance on business-related items associated with taxable business association expenses, security expenses, non-resident state taxes on business travel and travel expenses for a family member accompanying the NEO while on business travel.
*Total Without Change in Pension Value
The separate column labeled “Total Without Change in Pension Value” shows total compensation as required to be disclosed by the SEC in column (j) less the amount shown in Change in Pension Value and Nonqualified Deferred Compensation Earnings in column (h). We provided this column because the amount reported in column (h) for Change in Pension Value is not current compensation and represents the present value of an estimated stream of payments to be made following retirement. The methodology used to report the Change in Pension Value underapplicable accounting rules is sensitive to assumptions about life expectancy and changes in the discount rate determined at each year end, which are functions of economic factors and actuarial calculations that are outside of the control of the Compensation Committee. The amounts shown in the separate column are not a substitute for the amounts reported in the Total column, and differ substantially from the amounts reported in the Total column for several reasons.
2018 Proxy Statement
      51

Table of Contents
Executive Compensation
2017 Grants of Plan-Based Awards

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
Estimated Future Payouts
Under Equity Incentive
Plan Awards
Grant Date
Fair Value
of Stock
Awards
($)
Name Grant
Date Award
Type Threshold
($) Target
($) Maximum
($) Threshold
(#) Target
(#) Maximum
(#)
(a)     (b)         (c)     (d)     (e)     (f)     (g)     (h)     (l)
Marillyn A. Hewson - MICP 207,638 2,966,250 5,932,500 - - - 0
1/26/2017 RSU - - - 0 14,003 14,003 3,563,904
- LTIP 148,500 2,376,000 4,752,000 - - - 0
1/26/2017 PSU - - - 1,459 22,819 45,638 5,940,349
Bruce L. Tanner - MICP 77,000 1,100,000 2,200,000 - - - 0
1/26/2017 RSU - - - 0 4,950 4,950 1,259,825
- LTIP 52,500 840,000 1,680,000 - - - 0
1/26/2017 PSU - - - 516 8,068 16,136 2,100,296
Dale P. Bennett - MICP 56,858 812,250 1,624,500 - - - 0
1/26/2017 RSU - - - 0 3,948 3,948 1,004,805
- LTIP 41,875 670,000 1,340,000 - - - 0
1/26/2017 PSU - - - 412 6,436 12,872 1,675,452
Orlando P. Carvalho - MICP 56,858 812,250 1,624,500 - - - 0
1/26/2017 RSU - - - 0 3,948 3,948 1,004,805
- LTIP 41,875 670,000 1,340,000 - - - 0
1/26/2017 PSU - - - 412 6,436 12,872 1,675,452
Maryanne R. Lavan - MICP 52,868 755,250 1,510,500 - - - 0
1/26/2017 RSU - - - 0 3,182 3,182 809,851
- LTIP 33,750 540,000 1,080,000 - - - 0
1/26/2017 PSU - - - 332 5,187 10,374 1,350,310

Estimated Future Payouts Under Non-Equity Incentive Plan Awards (Columns (c), (d) and (e))
Includes annual incentive grants (MICP) for 2017 and LTIP grants for the 2017-2019 period ending December 31, 2019.
The MICP measures performance over a one-year period and is described under “2017 Annual Incentive” on page 38. The threshold, or minimum amount payable (assuming an award is earned), is 7% of target while the maximum is 200% of target.
The LTIP award measures performance against three separate metrics described under “2017 Long-Term Incentive Compensation” on page 40. The threshold is the minimum amount payable for a specified level of performance stated in the LTIP award agreement. For the 2017-2019 award, the threshold amountpayable is 6.25% of the target award. The maximum award payable under the LTIP award is 200% of target value. Awards are subject to forfeiture upon termination of employment prior to the end of the performance cycle, except in the event of retirement, death, disability, divestiture or layoff. If death, disability, or divestiture occurs prior to the end of the performance period, LTIP awards are prorated. If the employee retires or is laid off after July 26, 2017, but prior to the end of the performance period, the LTIP awards are prorated. Following a change in control, the 2017-2019 LTIP awards vest at the target amount upon involuntary termination without cause or voluntary termination with good reason or if the successor does not assume the LTIP awards.
52     www.lockheedmartin.com/investor
Table of Contents
Executive Compensation
Estimated Future Payouts Under Equity Incentive Plan Awards (Columns (f), (g) and (h))
Shows the number of RSUs granted by the Compensation Committee on January 26, 2017. The RSU grants made to the NEOs were subject to forfeiture to the extent the value of the RSUs granted to a recipient on the award date was greater than 0.2% for the CEO and 0.1% for each of the other NEOs of 2017 Performance Cash. Based on 2017 Performance Cash, none of the RSUs were forfeited. The RSUs vest on the third anniversary of the date of grant or upon death or disability. The 2017 RSUs are prorated upon divestiture if not assumed by the successor. Following a change in control, the RSUs vest upon involuntary termination without cause or voluntary termination for good reason or if the successor does not assume the RSUs. If the employee retires or is laid off after July 26, 2017, but prior to the third anniversary of the date of grant, the RSUs become nonforfeitable and are paid at the end of the vesting period. During the vesting period, deferred dividend equivalents are accrued and subject to the same vesting schedule as the underlying RSUs. At the end of the vesting period, the RSUs are paid in shares of stock and the accrued dividend equivalents are paid in cash. If any tax withholding is required on the 2017 RSUs or accrued dividend equivalents during the vesting period (for example, on account of retirement eligibility), the RSUs provide for accelerated vesting of the number of shares or accrued dividend equivalents required to satisfy the tax withholding. The award is then reduced either by the number of shares or by the amount of accrued dividend equivalents subject to acceleration ofvesting for tax withholding. The table includes PSU awards for the 2017-2019 period ending December 31, 2019. At the end of the three-year vesting period, which ends on the third anniversary of the date of grant, the amount earned is payable in shares of stock and cash representing deferred dividend equivalents accrued on the earned shares during the three-year performance period. Awards are subject to forfeiture upon termination of employment prior to the end of the vesting period, except in the event of termination following retirement, or layoff occurring after July 26, 2017, death, disability or divestiture. In any of these events, PSU awards are paid out at the end of the vesting period on a prorated basis. Following a change in control, the PSUs vest at the target amount upon involuntary termination without cause or voluntary termination with good reason or if the successor does not assume the PSUs.
Shares are earned under the PSU awards based upon performance against three separate metrics described under “PSU Awards” on page 41. If performance falls below the threshold level of performance for a metric, no shares would be earned with respect to that metric. Assuming any payment is earned, the minimum amount payable under the PSU award is 25% of the target shares attributable to ROIC or Performance Cash, the lowest level payable under these metrics. The maximum number of shares payable under the PSU is 200% of the number of target shares.
Grant Date Fair Value of Stock Awards (Column (1))
Represents the aggregate grant date fair value computed in accordance with FASB ASC 718 for RSUs and PSUs granted in 2017, disregarding potential forfeitures based on service requirements.
The grant date fair value of the 2017 RSU grant is $254.51 per RSU, which is based on the closing price of one share of our stock on the date of grant, discounted to take into account the deferred dividend equivalents accrued until vesting.
The grant date fair value for the PSUs, which are subject to performance conditions, is based on the probable outcome of each of the three performance conditions. The grant date fair value of $266.41 for the Relative TSR portion of the award is determined using a Monte Carlo simulation model. The grant date fair value of $254.51 for the Performance Cash and ROIC portions of the awards is based on the closing price of one share of our stock on the date of grant, discounted to take into account the deferred dividend equivalents accrued until vesting.
2018 Proxy Statement
      53

Table of Contents
Executive Compensation
Outstanding Equity Awards at 2017 Fiscal Year-End
Option Awards
Stock Awards
Name
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
Number
of Shares
or Units of
Stock That
Have Not
Vested¹
(#)
Market Value
of Shares or
Units of Stock
That Have
Not Vested²
($)
Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested³
(#)
Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights That
Have Not Vested⁴
($)
(a) (b)    (e)    (f)    (g) (h)    (i) (j)
Marillyn A. Hewson 82,935 82.01 1/28/2022 14,003 ⁵ 4,495,663 22,819 ⁶ 7,326,041
59,434 79.60 1/29/2021 16,005 ⁷ 5,138,405 48,318 ⁸ 15,512,495
- - - 16,679 ⁹ 5,354,793 - -
- - - 42,745 ¹⁰ 13,723,282 - -
Bruce L. Tanner 97,213 82.01 1/28/2022 4,950 ⁵ 1,589,198 8,068 ⁶ 2,590,231
64,531 79.60 1/29/2021 5,570 ⁷ 1,788,249 16,819 ⁸ 5,399,740
55,000 74.89 1/31/2020 5,979 ⁹ 1,919,558 - -
- - - 15,324 ¹⁰ 4,919,770 - -
Dale P. Bennett - - - 3,948 ⁵ 1,267,505 6,436 ⁶ 2,066,277
- - - 4,638 ⁷ 1,489,030 13,908 ⁸ 4,465,163
- - - 3,748 ⁹ 1,203,295 - -
- - - 9,541 ¹⁰ 3,063,138 - -
Orlando P. Carvalho 29,705 82.01 1/28/2022 3,948 ⁵ 1,267,505 6,436 ⁶ 2,066,277
20,466 79.60 1/29/2021 4,638 ⁷ 1,489,030 13,908 ⁸ 4,465,163
15,300 74.89 1/31/2020 4,497 ⁹ 1,443,762 - -
- - - 11,451 ¹⁰ 3,676,343 - -
Maryanne R. Lavan - - - 3,182 ⁵ 1,021,581 5,187 ⁶ 1,665,286
- - - 3,690 ⁷ 1,184,675 11,144 ⁸ 3,577,781
- - - 3,871 ⁹ 1,242,785 - -
- - - 9,924 ¹⁰ 3,186,100 - -

(1)
We reported RSUs granted in January 2017 as equity incentive awards in columns (f) through (h) of the “2017 Grants of Plan-Based Awards” table because there was the potential for forfeiture based on failure to achieve the performance metrics specified in the award agreements. For this table, we reported the January 2017 RSUs in columns (g) and (h) because the performance feature of the RSU grants was satisfied at the end of 2017. This column also includes PSUs granted on January 29, 2015 for the 2015-2017 performance period. The vesting period for the PSUs ended on January 29, 2018 and the performance period ended on December 31, 2017. The number of shares shown in column (g) for the 2015-2017 PSUs is the number of shares earned under the PSU metrics and paid upon vesting. NEOs also receive a cash payment for deferred dividend equivalents accrued through vesting.
(2)
The market value shown in column (h) is calculated by multiplying the number of shares shown in column (g) by the December 29, 2017 per share closing price of our stock ($321.05). NEOs also receive a cash payment for deferred dividend equivalents accrued through vesting.
(3)
Represents PSUs granted on January 26, 2017 for the 2017-2019 performance period and on January 28, 2016 for the 2016-2018 performance period; the PSUs are earned and paid out in shares of our stock at the end of the three-year vesting period based upon performance on three separate metrics (Relative TSR, Performance Cash, and ROIC). The number of shares of stock shown in column (i) is based upon the threshold level of performance for each of the three metrics or, if performance to date on the metric has exceeded the threshold level (as is the case for performance through December 31, 2017), the estimated level of performance as of December 31, 2017. Performance under each metric is determined separately, with the three results added together to obtain the number of shares shown in column (i). NEOs also receive a cash payment for deferred dividend equivalents accrued through vesting.
(4)
The market value shown in column (j) is calculated by multiplying the number of PSUs reported in column (i) by the December 29, 2017 per share closing price of our stock ($321.05).
(5)
Represents RSUs granted on January 26, 2017, which vest January 26, 2020, except that vesting may occur earlier as described in the “2017 Grants of Plan-Based Awards” table.
(6)
Represents PSUs granted on January 26, 2017 and which are earned over a three-year period but provide for pro rata payments for certain terminations as described in the “2017 Grants of Plan-Based Awards” table.
(7)
Represents RSUs granted on January 28, 2016, which vest on January 28, 2019, except that vesting may occur earlier as described in the “2017 Grants of Plan-Based Awards” table.
(8)
Represents PSUs granted on January 28, 2016 and which are earned over a three-year period but provide for pro rata payments for certain terminations as described in the “2017 Grants of Plan-Based Awards” table.
(9)
Represents RSUs granted on January 29, 2015, which vested on January 29, 2018.
(10)
Represents PSUs granted on January 29, 2015, which vested on January 29, 2018.
54     www.lockheedmartin.com/investor
Table of Contents
Executive Compensation
Option Exercises and Stock Vested During 2017
Option Awards
Stock Awards
Name

Number of Shares
Acquired on Exercise
(#)

Value Realized
on Exercise¹
($)

Number of Shares
Acquired on Vesting²
(#)

Value Realized
on Vesting³
($)
(a) (b) (c) (d) (e)
Marillyn A. Hewson - - 77,453 19,635,458
Bruce L. Tanner 49,700 11,107,319 28,116 7,127,798
Dale P. Bennett - - 17,081 4,330,311
Orlando P. Carvalho - - 20,938 5,308,060
Maryanne R. Lavan - - 18,444 4,675,813

(1)
Value realized was calculated based on the difference between the aggregate exercise price of the options and the weighted average sale price per share on the date of exercise and sale.
(2)
Vesting on January 27, 2017 of RSUs and PSUs granted on January 27, 2014 following ~~guidelines:~~the three-year vesting period and accelerated vesting on January 26, 2017 of a portion of RSUs granted on January 28, 2016 equal to the value of the tax withholding obligation due upon retirement-eligibility of the NEO and following the Board’s certification of the one-year performance goal based on the per share closing price on the date of vesting. Represents aggregate number of shares vested prior to disposition of shares to the Corporation to satisfy tax withholding obligation.
~~Title~~ ~~Annual Base~~
~~Salary Multiple~~
(3)
Value realized was calculated based on the number of shares acquired on vesting multiplied by the per share closing price of our common stock on the date of vesting (January 27, 2017, $253.50 and January 26, 2017, $254.97).
~~Chairman, President and CEO~~ ~~6 times~~
2017 Pension Benefits
During 2017, the NEOs participated in the Lockheed Martin Corporation Salaried Employee Retirement Program (LMRP), which is a combination of several prior plans (collectively, the “Prior Plan”) for salaried employees with some protected benefits.
The calculation of retirement benefits under the LMRP is determined by a formula that 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 ending with 2015. Average compensation includes the NEO’s base salary and annual incentive bonuses. NEOs must have either five years of service or be actively employed by the Corporation at age 65 to vest in the LMRP. Normal retirement age is 65; however, benefits are payable as early as age 55 at a reduced amount or without reduction at age 60. Benefits are payable as a monthly annuity for the lifetime of the employee, as a joint and survivor annuity, as a life annuity with a five- or ten-year guarantee, or as a level income annuity.
The calculation of retirement benefits under the Prior Plan is based on a number of formulas, some of which take into account the participant’s years of credited service and pay over the career of the NEO. Certain other formulas in the Prior Plan are based upon the final average compensation and credited service of the employee. Pay under certain formulas in the Prior Plan currently includes salary, commissions, overtime, shift differential, lump sum pay in lieu of a salary increase, annual incentive bonuses awarded that year, and pre-tax employee contributions. A portion of the pension benefits for Mr. Tanner was earned under the Prior Plan.
All of the NEOs were vested and eligible for early retirement as of December 31, 2017 under the LMRP.
During 2017, the NEOs also participated in the Lockheed Martin Corporation Supplemental Retirement Plan (Supplemental Pension), which is a restorative plan and provides benefits in excess of the benefit payable under IRS rules through the LMRP, our tax-qualified plan (see the footnote to column (d) to the “2017 Pension Benefits” table on page 56).
In July 2014, the Corporation announced that the LMRP will be frozen in two steps. Increases in compensation are no longer taken into account effective January 1, 2016. Increases in service will no longer be taken into account effective January 1, 2020. This change in plan structure also carries over to the Supplemental Pension benefit accruals available to the NEOs. Retirement benefits earned thereafter will be paid through defined contribution plans. As part of the transition to paying retirement benefits from defined contribution plans, beginning in 2016 eligible salaried employees (including the NEOs) receive a 2% Corporation contribution to the Lockheed Martin Corporation Salaried Savings Plan. The NEOs continue to receive the 2% Corporation contribution in the NCAP after reaching the Internal Revenue Code limitation for this contribution in the qualified plan. This contribution will increase to 6% beginning in 2020. Employees (none of which are NEOs) hired after January 1, 2006 do not participate in the LMRP and already receive the 6% contribution.
2018 Proxy Statement
      55
~~Chief Financial Officer~~ ~~4 times~~

Table of Contents
Executive Compensation
2017 Pension Benefits
Name       Plan Name       Number of Years
Credited Service
(#)       Present Value of
Accumulated
Benefit
($)
Payments
During Last
Fiscal Year
($)
(a) (b) (c) (d) (e)
Marillyn A. Hewson Lockheed Martin Corporation Salaried Employee Retirement Program 35.1 2,002,129 0
Lockheed Martin Corporation Supplemental Retirement Plan - 48,810,253 0
Bruce L. Tanner Lockheed Martin Corporation Salaried Employee Retirement Program 35.1 1,907,182 0
Lockheed Martin Corporation Supplemental Retirement Plan - 17,639,101 0
Dale P. Bennett Lockheed Martin Corporation Salaried Employee Retirement Program 36.6 2,071,535 0
Lockheed Martin Corporation Supplemental Retirement Plan - 12,694,683 0
Orlando P. Carvalho Lockheed Martin Corporation Salaried Employee Retirement Program 37.5 2,098,578 0
Lockheed Martin Corporation Supplemental Retirement Plan - 14,638,144 0
Maryanne R. Lavan Lockheed Martin Corporation Salaried Employee Retirement Program 27.8 1,634,163 0
Lockheed Martin Corporation Supplemental Retirement Plan - 10,916,539 0

Plan Name (Column (b))
~~Executive Vice Presidents~~ ~~3 times~~
The Lockheed Martin Corporation Supplemental Retirement Plan (Supplemental Pension) uses the same formula for benefits as the tax-qualified plan uses for calculating the NEO’s benefit. Although all service recognized under the tax-qualified plan is recognized under the Supplemental Pension, a benefit would be earned underthe Supplemental Pension only in years when the NEO’s total accrued benefit would exceed the benefit accrued under the tax-qualified plan. The Supplemental Pension benefits are payable in the same form as benefits are paid under the LMRP, except lump sum payments are available under the Supplemental Pension.
Present Value of Accumulated Benefit (Column (d))
~~Senior Vice Presidents~~ ~~2 times~~
The amounts in column (d) were computed using the same assumptions we used to account for pension liabilities in our financial statements and as described in Note 11 to our financial statements contained in our 2017 Annual Report, except that the amounts were calculated based on benefits commencing at age 60 (or current age if greater). We used these ages rather than the plan’s normal retirement age of 65 because an employee may commence receiving pension benefits at age 60 without any reduction for early commencement. A portion of Mr. Tanner’s benefit was earned under the Prior Plan that applies a reduction for early commencement at age 60. The amounts shown for Mr. Tanner reflect the reduction for early commencement of thebenefit. Amounts paid under our plans use assumptions contained in the plans and may be different than those used for financial statement reporting purposes. Only the benefit payable under the Supplemental Pension is payable in the form of a lump sum. If a NEO elected a lump sum payment, the amount of the lump sum would be based on plan assumptions and not the assumptions used for financial statement reporting purposes. As a result, the actual lump sum payment would be an amount different than what is reported in this table. The age of the NEO at retirement would also impact the size of the lump sum payment. The amount using plan assumptions is shown on the “Potential Payments Upon Termination or Change in Control” table.
56     www.lockheedmartin.com/investor
Table of Contents
Executive Compensation
2017 Nonqualified Deferred Compensation
Participants in our tax-qualified 401(k) plan may defer up to 40% of base salary on a pre-tax, Roth or after-tax basis. In addition, we make a matching contribution equal to 50% of up to the first 8% of base salary contributed by the participant. Employee and Corporation matching contributions in excess of the Internal Revenue Code limitations may be contributed to the NQSSP on a pre-tax basis at the election of the NEO. In 2016, we also began making Corporation contributions in excess of the Internal Revenue Code limitations to the NCAP equal to 2% of the NEO’s base salary. Employee contributions, matching and Corporation contributions to the plans are nonforfeitable at all times. NQSSP and NCAP contributions are credited with earnings or losses, as appropriate, based on the investment option or options in which the account has been invested, as elected by the participant. Each of the NQSSP and NCAP investment options is available under our tax-qualified 401(k) plan for salaried employees. The NQSSP and NCAP provide for payment following termination of employment in a lump sum or up to 25 annual installments at the participant’s election. All amounts accumulated and unpaid under the NQSSP and NCAP must be paid in a lump sum within 15 calendar days following a change in control.
The Deferred Management Incentive Compensation Plan (DMICP) provides the opportunity to defer, until termination of employment or beyond, the receipt of all or a portion of annual incentive bonuses and LTIP awards. NEOs may elect any of the investment funds available in the NQSSP (with the exception of the Company Stock Fund) or two investment alternatives available only under the DMICP for crediting earnings (losses). Under the DMICP Stock Investment Option, earnings (losses) on deferred amounts will accrue at a rate that tracks the performance of our common stock, including reinvestment of dividends. Under the DMICP Interest Investment Option, earnings accrue at a rate equivalent to the then published rate for computing the present value of future benefits under Cost Accounting Standards 415, Deferred Compensation (CAS 415 rate). The Interest Investment Option was closed to new deferrals and transfers from other investment options effective July 1, 2009. Amounts credited to the Stock Investment Option may not be reallocated to other options. In addition, Stock Investment Option deferrals will be paid in shares of our common stock upon distribution. The DMICP provides for payment in January or July following termination of employment in a lump sum or up to 25 annual installments at the NEO’s election. All amounts accumulated under the DMICP must be paid in a lump sum within 15 days following a change in control.
2018 Proxy Statement
      57

Table of Contents
Executive Compensation
2017 Nonqualified Deferred Compensation
This table reports compensation earned by the NEOs and deferred under NQSSP, NCAP and DMICP. The NQSSP is a nonqualified 401(k) plan with a match on a portion of the salary deferral. The NCAP is a nonqualified defined contribution excess plan with Corporation contributions. The DMICP is a nonqualified deferred compensation plan through which participants may defer two types of compensation:
● Annual incentive bonus (DMICP (Bonus)).
● Amounts payable under our LTIP program (DMICP (LTIP)).

Name             Executive
Contributions
in Last FY
($)       Registrant
Contributions
in Last FY
($)       Aggregate
Earnings in
Last FY
($)       Aggregate
Balance at
Last FYE
($)
(a) (b) (c) (d) (f)
Marillyn A. Hewson NQSSP 326,615 65,007 953,320 5,346,620
NCAP - 28,998 4,494 60,839
DMICP (Bonus) 0 - 3,882,488 26,501,813
DMICP (LTIP) 0 - 2,284,851 15,407,474
TOTAL 326,615 94,005 7,125,153 47,316,746
Bruce L. Tanner NQSSP 229,970 36,795 1,063,517 5,657,630
NCAP - 14,893 2,517 31,295
DMICP (Bonus) 868,340 - 581,950 3,266,410
DMICP (LTIP) 1,045,100 - 117,420 1,162,520
TOTAL 2,143,410 51,688 1,765,404 10,117,855
Dale P. Bennett NQSSP 193,215 30,914 325,020 2,431,238
NCAP - 11,952 1,738 24,728
DMICP (Bonus) 682,159 - 1,133,568 6,442,229
DMICP (LTIP) 320,345 - 479,131 2,769,244
TOTAL 1,195,719 42,866 1,939,457 11,667,439
Orlando P. Carvalho NQSSP 84,196 28,065 6,936 119,197
NCAP - 11,952 1,982 25,010
DMICP (Bonus) 0 - 76,796 325,331
DMICP (LTIP) 0 - 0 0
TOTAL 84,196 40,017 85,714 469,538
Maryanne R. Lavan NQSSP 119,095 28,022 301,827 2,582,998
NCAP - 10,729 1,758 22,363
DMICP (Bonus) 24,122 - 412,462 1,723,326
DMICP (LTIP) 24,122 - 280,094 1,227,941
TOTAL 167,339 38,751 996,141 5,556,628
58     www.lockheedmartin.com/investor
Table of Contents
Executive Compensation
Executive Contributions in Last Fiscal Year (Column (b))
Includes salary deferrals to NQSSP in 2017, annual incentive bonus paid in 2017 for 2016 performance deferred to DMICP, and LTIP paid in 2017 for the 2014-2016 performance period deferred to the DMICP.
Registrant Contributions in Last Fiscal Year (Column (c))
Includes Corporation matching contributions to NQSSP made in 2017 and Corporation contributions made to NCAP in 2017. The NQSSP match and NCAP Corporation contributions are also included in column (i) of the “Summary Compensation Table.”
Aggregate Balance at Last Fiscal Year End (Column (f))
The following table lists the amounts reported as executive or registrant contributions in columns (b) and (c) of the “2017 Nonqualified Deferred Compensation” table that are also reported as compensation in the “Summary Compensation Table” for 2017. These contributions consist of NEO and Corporation matching contributions made to the NQSSP and Corporation contributions made to the NCAP for service in 2017. Contributions with respect to 2017 performance deferred in 2018 (annualincentive bonus and LTIP) are not included as these amounts are not credited until 2018, and are not included in column (f). The following table also lists the amounts reported in column (f) as part of the Aggregate Balance at Last FYE (2017) that is reported as compensation for prior years in the “Summary Compensation Table” for years beginning with 2006. For 2017, there were no earnings in excess of 120% of the applicable federal rate.
Of Amount Reported in Column (f)
Name       Aggregate Balance
at December 31,
2017 in Column (f)
($)       NEO and Corporation Contributions to
NQSSP and Corporation Contributions to NCAP
Reported in “Summary Compensation
Table” for 2017
($)       Amount Reported in “Summary
Compensation Table” for Prior
Years
(Beginning with 2006)
($)
Ms. Hewson 47,316,746 420,620 21,729,114
Mr. Tanner 10,117,855 281,657 5,479,341
Mr. Bennett 11,667,439 236,081 2,866,368
Mr. Carvalho 469,538 124,214 10,873
Ms. Lavan 5,556,628 157,847 637,094

2018 Proxy Statement
      59

Table of Contents
Executive Compensation
Potential Payments Upon Termination or Change in Control
The table below summarizes the benefits that become payable to a NEO at, following, or in connection with retirement, change in control, death, disability, layoff, divestitures, termination or resignation under the terms of our benefit plans.
SUMMARY OF PAYMENT TRIGGERS
PENSION-QUALIFIED¹
Retirement– Annuity payable on a reduced basis at age 55; annuity payable on a non-reduced basis at age 60; steeper reduction for early commencement at age 55 for terminations prior to age 55 than for terminations after age 55.
Change in Control– No acceleration.
Death/Disability/Layoff– Spousal annuity benefit as required by law in event of death unless waived by spouse. For either (i) disability between age 53 and 55 with eight years of service or (ii) layoff between age 53 and 55 with eight years of service or before age 55 with 25 years of service, participant is eligible for the more favorable actuarial reductions for participants terminating after age 55.
Divestiture– No provisions; absent a negotiated transfer of liability to buyer, treated as retirement or termination.
Termination/Resignation– Annuity payable on a reduced basis at age 55; annuity payable on a non-reduced basis at age 60; steeper reduction for early commencement at age 55 for terminations prior to age 55 than for terminations after age 55.
SUPPLEMENTAL PENSION¹
Retirement– Annuity or lump sum at later of age 55 or termination, same early reductions applied as for Pension-Qualified.
Change in Control– Lump sum.
Death/Disability/Layoff– Annuity or lump sum at later of age 55 or termination, same provisions as Pension-Qualified for spousal waiver, disability, and layoff.
Divestiture– No provisions; absent a negotiated transfer of liability to successor, treated as retirement or termination.
Termination/Resignation– Annuity or lump sum, same early reductions applied as for Pension-Qualified.
LTIP (2016-2018 and 2017-2019)
Retirement/Death/Disability/Layoff– Prorated payment at the end of the three-year performance period for retirement, death, disability or layoff during that period, subject to six-month minimum service from date of grant for retirement and layoff.
Change in Control– Immediate payment at target for change in control event occurring during performance cycle if not assumed by successor; immediate payment at target following involuntary termination without cause or voluntary termination with good reason within 24 months of change in control during performance cycle if award is assumed by successor.
Divestiture²– Prorated payment at the end of the three-year performance period for divestiture during that period.
Termination/Resignation– Forfeited if termination occurs prior to becoming retirement-eligible; termination on or after (i) age 55 and ten years of service or (ii) age 65 with at least six months of service during performance cycle is treated as retirement-eligible.
RSUs
Retirement– Continued vesting of RSUs and dividend equivalents subject to six-month minimum service from date of grant.
Change in Control– Immediate vesting of RSUs and dividend equivalents if not assumed by successor. Immediate vesting following involuntary termination without cause or voluntary termination with good reason within 24 months of change in control if assumed by successor.
Death/Disability/Layoff– Continued vesting of RSUs and dividend equivalents after layoff, subject to six-month minimum service from date of grant. Immediate vesting following death or disability.
Divestiture²– Immediate vesting of RSUs and dividend equivalents for 2015 grants. Unless assumed by the successor, 2016 and 2017 RSU grants will vest on a pro-rata basis based on the days into the vesting period at closing unless the employee is retirement-eligible in which case the RSU grant will continue to vest until the vesting date.
Termination/Resignation– Forfeit unvested RSUs and dividend equivalents if termination occurs prior to becoming retirement-eligible. Termination on or after (i) age 55 and ten years of service or (ii) age 65 with at least six months of service from date of grant is treated as retirement-eligible.
60     www.lockheedmartin.com/investor
Table of Contents
Executive Compensation
PSUs (2016-2018 and 2017-2019)
Retirement/Death/Disability/Layoff– Prorated payment of PSUs and dividend equivalents at the end of the three-year performance period forretirement, death, disability or layoff during that period subject to six-month minimum service from date of grant for retirement and layoff.
Change in Control– Immediate vesting of PSUs and dividend equivalents at target if award is not assumed by successor. Immediate paymentat target following involuntary termination without cause or voluntary termination with good reason within 24 months of change in control ifassumed by successor.
Divestiture²– Prorated payment of PSUs and dividend equivalents at the end of the three-year performance period for divestiture during that period.
Termination/Resignation– Forfeit PSUs and dividend equivalents if termination occurs prior to becoming retirement-eligible; termination onor after (i) age 55 and ten years of service, or (ii) age 65 with at least six months of service from date of grant is treated as retirement-eligible.
EXECUTIVE SEVERANCE PLAN
Retirement– No payment.
Change in Control– No payment unless terminated.
Death/Disability– No payment.
Layoff– Payment of a lump sum amount equal to a multiple of salary, annual bonus equivalent, and health care continuation coverage cost plus outplacementservices and relocation assistance. The multiple of salary and annual bonus equivalent for the CEO is 2.99; for all other NEOs it is 1.0.
Divestiture– No payment.
Termination/Resignation– No payment.
ANNUAL INCENTIVE BONUS³
Retirement– Payment may be prorated for retirement during the year with six months of participation in the year.
Change in Control– No provision.
Death/Disability– Payment may be prorated for death, disability or layoff during the year with three months of participation in the year.
Layoff– No payment if payment is made under the Executive Severance Plan. Otherwise, payment may be prorated with six months ofparticipation in the year.
Divestiture– No provision.
Termination/Resignation– No payment will be made for termination/resignation during the year.
DMICP⁴
Retirement– Lump sum or installment payment in accordance with NEO elections.
Change in Control– Immediate lump sum payment.
Death/Disability/Layoff– Lump sum or installment payments in accordance with NEO elections, except lump sum only for layoff prior to age 55.
Divestiture– Follows termination provisions.
Termination/Resignation– Lump sum if termination is prior to age 55; after age 55, lump sum or installment payment in accordance with NEO elections.
NQSSP/NCAP⁴
Retirement– Lump sum or installment payments in accordance with NEO elections.
Change in Control– Immediate lump sum payment.
Death/Disability/Layoff– Lump sum for death; for disability or layoff, lump sum or installment payments in accordance with NEO elections.
Divestiture– Follows termination provisions.
Termination/Resignation– Lump sum or installment payments in accordance with NEO elections.
(1)
See “2017 Pension Benefits” table for present value of accumulated benefit.
(2)
Divestiture is defined as a transaction which results in the transfer of control of a business operation to any person, corporation, association, partnership, joint venture, or other business entity of which less than 50 percent of the voting stock or other equity interests (in the case of entities other than corporations) is owned or controlled directly or indirectly by us, one or more of our subsidiaries, or by a combination thereof following the transaction.
(3)
See “Compensation Discussion and Analysis” for discussion of annual incentive bonus payment calculation.
(4)
See “Aggregate Balance at Last FYE” column in “2017 Nonqualified Deferred Compensation” table for amounts payable.

2018 Proxy Statement
52      61~~www.lockheedmartin.com/investor~~

Table of Contents
Executive Compensation
NEOs are required to achieve ownership levels within five years of assuming their role and must hold net shares from vested RSUs and PSUs and net shares from options exercised until the value of the shares equals the specified multiple of base salary. The securities counted toward their respective target threshold include common stock, unvested RSUs, unvested PSUs at target (which no longer may be counted towards ownership levels beginning with 2015 awards) and stock units under our 401(k) plans and other deferral plans. As of February 1, 2016, each of our NEOs exceeded their respective ownership requirements.
~~Post-Employment, Change in Control, Divestiture and Severance Benefits~~
Our NEOs do not have employment agreements. In January 2008, the Board approved the Lockheed Martin Corporation Severance Benefit Plan For Certain Management Employees (renamed the Lockheed Martin Corporation Executive Severance Plan). Benefits are payable under this plan in the event of a company-initiated termination of employment other than for cause. All of the NEOs are covered under the plan.
The benefit payable in a lump sum under the plan is two weeks of basic severance plus a supplemental payment of one times the NEO’s base salary and the equivalent of one year’s target annual incentive bonus. For the CEO, the multiplier is 2.99 instead of 1.
NEOs participating in the plan also receive a lump sum payment to cover the cost of medical benefits for one year in addition to outplacement and relocation services. To receive the supplemental severance benefit, the NEO must execute a release of claims and an agreement containing post-employment, non-compete and non-solicitation covenants comparable to those included in our NEOs’ LTI award agreements.
With respect to LTI, upon certain terminations of employment, including death, disability, retirement, layoff, divestiture or a change in control, the NEOs may be eligible for continued vesting on the normal schedule, immediate payment of benefits previously earned or accelerated vesting of LTI in full or on a pro rata basis. The type of event and the nature of the benefit determine which of these approaches will apply. The purpose of these provisions is to protect previously earned or granted benefits by making themavailable following the specified event. We view the vesting (or continued vesting) to be an important retention feature for senior-level employees. Because benefits paid at termination consist of previously granted or earned benefits, we do not consider termination benefits as a separate item in compensation decisions. Our LTI plans do not provide for tax assistance.
In the event of a change in control, our plans provide for the acceleration of the payment of the nonqualified portion of earned pension benefits and nonqualified deferred compensation. Unless the successor does not assume the award agreements, all LTI awards require a “double trigger” for vesting to accelerate (both a change in control and a qualifying termination of employment).
For executives whose business unit is divested, 2014 and 2015 RSUs accelerate and PSUs and LTIP are prorated to the day of the divestiture and paid at end of the cycle. For 2016 awards, RSUs, PSUs and LTIP are pro-rated to the day of the divestiture unless assumed by the successor.
~~Tax Deductibility of Executive Compensation~~
The Corporation’s tax deduction for compensation paid to each of the NEOs who are subject to the compensation deduction limits of Section 162(m) of the Internal Revenue Code is capped at $1 million. Section 162(m) provides an exemption from the $1 million cap for compensation qualifying as “performance-based.” We intend for our annual incentive and LTI programs for NEOs to qualify as “performance-based” compensation exempt from the $1 million cap on deductibility. The Corporation and Compensation Committee reserve the right to provide compensation that does not qualify under Section 162(m).
We are proposing that stockholders re-approve the performance-based goals applicable to awards under the Lockheed Martin Corporation 2011 Incentive Performance Award Plan, as amended and restated (2011 IPAP or Plan) for five additional years (see Proposal 4 on page 71). The performance goals must be approved by stockholders every five years to preserve, to the extent possible, our tax deduction for certain awards made under the Plan in accordance with Section 162(m) of the Internal Revenue Code of 1986.
~~2016 Proxy Statement~~
53

~~Table of Contents~~
~~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 NEOs for the fiscal year ended December 31, 2015 and, where applicable, the prior fiscal years. Numbers have been rounded to the nearest dollar.
Name and Principal
Position
Year
Salary
($) Stock
Awards
($) Non-Equity
Incentive Plan
Compensation
($) Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($) All Other
Compensation
($) Total
($) Total
Without
Change In
Pension
Value*
($)
(a)      (b)      (c)      (e)      (g)      (h)      (i)      (j)
Marillyn A. Hewson
Chairman, President and
Chief Executive Officer
2015 1,603,221 8,962,915 9,096,460 8,402,875 500,573 28,566,044 20,163,169
2014 1,497,692 8,905,240 7,060,860 15,817,715 415,055 33,696,562 17,878,847
2013 1,368,654 8,166,696 5,979,710 9,409,264 238,150 25,162,474 15,753,210
Bruce L. Tanner
Executive Vice President and
Chief Financial Officer
2015 937,436 3,213,033 3,251,712 2,004,331 63,043 9,469,555 7,465,224
2014 884,311 3,243,441 4,350,640 3,864,483 55,018 12,397,893 8,533,410
2013 838,586 2,952,952 3,384,234 865,902 74,779 8,116,453 7,250,551
Dale P. Bennett
Executive Vice President
Mission Systems and Training
2015 717,720 2,000,641 2,233,730 2,980,085 69,117 8,001,293 5,021,208
- - - - - - - -
- - - - - - - -
Orlando P. Carvalho
Executive Vice President
Aeronautics
2015 795,370 2,400,882 2,350,746 3,033,253 59,180 8,639,431 5,606,178
2014 720,836 2,407,492 1,949,430 3,694,876 72,074 8,844,708 5,149,832
- - - - - - - -
Maryanne R. Lavan
Senior Vice President, General Counsel
and Corporate Secretary
2015 744,704 2,080,765 3,073,510 1,475,058 53,873 7,427,910 5,952,852
2014 702,287 2,122,226 2,723,950 2,745,209 48,970 8,342,642 5,597,433
2013 668,348 1,447,149 2,114,090 1,193,094 46,158 5,468,839 4,275,745

*      ~~See explanation of Total Without Change In Pension Value on page 57.~~

~~Name and Principal Position (Column (a))~~

Ms. Hewson was appointed Chairman of the Board effective January 2014 and President and CEO effective January 2013. Information is provided for 2015 and 2014 only for Mr. Carvalho as he was not a NEO in 2013, and for 2015 only for Dale P. Bennett as he was not a NEO in 2014 or 2013.
~~Salary (Column (c))~~

Salary is paid weekly in arrears. The amount of salary reported may vary from the approved annual rate of pay because the salary reported in the table is based on the actual number of weekly pay periods in a year.
54~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Executive Compensation~~
~~Stock Awards (Column (e))~~

Represents the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 (ASC 718) for RSUs granted in 2015, 2014 and 2013, and PSUs granted in 2015, 2014 and 2013, disregarding potential forfeitures based on service requirements.
2015
Grant Date
Fair Value
RSUs
($) 2015
Grant Date
Fair Value
PSUs
($)
Ms. Hewson       3,359,901       5,603,014
Mr. Tanner 1,204,442 2,008,591
Mr. Bennett 749,892 1,250,749
Mr. Carvalho 899,870 1,501,011
Ms. Lavan 779,888 1,300,877

The ASC 718 grant date fair value of one 2015 RSU ($192.28), one 2014 RSU ($146.85) and one 2013 RSU ($89.24), is the closing price of one share of our stock on the date of grant, discounted to take into account the deferral of dividends until vesting.
Values for the PSUs, which are subject to performance conditions, are based on the probable outcome on the grant date of three separate performance conditions (approximately 50% of the target shares are earned based upon Relative TSR, approximately 25% of the target shares are earned based upon Performance Cash, and approximately 25% of the target shares are earned based upon ROIC).
The grant date fair value of $188.96 for 2015, $134.59 for 2014 and $61.29 for 2013 for the TSR portion of the PSU award was determined using a Monte Carlo simulation model. The valuewas determined using the historical stock price volatilities of the companies in our comparator group over the most recent 2.92-year period for 2015, 2.93-year period for 2014 and 2.92-year period for 2013, assuming dividends for each company are reinvested on a continuous basis and a risk-free rate of interest of 0.81% for 2015, 0.73% for 2014 and 0.44% for 2013. The grant date fair value of $192.28 for 2015, $146.85 for 2014 and $89.24 for 2013 for the Performance Cash and ROIC portions of the awards is based on the closing price of one share of our stock on the date of grant, discounted to take into account the deferral of dividends until vesting. The grant date fair values for the 2013-2015 and 2014-2016 PSUs have been modified from the disclosure in prior years to make an immaterial correction (less than 50 cents per share) in the Monte Carlo simulation model. In addition to the level of performance achieved, the value of the PSUs earned will be determined by the price of our stock which may be more or less than the grant date fair value.
The maximum grant date fair values of the 2015 PSU awards, assuming a 200% maximum payout on all three metrics are as follows: Ms. Hewson: $11,206,028; Mr. Tanner: $4,017,182; Mr. Bennett: $2,501,498; Mr. Carvalho: $3,002,023 and Ms. Lavan: $2,601,754.
The maximum grant date fair values of the 2014 PSU awards, assuming a 200% maximum payout on all three metrics are as follows: Ms. Hewson: $11,138,497; Mr. Tanner: $4,057,101; Mr. Carvalho: $3,011,372; and Ms. Lavan: $2,654,654.
~~The maximum grant date values of the 2013 PSU awards, assuming a 200% maximum payout on all three metrics are as follows: Ms. Hewson: $10,213,491; Mr. Tanner: $3,692,930; and Ms. Lavan: $482,676.~~
~~Non-Equity Incentive Plan Compensation (Column (g))~~

Includes the amount paid for annual incentive bonuses. We report the annual incentive bonus in column (g) because the annual incentive bonus is based on an assessment of performance against pre-established goals. The Compensation Committee willcontinue to use discretion to assess performance against objectives established at the beginning of the year. We also report amounts earned under our LTIP awards in the three-year period ending on December 31 of the year reported in column (g) of the table.
~~The table below shows the respective 2015 annual incentive bonus and amount earned under the 2013-2015 LTIP and reported for each NEO:~~
Annual Incentive Payout
($) LTIP Payout
($)
Ms. Hewson       5,477,500       3,618,960
Mr. Tanner 1,942,500 1,309,212
Mr. Bennett 1,435,430 798,300
Mr. Carvalho 1,501,000 849,746
Ms. Lavan 1,361,600 1,711,910

~~2016 Proxy Statement~~
55

~~Table of Contents~~
~~Executive Compensation~~
~~Change in Pension Value and Nonqualified Deferred Compensation Earnings (Column (h))~~

Reports the present value of the change in pension benefit for the NEO for the year reported (for example, from December 31, 2014 to December 31, 2015) and is not the amount that will be paid to the NEO.
The disclosure is based on the Corporation’s final average compensation formula in its defined benefit plan which multiplies a percentage (1.25% of compensation below the social security wage base and 1.5% above that level) times years of service times the average of the employee’s highest three years of compensation in the last ten years. This is the same formula used for all participants accruing a pension benefit in 2015; none of the NEOs (including Ms. Hewson) has been credited with any extra years of service or provided a benefit from a special or enhanced formula. Under a three-year final average compensation formula, increasing service, age and compensation will result in an increase in the earned benefit. When an employee receives a compensation increase, the three-year average compensation that goes into the formula likewise increases. The impact of that increase in the average is greater with a long service employee because the pension formulamultiplies the now-higher average compensation by years of service. The year-over-year value is also affected by the changes in interest rate and increased life expectancy assumptions.
The amounts reported for 2015, 2014 and 2013 used a discount rate of 4.375%, 4.00% and 4.75% respectively, as the interest rate. This is the same rate we used to report pension liabilities in our financial statements for each of those years.
Longevity assumptions are used to estimate the life expectancy of plan participants during which they are expected to receive benefit payments. Recent actuarial studies indicate life expectancies are longer and have the resultant effect of increasing the total expected benefit payments to plan participants. The amounts reported beginning in 2014 reflect the use of new longevity assumptions, which results in a larger accumulated pension benefit than otherwise would be the case under the 2013 longevity assumptions. We used the same new longevity and interest rate assumptions to report pension liabilities for all pension plan participants in our financial statements beginning in 2014.
~~All Other Compensation (Column (i)~~

Perquisites and other personal benefits provided to the NEOs in 2015 included: security; annual executive physicals; business association expenses; use of corporate aircraft for personal travel; and travel for a family member accompanying the NEO while on business travel. Not all of the listed perquisites or personal benefits were provided to each NEO. In addition, the Corporation made available event tickets, a company-provided car and driver for personal commuting, and access to club memberships to some of the NEOs, but required the NEOs to reimburse the Corporation for the incremental cost to the Corporation in 2015 of such items. The cost of any category of the listed perquisites and personal benefits did not exceed the greater of $25,000 or 10% of total perquisites and personal benefits for any NEO, except for (i) security for Ms. Hewson ($120,768) and (ii) use of the corporate aircraft for Ms. Hewson ($253,397). The incremental cost for use of corporate aircraft for personal travel was calculated based on the total personal travel flight hours multiplied by the estimated hourly aircraft operating costs for 2015 (including fuel, maintenance, staff travel expenses, and other variable costs, but excluding fixed capital costs for the aircraft, hangar facilities, and staff salaries).
The amounts reported for security include providing home security to some of our NEOs consistent with what is provided to corporate executives in other public companies in our industry. Given the nature of our business, additional security may be provided for travel in high-risk areas or to address particular situations. We believe that providing personal security in response to concerns arising out of employment by the Corporation is business-related.
In addition to perquisites, column (i) also contains items of compensation listed in the following table. All items are paid under broad-based programs for U.S. salaried employees except for the tax assistance and the Lockheed Martin Corporation Supplemental Savings Plan (NQSSP) match. Items include matching contributions made to eligible universities, colleges and other non-profit organizations under the Corporation’s matching gift programs. Listed amounts may include contributions made in 2016 to match 2015 executive contributions or actions as applicable.
56~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Executive Compensation~~
~~Other Items of Compensation Included in “All Other Compensation” Column (i)~~
Name Tax Assistance for
Business-Related Items
($) Corporation Matching
Contribution to 401(k) Plan
($) Corporation Matching
Contribution to NQSSP
(Nonqualified 401(k) Plan)
($) Group Life
Insurance
($) Matching Gift
Programs
($)
Ms. Hewson    41,581    4,500    57,789    15,741    1,000
Mr. Tanner 4,740 4,500 32,259 9,104 0
Mr. Bennett 31,125 4,500 23,474 6,317 1,000
Mr. Carvalho 23,200 10,600 0 7,379 0
Ms. Lavan 2,460 4,500 24,701 7,168 11,000

In 2015, the Corporation provided tax assistance on business-related items associated with taxable business association expenses, security expenses, non-resident state taxes on business travel and travel expenses for a family member accompanying the NEO while on business travel.
*Total Without Change In Pension Value

The separate column labeled “Total Without Change in Pension Value” shows total compensation as required to be disclosed by the SEC in column (j) less the amount shown in Change in Pension Value and Nonqualified Deferred Compensation Earnings in column (h). The amounts shown in this column are not a substitute for the amounts reported in the Total column, and differ substantially from the amounts reported in the Total column for several reasons. The amount reported in column (h) for Changein Pension Value is not current compensation and represents the present value of an estimated stream of payments to be made following retirement. The methodology used to report the Change in Pension Value under applicable accounting rules is sensitive to assumptions about life expectancy and changes in the discount rate determined at each year end, which are functions of economic factors and actuarial calculations that are outside of the control of the Compensation Committee.
~~2016 Proxy Statement~~
57

~~Table of Contents~~
~~Executive Compensation~~
~~2015 Grants of Plan-Based Awards~~
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards Estimated Future Payouts
Under Equity Incentive
Plan Awards Grant Date
Fair Value
of Stock
Awards
($)
Name    Grant
Date    Award
Type Threshold
($) Target
($) Maximum
($) Threshold
(#) Target
(#) Maximum
(#)
(a)     (b)         (c)     (d)     (e)     (f)     (g)     (h)     (l)
Marillyn A. Hewson 1/29/2015 MICP 342,344 2,738,750 5,477,500 - - - 0
1/29/2015 RSU - - - 0 17,474 17,474 3,359,901
1/29/2015 LTIP 140,000 2,240,000 4,480,000 - - - 0
1/29/2015 PSU - - - 1,821 29,396 58,792 5,603,014
Bruce L. Tanner 1/29/2015 MICP 121,406 971,250 1,942,500 - - - 0
1/29/2015 RSU - - - 0 6,264 6,264 1,204,442
1/29/2015 LTIP 50,188 803,000 1,606,000 - - - 0
1/29/2015 PSU - - - 653 10,538 21,076 2,008,591
Dale P. Bennett 1/29/2015 MICP 89,714 717,715 1,435,430 - - - 0
1/29/2015 RSU - - - 0 3,900 3,900 749,892
1/29/2015 LTIP 31,250 500,000 1,000,000 - - - 0
1/29/2015 PSU - - - 407 6,562 13,124 1,250,749
Orlando P. Carvalho 1/29/2015 MICP 93,813 750,500 1,501,000 - - - 0
1/29/2015 RSU - - - 0 4,680 4,680 899,870
1/29/2015 LTIP 37,500 600,000 1,200,000 - - - 0
1/29/2015 PSU - - - 488 7,875 15,750 1,501,011
Maryanne R. Lavan 1/29/2015 MICP 87,281 698,250 1,396,500 - - - 0
1/29/2015 RSU - - - 0 4,056 4,056 779,888
1/29/2015 LTIP 32,500 520,000 1,040,000 - - - 0
1/29/2015 PSU - - - 423 6,825 13,650 1,300,877

~~Estimated Future Payouts Under Non-Equity Incentive Plan Awards (Columns (c), (d) and (e))~~

~~Includes annual incentive grants (MICP) for 2015 and LTIP grants for the 2015-2017 period ending December 31, 2017.~~
The MICP measures performance over a one-year period and is described under “Annual Incentive” on page 40 in the CD&A. The threshold, or minimum amount payable, is 12.5% of target while the maximum is 200% of target.
The LTIP award measures performance against three separate metrics described under “2015 Long-Term Incentive Compensation” on page 45 in the CD&A. The threshold is the minimum amount payable for a specified level of performance stated in the LTIP award agreement. For the 2015-2017 award, the threshold amount payable is 6.25% of the target award. Themaximum award payable under the LTIP award is 200% of target value. Awards are subject to forfeiture upon termination of employment prior to the end of the performance cycle, except in the event of retirement, death, disability, divestiture, or layoff. If the event occurs prior to the end of the performance period, LTIP awards are prorated. Following a change in control, the 2015-2017 LTIP awards vest at the target amount upon involuntary termination without cause or voluntary termination with good reason or if the successor does not assume the LTIP awards.
58~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Executive Compensation~~
~~Estimated Future Payouts Under Equity Incentive Plan Awards (Columns (f), (g) and (h))~~

Shows the number of RSUs granted by the Compensation Committee on January 29, 2015. The RSU grants made to the NEOs were subject to forfeiture to the extent the value of the RSUs granted for a recipient on the award date was greater than 0.2% for the CEO and 0.1% for each of the other NEOs of 2015 Performance Cash. Based on 2015 Performance Cash, none of the RSUs were forfeited. The RSUs vest on the third anniversary of the date of grant or upon death, disability, divestiture. Following a change in control, the RSUs vest upon involuntary termination without cause or voluntary termination for good reason or if the RSUs are not assumed. If the employee retires or is laid off after July 29, 2015, but prior to the third anniversary of the date of grant, the RSUs become nonforfeitable and are paid at the end of the vesting period. During the vesting period, dividend equivalents are accrued and subject to the same vesting schedule as the underlying RSUs. At the end of the vesting period, the RSUs are paid in shares of stock and the deferred dividend equivalents are paid in cash. If any tax withholding is required on the 2015 RSUs or dividend equivalents during the vesting period (for example, on account of retirement-eligibility), the RSUs provide for accelerated vesting of the number of shares or dividend equivalents required to satisfy the tax withholding. The award is then reduced either by the number of shares or by the amount of accrued dividend equivalents that were accelerated for the tax withholding.
The table includes PSU grants for the 2015-2017 period ending December 31, 2017. At the end of the three-year vesting period, which ends on the third anniversary of the date of grant, the amount earned is payable in shares of stock and cash representing dividend equivalents accrued during the three-year performance period. Awards are subject to forfeiture upon termination of employment prior to the end of the vesting period, except in the event of termination following retirement, death, disability, divestiture, or layoff. If the event occurs after July 29, 2015, but prior to the end of the vesting period, PSU awards are paid out at the end of the vesting period on a prorated basis. Following a change in control, the PSUs vest at the target amount upon involuntary termination without cause or voluntary termination with good reason or if the successor does not assume the PSUs.
Shares are earned under the PSU awards based upon performance against three separate metrics described under “PSU Awards” on page 45. If performance falls below the threshold level of performance for a metric, no shares would be earned with respect to that metric. Assuming any payment is earned, the minimum amount payable under the PSU is 25% of the target shares attributable to ROIC or Performance Cash, the lowest level payable under these metrics. The maximum number of shares payable under the PSU is 200% of the number of target shares.
~~Grant Date Fair Value of Stock Awards (Column (1))~~

~~Represents the aggregate grant date fair value computed in accordance with FASB ASC 718 for RSUs and PSUs granted in 2015, disregarding potential forfeitures based on service requirements.~~
The grant date fair value of the 2015 RSU grant is $192.28 per RSU, which is based on the closing price of one share of our stock on the date of grant, discounted to take into account the deferral of dividends until vesting.
The grant date fair value for the PSUs, which are subject to performance conditions, is based on the probable outcome of each of the three performance conditions. The grant date fair value of $188.96 for the Relative TSR portion of the award is determined using a Monte Carlo simulation model. The grant date fair value of $192.28 for the Performance Cash and ROIC portions of the awards is based on the closing price of one share of our stock on the date of grant, discounted to take into account the deferral of dividends until vesting.
~~2016 Proxy Statement~~
59

~~Table of Contents~~
~~Executive Compensation~~
~~Outstanding Equity Awards at 2015 Fiscal Year-End~~
Option Awards Stock Awards
Name    Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#) Option
Exercise
Price
($) Option
Expiration
Date Number
of Shares
or Units of
Stock That
Have Not
Vested¹
(#) Market Value
of Shares or
Units of Stock
That Have
Not Vested²
($) Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested³
(#) Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights That
Have Not Vested⁴
($)
(a)      (b)      (e)      (f)      (g)      (h)      (i)      (j)
Marillyn A. Hewson 82,935 82.01 1/28/2022 17,474 ⁵ 3,794,479 31,353 ⁶ 6,808,304
59,434 79.60 1/29/2021 21,913 ⁷ 4,758,408 46,183 ⁸ 10,028,639
- - - 34,289 ⁹ 7,445,856 - -
- - - 127,693 ¹⁰ 27,728,535 - -
Bruce L. Tanner 97,213 82.01 1/28/2022 6,264 ⁵ 1,360,228 11,240 ⁶ 2,440,766
64,531 79.60 1/29/2021 7,897 ⁷ 1,714,834 16,822 ⁸ 3,652,898
55,000 74.89 1/31/2020 12,399 ⁹ 2,692,443 - -
49,700 82.52 1/25/2019 46,171 ¹⁰ 10,026,033 - -
Dale P. Bennett 10,800 106.87 1/26/2018 3,900 ⁵ 846,885 6,999 ⁶ 1,519,833
- - 1/28/2022 4,817 ⁷ 1,046,012 10,182 ⁸ 2,211,022
- - 1/29/2021 7,562 ⁹ 1,642,088 - -
- - - 28,162 ¹⁰ 6,115,379 - -
Orlando P. Carvalho 29,705 82.01 1/28/2022 4,680 ⁵ 1,016,262 8,399 ⁶ 1,823,843
20,466 79.60 1/29/2021 5,940 ⁷ 1,289,871 12,486 ⁸ 2,711,335
15,300 74.89 1/31/2020 6,712 ⁹ 1,457,511 - -
12,700 82.52 1/25/2019 3,009 ¹⁰ 653,404 - -
Maryanne R. Lavan 8,202 82.01 1/28/2022 4,056 ⁵ 880,760 7,279 ⁶ 1,580,635
6,518 79.60 1/29/2021 5,212 ⁷ 1,131,786 11,006 ⁸ 2,389,953
- - - 13,512 ⁹ 2,934,131 - -
- - - 6,036 ¹⁰ 1,310,718 - -

~~(1)~~ We reported RSUs granted in January 2015 as equity incentive awards in columns (f) through (h) of the “2015 Grants of Plan-Based Awards” table because there was the potential for forfeiture based on failure to achieve the performance metrics specified in the award agreements. For this table, we reported the RSUs in columns (g) and (h) because the performance feature of the RSU grants was satisfied at the end of 2015. This column also includes PSUs granted on January 28, 2013 for the 2013- 2015 performance period. The vesting period for the PSU granted ends on January 28, 2016 but the performance period ended on December 31, 2015.The number of shares shown in column (g) for the 2013-2015 PSUs is the number of shares earned under the PSU metrics and to be paid upon vesting in January 2016.
~~(2)~~ The market value shown in column (h) is calculated by multiplying the number of shares shown in column (g) by the December 31, 2015 per share closing price of our stock ($217.15). NEOs also receive a cash payment for deferred dividend equivalents upon vesting of the RSUs.
~~(3)~~ Represents PSUs granted on January 29, 2015 for the 2015-2017 performance period and on January 27, 2014 for the 2014-2016 performance period; the PSUs are earned and paid out in shares of our stock at the end of the three-year vesting period based upon performance on three separate metrics (Relative TSR, Performance Cash, and ROIC). The number of shares of stock shown in column (i) is based upon the threshold level of performance for each of the three metrics or, if performance to date on the metric has exceeded the threshold level (as is the case for 2015 and 2014), the estimated level of performance as of December 31, 2015. Performance under each metric is determined separately, with the three results added together to obtain the number of shares shown in column (i). NEOs also receive a cash payment for accrued dividend equivalents upon vesting of the PSUs.
~~(4)~~ ~~The market value shown in column (j) is calculated by multiplying the number of PSUs reported in column (i) by the December 31, 2015 per share closing price of our stock ($217.15).~~
~~(5)~~ ~~Represents RSUs granted on January 29, 2015, which vest January 29, 2018, except that vesting may occur earlier as described in the “2015 Grants of Plan-Based Awards” table.~~
~~(6)~~ Represents PSUs granted on January 29, 2015 and which are earned over a three-year period but provide for pro rata payments for certain terminations as described in connection with the “2015 Grants of Plan-Based Awards” table.
~~(7)~~ ~~Represents RSUs granted on January 27, 2014, which vest on January 27, 2017, except that vesting may occur earlier as described in the “2015 Grants of Plan-Based Awards” table.~~
~~(8)~~ Represents PSUs granted on January 27, 2014 and which are earned over a three-year period but provide for pro rata payments for certain terminations as described in the “2015 Grants of Plan-Based Awards” table.
~~(9)~~ ~~Represents RSUs granted on January 28, 2013, which vested on January 28, 2016.~~
~~(10)~~   ~~Represents PSUs granted on January 28, 2013, which vested on January 28, 2016.~~

60~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Executive Compensation~~
~~Option Exercises and Stock Vested During 2015~~
Option Awards Stock Awards
Name Number of Shares
Acquired on Exercise
(#) Value Realized
on Exercise¹
($) Number of Shares
Acquired on Vesting²
(#) Value Realized
on Vesting³($)
(a)       (b)       (c)       (d)       (e)
Marillyn A. Hewson 45,700 5,386,088 11,503 2,170,141
Bruce L. Tanner 32,000 4,049,882 12,916 2,434,540
Dale P. Bennett 16,809 1,940,399 2,686 506,747
Orlando P. Carvalho 0 0 4,033 760,526
Maryanne R. Lavan 19,000 2,216,546 7,632 1,438,470

~~(1)~~   ~~Value realized was calculated based on the difference between the aggregate exercise price of the options and the weighted average sale price per share on the date of exercise and sale.~~
~~(2)~~ Vesting on January 30, 2015 of RSUs granted on January 30, 2012 following the three-year vesting period; and accelerated vesting on January 29, 2015 of a portion of RSUs granted on January 27, 2014 equal to the value of the tax withholding obligation due upon retirement-eligibility of the NEO and following the Board’s certification of the one-year performance goal based on the per share closing price on the date of vesting. Represents aggregate number of shares vested prior to disposition of shares to the Corporation to satisfy tax withholding obligation.
~~(3)~~ Value realized was calculated based on the number of shares acquired on vesting multiplied by the per share closing price of our common stock on the date of vesting (January 30, 2015, $188.37) and (January 29, 2015, $192.50).
~~Retirement Plans~~
During 2015, the NEOs participated in the Lockheed Martin Corporation Salaried Employee Retirement Program (LMRP), which is a combination of several prior plans (collectively, the “Prior Plan”) for salaried employees with some protected benefits.
The calculation of retirement benefits under the LMRP is determined by a formula that takes into account the participant’s years of credited service and average compensation for the highest three years of the last ten years of employment. Average compensation includes the NEO’s base salary, annual incentive bonuses and lump sum payments in lieu of a salary increase. NEOs must have either five years of service or be actively employed by the Corporation at age 65 to vest in the LMRP. Normal retirement age is 65; however, benefits are payable as early as age 55 (with five years of service) at a reduced amount or without reduction at age 60. Benefits are payable as a monthly annuity for the lifetime of the employee, as a joint and survivor annuity, as a life annuity with a five or ten year guarantee, or as a level income annuity.
The calculation of retirement benefits under the Prior Plan is based on a number of formulas, some of which take into account the participant’s years of credited service and pay over the career of the NEO. Certain other formulas in the Prior Plan are based upon the final average compensation and credited service of the employee. Pay under certain formulas in the Prior Plan currently includessalary, commissions, overtime, shift differential, lump sum pay in lieu of a salary increase, annual incentive bonuses awarded that year, and 401(k) and pre-tax contributions. A portion of the pension benefits for Mr. Tanner was earned under the Prior Plan.
~~All of the NEOs were eligible for early retirement as of December 31, 2015. As of December 31, 2015, all of the NEOs were vested in the LMRP.~~
During 2015, the NEOs also participated in the Lockheed Martin Corporation Supplemental Retirement Plan (Supplemental Pension), which is a restorative plan and provides benefits in excess of the benefit payable under IRS rules through the LMRP, our tax-qualified plan (see the footnote to column (d) to the “2015 Pension Benefits” table on page 62).
In July 2014, the Corporation announced that the LMRP will be frozen, in two steps, with increases in compensation no longer taken into account effective January 1, 2016 and increases in service no longer taken into account effective January 1, 2020. This change in plan structure also will carry over to the Supplemental Pension benefit accruals available to the NEOs. Retirement benefits earned thereafter will be paid through defined contribution plans. Beginning in 2016 eligible salaried employees (including the NEOs) will receive a 2% company contribution to the salaried 401(k) plan.
~~2016 Proxy Statement~~
61

~~Table of Contents~~
~~Executive Compensation~~
~~2015 Pension Benefits~~
Name Plan Name Number of Years
Credited Service
(#) Present Value of
Accumulated
Benefit
($) Payments
During Last
Fiscal Year
($)
(a)       (b)       (c)       (d)       (e)
Marillyn A. Hewson Lockheed Martin Corporation Salaried Employee Retirement Program 33.1 1,852,063 0
Lockheed Martin Corporation Supplemental Retirement Plan 45,121,313 0
Bruce L. Tanner Lockheed Martin Corporation Salaried Employee Retirement Program 33.1 1,538,477 0
Lockheed Martin Corporation Supplemental Retirement Plan 14,186,176 0
Dale P. Bennett Lockheed Martin Corporation Salaried Employee Retirement Program 34.6 1,796,270 0
Lockheed Martin Corporation Supplemental Retirement Plan 11,037,324 0
Orlando P. Carvalho Lockheed Martin Corporation Salaried Employee Retirement Program 35.5 1,696,551 0
Lockheed Martin Corporation Supplemental Retirement Plan 11,874,179 0
Maryanne R. Lavan Lockheed Martin Corporation Salaried Employee Retirement Program 25.8 1,291,176 0
Lockheed Martin Corporation Supplemental Retirement Plan 8,625,309 0

~~Plan Name (Column (b))~~

The Lockheed Martin Corporation Supplemental Retirement Plan (Supplemental Pension) uses the same formula for benefits as the tax-qualified plan uses for calculating the NEO’s benefit. Although all service recognized under the tax-qualified plan is recognized under the Supplemental Pension, a benefit would be earned underthe Supplemental Pension only in years when the employee’s total accrued benefit would exceed the benefit accrued under the tax-qualified plan. The Supplemental Pension benefits are payable in the same form as benefits are paid under the LMRP, except lump sum payments are available under the Supplemental Pension.
~~Present Value of Accumulated Benefit (Column (d))~~

The amounts in column (d) were computed using the same assumptions we used to account for pension liabilities in our financial statements and as described in Note 11 to our financial statements contained in our 2015 Annual Report, except that the amounts were calculated based on benefits commencing at age 60 (or current age if greater). We used these ages rather than the plan’s normal retirement age of 65 because an employee may commence receiving pension benefits at age 60 without any reduction for early commencement. A portion of Mr. Tanner’s benefit was earned under grandfathered plans that apply a reduction for early commencement at age 60. The amounts shown for Mr. Tanner reflect the reduction for early commencement of the benefit. Amounts paid under our plans use assumptions contained in the plans and may be different than those used for financial statement reporting purposes.
Only the benefit payable under the Supplemental Pension is payable in the form of a lump sum. If an executive elected a lump sum payment, the amount of the lump sum would be based on plan assumptions and not the assumptions used for financial statement reporting purposes. As a result, the actual lump sum payment would be an amount different than what is reported in this table. The age of the executive at retirement would also impact the size of the lump sum payment. The amount using plan assumptions is shown on the “Potential Payments Upon Termination or Change in Control” table.
62~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Executive Compensation~~
~~Nonqualified Deferred Compensation~~
Participants in our tax-qualified 401(k) plan may defer up to 25% of base salary on a pre-tax, Roth or after-tax basis. In addition, we make a matching contribution equal to 50% of up to the first 8% of compensation contributed by the participant. Employee and Corporation matching contributions in excess of the Internal Revenue Code limitations may be contributed to the NQSSP on a pre-tax basis at the election of the NEO. Employee and Corporation matching contributions are nonforfeitable at all times. NQSSP contributions are credited with earnings or losses, as appropriate, based on the investment option or options in which the account has been invested, as elected by the participant. Each of the NQSSP investment options is available under our tax-qualified 401(k) plan for salaried employees. The NQSSP provides for payment following termination of employment in a lump sum or up to 25 annual installments at the participant’s election. All amounts accumulated and unpaid under the NQSSP must be paid in a lump sum within 15 calendar days following a change in control.
The Deferred Management Incentive Compensation Plan (DMICP) provides the opportunity to defer, until termination of employment or beyond, the receipt of all or a portion of annual incentive bonuses, LTIP awards and amounts paid in respect of the termination of the Lockheed Martin Post-Retirement Death Benefit Plan. Employees may elect any of the investment fundsavailable in the NQSSP (with the exception of the Company Stock Fund) or two investment alternatives available only under the DMICP for crediting earnings (losses). Under the DMICP Stock Investment Option, earnings (losses) on deferred amounts will accrue at a rate that tracks the performance of our common stock, including reinvestment of dividends. Under the DMICP Interest Investment Option, earnings accrue at a rate equivalent to the then published rate for computing the present value of future benefits under Cost Accounting Standards 415, Deferred Compensation (“CAS 415 rate”). The Interest Investment Option was closed to new deferrals and transfers from other investment options effective July 1, 2009. Amounts credited to the Stock Investment Option may not be reallocated to other options. In addition, Stock Investment Option deferrals will be paid in shares of our common stock upon distribution. For the 2013–2015 LTIP grant, any award is subject to a one-year mandatory deferral to the extent the award value would exceed $10 million. For the 2014–2016 LTIP grant, the amount in excess of $10 million is forfeited. The DMICP provides for payment in January or July following termination of employment in a lump sum or up to 25 annual installments at the NEO’s election. All amounts accumulated under the DMICP must be paid in a lump sum within 15 days following a change in control.
~~2016 Proxy Statement~~
63

~~Table of Contents~~
~~Executive Compensation~~
~~2015 Nonqualified Deferred Compensation~~
This table reports compensation earned by the NEOs and deferred under our NQSSP and DMICP. The NQSSP is a nonqualified 401(k) plan with an employer match on a portion of the salary deferral. Three types of compensation may be deferred into the DMICP:
●
~~Annual incentive bonus (“DMICP (Bonus)”).~~
●
~~Amounts payable under our LTIP program and mandatorily deferred (“DMICP (LTIP1 Mandatory)”).~~
●
~~Amounts payable under our LTIP program and voluntarily deferred (“DMICP (LTIP2 Voluntary)”).~~

Name Executive
Contributions in
Last FY
($) Registrant
Contributions in
Last FY
($) Aggregate
Earnings in
Last FY
($) Aggregate
Withdrawals/
Distributions
($) Aggregate
Balance at
Last FYE
($)
(a)             (b)       (c)       (d)       (e)       (f)
Marillyn A. Hewson NQSSP 361,178 57,789 24,361 0 3,173,740
DMICP (Bonus) 2,284,653 N/A (222,115 ) 0 14,871,871
DMICP (LTIP1 Mandatory) N/A N/A 0 1,402,870 0
DMICP (LTIP2 Voluntary) 3,029,654 N/A 54,619 0 8,254,742
TOTAL 5,675,485 57,789 (143,135 ) 1,402,870 26,300,353
Bruce L. Tanner NQSSP 201,620 32,259 142,599 0 3,581,322
DMICP (Bonus) 0 N/A 183,734 0 1,575,911
DMICP (LTIP1 Mandatory) N/A N/A 0 1,740,858 0
DMICP (LTIP2 Voluntary) 0 N/A 0 0 0
TOTAL 201,620 32,259 326,333 1,740,858 5,157,233
Dale P. Bennett NQSSP 146,714 23,474 100,398 0 1,518,089
DMICP (Bonus) 278,863 N/A 221,450 0 3,187,458
DMICP (LTIP1 Mandatory) N/A N/A 0 396,104 0
DMICP (LTIP2 Voluntary) 550,745 N/A 58,205 0 1,161,066
TOTAL 976,322 23,474 380,053 396,104 5,866,613
Orlando P. Carvalho NQSSP 0 0 0 0 0
DMICP (Bonus) 0 N/A 28,597 0 210,858
DMICP (LTIP1 Mandatory) N/A N/A 0 490,144 0
DMICP (LTIP2 Voluntary) 0 N/A 0 0 0
TOTAL 0 0 28,597 490,144 210,858
Maryanne R. Lavan NQSSP 104,978 24,701 70,132 0 1,847,563
DMICP (Bonus) 19,086 N/A 150,516 0 1,088,211
DMICP (LTIP1 Mandatory) N/A N/A 0 354,932 0
DMICP (LTIP2 Voluntary) 24,315 N/A 98,466 0 784,407
TOTAL 148,379 24,701 319,114 354,932 3,720,181

64~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Executive Compensation~~
~~Executive Contributions in Last Fiscal Year (Column (b))~~

Includes 2015 salary deferrals to NQSSP, annual incentive bonus paid in 2015 for 2014 performance deferred to DMICP, and voluntary deferrals of LTIP for the 2012–2014 period to the DMICP. The table reflects the year in which the deferral is credited to the NEO’s account (2015) and not the year in which it was earned (2014).
~~Registrant Contributions in Last Fiscal Year (Column (c))~~

Includes 2015 Corporation matching contributions to NQSSP. The NQSSP match is also included in column (i) of the “Summary Compensation Table.” The table reflects the year in which the deferral is credited to the NEO’s account (2015) and not the year in which it was earned (2014).
~~Aggregate Withdrawals/Distributions (Column (e))~~

~~Includes distributions of mandatory LTIP deferral from the 2010-2012 period in January 2015 following the end of the two-year deferral period.~~
~~Aggregate Balance at Last Fiscal Year End (Column (f))~~

The following table lists the amounts reported as executive or registrant contributions in columns (b) and (c) of the “2015 Nonqualified Deferred Compensation” table that are also reported as compensation in the “Summary Compensation Table” for 2015. These contributions consist of NEO and Corporation contributions made to the NQSSP for service in 2015. Contributions with respect to 2015 performance deferred in 2016 (annual incentive bonus and LTIP) are not included as these amounts are not credited until 2016, and are not included in column (f). The following table also lists the amounts reported in column (f) as part of the Aggregate Balance at Last FYE (2015) that is reported as compensation for prior years in the “Summary Compensation Table” for years beginning with 2006. For 2015, there were no earnings in excess of 120% of the applicable federal rate.
Of Amount Reported in Column (f)
Name      Aggregate Balance
at December 31,
2015 in Column (f)
($)      NEO and Corporation Contributions to
NQSSP Reported in “Summary Compensation
Table” for 2015
($)      Amount Reported in “Summary
Compensation Table” for Prior Years
(Beginning with 2006)
($)
Ms. Hewson 26,300,353 418,967 12,152,836
Mr. Tanner 5,157,233 233,879 3,066,591
Mr. Bennett 5,866,613 170,189 0
Mr. Carvalho 210,858 0 0
Ms. Lavan 3,720,181 129,679 304,783

~~2016 Proxy Statement~~
65

~~Table of Contents~~
~~Executive Compensation~~
~~Potential Payments Upon Termination or Change in Control~~
The table below summarizes the benefits that become payable to a NEO at, following, or in connection with any termination, including resignation, severance, retirement, or a constructive termination of a NEO, or a change in control under the terms of our benefit plans.
~~SUMMARY OF PAYMENT TRIGGERS~~
~~PENSION-QUALIFIED~~¹
~~Retirement –~~Annuity payable on a reduced basis at age 55; annuity payable on a non-reduced basis at age 60; steeper reduction for early commencement at age 55 for terminations prior to age 55 than for terminations after age 55.
~~Change in Control –~~~~No acceleration.~~
~~Death/Disability/Layoff –~~ Spousal annuity benefit as required by law in event of death unless waived by participant. For either (i) disability between age 53 and 55 with eight years of service or (ii) layoff between age 53 and 55 with eight years of service or before age 55 with 25 years of service, participant is eligible for the more favorable actuarial reductions for participants terminating after age 55.
~~Divestiture~~² –~~No provisions; absent a negotiated transfer of liability to buyer, treated as retirement or termination.~~
~~Termination/Resignation –~~ Annuity payable on a reduced basis at age 55; annuity payable on a non-reduced basis at age 60; steeper reduction for early commencement at age 55 for terminations prior to age 55 than for terminations after age 55.
~~SUPPLEMENTAL PENSION~~¹
~~Retirement –~~ ~~Annuity or lump sum at later of age 55 or termination.~~
~~Change in Control –~~ ~~Lump sum.~~
~~Death/Disability/Layoff –~~ ~~Annuity or lump sum at later of age 55 or termination.~~
~~Divestiture~~² – ~~No provisions; absent a negotiated transfer of liability to buyer, treated as retirement or termination.~~
~~Termination/Resignation –~~ ~~Annuity or lump sum.~~
~~LTIP~~
~~Retirement/Death/Disability/Layoff –~~ ~~Prorated payment at the end of the three-year performance period for retirement, death, disability, or layoff during that period.~~
~~Change in Control –~~Immediate payment at target for change in control event occurring during performance cycle if not assumed by successor; immediate payment at target following involuntary termination without cause or voluntary termination with good reason within 24 months of change in control during performance cycle if award is assumed by successor.
~~Divestiture~~² – ~~Prorated payment at the end of the three-year performance period for divestiture during that period.~~
~~Termination/Resignation –~~ ~~Forfeited if termination occurs prior to becoming retirement-eligible; termination on or after (i) age 55 and ten years of service or (ii) age 65 treated as retirement-eligible.~~
~~RSUs~~
~~Retirement –~~~~Continued vesting of RSUs and dividend equivalents subject to six-month minimum service from date of grant.~~
~~Change in Control –~~Immediate vesting of RSUs and dividend equivalents if not assumed by successor. Immediate vesting following involuntary termination without cause or voluntary termination with good reason within 24 months of change in control if assumed by successor.
~~Death/Disability/Layoff –~~~~Continued vesting of RSUs and dividend equivalents after layoff, subject to six-month minimum service from date of grant. For all awards, immediate vesting following death or disability.~~
~~Divestiture~~² –~~Immediate vesting of RSUs and dividend equivalents.~~
~~Termination/Resignation –~~Forfeit unvested RSUs and dividend equivalents if termination occurs prior to becoming retirement-eligible. Termination on or after (i) age 55 and ten years of service or (ii) age 65 with at least six months of service during the performance cycle is treated as retirement-eligible.

66~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Executive Compensation~~
~~PSUs~~
~~Retirement/Death/Disability/Layoff –~~ Prorated payment of PSUs and dividend equivalents at the end of the three-year performance period for retirement, death, disability or layoff during that period subject to six-month minimum service from date of grant.
~~Change in Control –~~ Immediate vesting of PSUs and dividend equivalents at target if award is not assumed by successor. Immediate payment at target following involuntary termination without cause or voluntary termination with good reason within 24 months of change in control if assumed by successor.
~~Divestiture~~² –~~Prorated payment of PSUs and dividend equivalents at the end of the three-year performance period for divestiture during that period.~~
~~Termination/Resignation –~~ Forfeit PSUs and dividend equivalents if termination occurs prior to becoming retirement-eligible; termination on or after (i) age 55 and ten years of service or (ii) age 65 treated as retirement-eligible.
~~EXECUTIVE SEVERANCE PLAN~~
~~Retirement –~~~~No payment.~~
~~Change in Control –~~~~No payment unless terminated.~~
~~Death/Disability –~~ ~~No payment for death or disability.~~
~~Layoff –~~ Payment of a lump sum amount equal to a multiple of salary, annual bonus equivalent, and health care continuation coverage cost plus outplacement services and relocation assistance. The multiple of salary and annual bonus equivalent for the CEO is 2.99; for all other NEOs it is 1.0.
~~Divestiture~~² – ~~No payment.~~
~~Termination/Resignation –~~ ~~No payment.~~
~~ANNUAL INCENTIVE BONUS~~³
~~Retirement –~~ ~~Payment may be prorated for retirement during the year with six months of participation in the year.~~
~~Change in Control –~~~~No provision.~~
~~Death/Disability/Layoff –~~ ~~Payment may be prorated for death, disability or layoff during the year with six months of participation in the year.~~
~~Divestiture~~² – ~~No provision.~~
~~Termination/Resignation –~~ ~~Eligible for prorated award if termination/ resignation occurs after December 1 with six months of participation in the year.~~
~~DMICP~~⁴
~~Retirement –~~ ~~Lump sum or installment payment in accordance with NEO elections.~~
~~Change in Control –~~ ~~Immediate lump sum payment.~~
~~Death/Disability/Layoff –~~ ~~Lump sum or installment payment in accordance with NEO elections, except lump sum only for layoff prior to age 55.~~
~~Divestiture~~² ~~– Follows termination provisions.~~
~~Termination/Resignation –~~ ~~Lump sum if termination is prior to age 55; after age 55, lump sum or installment payment in accordance with NEO elections.~~
~~NQSSP~~⁴
~~Retirement –~~ ~~Lump sum or installment payment in accordance with NEO elections.~~
~~Change in Control –~~~~Immediate lump sum payment~~
~~Death/Disability/Layoff –~~~~Lump sum for death; for disability or layoff, lump sum or installment payment in accordance with NEO elections.~~
~~Divestiture~~² – ~~Lump sum or installment payment in accordance with NEO elections.~~
~~Termination/Resignation –~~ ~~Lump sum or installment payment in accordance with NEO elections.~~

~~(1)~~ ~~See “2015 Pension Benefits” table for present value of accumulated benefit.~~
~~(2)~~ Divestiture is defined as a transaction which results in the transfer of control of a business operation to any person, corporation, association, partnership, joint venture, or other business entity of which less than 50% of the voting stock or other equity interests (in the case of entities other than corporations) is owned or controlled directly or indirectly by us, one or more of our subsidiaries, or by a combination thereof following the transaction. Beginning with the 2016 grants, RSUs vest on a prorated basis unless assumed by the buyer.
~~(3)~~ ~~See “Compensation Discussion and Analysis” for discussion of annual incentive bonus payment calculation.~~
~~(4)~~   ~~See “Aggregate Balance at Last FYE” column in “2015 Nonqualified Deferred Compensation” table for amounts payable.~~

~~2016 Proxy Statement~~
67

~~Table of Contents~~
~~Executive Compensation~~
The following table quantifies the payments under our executive compensation programs in RSUs and LTIP awards and the lump sum payable under the Supplemental Pension that would be made assuming a termination event had occurred on December 31, 2015. Payments under other plans do not change as a result of the termination event, and quantification of those payments are found elsewhere in this Proxy Statement or are paid under plans available generally to salaried employees. The table shows amounts that would actually be paid on or shortly after December 31, 2015 onaccount of the trigger event. Amounts that are contingent upon future performance, continued vesting or already earned as of December 31, 2015 are described and quantified in the footnotes following the table. Award agreements for the NEOs contain post-employment restrictive covenants and to receive a supplemental severance benefit, an executive must execute a release of claims and an agreement containing a two-year post-employment non-compete and non-solicitation covenants. Numbers have been rounded to the nearest dollar.
Potential Payments Upon Termination or Change in Control
Name         Retirement
($)     Change
In Control
($)     Death/
Disability
($)     Layoff
($)     Divestiture
($)     Termination/
Resignation
($)
Marillyn A. Hewson Supplemental Pension 45,743,777 45,743,777 45,743,777 45,743,777 45,743,777 45,743,777
LTIP 0 4,464,000 0 0 0 0
RSUs 0 16,924,301 16,924,301 0 16,924,301 0
PSUs 0 32,054,429 0 0 0 0
Executive Severance 0 0 0 12,894,703 0 0
TOTAL 45,743,777 99,186,507 62,668,078 58,638,480 62,668,078 45,743,777
Bruce L. Tanner Supplemental Pension 15,451,906 15,451,906 15,451,906 15,451,906 15,451,906 15,451,906
LTIP 0 1,613,000 0 0 0 0
RSUs 0 6,101,540 6,101,540 0 6,101,540 0
PSUs 0 11,593,960 0 0 0 0
Executive Severance 0 0 0 1,915,986 0 0
TOTAL 15,451,906 34,760,406 21,553,446 17,367,892 21,553,446 15,451,906
Dale P. Bennett Supplemental Pension 11,570,114 11,570,114 11,570,114 11,570,114 11,570,114 11,570,114
LTIP 0 990,300 0 0 0 0
RSUs 0 3,739,208 3,739,208 0 3,739,208 0
PSUs 0 7,086,178 0 0 0 0
Executive Severance 0 0 0 1,559,874 0 0
TOTAL 11,570,114 23,385,800 15,309,322 13,129,989 15,309,322 11,570,114
Orlando P. Carvalho Supplemental Pension 12,989,586 12,989,586 12,989,586 12,989,586 12,989,586 12,989,586
LTIP 0 1,201,300 0 0 0 0
RSUs 0 3,971,778 3,971,778 0 3,971,778 0
PSUs 0 4,598,136 0 0 0 0
Executive Severance 0 0 0 1,571,479 0 0
TOTAL 12,989,586 22,760,800 16,961,364 14,561,064 16,961,364 12,989,586
Maryanne R. Lavan Supplemental Pension 9,104,324 9,104,324 9,104,324 9,104,324 9,104,324 9,104,324
LTIP 0 1,050,000 0 0 0 0
RSUs 0 5,254,156 5,254,156 0 5,254,156 0
PSUs 0 4,462,237 0 0 0 0
Executive Severance 0 0 0 1,460,287 0 0
TOTAL 9,104,324 19,870,717 14,358,480 10,564,610 14,358,480 9,104,324
The following table quantifies the payments under our executive compensation programs in RSU, LTIP and PSU awards and the lump sum payable under the Supplemental Pension that would be made assuming a termination event had occurred on December 31, 2017. Payments under other plans do not change as a result of the termination event, and quantification of those payments is found elsewhere in this Proxy Statement; benefits under plans available generally to salaried employees also are not included. The table shows amounts that would actually be paid on or shortly afterDecember 31, 2017 on account of the trigger event. Amounts that are contingent upon future performance, continued vesting or already earned as of December 31, 2017 are described and quantified in the footnotes following the table. Award agreements for the NEOs contain post-employment restrictive covenants and to receive a supplemental severance benefit, an executive must execute a release of claims and an agreement containing two-year post-employment non-compete and non-solicitation covenants.
Name         Retirement
($)     Change
In Control
($)     Death/
Disability
($)     Layoff
($)     Divestiture
($)     Termination/
Resignation
($)
Marillyn A. Hewson Supplemental Pension 46,615,029 46,615,029 46,615,029 46,615,029 46,615,029 46,615,029
LTIP 0 4,683,000 0 0 0 0
RSUs 0 15,660,993 15,660,993 0 5,694,711 0
PSUs 0 26,771,251 0 0 0 0
Executive Severance 0 0 0 13,966,604 0 0
TOTAL 46,615,029 93,730,273 62,276,022 60,581,633 52,309,740 46,615,029
Bruce L. Tanner Supplemental Pension 17,131,570 17,131,570 17,131,570 17,131,570 17,131,570 17,131,570
LTIP 0 1,643,000 0 0 0 0
RSUs 0 5,535,044 5,535,044 0 2,041,410 0
PSUs 0 9,464,078 0 0 0 0
Executive Severance 0 0 0 2,121,710 0 0
TOTAL 17,131,570 33,773,692 22,666,614 19,253,280 19,172,980 17,131,570
Dale P. Bennett Supplemental Pension 12,262,075 12,262,075 12,262,075 12,262,075 12,262,075 12,262,075
LTIP 0 1,334,000 0 0 0 0
RSUs 0 4,131,666 4,131,666 0 1,279,680 0
PSUs 0 7,013,861 0 0 0 0
Executive Severance 0 0 0 1,689,324 0 0
TOTAL 12,262,075 24,741,602 16,393,741 13,951,399 13,541,755 12,262,075
Orlando P. Carvalho Supplemental Pension 14,385,572 14,385,572 14,385,572 14,385,572 14,385,572 14,385,572
LTIP 0 1,334,000 0 0 0 0
RSUs 0 4,387,397 4,387,397 0 1,535,411 0
PSUs 0 7,462,159 0 0 0 0
Executive Severance 0 0 0 1,703,383 0 0
TOTAL 14,385,572 27,569,127 18,772,968 16,088,955 15,920,982 14,385,572
Maryanne R. Lavan Supplemental Pension 10,601,824 10,601,824 10,601,824 10,601,824 10,601,824 10,601,824
LTIP 0 1,072,000 0 0 0 0
RSUs 0 3,604,178 3,604,178 0 1,321,676 0
PSUs 0 6,164,946 0 0 0 0
Executive Severance 0 0 0 1,580,270 0 0
TOTAL 10,601,824 21,442,947 14,206,001 12,182,094 11,923,499 10,601,824

Termination/Resignation

Resignation by executives who are eligible for retirement, for purposes of this table, is treated as retirement. All NEOs were eligible for retirement as of December 31, ~~2015.~~2017.
6862     www.lockheedmartin.com/investor

Table of Contents
Executive Compensation
Supplemental Pension

The Supplemental Pension lump sum value was calculated using plan assumptions and age of the executive as of December 31, ~~2015.~~2017. Payments under the Supplemental Pension do not commence prior to age 55, except in the case of a change in control. The ~~lump sum payable upon change in control has been reduced to reflect early payment. The~~ Supplemental Pension assumptions in effect for December 31, ~~2015,~~2017, are a ~~4.00%~~4.00 percent discount rate ~~(2.25%~~(1.75 percent for benefits earned prior to 2005) and the mortality tables applicable to lump sum distributions for qualified plans under section 417(e)of the Internal Revenue Code (1983 Group Annuity Mortality ~~forbenefits~~for benefits earned prior to ~~2005~~2005; and after 2004 if the resulting benefit is larger). The Supplemental Pension assumptions are set forth in the plan document and may be different than the assumptions used to calculate the accrued benefit reported in the ~~“2015~~“2017 Pension Benefits” or “Summary Compensation” tables or for financial reporting. In 2015, the Supplemental Pension Plan was amended to use the mortality assumptions applicable to lump sum distributions for qualified plans under section 417(e) of the Internal Revenue Code for benefits accrued after December 31, 2004.
Long-Term Incentive Performance Awards

The table shows an amount payable ~~only~~ in the event of a change in control trigger event for the ~~2014-2016~~2016-2018 and ~~2015-2017~~2017-2019 LTIP performance periods. For a trigger event based upon death,disability, retirement (or resignation after satisfying the requirements for retirement), layoff or divestitures on December 31, ~~2015,~~2017, amounts (if any) for the ~~2014-2016~~2016-2018 and ~~2015-2017~~2017-2019 LTIP performance periods would not be payable until after the end of the performance period. The estimated prorated amounts payable for the ~~2014-2016~~2016-2018 performance cycle based on performance through December 31, ~~2015~~2017 are: Ms. Hewson: ~~$1,666,582;~~$2,692,846; Mr. Tanner: ~~$606,984;~~$937,302; Mr. Bennett: ~~$367,413;~~$775,054; Mr. Carvalho: ~~$450,592; andMs.~~$775,054; and Ms. Lavan: ~~$397,163.~~$620,977. The estimated prorated amounts payable for the ~~2015-2017~~2017-2019 performance cycle based on performance through December 31, ~~2015~~2017 are: Ms. Hewson: ~~$792,913;~~$940,802; Mr. Tanner: ~~$284,246;~~$332,607; Mr. Bennett: ~~$176,990;~~$265,293; Mr. Carvalho: ~~$212,388;~~$265,293; and Ms. Lavan: ~~$184,070.~~$213,819. The table does not include amounts for the ~~2013-2015~~2015-2017 performance cycle ~~which~~as these amounts are reported in the Summary Compensation Table (see notes to column (g)) ~~or mandatory deferrals for the 2011-2013 performance cycle because these amounts become payable on December 31, 2015 without regard to any trigger event.~~.
Restricted Stock Units

All ~~2013, 2014~~2015, 2016 and ~~2015~~2017 RSUs would continue to vest for retirement or layoff occurring on December 31, ~~2015,~~2017, and would not become payable until January ~~2016,~~2018, January ~~2017~~2019 and January ~~2018,~~2020, respectively, and are not included in the table. For a change ofin control (assuming satisfaction of the double trigger), death, disability or divestiture, the reported value of the RSUs was based upon the closing price of our stock on December ~~31,2015 ($217.15)~~29, 2017($321.05) plus ~~accrued~~deferred dividend ~~equivalents.~~equivalents that accrued. The amounts ~~payable~~ for retirement or layoff on December 31, ~~2015 at~~2017 are not payable until the end of the respective vesting periods (January ~~2016,~~2018, January ~~2017~~2019 and January ~~2018~~2020 for the ~~2013, 2014~~2015, 2016 and ~~2015~~2017 RSUs, respectively) ~~are~~but would have the same value on December 31, 2017 as the amounts shown for immediate payment on account of death, disability and divestiture.
Performance Stock Units

The table shows an amount payable ~~only~~ in the event of a change in control trigger event for the ~~2013-2015, 2014-2016~~2015-2017, 2016-2018 and ~~2015-2017~~2017-2019 performance periods. The amount shown for the PSUs upon a change in control is the target level of the shares valued using the closing price of our stock on December ~~31, 2015~~29, 2017 ($~~217.15)~~321.05) plus ~~accrued~~deferred dividend ~~equivalents.~~equivalents that accrued. The table assumes the double trigger occurred. For a trigger event based upon death, disability, retirement (or resignation after satisfying the requirements for retirement), layoff or divestitures on December 31, ~~2015,~~2017, amounts (if any) for the ~~2013-2015, 2014-2016~~2015-2017, 2016-2018 and ~~2015-2017~~2017-2019 PSU performance periods would be paid on a prorated basis following the end of the applicable performance period. The payments estimated to be paid on a non-prorated basis following the end of the performance cycle using the December ~~31, 2015 stockprice~~29,2017 stock price are reported for the ~~2013-2015~~2015-2017 PSU performance cycle in column (h) of the Outstanding Equity Awards at ~~2015~~2017 and for ~~the 2014-2016~~2016-2018 and ~~2015-2017~~2017-2019 in column (j) of that table. The prorated amounts for a trigger event occurring on December 31, ~~2015~~2017 plus ~~accrued~~deferred dividend equivalents that accrued are for each cycle: (i) 2013-2015 cycle: Ms. Hewson: $29,064,984; Mr. Tanner: $10,509,015; Mr. Bennett: $6,410,329; Mr. Carvalho: $684,593; and Ms. Lavan: $1,374,326; (ii) 2014-2016 cycle: Ms. Hewson: $6,781,336; Mr. Tanner: $2,470,246; Mr. Bennett: $1,494,915; Mr. Carvalho: $1,833,294; and Ms. Lavan: $1,616,173; and (iii) 2015-2017 cycle: Ms. Hewson: ~~$2,151,049;~~$14,222,267; Mr. Tanner: ~~$771,278;~~$5,098,232; Mr. Bennett: ~~$480,096;~~$3,174,958; Mr. Carvalho: ~~$576,337;~~$3,810,017; and Ms. Lavan: ~~$499,298.~~
~~2016 Proxy Statement~~
69

~~Table~~$3,301,970; (ii) 2016-2018 cycle: Ms. Hewson: $10,405,414; Mr. Tanner: $3,621,695; Mr. Bennett: $2,995,725; Mr. Carvalho: $2,995,725; and Ms. Lavan: $2,399,935; and (iii) 2017-2019 cycle: Ms. Hewson: $2,327,495; Mr. Tanner: $823,246; Mr. Bennett: $656,692; Mr. Carvalho: $656,692; and Ms. Lavan: $529,231. The prorated amounts are based on the estimated performance and stock price as of ~~Contents~~
~~Executive Compensation~~December 29, 2017.
Executive Severance

The total amounts projected for severance payments due to layoff are based on the plan (as amended) approved by the Board in 2008. It includes payment for one year of salary (2.99 years for Ms. Hewson) and one year of target annual incentive ~~equivalentto one-year’s payment~~ (2.99 ~~years~~ for Ms. Hewson), estimated costs for benefits continuation for one year, outplacement services and relocation assistance (if required under the plan terms).
2018 Proxy Statement
      63

Table of Contents
Executive Compensation
CEO Pay Ratio
Beginning in 2018, the Corporation must annually disclose in its proxy statement the median of the annual total compensation of all employees (excluding the CEO), the annual total compensation of its CEO, and the ratio of the CEO compensation to the employee median compensation.
Lockheed Martin employs approximately 100,000 employees that are, in large part, highly-skilled professionals located primarily in the United States, but also represented in numerous other countries. Our calculation included all employees as of December 31, 2017.
The annual total compensation of the median employee was determined in the same manner as the total compensation shown for our CEO in column (j) in the “Summary Compensation Table” on page 48.
We determined the required ratio by:
● calculating the total annual cash compensation (base salary plus annual incentive) of all employees except the CEO, and then sorting those employees from highest to lowest;
● determining the median employee from that list; and
● calculating the total annual compensation of our CEO and of the median employee using the same methodology required for the Summary Compensation Table.
The total annual compensation for our CEO for fiscal year 2017 was $22,866,843. The total annual compensation for the median employee was $123,231, encompassing base salary, incentives/recognition awards, overtime, change in pension value, company contributions to defined contribution plans, and company-paid life insurance premiums. The resulting ratio of CEO pay to the pay of the Corporation’s median employee for fiscal year 2017 is 186 to one.
Equity Compensation Plan Information
The following table provides information about the Corporation’s equity compensation plans that authorize the issuance of shares of Lockheed Martin common stock to employees and directors. The information is provided as of December 31, ~~2015.~~2017.
    Number of securities
to be issued upon
exercise of outstanding
options, warrants
and rights
(#)     Weighted-average
exercise price of
outstanding options,
warrants and rights
($)     Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected
in column (a))
(#)       Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(#)       Weighted-average
exercise price of
outstanding options,
warrants and rights
($)       Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities reflected
in column (a))
(#)
Plan category (a) (b) (c) (a) (b) (c)
Equity compensation plans approved by security holders¹ Equity compensation plans approved by security holders¹ 8,186,564 $86.61 6,955,485 4,675,190 82.71 5,580,042
Equity compensation plans not approved by security holders² Equity compensation plans not approved by security holders² 1,185,715 0 2,484,313 975,470 - 2,485,191
Total Total 9,372,279 $86.61 9,439,798 5,650,660 82.71 8,065,233
(1)
Column (a) includes, as of December 31, ~~2015: 2,567,391~~2017: 1,552,579 shares that have been granted as RSUs, ~~1,307,992~~774,519 shares that could be earned pursuant to grants of PSUs (assuming the maximum number of PSUs are earned and payable at the end of the three-year performance period) and ~~4,137,024~~2,216,948 shares granted as options under the Lockheed Martin Corporation 2011 ~~IPAP~~Incentive Performance Award Plan (2011 IPA Plan) or predecessor plans ~~prior to January 1, 2013~~ and ~~28,439~~19,660 shares granted as options and ~~145,718~~111,484 stock units payable in stock or cash ~~granted~~ under the ~~2009 Directors Equity~~Existing Plan ~~(Directors Equity Plan)~~ or predecessor plans for ~~members (or former members) of the Board of Directors.~~non-employee directors. Column (c) includes, as of December 31, ~~2015, 6,491,410~~2017, 5,166,717 shares available for future issuance under the 2011 ~~IPAP~~IPA Plan as options, stock appreciation rights, restricted stock awards, RSUs or PSUs and ~~464,075~~413,325 shares available for future issuance under the ~~Directors Equity~~Existing Plan as stock options and stock units. Of the ~~6,491,410~~5,166,717 shares available for grant under the 2011 ~~IPAP~~IPA Plan on December 31, ~~2015, 670,409~~2017, 398,012 and ~~284,662~~181,392 shares are issuable pursuant to grants made on ~~January 28, 2016,~~February 22, 2018, of RSUs and PSUs (assuming the maximum number of PSUs are earned and payable at the end of the three-year performance period), respectively. Of the ~~464,075~~413,325 shares available for grant under the ~~Directors Equity~~Existing Plan on December 31, ~~2015, 7,142 shares~~2017, 4,514 are units issuable ~~(or payable in cash)~~ pursuant to grants made on ~~February~~January 31, 2018 which vest 50 percent on June 30 and 50 percent on December 31 following the grant date. Vested stock units are payable to directors upon their termination of service from our Board, except that directors who have satisfied the stock ownership guidelines may elect to have payment of awards made after January 1, ~~2016.~~2018 beginning on March 31 following the vesting of the award. The weighted average price does not take into account shares issued pursuant to RSUs or ~~PSUs or as stock units under the Directors Equity Plan.~~PSUs.
(2)
The shares represent annual incentive bonuses and LTIP payments earned and voluntarily deferred by employees. The deferred amounts are payable under the DMICP. Deferred amounts are credited as phantom stock units at the closing price of our stock on the date the deferral is effective. Amounts equal to our dividend are credited as stock units at the time we pay a dividend. Following termination of employment, a number of shares of stock equal to the number of stock units credited to the employee’s DMICP account are distributed to the employee. There is no discount or value transfer on the stock distributed. Distributions may be made from newly issued shares or shares purchased on the open market. Historically, all distributions have come from shares held in a separate trust and, therefore, do not further dilute our common shares outstanding. As a result, these shares also were not considered in calculating the total weighted average exercise price in the table. Because the DMICP shares are outstanding, they should be included in the denominator (and not the numerator) of a dilution calculation.

70~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~PROPOSAL 4: MANAGEMENT PROPOSAL~~
~~TO RE-APPROVE THE PERFORMANCE GOALS~~
~~FOR THE 2011 INCENTIVE PERFORMANCE~~
~~AWARD PLAN~~
Our Board’s compensation philosophy has always been to link executive compensation to the Corporation’s performance against pre-established strategic, operational and financial goals and to use equity as a means to tie a substantial portion of executive compensation to the long-term interests of our stockholders. Share-based and cash-based long-term incentive awards have been a significant component of the Corporation’s management compensation since the Corporation was formed in 1995. In 2011, the Board adopted, and stockholders approved, the Lockheed Martin Corporation 2011 Incentive Performance Award Plan, which Plan was further amended and restated most recently on September 24, 2015 (collectively, the 2011 IPAP or Plan).
We are proposing that stockholders re-approve the performance-based goals applicable to certain awards under the Plan for five additional years. The performance goals must be approved by stockholders to preserve, to the extent possible, our tax deduction for certain awards made under the Plan in accordance with Section 162(m) of the Internal Revenue Code of 1986.
The principal features of the 2011 IPAP are summarized below. This summary does not contain all the information that may be important to you. The following description is qualified in its entirety by reference to the text of the 2011 IPAP. You are urged to read the 2011 IPAP in its entirety, which is attached as Appendix B.
The 2011 IPAP authorizes an independent Compensation Committee of the Board to award stock options, restricted stock, stock appreciation rights (SARs), stock units and cash-based performance awards to key employees for the purpose of attracting, motivating, retaining and rewarding talented and experienced employees. The Compensation Committee performs this function and is composed entirely of independent directors.
Section 162(m) denies a publicly-held corporation a tax deduction for certain compensation in excess of $1 million paid to “covered employees” (generally, (a) the CEO and (b) the three highest compensated officers other than the CEO or the CFO, as identified in the “Summary Compensation Table” on page 54), unless the compensation qualifies as performance-based compensation. For certain types of incentive compensation intended to qualify as performance-based compensation, IRS regulations generally require that (i) the compensation must be paid solely as a result of attaining one or more objective performance goals established inadvance by the independent Compensation Committee and (ii) the material terms, including the performance goals, must be properly disclosed in the proxy statement and approved by the stockholders. The performance goals must be submitted for re-approval by the stockholders no later than five years after initial approval or earlier if the performance goals are materially modified. Stockholders initially approved these goals when the Plan was adopted in 2011. The goals are approved currently until April 2016. Stockholder approval of this proposal at the 2016 Annual Meeting would extend the approval period from 2016 until 2021.
~~The material terms of the performance goals of the Plan include:~~
●
~~Eligibility—the employees eligible to receive compensation;~~
● ~~Business Criteria upon which the performance goals are based; and~~
●
~~Participant Award Limits—the maximum amount of compensation that may be paid to an employee during a specified period if the performance goals are met.~~
~~Eligibility~~64
Awards under the Plan may be granted to key salaried employees (including officers) of the Corporation and its subsidiaries. All elected officers of the Corporation (one of whom also is a director of the Corporation) are among those eligible to receive awards.
The number of key salaried employees of the Corporation and its subsidiaries eligible to receive awards in any given year is subject to the discretion of the Compensation Committee. In January 2016, share-based awards in the form of performance share units (PSUs) or restricted share units (RSUs) were made to approximately 1,276 employees; and cash-based long-term incentive performance (LTIP) awards were made to approximately 324 employees. The awards made to the NEOs in 2015 are set forth in Grant of Plan-Based Awards table on page 58 and the awards made in 2016 are described in the CD&A on page 49. As of December 31, 2015, approximately 2,701 employees and former employees have received grants under the Plan. The individual employees who are to receive future awards, the number of awards that will be granted to any employee or group of employees, and the amounts payable with respect to future awards have not been determined at this time.
~~2016 Proxy Statement~~www.lockheedmartin.com/investor
71

~~Table of Contents~~
~~Proposal 4: Management Proposal to Re-Approve the Performance Goals for the 2011 Incentive Performance Award Plan~~
~~Business Criteria for Performance Goals~~
Under the Plan, one or more of the following criteria or combination of the following criteria will be used exclusively by the Compensation Committee in establishing goals for performance-based awards:
● ~~Backlog;~~
● ~~Cash flow;~~
● ~~Earnings per share;~~
● ~~Earnings per share growth;~~
● ~~Free cash flow per share;~~
● ~~Orders;~~
● ~~Percentage of free cash flow to stockholders;~~
● ~~Return on invested capital (ROIC);~~
● ~~Sales;~~
● ~~Segment operating profit;~~
● ~~Segment return on invested capital; or~~
● ~~Total stockholder return (TSR).~~
Performance goals may be applied over either consecutive, rolling or stand-alone cycles determined by the Compensation Committee in its discretion, on an absolute, average or relative basis (including relative to published or specially constructed indices), and may be measured on a corporate, consolidated, subsidiary, segment or business unit basis (or combination basis). The performance cycles for cash-based awards must be more than one but not more than five years. Specific cycles, weightings of more than one performance goal and target levels of performance upon which actual payments are based, as well as the award levels payable upon achievement of specified levels of performance, are determined by the Compensation Committee not later than the applicable deadline under Section 162(m) and in any event at a time when achievement of such targets is substantially uncertain. These variables may change from cycle to cycle.
The Compensation Committee has the right to determine conditions, restrictions or other limitations on the payment of an individual award and may reserve the right to reduce the amount payable on any basis that the Committee determines with the result that an individual award recipient or all award recipients may receive an amount less than the amount payable upon satisfaction of a specified performance goal.
Appropriate adjustments to the performance goals and targets in respect of performance-based awards may be made by the Compensation Committee based upon objective criteria in the case of an extraordinary gain or loss or other event that is considered under GAAP to be an extraordinary item recognized under any accounting policy or practice affecting the Corporation and/or any performance goals or targets, provided in each case that the nature of any such adjustments is specified at the time the performancegoals or targets are established by the Compensation Committee. The Compensation Committee may reserve the right to authorize payment in the event of a change in control without regard to satisfaction of the performance goals. Award agreements have provided for adjustments to take account of tax payments or tax benefits associated with divestitures and voluntary prefunding of pension contributions which in either case were not forecast in the Corporation’s long range plan and the impact of an acquisition or divestiture with a transaction value in excess of $1 billion.
The Compensation Committee must certify the achievement of the applicable performance goals and the actual amount payable to each participant under the RSU, PSU and LTIP awards prior to payment. The Compensation Committee may retain discretion to reduce, but not increase, the amount payable under a PSU or LTIP award to any participant, notwithstanding the achievement of targeted performance goals.
We have used cash flow, TSR and ROIC as performance goals in PSU and LTIP awards and cash flow in RSU awards, as described on page 45 of the CD&A. In addition, other types of awards under the Plan may be granted to qualify as performance-based compensation under Section 162(m). Stock options and SARs granted under the Plan are intended to qualify as performance-based compensation and may qualify without regard to whether satisfaction of any performance goals are conditions to the underlying award. In addition, restricted stock and restricted stock units may be granted under the Plan to qualify as performance-based compensation under Section 162(m), using the performance goals, certification and payout procedures, and Compensation Committee discretion discussed above.
~~Participant Award Limits~~
~~The maximum annual amounts payable to any one participant as performance-based awards are as follows:~~
●
~~Share-Based Awards:~~The aggregate number of shares of stock issuable under the Plan for options, SARs payable in shares, restricted stock and stock units payable in shares granted as performance-based awards during any calendar year to any participant may not exceed 1,000,000. Of that amount, the maximum number of shares of stock that may be granted as restricted stock awards during any calendar year to any participant (including as performance-based awards) may not exceed 750,000 shares. Awards canceled as a result of forfeiture or expiration during a calendar year are counted against these limits.
●
~~Share-Unit Awards and SARs Payable Only in Cash:~~The maximum number of stock units or SARs exercisable or payable only in cash during any calendar year to any participant as performance-based awards is 300,000. Awards canceled during a calendar year due to expiration or forfeiture are counted against this limit.
●
~~Cash-Based Awards:~~~~The aggregate amount payable to any participant under all cash-based awards granted under the Plan during any calendar year is $10,000,000.~~

72~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Proposal 4: Management Proposal to Re-Approve the Performance Goals for the 2011 Incentive Performance Award Plan~~
~~Other Features of the 2011 IPAP~~

~~Types of Awards~~
The 2011 IPAP authorizes awards in the form of nonqualified stock options, incentive stock options (“ISOs”), SARs, restricted stock, stock units (including RSUs and PSUs) or cash-based incentive awards. Awards may be granted singly or in combination with other awards.
Since the Corporation’s formation in 1995, we have made equity grants in the form of restricted stock awards, stock options and stock units, and cash awards in the form of LTIP awards. The last year in which we granted restricted stock awards was 2004 and the last year in which we granted stock options to employees was 2012. We have never granted ISOs or SARs under the 2011 IPAP.
~~Authorized Shares~~
The aggregate number of shares of our stock that initially were subject to awards under the 2011 IPAP was 9,963,688, which represented 1,963,688 shares that were reserved for future awards under the Corporation’s predecessor incentive performance award plan (the 2003 IPAP) at the time the stockholders approved the 2011 IPAP and an additional 8,000,000 shares approved under the 2011 IPAP. At our 2014 annual meeting, stockholders approved an increase of 4,000,000 in the number of shares available for awards under the 2011 IPAP. Shares of our stock subject to awards outstanding under the 2011 IPAP and the 2003 IPAP that are unexercised, unconverted or undistributed as a result of termination, expiration or forfeiture of an award (other than in the case of SARs and shares withheld to satisfy a tax withholding obligation) also are available for grants under the 2011 IPAP. As of February 1, 2016, 5,595,492 shares were available for issuance in respect of future awards under the 2011 IPAP.
~~Terms of Awards~~
~~The maximum term of an award is 10 years after the date of grant of the award.~~
Each award under the 2011 IPAP is evidenced by an award agreement in a form approved by the Compensation Committee setting forth, in the case of share-based awards, the number of shares of stock or share units, as applicable, subject to the award, and the price (if any) and term of the award and, in the case of performance-based awards, any applicable performance goals. Awards under the 2011 IPAP that are not vested or exercised generally are nontransferable by a holder (other than by will or the laws of descent and distribution). Section 6 of the 2011 IPAP sets forth minimum vesting requirements for options, SARs payable in stock, restricted stock and stock units payable in stock. Vesting requirements for cash-based awards are at the discretion of the Compensation Committee.
~~Adjustments to Stock; Corporate Reorganizations~~
The number and type of shares available for grant and the shares subject to outstanding awards (as well as individual share and share unit limits on awards, performance targets and exercise or conversion prices of awards) may be adjusted to reflect the effect of a recapitalization, stock dividend, stock split, merger, combination, consolidation or other reorganization, any extraordinary dividend or other extraordinary distribution in respect of our shares, or any split-up, spin-off, split-off or extraordinary redemption, or in exchange of outstanding shares, any other similar corporate transaction or event, or a sale of all or substantially all of the Corporation’s assets.
~~Change in Control~~
The Compensation Committee is authorized to include provisions in award agreements relating to the treatment of awards in the event of a “change in control” of the Corporation (as defined in the 2011 IPAP) and is authorized to take certain other actions in such an event, including but not limited to providing for acceleration or extension of time for purposes of exercising, vesting in or realizing gain from an award and providing for the assumption or continuation of the award and the substitution of shares of stock of a successor entity, or a parent or subsidiary of a successor entity, together with appropriate adjustments to the terms of the award to reflect the change in control transaction.
In addition, if an award constitutes deferred compensation for purposes of the Internal Revenue Code, benefits available in the event of a change in control are accelerated only if the events that constituted a change in control under the 2011 IPAP also constituted a change in the ownership or effective control of the Corporation or in the ownership of a substantial portion of the assets of the Corporation within the meaning of Section 409A of the Internal Revenue Code.
The award agreements for all currently unvested awards contain double trigger change in control provisions in the event the awards are not assumed by the successor which are described on page 53 of the CD&A.
~~Administration~~
The 2011 IPAP is administered by a committee of the Board, constituted so as to permit the 2011 IPAP to comply with the “non-employee director” provisions of Rule 16b-3 under the Securities Exchange Act of 1934 and the “outside director” requirements of Section 162(m) of the Internal Revenue Code. The Compensation Committee currently performs this role. The Compensation Committee has the authority to designate recipients of awards, determine or modify the form, amount, terms, conditions, restrictions, and limitations of awards, including vesting provisions, terms of exercise of an award,
~~2016 Proxy Statement~~
73

~~Table of Contents~~
~~Proposal 4: Management Proposal to Re-Approve the Performance Goals for the 2011 Incentive Performance Award Plan~~
expiration dates and the treatment of an award in the event of the retirement, layoff, disability, death or other termination of a participant’s employment with the Corporation, and to construe and interpret the Plan. The authority of the Compensation Committee is subject to any express limitation set forth in the 2011 IPAP.
The Compensation Committee also has the authority to grant awards under the 2011 IPAP in substitution for or as the result of the assumption of stock incentive awards held by employees of another entity who become employees of the Corporation or a subsidiary as a result of a merger or acquisition of the entity.
The Compensation Committee may delegate to the officers or employees of the Corporation or its subsidiaries the authority to execute and deliver such instruments and documents and to take actions necessary, advisable or convenient for the effective administration of the 2011 IPAP.
~~Duration, Amendment and Termination~~
~~The 2011 IPAP will remain in existence as to all outstanding awards until all awards are either exercised or terminated; however, no award can be made after April 27, 2021.~~
The Board has the authority to terminate, suspend or discontinue the 2011 IPAP at any time. The Board may amend the 2011 IPAP at any time, provided that any material amendment to the 2011 IPAP will not be effective unless approved by the Corporation’s stockholders. For this purpose, an amendment is considered to be a “material” amendment only if it would:
●
materially increase the number of shares of stock available under the Plan or issuable to a participant (except in the limited case of adjustments relating to a change in control, adjustments to our stock or other corporate reorganizations);
●
~~change the types of awards that may be granted under the Plan;~~
●
~~expand the class of persons eligible to receive awards or otherwise participate in the Plan;~~
●
reduce the price at which an option is exercisable or the base price of a SAR, either by amendment of an award agreement or by substitution of a new award at a reduced price (except in the limited case of adjustments relating to a change in control, adjustments to our stock or other corporate reorganizations); or
●
~~require stockholder approval pursuant to the New York Stock Exchange Listed Company Manual (so long as the Corporation is a listed corporation on the NYSE) or other applicable law.~~
The Compensation Committee may at any time alter or amend any or all award agreements under the 2011 IPAP in any manner that would be authorized for a new award under the Plan, so long as such an amendment would not require approval of the Corporation’s stockholders if such amendment were made to the Plan. No action by the Board or the Compensation Committee, however, shall affect adversely any outstanding award without the consent in writing of the participant entitled to the award.
~~Non-Exclusivity~~
The 2011 IPAP is not exclusive and does not limit the authority of the Board or its committees to grant awards or authorize any other compensation, with or without reference to our common stock, under any other plan or authority. The 2011 IPAP has not been and is not expected to be our exclusive cash incentive plan for eligible persons (including executive officers); other cash incentive plans may be retained and/or developed to implement our compensation objectives and policies.
~~Federal Income Tax Consequences~~
The following is a general description of federal income tax consequences to participants and the Corporation relating to nonqualified stock options, LTIP awards, RSUs, and PSUs under the 2011 IPAP. This discussion does not purport to cover all tax consequences relating to awards under the Plan.
There are no federal income tax consequences to a participant upon the grant of a nonqualified stock option to purchase shares of stock. Upon the exercise of the option, the participant will recognize compensation income in an amount equal to the excess of the fair market value of the stock on the date the option is exercised over the option price for the stock. This compensation income will be taxable to the participant in the year of the exercise of the option. The Corporation will withhold FICA (Social Security and Medicare) taxes and federal, state, and local income taxes at the minimum rate prescribed by law.
The participant’s tax basis in the stock acquired will equal the option price for the stock plus the amount of compensation income that the participant recognizes upon exercise of the option. For capital gains tax purposes, the holding period of the stock commences upon the date of exercise. A participant who sells stock will recognize capital gain or loss measured by the difference between the participant’s tax basis in the stock and the amount realized on the sale. The capital gain or loss will be long-term if the stock is held for more than one year following exercise.
There are no federal income tax consequences to a participant upon the award of an LTIP. A participant will recognize compensation income for federal income tax purposes upon payment of the award. At the time of payment, the Corporation will withhold FICA taxes and federal, state, and local income taxes at the minimum rate prescribed by law.
There are no federal income tax consequences to a participant upon the grant of RSUs. Upon the termination of the restricted period, the fair market value of the stock deliverable to a participant in respect of the RSUs will be taxable to the participant as compensation income, based on the fair market value of the stock on the day the stock is deliverable to the participant. FICA tax withholding also will apply except to the extent FICA taxes have already been collected in the case of laid off or retirement-eligible employees as described below.
74     ~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Proposal 4: Management Proposal to Re-Approve the Performance Goals for the 2011 Incentive Performance Award Plan~~
Withholding taxes on stock deliverable to a participant will be satisfied by means of the Corporation reducing the number of shares of stock delivered to the participant. The Corporation will withhold FICA taxes and federal, state, and local income taxes at the minimum rate prescribed by law.
Any cash paid to a participant for deferred dividend equivalents also will be taxable to the participant as compensation income in the year paid. Such cash payments will be subject to withholding of federal, state, and local income taxes at the minimum rate prescribed by law, as well as FICA taxes (except to the extent FICA taxes have already been collected in the case of laid off or retirement-eligible employees as described below). The Corporation will withhold taxes on the deferred dividend equivalents by reducing the cash paid to the participant.
A participant’s tax basis in the shares of stock delivered to him or her in respect of the RSUs will be equal to the fair market value of such shares on the day the stock is deliverable to the participant. A participant’s holding period for purposes of determining long-term capital gain or loss treatment on any subsequent sale of such stock will begin on that day.
If a participant is or becomes eligible for retirement (attainment of age 55 with ten years of service or attainment of age 65) or is laid off during the restricted period, such participant’s RSU award (and any deferred dividend equivalents) will become subject to FICA taxes prior to the termination of the restricted period. The Corporation will generally accelerate vesting on deferred dividend equivalents or a number of RSUs sufficient to satisfy the withholding obligation shortly before or after the date FICA taxes are due. Alternatively, the Corporation may withhold the FICA taxes due with respect to the RSU award from the participant’s paycheck or require a participant to deliver a check to the Corporation to satisfy the withholding obligation.
There are no federal income tax consequences to a participant upon the grant of PSUs. Upon the termination of the vesting period, the fair market value of the stock deliverable to a participant in respect of the PSUs will be taxable to the participant as compensation income, based on the fair market value of the stock on the day the stock is deliverable to the participant. FICA (Social Security and Medicare) tax withholding also will apply.
Withholding taxes on stock deliverable to a participant will be satisfied by means of the Corporation reducing the number of shares of stock delivered to the participant. The Corporation will withhold FICA taxes and federal, state, and local income taxes at the minimum rate prescribed by law.
Any cash paid to a participant as deferred dividend equivalents also will be taxable to the participant as compensation income in the year paid. Such cash payments will be subject to withholding of federal, state, and local income taxes at the minimum rate prescribed by law, as well as FICA taxes. The Corporation will withhold taxes on the deferred dividend equivalents by reducing the cash paid to the participant.
A Participant’s tax basis in the shares of stock delivered to him or her in respect of the PSUs will be equal to the fair market value of such shares on the day the stock is deliverable to the participant. A participant’s holding period for purposes of determining long-term capital gain or loss treatment on any subsequent sale of such stock will begin on that day.
~~Additional Information~~
~~Inasmuch as the awards under the 2011 IPAP are subject to the discretion of the Compensation Committee, it is not possible to determine the number of awards that will be granted in the future.~~
The following table provides information about option awards granted under the 2011 IPAP since it was adopted. No options have been granted since 2012. Such options to purchase shares of our common stock were granted at an exercise price of not less than 100% of the fair market value of our common stock on the date of the grant and had a term of 10 years. No options have been granted since 2012. Stock options previously granted to the NEOs under the 2011 IPAP and outstanding as of December 31, 2015 are included in the Outstanding Equity Awards at 2015 Fiscal Year End on page 60. The information is provided as of February 1, 2016. The closing price of our common stock on February 1, 2016 was $209.80.
~~Name of Individual or Identity of Group~~ ~~Number of~~
~~Options~~
~~Granted Since~~
~~Plan Inception~~
~~Ms. Hewson~~ ~~82,935~~
~~Mr. Tanner~~ ~~97,213~~
~~Mr. Bennett~~ ~~19,356~~
~~Mr. Carvalho~~ ~~29,705~~
~~Ms. Lavan~~ ~~57,602~~
~~All Current Executive Officers (including NEOs)~~ ~~358,929~~
All Current Directors who are not Executive Officers* 0
Director Nominees* 0
~~All Employees (including officers who are not~~
~~Executive Officers)~~ ~~3,031,419~~

*
Directors who are not employees of the Corporation are not eligible to receive equity awards under the 2011 IPAP, but are eligible to receive equity awards under the Directors Equity Plan. The only director-nominee who is an employee of the Corporation and received an option grant under the 2011 IPAP in the amount of 82,935 is Ms. Hewson.

~~2016 Proxy Statement~~
75

~~Table of Contents~~
~~Proposal 4: Management Proposal to Re-Approve the Performance Goals for the 2011 Incentive Performance Award Plan~~
No person received 5% or more of the total equity awards granted to all participants under the 2011 IPAP. No associate of a director, nominee for election as a director or executive officer has received an equity award under the 2011 IPAP.
~~Required Vote for Approval and Consequences of Vote~~
~~The affirmative vote of a majority of the votes cast at the 2016 Annual Meeting is needed to re-approve the performance goals under the 2011 IPAP.~~
If stockholders re-approve the performance goals, we can continue to deduct until April 2021, to the extent permissible, amounts payable under performance awards that are in excess of $1 million in any year for certain of our executive officers.
If stockholders do not re-approve the performance goals applicable to the Plan at the 2016 Annual Meeting, no performance awards under the Plan within the meaning of section 162(m) (other than stock options and SARs) would be made after the April 2016 Annual Meeting. Absent stockholder approval, we may grant other types of equity awards after the April 2016 Annual Meeting to executive officers and other employees that are not intended to qualify for the exemption for performance-based compensation under Section 162(m) under the Plan. In addition, absent stockholder approval of the performance-based goals, we may grant cash-based incentive awards that are not intended to qualify for the exemption under Section 162(m) under other benefit plans.
~~The Board unanimously recommends that you vote FOR the re-approval of performance goals for the 2011 Incentive Performance Award Plan (Proposal 4).~~

76     ~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
DIRECTOR COMPENSATION

Annual Directors’ Compensation (Non-Employee Directors)

~~Annual Cash Retainer~~ ~~$145,000~~
~~Annual Equity Retainer~~¹ ~~$145,000~~
~~Audit Committee Chairman Fees~~ ~~$25,000~~
~~Compensation Committee Chairman Fees~~ ~~$20,000~~
~~Other Committee Chairman Fees~~ ~~$15,000~~
~~Lead Director Fees~~ ~~$25,000~~
~~Travel Accident Insurance~~ ~~$1,000,000~~
~~Deferred Compensation Plan – deferral plan for cash retainer~~
~~Director Education – reimbursed for costs and expenses~~
~~Stock Ownership Guidelines – five times the annual cash retainer~~
~~(1) Payable under the Lockheed Martin Corporation 2009 Directors Equity Plan.~~

      Effective
January 1,
2017       Effective
January 1,
2018
Annual Cash Retainer $145,000 $155,000
Annual Equity Retainer $145,000 $155,000
Audit Committee Chairman Cash Retainer $25,000 $30,000
Compensation Committee Chairman
Cash Retainer $20,000 $30,000
Other Committee Chairman Cash Retainers $15,000 $20,000
Lead Director Cash Retainer $25,000 $35,000
Director Education – reimbursed for costs and expenses
Director compensation is an important tool used to attract and retain qualified directors. The Governance Committee annually reviews publicly available data for the companies ~~that comprise~~in the ~~peer~~comparator group we use for benchmarking executive ~~compensation. In June 2015,~~compensation (listed on page 36). Although the Committee reviews director compensation annually, it ~~determined that~~has been the practice of the Committee to recommend changes no more frequently than every two years. As director compensation for other comparator companies continues to increase during the two-year cycle, the Corporation’s position relative to the median for director compensation ~~was lower than~~changes. For this reason, the ~~peer group~~Committee sets director compensation above the median ~~or market for~~with the expectation that compensation will decline relative to the median over the two-year cycle and may be below the median by the end of the two-year period. In 2017, Meridian acting as independent compensation consultant to the Governance Committee assisted in its review of director ~~compensation.~~compensation and best practices in director compensation design. Based ~~on this information,~~upon that review at its September 2017 meeting, the Board ~~approved an increase in~~increased the annual ~~retainer from $260,000 to $290,000.~~directors’ compensation for 2018 as shown above. A prorated (one quarter) portion of the increase inof each cash component was effective for the ~~cash portion~~fourth quarter of ~~the retainer attributable to the remaining six months of 2015 ($15,000) was paid in the second half of 2015,~~2017, with the full increase of the annual cash amount and the increase in the ~~cash~~equity component effective for 2018.
Consistent with the terms of an amendment to the Existing Plan approved by the Board in September 2017, from and ~~equity portions taking effect~~after January 1, 2018, a director who has satisfied the Board’s stock ownership guidelines may elect to have vested stock units awarded after that date to be paid in ~~January 2016. The non-employee director annual retainer of $290,000 (not including Lead Director or committee chairmen fees) is paid 50% in cash and 50% in equity.~~
~~The cash portion~~a lump sum on the March 31 following the one-year anniversary of the ~~non-employee~~grant rather than following termination of Board service. Any director ~~retainer is~~who has not satisfied the stock ownership guidelines will continue to be paid ~~quarterly. The Lockheed Martin Corporation 2009 Directors Equity~~along with any accumulated dividend equivalents upon termination or retirement from the Board.
Although the Existing Plan ~~(Directors Equity Plan)~~authorizes the grant of stock units or ~~predecessor plans governs the equity portion of the non-employee director retainer. In~~stock options, in June 2014, the Board ~~resolved~~approved a resolution to the effect that each non-employee director would elect to receive the equity portion of the retainer in the form of stock units for each year beginning with 2015 and would not elect options to purchase shares unless the Board resolution is further amended or revoked.
The ~~Directors Equity~~Existing Plan provides that a director eligible for retirement at the next ~~Annual Meeting~~annual meeting receives a prorated grant (one-third) for the four months of service prior to the ~~Annual Meeting.~~annual meeting. Except in certain circumstances, stock units vest ~~50%~~50 percent on June 30 and ~~50%~~50 percent on December 31 following the grant date. Upon a change in control or a director’s retirement, death, or disability, the director’s stock units and outstanding options become fully vested, and the director has the right to exercise the options. Upon a director’s termination of service from our Board, we distribute the vested stock units, at the director’s election, in whole shares of stock or in cash, in a lump sum or in annual installments over a period of up to 20 years. Prior to distribution, a director has no voting, dividend or other rights with respect to the stock units held under the ~~Directors Equity~~Existing Plan, but is credited with additional stock units representing dividend equivalents (converted to stock units based on the closing price of our stock on the dividend payment dates). ~~The outstanding~~Outstanding options have a term of ten years.
The Directors Equity Plan provides that equity grants are made with respect to a calendar year on the second business day following the later of (i) the date of the first regular meeting of the Board in each calendar year, or (ii) the date on which the Corporation releases its financial results for the previous calendar year; provided that, if such date is later than February 15, the award date is February 15 (or the next business day if February 15 is not a business day).
The Lockheed Martin Corporation Directors Deferred Compensation Plan (Directors Deferred Compensation Plan) provides non-employee directors the opportunity to defer up to ~~100%~~100 percent of the cash portion of their fees. Deferred amounts earn interest at a rate that tracks the performance of: (i) the investment options available under the employee deferred compensation plans; or (ii) our company stock (with dividends reinvested), at the director’s election. Deferred fees are distributed in a lump sum or in up to 15 annual installments commencing at a time designated by the director following termination.
Stock Ownership Guidelines
To align their interests with the long-term interests of our stockholders, we expect our directors to maintain an ownership interest in the Corporation. Under our ~~Director Stock Ownership Guidelines,~~stock ownership guidelines for directors, non-employee directors have five years from the time they join the Board to achieve stock ownership levels (common stock or stock units) equivalent to five times the annual cash retainer. Each non-employee director has exceeded the stock ownership guidelines, ~~with the exception of Mr. Carlson who~~except for Ms. Gordon (who has until ~~July 2020~~June 2021 to meet the ~~guidelines.~~guidelines) and Mr. Johnson and Mr. Taiclet (who each have until January 2023 to meet the guidelines). Ms. Hewson is subject to the Stock Ownership Requirements for Key Employees as described on page ~~52.~~46.
2018 Proxy Statement
      65

Director Compensation
2017 Director Compensation
The following table provides information on the compensation of our directors for the fiscal year ended December 31, ~~2015.~~2017. Ms. Hewson does not receive separate compensation for service as a director of the Corporation.
Name * Fees Earned or
Paid in Cash
($)       Stock
Awards
($)       All Other
Compensation
($)        Total
($)
(a) (b) (c) (g) (h)
Daniel F. Akerson 170,000 145,000 319 315,319
Nolan D. Archibald 191,250 145,000 10,000 346,250
Rosalind G. Brewer 108,750 145,000 1,174 254,924
David B. Burritt 147,500 145,000 10,257 302,757
Bruce A. Carlson 147,500 145,000 1,278 293,778
James O. Ellis, Jr. 163,750 145,000 2,681 311,431
Thomas J. Falk 173,750 145,000 11,129 329,879
Ilene S. Gordon 147,500 145,000 12,000 304,500
James M. Loy 163,750 145,000 52 308,802
Joseph W. Ralston 163,750 145,000 560 309,310
Anne Stevens 132,596 145,000 387 277,983

~~2016 Proxy Statement~~*
77
Mrs. Brewer and Ms. Stevens resigned from the Board in October 2017 and November 2017, respectively. Messrs. Johnson and Taiclet did not join the Board until January 1, 2018.

~~Table of Contents~~
~~Director Compensation~~
~~2015 Director Compensation~~
Name       Fees Earned or
Paid in Cash
($)       Stock
Awards
($)       All Other
Compensation
($)       Total
($)
(a) (b) (c) (g) (h)
Daniel F. Akerson 151,346 130,000 0 281,346
Nolan D. Archibald 169,808 130,000 10,000 309,808
Rosalind G. Brewer 137,500 130,000 11,804 279,304
David B. Burritt 145,192 130,000 11,215 286,407
Bruce A. Carlson 72,500 65,000 50 137,550
James O. Ellis, Jr. 152,500 130,000 20,036 302,536
Thomas J. Falk 154,808 130,000 11,190 295,998
Gwendolyn S. King 142,115 130,000 115 272,230
James M. Loy 147,885 130,000 253 278,138
Douglas H. McCorkindale 52,308 43,333 773 96,414
Joseph W. Ralston 147,885 130,000 680 278,565
Anne Stevens 143,654 130,000 1,575 275,229

Fees Earned or Paid in Cash (Column (b))

Represents the aggregate dollar amount of ~~2015~~2017 fees earned or paid in cash for services as a director, including annual retainer, ~~fees,~~ committee chairman ~~fees,~~retainer and Lead Director ~~fees.~~retainer.
Stock Awards (Column (c))

Represents the aggregate grant date fair value computed in accordance with ASC 718 for awards of stock units in ~~2015~~2017 under the ~~Directors Equity~~Existing Plan. For ~~2015,~~2017, each non-employee director ~~(with the exception of Messrs. McCorkindale and Carlson)~~ was credited with ~~687~~573.5079 stock units with an aggregate grant date fair value of ~~$130,000.~~$145,000. The grant date fair value is the closing price of our stock ($~~189.33)~~252.83) on the date of the grant ~~(February 2, 2015)~~(January 30, 2017). Mr. McCorkindale, who retired from the Board at the 2015 annual meeting, received a prorated award on February 2, 2015 and was credited with 229 stock units with an aggregate grant date fair value of $43,333. Mr. Carlson joined the Board in July 2015 and was credited with 313 stock units on August 3, 2015 with an aggregate grant date fair value of $65,000. The grant date fair value of Mr. Carlson’s grant was $207.79 per share. The outstanding number of stock units credited to each director under the ~~Directors Equity~~Existing Plan (and the comparable ~~plan in place prior to January 1, 2009)~~predecessor plans), as of December 31, ~~2015,~~2017, were: Mr. Akerson ~~1,406;~~2,801; Mr. Archibald ~~21,752;~~24,269; Mrs. Brewer ~~5,929;~~1,920; Mr. Burritt ~~6,290;~~7,954; Mr. Carlson ~~317;~~1,652; Mr. Ellis ~~16,729;~~18,970; Mr. Falk ~~7,393; Mrs. King 30,201;~~9,119; Ms. Gordon 891; Mr. Loy ~~15,441;~~17,610; and Mr. Ralston ~~20,088;~~22,514. Following their respective resignations, Mrs. Brewer and Ms. Stevens ~~18,642. The outstanding number~~forfeited 50 percent of their unvested 2017 stock ~~units credited under the Lockheed Martin Corporation Directors Deferred Stock Plan (Directors Deferred Stock Plan) as of December 31, 2015, was 1,530 for Mrs. King.~~award, including accumulated dividend equivalents.
All Other Compensation (Column (g))

Perquisites and other personal benefits provided to directors did not exceed ~~$10,000, except for personal use of corporate aircraft for Mr. Ellis ($16,067) to attend a meeting of the board of directors of The Space Foundation.~~$10,000. All other compensation includes matching contributions made to eligible universities, colleges, and other non-profit organizations under the Corporation’s matching gift programs. The Corporation’s matching contribution includes the following charitable contributions made in ~~2015~~2017 or to be made by the Corporation in ~~2016~~2018 to match a contribution in the prior year:
Mr. Archibald $10,000; Mrs. Brewer ~~$11,000;~~$1,000; Mr. Burritt $10,000; Mr. ~~Carlson $50; Mr.~~ Ellis $1,000; ~~and~~ Mr. Falk ~~$10,000.~~$10,000; and Ms. Gordon $12,000. The matching gift programs are the same as the programs generally available to employees. Other amounts include tax assistance on travel expenses for a spouse accompanying a director while on business travel.
7866     www.lockheedmartin.com/investor

~~Table of Contents~~
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS

Directors and Executive Officers

The following table shows Lockheed Martin common stock beneficially owned by and stock units credited to each NEO, director, nominee and all NEOs, directors, nominees and other executive officers as a group as of ~~February 1, 2016.~~January 31, 2018. Except as otherwise noted, the named individuals had sole voting and investment power with respect to such securities. No director,nominee or NEO, individually or as a group, beneficially owned more than one percent of our outstanding common stock. All amounts are rounded to the nearest whole share. No shares have been pledged. The address of each director, nominee and executive officer is c/o Lockheed Martin Corporation, 6801 Rockledge Drive, Bethesda, MD 20817.
Name       Common
Stock^1,2          Stock
Units*          Total Common
Stock^1,2       Stock
Units *       Total
Daniel F. Akerson 5,022 ³ 2,097 ⁶ 7,119 7,522 ³ 3,238 ⁵ 10,760
Nolan D. Archibald 21,751 691 ⁶ 22,442 24,268 437 ⁵ 24,705
Dale P. Bennett 42,483 27,471 ^8,9,10 69,954 43,430 25,043 ^7,8,9 68,473
Rosalind G. Brewer 5,929 3,380 ^6,7 9,309
David B. Burritt 8,502 11,876 ^6,7 20,378 8,470 14,423 ^5,6 22,894
Bruce A. Carlson 317 1,034 ^6,7 1,352 691 1,760 ^5,6 2,451
Orlando P. Carvalho 104,541 16,202 ^8,10 120,743 105,711 9,673 ^7,8,9 115,384
James O. Ellis, Jr. 16,929 691 ⁶ 17,621 18,537 1,069 ⁵ 19,606
Thomas J. Falk 5,250 ⁴ 8,085 ⁶ 13,335 5,250 ⁴ 9,555 ⁵ 14,805
Ilene S. Gordon 0 1,327 ⁵ 1,327
Marillyn A. Hewson 235,798 65,987 ^8,9,10 301,785 236,572 41,701 ^7,8,9 278,272
Gwendolyn S. King 546 ⁵ 31,961 ^6,11 32,507
Jeh C. Johnson 0 437 ⁵ 437
Maryanne R. Lavan 26,379 23,085 ^8,9,10 49,465 10,502 18,005 ^7,8,9 28,507
James M. Loy 0 16,132 ⁶ 16,132 0 17,756 ⁵ 17,756
Joseph W. Ralston 20,088 691 ⁶ 20,780 22,514 437 ⁵ 22,951
Anne Stevens 17,177 2,156 ⁶ 19,333
James D. Taiclet, Jr. 0 437 ⁵ 437
Bruce L. Tanner 324,166 29,228 ^8,9,10 353,393 298,999 20,817 ^7,8,9 319,815
All directors, nominees and executive officers as a group (21 individuals including those named above) 976,430 315,177 1,291,606
All directors, nominees and executive officers as a group (20 individuals including those named above) 799,532 197,060 996,592

*
Does not include unvested PSUs.
(1)
Includes common stock not currently owned but which could be acquired within 60 days following ~~February 1, 2016~~January 31, 2018 through the exercise of stock options for Mr. ~~Bennett 10,800; Mr.~~ Carvalho ~~78,171;~~65,471; Ms. Hewson 142,369; ~~Ms. Lavan 14,720;~~ and Mr. Tanner ~~266,444.~~216,744. Includes shares payable at termination with respect to vested stock units credited under the ~~Directors Equity~~Existing Plan for which a director has elected payment in stock for ~~Mr. Archibald 21,752; Mrs. Brewer 5,929;~~Mr.Archibald 24,268; Mr. Burritt 340; ~~Mr. Carlson 317; Mr. Ellis 16,729; Mr. Ralston 20,088;~~Mr.Carlson 691; Mr.Ellis 18,337; and ~~Ms. Stevens 17,177.~~Mr.Ralston 22,514. Units for which a director has elected payment in cash are reported in the “Stock Units” column. There are no voting rights associated with stock units.
(2)
Includes shares attributable to the participant’s account in the Lockheed Martin Salaried Savings Plan for ~~Mr. Bennett 8,296; Mr. Carvalho 10,186; Ms. Hewson 403;~~Mr.Bennett 8,778; Mr.Carvalho 11,003; Ms.Hewson 455; Ms. Lavan ~~620;~~699; and Mr. Tanner ~~2,324.~~2,480. Participants have voting power and investment power over the shares.
(3)
Includes 22 shares owned by ~~Mr. Akerson’s~~Mr.Akerson’s spouse’s family trust.
(4)
Represents shares beneficially owned by Mr. Falk and his spouse through a family limited partnership.
(5)
Represents ~~shares held jointly by Mrs. King and her spouse with shared voting or investment power.~~
~~(6)~~ ~~Includes~~ stock units under the ~~Directors Equity~~Existing Plan ~~for Mr. Akerson 1,406; Mr. Burritt 5,949; Mr. Falk 7,393; Mrs. King 30,201; Mr. Loy 15,441 and Ms. Stevens 1,465;~~ for which directors have elected to receive distributions of units in the form of cash and unvested stock units credited on ~~February 1, 2016 under the Directors Equity Plan (691~~January 31, 2018 (annual equity award) for ~~each director, except Mrs. King who was credited with 230).~~Mr.Akerson 3,238; Mr.Archibald 437; Mr. Burritt 8,391; Mr. Carlson 1,398; Mr. Ellis 1,069; Mr. Falk 9,555; Ms. Gordon 1,327; Mr. Johnson 437; Mr. Loy 17,756; Mr. Ralston 437 and Mr. Taiclet 437. There are no voting rights associated with stock units.
~~(7)~~(6) ~~Includes~~
Represents stock units under the Directors Deferred Compensation Plan representing deferred cash compensation for ~~Mrs. Brewer 2,689;~~ Mr. Burritt ~~5,235~~6,033 and Mr. Carlson ~~343.~~362. The stock units (including dividend equivalents credited as stock units) are distributed in the form of cash. There are no voting rights associated with stock units.
~~(8)~~(7)
Includes stock units attributable to the participant’s account under the DMICP (including any units credited under the LTIP awards) for Mr. Bennett ~~11,044;~~12,870; Mr. Carvalho ~~939;~~990; Ms. Hewson ~~8,090;~~8,537; Ms. Lavan ~~8,239;~~8,889; and Mr. Tanner ~~5,841.~~6,163. Although most of the units will be distributed following termination or retirement in shares of stock, none of the units are convertible into shares of stock within 60 days of ~~February 1, 2016.~~January 31, 2018. There are no voting rights associated with stock units.
~~(9)~~(8)
Includes stock units attributable to the participant’s account under the NQSSP for Mr. Bennett ~~3,062;~~3,587; Mr. Carvalho 96; Ms. Hewson ~~2,537;~~3,156; Ms. Lavan ~~1,897;~~2,244; and ~~Mr. Tanner 3,675.~~Mr.Tanner 4,134. Amounts credited to a participant’s account in the NQSSP are distributed in cash following termination of employment. There are no voting rights associated with stock units.
~~(10)~~ (9)
Includes unvested RSUs for Mr. Bennett ~~13,364;~~8,586; Mr. Carvalho ~~15,263;~~8,586; Ms. Hewson ~~55,360;~~30,008; Ms. Lavan ~~12,949;~~6,872; and Mr. Tanner ~~19,712.~~10,520. Each RSU represents a contingent right to receive one share of common stock. There are no voting rights associated with RSUs.
~~(11)~~ ~~Includes 1,530 stock units under the Directors Deferred Stock Plan for Mrs. King. There are no voting rights associated with stock units.~~

~~2016~~2018 Proxy Statement
79      67

~~Table of Contents~~
Security Ownership of Management and Certain Beneficial Owners
Security Ownership of Certain Beneficial Owners

The following table shows information regarding each person known to be a “beneficial owner” of more than 5% of our common stock. For purposes of this table, beneficial ownership of securities generally means the power to vote or dispose of securities, or ~~the right~~theright to acquire securities that may be voted or disposed of, regardless of any economic interest in the securities. All information shown is based on information reported by the filer on a Schedule 13G filed with the SEC on the dates indicated in the footnotes to this table.
Name and Address Amount of Common Stock Percent of Outstanding Shares Amount of Common Stock       Percent of Outstanding Shares
State Street Corporation and State Street       51,378,136       16.7 47,059,612 16.4
Bank and Trust Company¹
State Street Financial Center
One Lincoln Street
Boston, MA 02111
Capital World Investors² 28,304,237 9.2 21,948,570 7.6
333 South Hope Street
Los Angeles, CA 90071
BlackRock, Inc.³ 18,705,512 6.1
55 East 52nd Street
New York, NY 10022
The Vanguard Group⁴ 17,430,560 5.67
The Vanguard Group³ 20,251,879 7.1
100 Vanguard Boulevard
Malvern, PA 19355
BlackRock, Inc.⁴ 19,193,367 6.7
55 East 52nd Street
New York, NY 10055

(1)
As reported on a Schedule 13G filed on February ~~16, 2016~~14, 2018 by State Street Corporation on behalf of itself and specified direct and indirect subsidiaries (State Street) in their various fiduciary and ~~State Street Bank and Trust Company.~~other capacities. State Street Bank and Trust Company (SSBTC) is the trustee and State Street Global Advisors (SSGA) is the independent fiduciary and/or investment manager for Lockheed Martin common stock held in a master trust for Lockheed Martin benefit plans which trust owns 12.94% of the common stock of the Corporation. SSBTC beneficially owns ~~45,893,513~~37,124,070 of the ~~51,378,136~~47,059,612 shares held by State Street of which 37,106,670 shares are held in its capacity as trustee for Lockheed Martin employee benefit plans. SSGA beneficially owns 43,790,538 shares of the 47,059,612 shares held by State Street of which 37,106,670 were held by SSGA as independent fiduciary and/or investment manager for Lockheed Martin employee benefit plans. In their respective capacities, SSBTC had voting power and ~~its direct and indirect subsidiaries, acting~~SSGA had dispositive power over the 37,106,670 shares in ~~various capacities.~~certain circumstances. Both State Street and ~~State Street Bank and Trust Company have~~SSBTC had sole voting power with respect to ~~1,794,963~~1,585,596 shares. State Street has shared voting power with respect to 49,583,173 shares, and State Street Bank and Trust Company has shared voting power with respect to 44,098,550 shares. State Street has shared dispositive power with respect to 51,378,136 shares and State Street Bank and Trust Company has shared dispositive power with respect to 45,893,513 shares. State Street Bank and Trust Company holds 41,666,167 of its 45,893,513 shares as trustee, independent fiduciary and/or investment manager for various Lockheed Martin employee benefit plans. In this capacity, State Street Bank and Trust Company has dispositive power and voting power over the shares in certain circumstances.
(2)
As reported on a Schedule 13G/A filed on February ~~12, 2016~~14, 2018 by Capital World Investors (Capital World), a division of Capital Research and Management ~~Company (Capital Research).~~Company. Capital World had sole voting and dispositive power with respect to such shares and is deemed to be the beneficial owner as a result of Capital Research acting as an investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940.shares.
(3)
As reported on a schedule 13G/A filed on February 9, 2018 by The Vanguard Group. The Vanguard Group had sole dispositive power with respect to 19,853,677 shares and sole voting power over 353,921 shares.
(4)
As reported on a Schedule 13G/A filed on ~~February 10, 2016~~January 25, 2018 by BlackRock, Inc. BlackRock, Inc. and its subsidiaries had sole dispositive power with respect to ~~18,703,221~~19,193,367 shares and sole voting power over ~~16,579,320~~17,308,932 shares.
~~(4)~~ ~~As reported on a schedule 13G filed on February 10, 2016 by Vanguard Group. Vanguard had sole dispositive power with respect to 16,910,945 shares and sole voting power over 498,926 shares.~~
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the ~~Securities~~ Exchange Act, ~~of 1934, as amended,~~ requires that our executive officers and directors (and persons who own more than 10% of our equity securities) file reports of ownership and changes in ownership with the SEC, the NYSE and with us. Based solely on our review of copies of forms and written representations from reporting persons, ~~we believe~~the Corporation has determined that ~~all ownership filing requirements were timely met~~no reporting person known to it was delinquent with respect to their reporting obligations during ~~2015.~~2017.
8068     www.lockheedmartin.com/investor

~~Table of Contents~~
PROPOSAL 5: STOCKHOLDER PROPOSAL 5TO ADOPT
STOCKHOLDER ACTION BY WRITTEN CONSENT
The stockholder identified below has submitted the following proposal to be voted upon at the Annual Meeting. In accordance with SEC rules, we are reprinting the proposal and ~~supportingstatements~~supporting statements as they were submitted to us. The Corporation is not responsible for ~~the~~their contents ~~thereof~~ or any inaccuracies ~~the proposal may contain.~~contained therein.
~~Proposal 5: Stockholder Proposal on Special Meeting Stock Ownership Threshold~~

John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, the beneficial owner of no less than ~~100~~200 shares of common stock of the Corporation having a market value greater than $2,000, has notified the Corporation that he intends to present the following proposal at this year’s Annual Meeting:
Proposal 5 – ~~Special Shareowner Meetings~~Shareholder Right to Act by Written Consent
~~Resolved, Shareowners ask~~Shareholders request that our board of directors undertake such steps as may be necessary to ~~take~~permit written consent by shareholders entitled to cast the ~~steps~~minimum number of votes that would be necessary ~~(unilaterally if possible)~~ to ~~amend our bylaws~~authorize the action at a meeting at which all shareholders entitled to vote thereon were present and ~~each appropriate governing document~~voting. This written consent is to ~~give holders in~~be consistent with applicable law and consistent with giving shareholders the ~~aggregate of 15% of our outstanding common stock the~~fullest power to ~~call a special shareowner meeting.~~ act by written consent consistent with applicable law. This includes shareholder ability to initiate any topic for written consent consistent with applicable law.
This proposal ~~does not impact our board’s current power~~topic won majority shareholder support at 13 major companies in a single year. This included 67%-support at both Allstate and Sprint. Hundreds of major companies enable shareholder action by written consent.
Taking action by written consent in lieu of a meeting is a means shareholders can use to ~~call a special meeting.~~
~~A shareholder right to call a special~~raise important matters outside the normal annual meeting ~~and a~~cycle. A shareholder right to act by written consent and to call a special meeting are 2 complimentary ways to bring an important matter to the attention of both management and shareholders outside the annual meeting cycle. ~~This is important because there could be 15-months between annual meetings.~~
~~A shareholder right for a group owning 15% of the shares of our company to call a special meeting is one method to equalize our lack of a right~~More than 100 Fortune 500 companies provide for shareholders to ~~act by written consent. Forinstance a group owning 25% of the shares of our company is now needed to~~ call a special meeting compared to Delaware law which allows 10% of such shares to call a special meeting. If 15% of shares could call a special meeting, instead of our current 25% of shares – this would help make up for our lack of a rightmeetings and to act by written consent.
~~This proposal topic won more than 70% support at Edwards Lifesciences and SunEdison in 2013. It may be possible to adopt this proposal by simply incorporating this text into our governing documents:~~
“Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board or the President, and shall be called by the Chairman of the Board or President or Secretary upon the order in writing of a majority of or by resolution of the Board of Directors, or at the request in writing of stockholders owning 15% of the entire capital stock of the Corporation issued and outstanding and entitled to vote.”
~~Please vote to enhance shareholder value:~~
~~Special Shareowner Meetings – Proposal 5~~

~~Board of Directors Statement in Opposition to Proposal 5~~

The Board recommends that you vote against this stockholder proposal. We believe that this proposal is unnecessary because our stockholders already have a meaningful right to call special meetings. Currently, any stockholder who individually owns 10 percent, or stockholders who in the aggregate own 25 percent, of our outstanding common stock may demand the calling of a special meeting to consider any business properly before the stockholders. Our BylawsLockheed shareholders also do not ~~restrict~~have the timing of a request for a special meeting. The only subject matter restriction is that we are not required to call a special meeting to consider a matter that is substantially the same as voted on at a special meeting within the preceding 12 months unless requested by a majority of all stockholders.
Our 25 percent ownership threshold was established by the Board in 2010 and is the most prevalent standard among the companies in our comparator group and is also consistent with Maryland law. The Board also included the 10 percent threshold for individual stockholders to call a special meeting in light of our institutional ownership profile. The Board believes that the aggregate 15% threshold called for in this stockholder proposal is unduly low and could result in a relatively small minority of stockholders using the mechanism of special meetings for their own interest, which may not be shared more broadly by all stockholders. Special meetings can be costly, time-consuming and potentially disruptive to our normal business operations and long-term stockholder interests. We believe that the holders of at least 25% of our common stock (or an individual 10 percent stockholder) would agree to address a matter or concern before a special meeting is called.
In recommending a vote against the stockholder proposal, the Board believes that it is also important to consider our other corporate governance practices and the many stockholder protections we have adopted.
~~2016 Proxy Statement~~
81

~~Table of Contents~~
~~Stockholder Proposal 5~~
~~In addition to the stockholder~~full right to call a special meeting ~~stockholders have~~that is available under Delaware law. According to the lame Lockheed special meeting provision it would take 25% of shares (instead of 10% per Delaware law) to call a ~~number~~special meeting.
Adoption of ~~ways~~this proposal would at least give shareholders a better position to ~~communicate concerns~~engage with the Board and management about improving the qualifications of our directors. For instance there may be an issue with board refreshment. The following directors had long-tenure of more than 14-years:
Anne Stevens
Joseph Ralston
Nolan Archibald
This long-tenure was compounded by the fact that Ms. Stevens received 20% in negative votes and was potentially distracted with work on 4 boards. Mr. Archibald received 22% in negative votes and had oversized influence ~~oversight~~since he was the Lead Director and worked on 2 of the ~~Corporation.~~most important board committees at Lockheed. Long-tenure can impair the independence of any director no matter how well qualified. Independence is an all-important quality for a director – especially a Lead Director.
Four directors total exceeded 20% in negative votes (running unopposed) and had an oversized influence on Lockheed by holding 7 seats on Lockheed’s most important board committees.
Plus we had too many directors (4) who come from a culture where following orders is paramount. Such directors should be consultants instead of directors.
Lockheed needs to be engaged about the qualifications of its directors at a time of massive cost and schedule overruns on the F-35, a sluggish stealth fighter. It has left Boeing an opening to spruce up the F-18 Hornet design, which first flew in 1978, and potentially steal F-35 orders.
Please vote for a best practice in corporate governance:
Shareholder Right to Act by Written Consent – Proposal 5
2018 Proxy Statement
      69

Stockholder Proposal 5
Board of Directors Statement in Opposition to Stockholder Proposal 5
The Board has considered this proposal and recommends that stockholders voteAGAINSTthis proposal for the following reasons:
●
~~All directors are elected annually~~Our stockholders already have the right to call a special meeting at any time.Any stockholder who individually owns 10 percent, or stockholders who in the aggregate own 25 percent, of our outstanding common stock may demand the calling of a special meeting to consider any business properly before the stockholders. This threshold is half (or less) of what would be necessary to act by ~~our stockholders.~~
written consent under the proposal. See “Stockholder Right to Call Special Meeting” on page 10.
●
~~In uncontested elections, directors must~~The Board believes allowing stockholders to act by written consent circumvents the deliberative stockholder process and could result in an unfair and unsound process because it allows stockholders to take action without complying with the procedural safeguards inherent in the stockholder meeting process.Action by written consent does not require that all stockholders receive ~~a majority~~notice of the ~~votes cast~~written consent proposal, be given adequate time to review the subject matter of the proposal, be ~~elected.~~
given the opportunity to consider alternative views on the proposal, or be afforded the opportunity to debate the merits of the proposal at an open meeting. The Board believes that requiring stockholder business be acted upon at a meeting is an inherently more structured, democratic and open process and helps to ensure the accuracy and completeness of information presented to all stockholders for their consideration.
●
ToWritten consent provides a greater opportunity for abuse.The written consent proposal does not impose any ownership requirements on the stockholders soliciting written consent and, as a result, it could be initiated by a single stockholder holding a very small number of shares. It may encourage short-term stock ownership manipulation by a small group of investors to advance a special agenda that may be contrary to the long-term best interests of the Corporation and its stockholders. The proposed arrangement may result in frequent special interest demands or complaints relating to the ordinary business of the Corporation that distract management and the Board and may result in significant administrative burdens and expense. It may also create confusion because multiple groups of stockholders would be able to solicit written consents simultaneously, some of which may be duplicative or contradictory.
● Our existing corporate governance policies and practices already provide stockholders multiple means to express their views and ensure Board accountability.In addition to providing for stockholders’ right to call special meetings, the Corporation has been responsive to stockholder input and has enhanced its governance policies and practices to further the rights of stockholders and Board accountability. Examples include:
- Proxy Access. In September 2016, the Board proactively adopted a proxy access bylaw provision that allows an eligible stockholder or group of stockholders to nominate candidates for election to the Board of Directors and for those nominees to be included in Lockheed Martin’s proxy solicitation materials. See “Proxy Access” on page 10.
- Amendments to Bylaws. In December 2017, following engagement with many of our largest stockholders, the Board proactively amended the Corporation’s Bylaws to provide that the stockholders shall have ~~an opportunity~~the power to ~~raise important issues between annual meetings,~~amend the Corporation’s Bylaws. See Stockholder Right to Amend Bylaws on page 10.
- Stockholder Engagement. The Corporation has a longstanding, active investor engagement program. At the direction of the Board, the Corporation engages directly with its ~~largest~~ stockholders throughout the year to seek their views on ~~important~~an array of issues, including corporate governance ~~matters and executive compensation practices.~~matters. All stockholders may contact the Lead Director (atLead.Director@lmco.com) individually or the non-management directors as a group at any time (see page ~~88)~~78).
●
- Empowered Independent Lead Director. The independence of our Board and the Board’s oversight of management is enhanced by the robust role executed by our independent Lead Director.
- Board Refreshment. The Board is focused on continuing Board refreshment to ensure our directors’ skill sets continue to align with our long-term business strategy. Four new directors have been added since 2015 (including two appointed during 2017) and three directors have retired from the Board since that time, and an additional director is scheduled to retire at the annual meeting.
- Annually Elected Board. All directors are elected annually by our stockholders.
70     www.lockheedmartin.com/investor
Stockholder Proposal 5
- Majority Voting Policy for Director Elections. In uncontested elections, directors must receive a majority of the votes cast to be elected.
- No Stockholder Rights Plan. The Corporation does not have a Stockholder Rights Plan or so-called “Poison Pill” in place. Your Board has ~~stated~~indicated that if it ~~were~~was to adopt a Stockholder Rights Plan, we would seek stockholder ratification within 12 months.

● Substantially identical proposals were rejected by the Corporation’s stockholders in 2015, 2014, 2013 and 2011.Substantially the same proposal has been submitted by the proponent, considered by the Board and rejected by the stockholders four times in the last seven years. Since theproponent last submitted this proposal in 2015, the Board has implemented proxy access for stockholders and has given stockholders concurrent authority to amend the Bylaws. The Board of Directors continues to believe that this proposal is not in the best interests of all stockholders, and urges our stockholders to reject the proposal once again.
~~The~~Your Board believes that our current governance ~~practice~~structure strikes an appropriate balance between ~~the right of~~permitting stockholders to ~~call a special meeting~~raise important matters at any time and ~~the interests of the Corporation~~ensuring that all stockholders are afforded an opportunity for meaningful participation based on accurate and ~~its stockholders in promoting the appropriate use of company resources.~~complete public disclosure. The Board will continue to review best corporate governance practices and adopt those practices that it believes, in light of the circumstances, serve the best interests of the Corporation and our stockholders.

The Board unanimously recommends that you vote AGAINST Proposal 5.

2018 Proxy Statement
      71

82~~www.lockheedmartin.com/investor~~

Table of Contents
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
Do I need an admission ticket to attend the Annual Meeting?

Yes. You (and any ~~guest or~~one family ~~member)~~member guest) must present both an admission ticket and valid, government-issued photographic identification to attend the Annual Meeting. Please follow the advance registration instructions on page ~~89. If you do~~79. Anyone not ~~have~~presenting an admission ticket and valid, ~~government-issued photographicidentification, you~~government-issuedphotographic identification, will not be admitted into the Annual Meeting. For security reasons, all hand-carried items will be subject to inspection, and ~~all bags, briefcases, and packages~~ must be ~~checked.~~screened at the door. Cameras, cell phones, ~~and other~~ electronic devices, bags and briefcases will not be ~~allowed~~permitted in the ~~meeting room.~~meeting.
Who is entitled to vote at the Annual Meeting?

Holders of our common stock at the close of business on February ~~26, 2016~~23, 2018 (the “Record Date”) are entitled to attend and vote their shares at the Annual Meeting. As of the Record Date, there were ~~304,774,508~~285,824,182 shares outstanding. Each share outstanding on the Record Date is entitled to one vote on ~~each proposal presentedat~~eachproposal presented at the Annual Meeting. This includes shares held through Lockheed Martin Direct Invest, our dividend reinvestment and stock purchase plan, orand through our employee benefit plans. Your proxy card shows the number of shares held in your account(s) as of the Record Date.
What is the difference between holding shares as a registered stockholder and as a beneficial owner?

If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A. (Computershare), you are considered the “registered stockholder” of those shares. We mail the Proxy Materials and our Annual Report to you directly.
If your shares are held in a stock brokerage account or by a bank or other nominee (street name), you are considered the “beneficial owner” of the shares that are registered in street name. In this case, the Proxy Materials and our Annual Report were forwarded to you by your broker, bank or other nominee. As the beneficial owner,you have the right to direct your broker, bank or other nominee how to vote your shares by following the voting instructions included in the mailing.
Employees with shares allocated into an employee benefit plan account will vote shares allocated to their benefit plan account electronically and will not receive a paper mailing for those shares. Employees should review the information on procedures for voting by ~~Plan Participants~~plan participants on page ~~85.~~74.
What am I voting on and what are the Board voting recommendations?

Our stockholders will be voting on the following proposals:
Proposal      Description      Board Voting Recommendations      Page
1 Election of Directors FOR ALL DIRECTOR-NOMINEES 22
2 Ratification of Appointment of Independent Auditors FOR 29
3 Advisory Vote to Approve the Compensation of our Named Executive Officers (“Say-on-Pay”) FOR 31
4 Management Proposal to Re-Approve the Performance Goals for the 2011 Incentive Performance Award Plan FOR 71
5 Stockholder Proposal on Special Meeting Stock Ownership Threshold AGAINST 81

~~2016 Proxy Statement~~
Proposal       Description       Board Voting
Recommendations       Page
1 Election of Directors FOR ALL DIRECTOR-
NOMINEES 18
2 Ratification of Appointment of Independent Auditors FOR 24
3 Management Proposal to Approve the Lockheed Martin Corporation Amended and Restated Directors Equity Plan FOR 27
4 Advisory Vote to Approve the Compensation of our Named Executive Officers (Say-on-Pay) FOR 30
5 Stockholder Proposal to Adopt Stockholder Action by Written Consent AGAINST 69
72     www.lockheedmartin.com/investor
83

Table of Contents
Questions and Answers About the Annual Meeting
Can other matters be decided at the Annual Meeting?

At the time this Proxy Statement went to press, we were not aware of any other matters to be presented at the Annual Meeting. If other matters are properly presented for consideration at the Annual Meeting, the proxy holders appointed by our Board (who are named on your proxy card if you are a registered stockholder) ~~willhave~~will have the discretion to vote on those matters in accordance with their best judgment on behalf of stockholders who provide a valid proxy by Internet, by telephone or by mail orif you received it by ~~scanning the QR code with a mobile device.~~mail.
What is the procedure for voting?

●
If your shares are registered in your name, you can vote using any of the methods described below.

●
If your shares are held in the name of a broker, bank, or other nominee, your nominee will provide you with instructions on the procedure for voting your shares. Employees with shares allocated into an employee benefit plan account should review the information on procedures for voting by employees on page ~~85.~~74.

●
If you hold shares in multiple accounts, you may receive multiple ~~proxy material~~Proxy Material packages (electronically and/or by mail). Please be sure to vote all of your Lockheed Martin shares in each of your accounts in accordance with the voting instructions you receive.
By Internet ~~QR Code,~~ or Telephone
You can vote your shares via the Internet at~~www.investorvote.com~~www.investorvote.com. ~~or by scanning your QR code (located on your proxy card) with your mobile device.~~ Please have your proxy card in hand when you go online. You will have an opportunity to confirm your voting selections before your vote is recorded.
You can vote your shares by telephone by calling toll free 1-800-652-8683 within the U.S., Canada, and Puerto Rico, or 1-781-575-2300 from outside the U.S. Please have your proxy card in hand when you call. You will have an opportunity to confirm your voting selections before your vote is recorded.
Internet ~~(including QR code access)~~ and telephone voting facilities for registered stockholders will be available 24 hours a day until 1:00 a.m., ~~Eastern Daylight Savings Time,~~EDT, on April ~~28, 2016.~~26, 2018. If you vote your shares on the Internet or by telephone, you do not have to return your proxy card.
The availability of Internet and telephone voting for beneficial owners will depend on the voting processes of your broker, bank or other nominee. You should follow the voting instructions in the materials that you received from your nominee.
By Mail
~~Mark,~~If you received your Proxy Materials by mail, mark, date and sign the proxy card and return it in the postage prepaid envelope provided. If voting instructions are provided, shares represented by the proxy card will be voted in accordance with the voting instructions.
If you want to vote in accordance with the Board’s recommendations, sign, date and return the proxy ~~card.~~card without marking it. The named proxy holders will vote signed but unmarked proxy cards in accordance with the Board’s recommendations.
If you are a registered stockholder, and the postage prepaid envelope is missing, please mail your completed proxy card to Lockheed Martin Corporation, c/o Computershare Investor Services, P.O. Box 43116, Providence, RI 02940.
In Person at the Annual Meeting
All registered stockholders can vote in person at the Annual Meeting. Voting your proxy electronically via the Internet, by telephone ~~by mail,~~ or by ~~scanning the QR code with a mobile device~~mail does not limit your right to vote at the Annual Meeting. You also can choose to be represented by another person at the Annual Meeting by executing a legally valid proxy designating that person to vote on your behalf. You must properly pre-register your designee by following the instructions on page 89. If you are a beneficial owner of shares, you must obtain a legally valid proxy from your broker, bank or other nominee and present it to the inspectors of election with your ballot to be able to vote at the Annual Meeting.
● Designating a proxy. You also can choose to be represented by another person at the Annual Meeting by executing a legally valid proxy designating that person to vote on your behalf. You must properly pre-register your designee by following the instructions on page 79.
● Beneficial owners. If you are a beneficial owner of shares, you must obtain a legally valid proxy from your broker, bank or other nominee and present it to the inspectors of election with your ballot to be able to vote at the Annual Meeting.
A legal proxy is an authorization from you (if you are a registered stockholder), or your broker, bank or other nominee (if you are a beneficial owner) to vote the shares held in your name or in the nominee’s name that satisfies Maryland law and the SEC requirements for proxies.
2018 Proxy Statement
      73

Table of Contents
Questions and Answers About the Annual Meeting
Can I change my proxy vote?

Yes. If you are a registered stockholder, you can change your proxy vote or revoke your proxy at any time before the Annual Meeting by:
●
Returning a signed proxy card with a later ~~date.~~date;

●
Authorizing a new vote electronically through the Internet ~~by telephone~~ or by ~~scanning the QR code with a mobile device.~~
telephone;
84~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Questions and Answers About the Annual Meeting~~
●
Delivering a written revocation of your proxy to ~~the~~Lockheed Martin Corporation, Attention: Senior Vice President, General Counsel and Corporate Secretary, ~~at Lockheed Martin Corporation,~~ 6801 Rockledge Drive, Bethesda, MD 20817, before your original proxy is voted at the Annual ~~Meeting.~~Meeting; or

●
Submitting a written ballot at the Annual Meeting.
If you are a beneficial owner of shares, you can submit new voting instructions by contacting your broker, bank or other nominee. You also can vote in person at the Annual Meeting if you obtain a ~~legalproxy~~legal proxy from your bank, broker or other nominee (the registered stockholder) as described in the answer to the previous question.
Your personal attendance at the Annual Meeting does not revoke your proxy. Unless you vote at the Annual Meeting, your last valid proxy prior to or at the Annual Meeting will be used to cast your vote.
What if I return my proxy card but do not provide voting instructions?

Proxies that are signed and returned but do not contain voting instructions will be voted:
●
FORthe election of the 11 director-nominees listed in this proxy statement (Proposal 1).;

●
FORthe ratification of the appointment of Ernst & Young LLP, an independent registered public accounting firm, as independent auditors for the ~~2016~~2018 fiscal year (Proposal 2).;

●
FORthe approval of the Lockheed Martin Corporation Amended and Restated Directors Equity Plan (Proposal 3);
● FORthe advisory vote to approve the compensation of our named executive officers (Say-on-Pay) (Proposal ~~3).~~4);

●
~~FOR~~AGAINSTthe ~~re-approval of performance goals under the 2011 Incentive Performance Award Plan~~stockholder proposal to adopt stockholder action by written consent (Proposal ~~4).~~5); and

●
~~AGAINST~~ ~~the stockholder proposal (Proposal 5).~~
●
In the best judgment of the named proxy holders if any other matters are properly brought before the Annual Meeting.

How do I vote if I participate in one of the Corporation’s 401(k) or defined contribution plans?

As a participant in one of our employee 401(k) or defined contribution plans, you can direct the plan trustees how to vote shares allocated to your account(s) on a proxy voting direction or instruction card, electronically through the Internet ~~by telephone,~~ or by ~~scanning the QR code with a mobile device.~~telephone. Most active employees who participate in these benefit plans will receive an email notification announcing Internet availability of the Proxy Materials and how to submit voting directions.
If you do not provide timely directions to the plan trustee, shares allocated to your account(s) will be voted by the plan trustee depending on the terms of your plan or other legal requirements.
Plan participants may attend the Annual Meeting, but may not vote plan shares at the Annual Meeting. If you wish to vote, whether you plan to attend the Annual Meeting or not, you should direct the trustee of your plan(s) how you wish to vote your plan shares no later than 11:59 p.m., ~~Eastern Daylight Savings Time,~~EDT, on April ~~25, 2016.~~23, 2018.
How many shares must be present to hold the Annual Meeting?

In order for us to lawfully conduct business at our Annual Meeting, a majority of the shares outstanding and entitled to vote as of the Record Date, must be present in person or by proxy. This is referred to as a quorum. Your shares are counted as present at the ~~AnnualMeeting~~Annual Meeting if you attend the Annual Meeting and vote in person or abstain from voting, or if you properly return a proxy by Internet, by telephone or by mail ~~or scan the QR code with a mobile device~~ in advance of the Annual Meeting and do not revoke the proxy.
74     www.lockheedmartin.com/investor
Table of Contents
Questions and Answers About the Annual Meeting
Will my shares be voted if I don’t provide my proxy or instruction card?

Registered Stockholders
If your shares are registered in your name, your shares will not be voted unless you provide a proxy by Internet, by telephone, by mail, ~~by scanning the QR code with a mobile device~~ or vote in person at the Annual Meeting.
Plan Participants
If you are a participant in one of our employee 401(k) or defined contribution plans and you do not provide timely directions to the plan trustee, shares allocated to your account(s) will be voted by the plan trustee depending on the terms of your plan and other legal requirements.
~~2016 Proxy Statement~~
85

~~Table of Contents~~
~~Questions and Answers About the Annual Meeting~~
Beneficial Owners
If you hold shares through an account with a broker and you do not provide voting instructions, under NYSE rules, your broker may vote your shares on routine matters only. The ratification ~~of the~~ofthe appointment of Ernst & Young LLP (Proposal 2) is considered a routine matter, and your nominee can therefore vote your shares on that Proposal even if you do not provide voting instructions. Proposals 1, 3, 4 and 5 are not considered routine matters, and your nominee cannot vote your shares on those Proposals unless you provide voting instructions. Votes withheld by brokers in the absence of voting instructions from a beneficial owner are referred to as “broker non-votes.”
Multiple Forms of Ownership
The Corporation cannot provide a single proxy or instruction card for stockholders who own shares in multiple forms as registered stockholders, plan participants or beneficial owners. As a result, if your shares are held in multiple types of accounts, you must submit your votes for each type of account in accordance with the instructions you receive for that account.
What is the vote required for each proposal?

For Proposal 1, the votes that stockholders cast “FOR” a director-nominee must exceed the votes that stockholders cast “AGAINST” a director-nominee to approve the election of each director-nominee. For each of Proposals 2, 3, 4 and 5 the affirmative vote of a majority of the votes cast is required to approve the proposal.“Votes cast” excludes broker non-votes and generally excludes abstentions. Proposals 2, 34 and 5 are advisory and non-binding. However, the Board will review the voting results on these proposals and take the results into account when making future decisions regarding these matters. ~~“Votes cast” exclude abstentions and broker non-votes.~~
What is the effect of an abstention?

A stockholder who abstains on some or all matters is considered present for purposes of determining if a quorum is present at the Annual Meeting, but an abstention is not counted as a vote cast under Maryland law. For matters requiring a vote under the NYSE listing rules such as Proposal 3, however, the NYSE requires thatabstentions be treated as votes cast. AnAccordingly, an abstention has no effect ~~for~~on the vote on any proposal other than Proposal 3. For Proposal 3, an abstention has the same effect as a vote against the proposal.
What is the effect of a broker non-vote?

If a broker casts a vote on Proposal 2 (Ratification of Auditors), the vote will be included in determining whether a quorum exists for holding the meeting. The broker does not have authority to vote on the other proposals absent directions from the beneficial owner.
As a result, if the beneficial owner does not vote on Proposals 1, 3, 4 or 5 so that there is a “broker non-vote” on those items, the broker non-votes do not count as votes cast for that proposal andhave no effect on the proposal. Thus, a broker non-vote on these proposals will not impact our ability to obtain a quorum, will not affect the outcome with respect to the election of directors and will not otherwise affect the outcome of the vote on a proposal that requires the affirmative vote of a majority of the votes cast on the proposal.
2018 Proxy Statement
      75

Table of Contents
Questions and Answers About the Annual Meeting
Who will count the votes?

Representatives of Computershare will tabulate the votes and act as inspectors of election for the Annual Meeting.
Where can I find the voting results of the Annual Meeting?

The preliminary voting results will be announced at the Annual Meeting. The final voting results will be tallied by the inspectors of election and disclosed by the Corporation in a Current Report on Form 8-K filed with the SEC within four business days following the Annual Meeting.
86~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Questions and Answers About the Annual Meeting~~
What is “householding” and how does it affect me?

We have adopted a procedure approved by the SEC called “householding.” Under this procedure, we send only one Annual Report and Proxy Statement to eligible stockholders who share a single address, unless we have received instructions to the contrary from any stockholder at that address. This practice is designed to reduce our printing and postage costs. Stockholders who participate in householding will continue to receive separate proxy cards. We do not use householding for any other stockholder mailings, such as dividend checks, Forms 1099 or account statements.
If you are eligible for householding, but received multiple copies of the Annual Report and Proxy Statement and prefer to receive only a single copy of each of these documents for your household, please contact Computershare, Shareholder Relations, P.O. ~~Box30170,~~Box 30170, College Station, TX 77842-3170, or call 1-877-498-8861. If you are a registered stockholder residing at an address with other registered stockholders and wish to receive a separate Annual Report or Proxy Statement at this time or in the future, we will provide you with a separate copy. To obtain this copy, please contact Computershare as indicated above. If you own shares through a broker, bank, or other nominee, you should contact the nominee concerning householding procedures.
~~To vote all of your shares, you must submit a proxy or voting instruction card for each account(employee benefit plan shares, registered shares, and beneficially-owned shares). Accordingly, you will receive a separate solicitation and proxy for each type of account in which shares are held.~~
Can I receive a copy of the Annual Report?

Yes. We will provide a copy of our Annual Report without charge, upon written request, to any registered or beneficial owner of common stock entitled to vote at the Annual Meeting. Requests should be made in writing addressed to Investor Relations,Lockheed Martin Corporation, 6801 Rockledge Drive, Bethesda, MD 20817, by calling Lockheed Martin Stockholder Direct at 1-800-568-9758, or by accessing the Corporation’s website atwww.lockheedmartin.com/~~investor.~~investor.
Can I view the Proxy Statement and Annual Report on the Internet?

Yes. The Proxy Statement and Annual Report are available on the Internet atwww.lockheedmartin.com/investor. Subject to the “householding” procedures above, all stockholders will receive paper copies of the Proxy Statement, proxy card and Annual Report by mail unless the stockholder has consented to electronicdelivery or is an employee with shares allocated in an employee benefit plan. The SEC also maintains a website atwww.sec.govthat contains reports, proxy statements, and other information regarding Lockheed Martin.
Can I choose to receive the Proxy Statement and Annual Report on the Internet instead of receiving them by mail?

Yes. If you are a registered stockholder or beneficial owner, you can elect to receive future Annual Reports and Proxy Statements on the Internet only and not receive copies in the mail by visiting Shareholder Services atwww.lockheedmartin.com/investorand completing the online consent form. Your request for electronic transmission will remain in effect for all future Annual Reports and Proxy Statements, unless withdrawn. Withdrawal procedures also are available on this website.
Most active employees who participate in the Corporation’s 401(k) and defined contribution plans will receive an email notification announcing Internet availability of the Proxy Materials. A paper copy will not be provided unless requested by the employee following the instruction in the email notification.
76     www.lockheedmartin.com/investor
Table of Contents
Questions and Answers About the Annual Meeting
Who pays the cost of this proxy solicitation?

The Corporation pays the cost of soliciting proxies on behalf of the Board for the Annual Meeting. We may solicit proxies by Internet, by telephone, by mail or in person. We may make arrangements with brokerage houses and other custodians, nominees and fiduciaries to send Proxy Materials to beneficial owners on our behalf. We reimburse them for their reasonable expenses. We have retained Morrow ~~& Co.,~~Sodali LLC, 470 West Avenue, Stamford, CT 06902 toaid in the solicitation of proxies and to verify related records for a fee of $45,000, plus expenses. To the extent necessary to ensure sufficient representation at the Annual Meeting, we may request the return of proxies by mail, express delivery, courier, telephone, Internet or other means. Stockholders are requested to return their proxies without delay.
~~2016 Proxy Statement~~
87

~~Table of Contents~~
~~Questions and Answers About the Annual Meeting~~
How do I submit a proposal or nomination for the Annual Meeting of Stockholders in ~~2017?~~2019?

Address to Submit a Stockholder Proposal:Any stockholder who wishes to submit a proposal or nominate a director for consideration at the ~~2017~~2019 Annual Meeting ~~and for inclusion in the 2017 Proxy Statement should~~must send their proposal to Lockheed Martin Corporation, Attention: Senior Vice President, General Counsel and Corporate Secretary, 6801 Rockledge Drive, Bethesda, MD 20817.
~~Proposals must be received no later than November 11, 2016,~~Deadline and ~~satisfy the~~Submission Requirements for Stockholder Proposals:There are separate requirements for stockholder proposals under ~~applicable SEC Rules (including~~ SEC Rule ~~14a-8) to be included in the Proxy Statement~~14a-8 and ~~on the~~proposals under our proxy card that will be used for solicitation of proxies by the Board for the 2017 Annual Meeting. For more complete guidance on stockholder proposals, see Staff Legal Bulletin 14, which may be found at the SEC’s website at~~www.sec.gov/interps/legal/cfslb14.htm~~.
Our Bylaws also require advance notice of any proposal by a stockholder to be presented at the 2017 Annual Meeting that is not included in our Proxy Statement and on the proxy card, including any proposal for the nomination of a director for election.
To be properly brought before the 2017 Annual Meeting, written nominations for directors or other business to be introduced by a stockholder must be received between the dates of October 12, 2016 and November 11, 2016, inclusive.access provision as stated below. A notice of a stockholder proposal (including a director nomination) must contain the information required by our Bylaws about the matter to be brought before the annual meeting and about the stockholder proponent and persons associated with the stockholder through control, ownership of the shares, agreement or coordinated activity. We reserve the right to reject proposals that do not comply with these requirements. A list of the information which is required to be included with a stockholder proposal may be found in Section 1.10copy of our Bylaws can be found atwww.lockheedmartin.com/~~corporate-governance~~corporate-governance.
Type of
Proposal
Stockholder Proposalto be included in our proxy statement and proxy card
Proxy Access Nominee - stockholder nomination of director to beincluded in our proxy statement and proxy card
Stockholder Proposal or Director Nomineenot intended to be included in our proxy statement and proxy card
Deadline
November 16, 2018
Must be received between October 17, 2018 and November 16, 2018
Must be received between October 17, 2018 and November 16, 2018
Submission
Requirements
●Must comply with applicable SEC Rules (including SEC Rule 14a-8); see also Staff Legal Bulletin 14, which may be found atwww.sec.gov
●Must provide the information required under our Bylaws, including Section 1.10
Must provide the information required under our Bylaws, including Section 1.11
Must provide the information required under our Bylaws, including Section 1.10

2018 Proxy Statement
      77

.Table of Contents
Questions and Answers About the Annual Meeting
How can I contact the Corporation’s non-management directors?

Stockholders and all interested parties may communicate with the Lead Director or with the non-management directors as a group. If you wish to raise a question or concern to the Lead Director or the non-management directors as a group, you may do so by writing to the Lead Director by email at~~Lead.Director@lmco.com~~Lead.Director@lmco.com.. You also may write to the Lead Director or Non-Management Directors, c/o Senior Vice President, General Counsel and Corporate Secretary, Lockheed Martin Corporation, 6801 Rockledge Drive, Bethesda, MD 20817.
Our Senior Vice President, General Counsel and Corporate Secretary or her delegate reviews all correspondence sent to the Board. The Board has authorized our Senior Vice President, GeneralCounsel and Corporate Secretary or her delegate to respond to correspondence regarding routine stockholder matters and services (e.g., stock transfers, dividends, etc.). Correspondence from stockholders relating to accounting, internal controls or auditing matters are brought to the attention of the Audit Committee. All other correspondence is forwarded to the Lead Director who determines whether distribution to a Board committee or to the full Board for review is appropriate. Any director may, at any time, review a log of all correspondence addressed to the Board and request copies of such correspondence.
Can I find additional information on the Corporation’s website?

Yes. Although the information contained on our website is not part of this Proxy Statement, you will find information about the Corporation and our corporate governance practices atwww.lockheedmartin.com/corporate-governance. Our website contains information about our Board, Board committees, Charter,Bylaws, Code of Conduct, Governance Guidelines and ~~informationabout~~information about insider transactions. Stockholders may obtain, without charge, hard copies of the above documents by writing to Investor Relations, Lockheed Martin Corporation, 6801 Rockledge Drive, Bethesda, MD 20817.
8878     www.lockheedmartin.com/investor

Table of Contents
ATTENDING THE ANNUAL MEETING
Location

~~Lockheed Martin Center for Leadership~~
~~Excellence Auditorium~~
~~6777 Rockledge Drive~~
~~Bethesda, Maryland 20817~~
~~Parking Garage~~
~~6720-C Rockledge Drive~~
~~Bethesda, Maryland 20817~~
~~(Parking will be validated and shuttles will transport~~
~~stockholders to the Auditorium.)~~

The meeting location, parking details and directions are provided on the back cover of this Proxy Statement. No parking is available at the Center for Leadership Excellence. If you plan to drive, proceed to the parking garage and a shuttle will take you to ~~the Auditorium.~~theAuditorium. Please plan additional time in your schedule for the shuttle. Shuttle service will begin at 7:15 a.m. The Annual Meeting will begin promptly at 8:00 a.m.
Admission to the Annual Meeting

Attendance at the Annual Meeting is limited to Lockheed Martin stockholders as of the Record Date (or a named and properly authorized representative), and one family ~~member.~~member guest. We reserve the right to limit the number of ~~representatives~~non-stockholder, family member guests who may attend the Annual Meeting. All attendees must pre-register. An admission ticket will be mailed to you.
Security Check
For security reasons, an admission ticket and valid, government-issued photographic identification (such as a driver’s license or passport) are required to enter the Annual Meeting. You also will be required to enter through a security check point before being granted access into the Annual Meeting. All hand-carried itemswill be subject to inspection and will be screened at the door. Cameras, cell phones, ~~and other~~ electronic devices, bags, briefcases and packages will not be permitted in the ~~Annual Meeting. All hand-carried items will be subject to inspection and all bags, briefcases and packages will be checked.~~meeting. The Corporation may implement additional security procedures to ensure the safety of the meeting attendees.
Registration Deadline
If you would like to attend the Annual Meeting, please follow the instructions below to pre-register. You are permitted one guest who must be a family member. You must also pre-register ~~any guest.~~your guest and provide his or her name and address. Your request to pre-register must be received by Friday, April ~~22, 2016.~~20, 2018. An admission ticket will be mailed to you.
Advance Registration Instructions

● Registered Stockholders. If you are a registered stockholder (your shares are held in your name), you ~~may~~must pre-register ~~and obtain~~andobtain an admission ticket by (i) checking the appropriate box on the Internet voting site, (ii) following the prompts on ~~the telephone~~thetelephone voting site or (iii) marking the appropriate box ~~on your~~onyour proxy card. ~~If a family member is attending with you, please indicate that when you pre-register and provide his or her name and address.~~
● 401(k) Participants. If you are a participant in the ~~Lockheed Martin~~LockheedMartin 401(k) or defined contribution plans, and you ~~received a~~receiveda notice of Internet availability of Proxy Materials or you received your Proxy Materials by email, you ~~may~~must pre-register to attend the Annual Meeting (but may not vote plan shares at the meeting). You ~~may~~must pre-register and obtain an ~~admission ticket~~admissionticket by (i) checking the appropriate box on the Internet voting site, (ii) following the prompts on the telephone voting site, or (iii) marking the appropriate box on your proxy voting direction card. ~~If a family member is attending with you, please indicate that when you pre-register and provide his or her name and address.~~
● Beneficial ~~Owners.~~Owners. If you are a beneficial owner (your shares are held through a broker, bank or other nominee), you ~~may pre-register~~mustpre-register and obtain an admission ticket by contacting ~~the Corporation~~theCorporation at:Lockheed Martin Corporation, Office of theCorporate Secretary, Mail Point 700, 6801 Rockledge Drive, Bethesda, MD 20817, or faxing a request to (301) ~~897-6960.~~897-6960 ~~Provide~~.Provide your name, mailing address and evidence of your stock ownership as of the Record Date. A copy of your brokerage or bank statement will suffice as evidence of ownership, or you ~~can obtain~~canobtain a letter from your broker or bank.
● Stockholder Proponent. If you are a ~~family member is attending with~~stockholder proponentand have submitted a proposal that will be presented at the 2018 annual meeting, you ~~please indicate that when you~~must pre-register and ~~provide his~~ obtain an admission ticket by contacting the Corporation at:LockheedMartin Corporation, Office of the Corporate Secretary, Mail Point 700, 6801 Rockledge Drive, Bethesda, MD 20817,or ~~her name and address.~~faxing a request to (301) 897-6960.

~~2016~~2018 Proxy Statement
89      79

Table of Contents
ADDITIONAL INFORMATION AND OTHER
MATTERS
Appendix A:
~~Definition of Non-GAAP (Generally~~
~~Accepted Accounting Principles) Measures~~

~~This Proxy Statement contains non-GAAP financial measures (as defined by SEC Regulation G). While we believe that these non-GAAP financial measures may be useful in evaluating~~ Lockheed Martin Corporation Amended and RestatedDirectors Equity Plan
LOCKHEED MARTIN CORPORATION
~~2009~~AMENDED AND RESTATED DIRECTORS EQUITY PLAN

ARTICLE I
TITLE, PURPOSE AND AUTHORIZED SHARES
~~This Plan shall be known as~~Lockheed Martin Corporation previously established the “Lockheed Martin Corporation 2009 Directors Equity Plan”, which was approved by stockholders on April 24, 2008, and~~shall become~~ effective~~on January 1,~~as of the Effective Date (as amended from time to time, the “2009.Plan”). The Corporation hereby amends and restates the 2009 Plan, as set forth herein, and renames the 2009 Plan the Lockheed Martin Corporation Amended and Restated Directors Equity Plan, effective as of the Restatement Date.
The purpose of this ~~information should be considered supplemental~~Plan is to attract, motivate and ~~isnot a substitute~~retain experienced and knowledgeable directors for ~~financial information prepared~~the Corporation and to further align their economic interests with the interests of stockholders generally.~~The~~
Subject to adjustment in accordance with ~~GAAP. In addition, our definitions for non-GAAP measures~~Section 7.1, thetotal number of shares of Common Stock that may ~~differ from similarly titled measures used by other companies or analysts.~~
~~Segment Operating Profit~~

~~Segment Operating Profit represents~~be subject to Options granted and Units awarded under this Plan is 600,000~~, subject to adjustment in accordance with Section 7.1.~~; provided, however, that the total ~~earnings~~number of shares of Common Stock that may be subject to Options granted and Units awarded from ~~our Business Segments before unallocated income~~ and ~~expense, interest expense, other non-operating income~~after the Restatement Date is equal to (i) the number of shares of Common Stock that remain available for grant under this Plan as of the Restatement Date,¹plus(ii) the number of shares of Common Stock subject to outstanding Awards as of the Restatement Date²under this Plan that on or after the Restatement Date terminate, expire, are forfeited, or paid in cash and ~~expense,~~would become available again for Awards under this Plan. Shares of Common Stock subject to an Option terminating or expiring for any reason prior to its exercise, and ~~income tax expense. This measure is used~~ subject toUnits that are forfeitedor paid in cash pursuant to this Plan, once again shall be available for Awards under this Plan.
ARTICLE II
DEFINITIONS
The following terms have the meanings specified below unless the context clearly indicates otherwise:
2.1“Accounts” means a Director’s Stock Unit Account and Dividend Equivalent Stock Account.
2.2“Annual Equity Award Amount” means a dollar amount equal to the Designated Equity Percentage multiplied by ~~our senior management inevaluating~~ the ~~performance~~Annual Retainer Amount, each determined as of ~~our Business Segments. The caption “Total Unallocated Items” reconciles Segment Operating Profit~~the applicable Award Date.
2.3“Annual Meeting” means an annual meeting of the stockholders of the Corporation at which Directors are elected by the stockholders.
2.4“Annual Retainer Amount” means the dollar amount of the aggregate annual retainer payable by the Corporation to ~~Consolidated Operating Profit. We use Segment Operating Profit~~a Director for service as a ~~performance goal in~~member of the ~~annual incentive plan.~~
2015
($M) Profit
Segment Operating Profit $ 5,486
Total Unallocated Items (50 )
Consolidated Operating Profit $      5,436

~~Return on Invested Capital~~

~~ROIC is defined~~Board of Directors (excluding any retainer amount for service on committees of the Board of Directors), as ~~net earnings plus after-tax interest expense divided by average invested capital (stockholders’ equity plus debt) after adjusting stockholders’ equity by adding back adjustments related~~it may be established from time to ~~the Corporation’s post-retirement benefit plans. We use ROIC as a performance measure for LTIP and PSUs.~~time.
Three-Year
ROIC Calculation ($M) 2013–2015
Net Earnings^(a) $ 3,400
Interest Expense (multiplied by 65%)^(a)(b) 245
Return       $      3,645
Average Debt^(c)(d) $ 8,452
Average Equity^(d)(e) 2,864
Average Benefit Plan Adjustments^(d)(f) 11,577
Average Invested Capital $ 22,893

ROIC 15.9 %

~~(a)~~ ~~Three-year 2013-2015 values for Net Earnings and Interest Expense reflect average values over the period.~~
~~(b)~~ Represents after-tax interest expense utilizing the federal statutory rate of 35 percent. Interest expense is added back to net earnings as it represents the return to debt holders. Debt is included as a component of average invested capital.
~~(c)~~ ~~Debt consists of long-term debt, including current maturities, and short-term borrowings (if any).~~
~~(d)~~   ~~The three-year averages are calculated using balances at the start of the three-year period and at the end of each year.~~
~~(e)~~ ~~Equity includes non-cash adjustments, primarily to recognize the funded/unfunded status of the Corporation’s benefit plans.~~
~~(f)~~ ~~Average Benefit Plan Adjustments reflect the cumulative value of entries identified in the Corporation’s Consolidated Statements of Stockholders’ Equity.~~

902.5“Award” means an award granted pursuant to Section 3.1.

¹As of the date of this Proxy Statement, the number of shares of Common Stock that remain available for grant under the 2009 Plan was 408,811.
²As of the date of this Proxy Statement, the number of shares of Common Stock that were subject to outstanding Awards under the 2009 Plan was 135,658.
80     www.lockheedmartin.com/investor

Table of Contents
Appendix ~~A: Definition of Non-GAAP (Generally Accepted Accounting Principles) Measures~~
~~Performance Cash~~

Performance Cash represents the Corporation’s cash from operations adjusted to exclude: (1) the difference between actual and planned pension funding under the Corporation’s Long-Range Plan and (2) unplanned tax payments or benefits on divestitures of business units. This definition is used in our annual incentive plan for performance limitation testing and in our award agreements for RSUs, LTIP and PSUs. The performance limitation is described on page 40. To illustrate, we calculate Performance Cash as follows:
Cash Flow ($M) 2015 2013–2015
Cash from Operations             $      5,101               $      13,513

Pension Funding Adjustment
Actual Pension Funding 91   4,588
Planned Pension Funding 0   3,140
       Delta 91   1,448
Adjustment for Unplanned Tax Payments / (Benefits) on Divestitures 0   (16 )
Net Adjusting Items $ 91   $ 1,432
Performance Cash $ 5,192   $ 14,945

~~Disclosure Regarding Forward-Looking Statements~~

This proxy statement contains statements that, to the extent they are not recitations of historical fact, constitute forward-looking statements within the meaning of the federal securities laws, and are based on our current expectations and assumptions. The words “believe,” “estimate,” “anticipate,” “project,” “intend,” “expect,” “plan,” “outlook,” “scheduled,” “forecast” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may differ materially due to factors such as:
● ~~our reliance on contracts with the U.S. Government, all of which are conditioned upon the availability of funding;~~
● ~~declining budgets; affordability initiatives; the implementation of automatic sequestration under the Budget Control Act of 2011 or Congressional actions intended to replace sequestration;~~
● ~~risks related to the development, production, performance, schedule, cost and requirements of complex and technologically advanced programs including our largest, the F-35 program;~~
● ~~economic, industry, business and political conditions (domestic and international) including their effects on governmental policy;~~
● ~~our success in growing international sales and expanding into adjacent markets and risks associated with doing business in new markets and internationally;~~
● the competitive environment for our products and services, including increased market pressures in our services businesses, competition from outside the aerospace and defense industry, and increased bid protests;
● ~~planned production rates for significant programs and compliance with stringent performance and reliability standards;~~
● ~~the performance of key suppliers, teammates, venture partners, subcontractors and customers;~~
● ~~the timing and customer acceptance of product deliveries;~~
● ~~our ability to attract and retain key personnel and transfer knowledge to new personnel; the impact of work stoppages or other labor disruptions;~~
● ~~the impact of cyber or other security threats or other disruptions to our businesses;~~
● ~~our ability to implement capitalization changes such as share repurchase activity and pension funding or debt levels;~~
● ~~our ability to recover certain costs under U.S. Government contracts and changes in contract mix;~~
● ~~the accuracy of our estimates and projections;~~
● ~~risk of a future impairment of goodwill or other long-term assets;~~
● ~~movements in interest rates and other changes that may affect pension plan assumptions and actual returns on pension plan assets;~~
● realizing the anticipated benefits of acquisitions or divestitures, ventures, teaming arrangements or internal reorganizations, and our efforts to increase the efficiency of our operations and improve the affordability of our products and services;

~~2016 Proxy Statement~~
91

~~Table of Contents~~A
~~Appendix A: Definition~~2.6“Award Date” means the second Business Day following the later of ~~Non-GAAP (Generally Accepted Accounting Principles) Measures~~
● ~~our ability to successfully integrate the Sikorsky business and realize synergies and other expected benefits of the acquisition;~~
● ~~adjustments required as a result of the ongoing purchase accounting analysis related to the Sikorsky acquisition;~~
● risks related to the completion of the Corporation’s previously announced transaction with Leidos Holdings, Inc. related to the Corporation’s IS&GS business segment, including anticipated terms and timing, obtaining Leidos stockholder and regulatory approvals and anticipated tax treatment; the dependency of any split-off transaction on market conditions and the value to be received in any split-off transaction;
● ~~the adequacy of our insurance and indemnities;~~
● ~~materialsavailability;~~
● ~~the effect of changes in or interpretation of legislation, regulation or policy, including those applicable to procurement (including competition from fewer and larger prime contractors), costallowability~~ ~~or recovery, accounting, taxation, or export; and~~
● the outcome of legal proceedings, bid protests, environmental remediation efforts, government allegations that we have failed to comply with law, other contingencies and U.S. Government identification of deficiencies in our business systems.
These are only some of the factors that may affect the forward-looking statements contained in this proxy statement. For a discussion identifying additional important factors that could cause actual results to vary materially from those anticipated in the forward-looking statements, see the Corporation’s filings with the SEC including, but not limited to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in the Corporation’s Annual Report on Form 10-K for the year ended Dec. 31, 2015. The Corporation’s filings may be accessed through the Investor Relations page of its website,~~www.lockheedmartin.com/investor~~~~, or through the website maintained by the SEC at~~~~www.sec.gov~~.
~~Except where required by applicable law, the Corporation expressly disclaims a duty to provide updates to forward-looking statements after~~(i) the date of ~~this proxy statement to reflect subsequent events, changed circumstances, changes in expectations, or~~ the ~~estimates and assumptions associated with them. The forward-looking statements in this proxy statement are intended to be subject to the safe harbor protection provided by the federal securities laws.~~
~~Appendix B: Lockheed Martin Corporation 2011 Incentive~~
~~Performance Award Plan, as Amended and Restated~~
~~SECTION 1. Purpose.~~
~~The purpose of this Plan is to benefit the Corporation’s stockholders by encouraging high levels of performance by individuals who contribute to the success~~first regular meeting of the ~~Corporation and its Subsidiaries and to enable~~Board of Directors in each calendar year or (ii) the date on which the Corporation ~~and~~publicly releases its ~~Subsidiaries to attract, motivate, retain and reward talented and experienced individuals. This purpose~~financial results for the previous calendar year; provided, however, that if such second Business Day is tolater than February 15 of a given calendar year, the Award Date shall be ~~accomplished by providing eligible employees with an opportunity to obtain or increase their proprietary interest in~~February 15 of that year (or if February 15 is not a Business Day, the ~~Corporation and thereby align their interests with those of~~next Business Day) (such date, a “Regular Award Date~~” ).~~”).Notwithstanding the ~~Corporation’s stockholders, and by providing eligible employees with additional incentives to join or remain with the Corporation and its Subsidiaries.~~
~~SECTION 2. Definitions; Rules of Construction.~~
~~(a)~~ ~~Defined Terms. The terms defined in this Section shall have the following meanings for purposes of this Plan:~~
~~“Award”~~ ~~means an award granted pursuant to Section 4.~~
~~“Award Agreement”~~ ~~means an agreement described in Section 6 entered into between the Corporation and a Participant, setting forth the terms and conditions of an Award granted to a Participant.~~
~~“Backlog”~~ means either funded backlog (unfilled firm orders for which funding has been both authorized and appropriatedby the customer) or unfunded backlog (unfilled firm orders for which funding has not been authorized and appropriated by the customer), as determined by the Committee at the time an Award is granted.
~~“Beneficiary”~~ ~~means a person or persons (including a trust or trusts) validly designated by a Participant,~~foregoing, in the event that in a given calendar year a Director is not a member of the ~~Participant’s death, as~~Board of Directors on the ~~Participant’s beneficiary under this Plan,~~Regular Award Date, the Award Date for that calendar year for that Director shall be the first Business Day of the month following the month in which the Director is elected to the Board of Directors (such date, an “Interim Award Date~~” ).~~”).
2.7“Beneficiary” or “Beneficiaries” has the meaning specified in ~~the absence of a valid designation, the Participant’s estate.~~Section 8.2(b).
2.8“Board of Directors”or “~~Board~~”“Board” means the Board of Directors of the Corporation.
2.9“~~Cash-Based Awards”~~Business Day” means ~~Awards that, if paid, must be paid~~a day other than a Saturday, Sunday or other day on which commercial banks in ~~cash and that~~New York, New York are ~~neither denominated in nor have a value derived from the value of, nor an exercise right~~authorized or ~~conversion privilege at a price related~~required by law to ~~shares of Stock, as described in Section 4(a)(6).~~close.
~~“Cash Flow”~~2.10 means cash and cash equivalents derived from either (i) net cash flow from operations or (ii) net cash flow from operations, financings and investing activities, as determined by the Committee at the time an Award is granted.
“Change in Control” means:
(a) A tender offer or exchange offer is consummated for the ownership of securities of the Corporation representing 25% or more of the combined voting power of the Corporation’s then outstanding voting securities entitled to vote in the election of directors of the Corporation.
(b) The Corporation is merged, combined, consolidated, recapitalized or otherwise reorganized with one or more other entities that are not Subsidiaries and, as a result of the merger, combination, consolidation, recapitalization or other reorganization, less than 75% of the outstanding voting securities of the surviving or resulting corporation shall immediately after the event be owned in the aggregate by the stockholders of the Corporation (directly or indirectly), determined on the basis of record ownership as of the date of determination of holders entitled to vote on the action (or in the absence of a vote, the day immediately prior to the event).
(c) Any person (as this term is used in Section 3(a)(9) and Section 13(d)(3) of the Exchange Act, but excluding any person described in and satisfying the conditions of Rule 13d-1(b) (1) thereunder), becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 25% or more of the combined voting power of the Corporation’s then outstanding securities entitled to vote in the election of directors of the Corporation.
(d) At any time within any period of two years after a tender offer, merger, combination, consolidation, recapitalization, or other reorganization or a contested election, or any combination of these events, the Incumbent Directors shall cease to constitute at least a majority of the authorized number of members of the Board. For purposes of this provision, “Incumbent Directors” means the persons who were members of the Board immediately before the first of these events and the persons who were elected or nominated as their successors or pursuant to increases in the size of the Board by a vote of at least 75% of the Board members who were then Board members (or successors or additional members so elected or nominated).
(e) The stockholders of the Corporation approve a plan of liquidation and dissolution or the sale or transfer of all or substantially all of the Corporation’s business and/or assets as an entirety to an entity that is not a Subsidiary.
Notwithstanding the foregoing, in the event the Board of Directors or a committee of the Board determines that an Award could be subject to taxation under Section 409A(a)(1) of the Code, a Change in Control shall have no effect on the Award unless the Change in Control also would constitute a change in the ownership or effective control ~~as defined~~of the Corporation, or in the ownership of a substantial portion of the assets of the Corporation, within the meaning of Section ~~7(c).~~409A(a)(2)(A)(v) of the Code.
922.11~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Appendix B: Lockheed Martin Corporation 2011 Incentive Performance Award Plan, as Amended and Restated~~
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
2.12“~~Committee”~~Common Stock” or “Stock” means shares of Common Stock of the ~~Committee described in~~Corporation, par value $1.00 per share, subject to adjustments made pursuant to Section 8.7.1 or by operation of law.
2.13“Corporation” means Lockheed Martin ~~Corporation.~~Corporation, a Maryland corporation, and its successors and assigns.
2.14“~~Date of Grant”~~Designated Equity Percentage” means the ~~date specified~~percentage of the Annual Retainer Amount determined from time to time by the ~~Committee~~Board of Directors or a committee of the Board as payable in Options or Units or a combination thereof under this Plan; provided, however, that absent such a determination, the ~~date on which an Award is to be granted (which date~~Designated Equity Percentage shall be no earlier than the date the resolution approving the Award is adopted by the Committee), or if no such date is specified by the Committee, the date on which the Committee adopts a resolution making the Award.50%.
2018 Proxy Statement
      81

Table of Contents
Appendix A
2.15“~~Deferred Dividend Equivalent” or “DDE”~~Director” means a ~~Dividend Equivalent that~~member of the Board of Directors of the Corporation who is ~~accrued during the restricted period set forth in~~not an ~~Award Agreement and that becomes payable to a Participant upon the expiration~~officer or ~~termination of such restricted period.~~
~~“Dividend Equivalent”~~ ~~means an amount equal to the cash dividends that would have been paid had a Participant owned a share of Stock during the restricted period set forth in an Award Agreement.~~
~~“Employee”~~ ~~means any officer (whether or not also a director) or any key salaried~~ employee of the Corporation or any of its ~~Subsidiaries, but excludes,~~subsidiaries.
2.16“Director Stock Ownership Guidelines” means the stock ownership guidelines applicable to Directors, as set forth in the ~~case~~Lockheed Martin Corporate Governance Guidelines, as it may be amended from time to time.
2.17“Disability” means “disabled” within the meaning of ~~an Incentive Stock Option, an Employee of any Subsidiary that is not a “subsidiary corporation”~~Section 409A(a)(2)(C) of the ~~Corporation as defined in Code Section 424(f).~~Code.
2.18“~~EPS”~~Dividend Equivalent” means ~~earnings per common share~~the amount of cash dividends or other cash distributions that would have been paid by the Corporation on Stock Units then credited to a ~~fully diluted basis determined~~Director’s Accounts had those Stock Units been shares of Common Stock.
2.19“Dividend Equivalent Stock Account” means the bookkeeping account maintained by the Corporation on behalf of a Director which is credited with Dividend Equivalents in the form of Stock Units in accordance with ~~GAAP.~~Section 4.2.
2.20“~~EPS Growth”~~Effective Date” means ~~the increase (on a dollar or percentage basis) in EPS for a specified period as compared to a comparable prior period, as specified by the Committee at the time an Award is granted.~~January 1, 2009.
2.21“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
2.22“~~Executive Officer”~~Fair Market Value” means, ~~executive officer as defined in Rule 3b-7 under the Exchange Act, provided that, if the Board has designated the executive officers of the Corporation~~ for purposes of ~~reporting under~~determining the ~~Exchange Act,~~exercise price of an Option or the ~~designation by~~value of a Stock Unit, the ~~Board shall be conclusive for purposes of this Plan.~~
~~“Fair Market Value”~~ ~~means the~~ closing ~~sale~~ price of the ~~relevant security~~Stock as reported byon the composite tape of the New York Stock Exchange on its web site as the closing price (or, if the security is not so listed or if the principal market on which it is traded is not the New York Stock Exchange, such other reporting system as shall be selected by the Committee) on the relevant date, or, if no sale of ~~the security~~Stock is reported for that ~~date,~~day, the next ~~preceding~~succeeding day for which there is a reported sale. ~~The Committee shall determine~~For purposes of determining the ~~Fair Market Value~~number of ~~any security that is notpublicly traded, using criteria as it shall determine, in its sole direction,~~Options to be ~~appropriate for the valuation.~~
~~“Free Cash Flow”~~ ~~means net cash flow from operations~~issued as ~~determined in accordance with GAAP, less the amount identified as capital expenditures as presented in the Corporation’s Statement~~part or all of ~~Cash Flows.~~
~~“Free Cash Flow per Share”~~ ~~means Free Cash Flow for a specified period divided by the average fully diluted common shares during the specified period.~~
~~“GAAP”~~ ~~means generally accepted accounting principles in the United States.~~
~~“Insider”~~ ~~means any person who is subject to the reporting obligations of Section 16(a) of the Exchange Act.~~
~~“Nonperformance-Based Award or Nonperformance-Based”~~ ~~means an Award that is not intended to satisfy the requirements of Section 4(b).~~
~~“Option”~~ ~~means a Nonqualified Stock Option or an Incentive Stock Option as described in Section 4(a)(1) or (2).~~
~~“Orders”~~ ~~means increases in contract values as specified in binding legal documents such as signed contracts, letters of award, notifications of award or purchase orders during a specified period.~~
~~“Participant”~~ ~~means an Employee who is granted~~ an Award pursuant to ~~this Plan so long~~Section 3.1(a), (b) or (c), Fair Market Value shall mean the fair market value of an option to buy Stock granted on the applicable Award Date as determined using the option pricing methodology as applied by the Corporation for its financial statement reporting purposes as of the Award ~~remains outstanding.~~Date.
~~“Percentage of Free Cash Flow to Stockholders”~~ ~~means the percentage of Free Cash Flow distributed to common stockholders during a specified period through dividends and stock repurchases.~~
~~“Performance-Based Awards”~~ ~~means an Award contemplated by Section 4(b).~~
~~“Performance Goal”~~ means Backlog, Cash Flow, EPS, EPS Growth, Free Cash Flow per Share, Orders, Percentage of Free Cash Flow to Stockholders, ROIC, Sales, Segment Operating Profit, Segment ROIC or Total Stockholder Return, and “Performance Goals” means any combination thereof. Except as the context otherwise requires, performance under any of the Performance Goals (A) may be used to measure the performance of (i) the Corporation and its Subsidiaries on a consolidated basis, (ii) the Corporation or any Subsidiary or Subsidiaries, or any combination thereof, or (iii) any one or more segments or business units of the Corporation and its Subsidiaries, in either case as the Committee determines in its sole discretion, and (B) may be compared to the performance of one or more of the companies or one or more published or specially constructed indices designated or approved by the Committee for comparison, as the Committee determines in its sole discretion.
~~2016 Proxy Statement~~
93

~~Table of Contents~~
~~Appendix B: Lockheed Martin Corporation 2011 Incentive Performance Award Plan, as Amended~~2.23“Option” means a nonqualified option to purchase shares of Common Stock with the terms and ~~Restated~~conditions described in Article V.
2.24
“Plan” ~~means this Lockheed Martin Corporation 2011 Incentive Performance Award Plan.~~
~~“Predecessor Plan”~~ means the Lockheed Martin Corporation~~2009~~Amended and Restated ~~2003 Incentive Performance Award~~ Directors Equity Plan.
2.25“Restatement Date” means the date on which this Plan is approved by the stockholders of the Corporation.
~~2.25~~2.26“~~ROIC”~~Retirement” means ~~return on invested capital calculated~~retirement from the Corporation as ~~(A) average (i) net income plus (ii) interest expense times one minus~~a Director at an Annual Meeting at which the ~~highest marginal federal corporate tax rate, divided by (B) (i) average debt (including current maturities~~Director is not eligible to stand for reelection as a result of ~~long-term debt) plus (ii) average stockholders’ equity, plus~~ the ~~postretirement amounts determined at year-end as included in~~mandatory retirement age provisions of Section 2.03 of the Corporation’s ~~Statement~~Bylaws.
~~2.26~~2.27“Stock Unit” or “Unit” means a non-voting unit of ~~Stockholders’ Equity.~~
~~“Rule 16b-3”~~ ~~means Rule 16b-3 under Section 16~~measurement that is deemed for bookkeeping purposes to be equivalent to an outstanding share of Common Stock of the ~~Exchange Act, as amended from time to time.~~Corporation.
~~2.27~~2.28“~~Sales”~~Stock Unit Account” means ~~net sales determined~~the bookkeeping account maintained by the Corporation on behalf of each Director who is credited with Stock Units in accordance with ~~GAAP.~~Section 4.1.
~~“SAR”2.28~~ ~~means a Stock Appreciation Right as described in Section 4(a)(3).~~2.29
~~“Segment Operating Profit”~~ ~~means operating profit calculated at the segment level.~~
~~“Segment ROIC”~~ means return on invested capital at the segment level calculated as (A) average (i) Segment Operating Profit times one minus the highest marginal federal corporate tax rate, divided by (B) average segment net assets.
~~“Share-Based Awards”~~ means Awards that are payable or denominated in or have a value derived from the value of, or an exercise right or conversion privilege at a price related to, shares of Stock, as described in Sections 4(a)(1) through (5).
~~“Share Units”~~ means the number of units under a Share-Based Award that is payable solely in cash or is actually paid in cash, determined by reference to the number of shares of Stock by which the Share-Based Award is measured.
~~“Stock”~~ ~~means shares of common stock of the Corporation, par value $1.00 per share, subject to adjustments made under Section 7 or by operation of law.~~
“Subsidiary” means, as to any person, any corporation, association, partnership, limited liability company, joint venture or other business entity of which ~~50 percent~~50% or more of the voting stock or other equity interests (in the case of entities other than corporations), is owned or controlled (directly or indirectly) by that entity, or by one or more ~~of the~~ Subsidiaries of that entity, or by a combination thereof.
~~“Tax”~~ARTICLE III
PARTICIPATION
3.1 Award.
(a) On each Regular Award Date during the term of this Plan, each Director shall be granted, in the form elected by the Director in accordance with Section 3.2, one of the following Awards:
(i) Units with a Fair Market Value equal to the Annual Equity Award Amount, which Units shall be credited to the Director’s Stock Unit Account;
(ii) Units with a Fair Market Value equal to 50% of the Annual Equity Award Amount, which Units shall be credited to the Director’s Stock Unit Account, and Options with a Fair Market Value equal to 50% of the Annual Equity Award Amount; or
(iii) Options with a Fair Market Value equal to the Annual Equity Award Amount.
82     www.lockheedmartin.com/investor
Table of Contents
Appendix A
Notwithstanding the foregoing, from time to time the Board by resolution may limit the types of Awards that Directors may elect under this Section 3.1.
(b) In the case of a Director who is not serving as a Director on the Regular Award Date for a given calendar year but (i) is elected a Director at the Annual Meeting for that year, or ~~“Taxes”~~ ~~means any U.S. Federal, state, local, or non-U.S. income, employment, or payroll tax, excise tax, or~~(ii) is elected a Director to fill a vacancy at any other ~~tax~~time during the year, on the Interim Award Date for the calendar year in which the Director is so elected the Director shall be granted, in the form elected by the Director in accordance with Section 3.2, an Award that shall be prorated based on the number of full months remaining in the calendar year. With respect to Awards granted pursuant to this Section 3.1(b), a Director shall be entitled to elect in accordance with Section 3.2 whether the Award is to be payable in Units, Options or ~~assessment owed~~a combination of Units and Options in the proportions contemplated by Section 3.1(a) for Awards granted on a Regular Award Date.
(c) In the case of a Director who will be eligible for Retirement at the Annual Meeting following a Regular Award Date, the Award to be made to the Director on that Regular Award Date shall be one-third of the amount of the Award the Director otherwise would be entitled to receive under Section 3.1(a).
(d) For purposes of this Section 3.1, Fair Market Value shall be determined on the applicable Award Date.
3.2 Election. On or prior to December 31 of the calendar year prior to each Award Date, a Director must, if applicable, file an election form, as provided by the Corporation, with the Secretary of the Corporation specifying the form of the Award the Director elects to receive pursuant to Section 3.1. A Director’s election shall be irrevocable during any calendar year in which it is in effect. A Director’s election as to the form of an Award shall remain in effect and shall be deemed to have been made for the next calendar year unless the Director files a revised election form with the Secretary of the Corporation by December 31 of the calendar year. Notwithstanding the foregoing, in a Director’s first year of service on the Board, an election as to the form of Award the Director elects to receive shall be valid if it is filed within 30 days after the Director commences service as a Director and in any event prior to the applicable Award Date. At the time a Director makes an election specifying the form of Award the Director elects to receive pursuant to Section 3.1, the Director also shall specify the time, manner and form of distribution, pursuant to Section 4.4, for the particular Award to which the election relates, as applicable. In the absence of an initial election as to the form of Award, the Director shall be deemed to have elected an Award consisting entirely of Units and shall be deemed to have elected a lump sum distribution payable in Stock~~upon~~on the first Business Day of the month followinghis or her termination of service,in accordance with Section 4.4. If a Director makes an initial election to receive Units, but does not make an election as to the time, manner and form of distribution, the Director shall be deemed to have elected a lump sum distribution payable in Stock~~upon~~on the first Business Day ofthe month following his or her termination of service,in accordance with Section 4.4. Any election by a Director of the time, manner and form of distribution of an Award shall be subject to change as provided in Section 4.4(f).
ARTICLE IV
STOCK UNITS
4.1 Stock Unit Account. If a Director elects an Award consisting in whole or in part of Stock Units, the Stock Unit Account of the Director shall be credited on the Award Date with either (i) Units determined pursuant to Section 3.1(a)(i) and, to the extent applicable, Section 3.1(b) or (c), or (ii) Units determined pursuant to Section 3.1(a)(ii) and, to the extent applicable, Section 3.1(b) or (c).
4.2 Dividend Equivalents; Dividend Equivalent Stock Account
(a)Allocation of Dividend Equivalents. Each Director shall be entitled to receive Dividend Equivalents on the Units credited to his or her Accounts, both before and after a termination of service. The Dividend Equivalents shall be credited to the Director’s Dividend Equivalent Stock Account in accordance with Section 4.2(b~~) below.~~).
(b)Dividend Equivalent Stock Account. Each Director’s Dividend Equivalent Stock Account shall be credited from time to time with an additional number of Units determined by dividing the dollar amount of the Director’s Dividend Equivalents by the Fair Market Value of a share of Common Stock as of the date on which the dividends to which such Dividend Equivalents relate are payable to stockholders of the Corporation. The Units credited to a Director’s Dividend Equivalent Stock Account shall be allocated (for purposes of distribution) in accordance with Section 4.4(b) and shall be subject to adjustment in accordance with Section 7.1.
2018 Proxy Statement
      83

Table of Contents
Appendix A
4.3 Vesting of Stock Unit Account and Dividend Equivalent Stock Account. A Director’s Units held in his or her Stock Unit Account shall vest as follows: 50% of the Units shall vest on June 30 following the applicable Award Date and 50% of the Units shall vest on December 31 following the applicable Award Date. Notwithstanding the foregoing provisions of this Section 4.3, all Units held in a Director’s Stock Unit Account shall vest (i) upon a Change in Control or upon termination of service as a Director as a result of the Director’s Retirement, death or Disability, (ii) in the case of Units awarded pursuant to Section 3.1(b), 100% on December 31 following the applicable Interim Award Date, and (iii) in the case of Units awarded prior to the date of the Annual Meeting for a given year where a Director does not stand for reelection at the Annual Meeting (other than as a result of Retirement, death or Disability) or stands for reelection but is not elected at the Annual Meeting, one-third on the day of the Annual Meeting. A Director’s Units held in his or her Dividend Equivalent Stock Account shall vest when the related Units in the Stock Unit Account vest. Except as set forth above, if a Director’s service as a Director terminates, all unvested Units shall be forfeited.
4.4 Distribution of Benefits
(a)Commencement of Benefits Distribution. Subject to the terms of Section 4.3 and this Section 4.4, each Director shall be entitled to receive a distribution of his or her Accounts~~upon a~~on the first Business Day of the month following his or her termination of service~~as a Director for any reason~~; provided, however, that for an Award granted on or after January 1, 2018 (together with any Dividend Equivalents thereon), a Director who as of November 1 of the calendar year prior to the Award Date for such Award has satisfied the Director Stock Ownership Guidelines shall be permitted to make an election in accordance with Section 3.2 to receive such Award (together with any Dividend Equivalents thereon) on thefirst business day of the month following the earlier of termination of service and the March 31 immediately following the first anniversary of the Award Date for such Award, in which case such Award (together with any Dividend Equivalents thereon) shall be distributed at such time~~. Benefits shall be distributed at the time or times set forth in~~, in accordance with this Section 4.4.
(b)Manner of Distribution
(i)Basic Distributions. The benefits payable under this Section 4.4 shall be distributed to the Director in a lump sum payable entirely in Stock, unless the Director elects in writing (on forms provided by the Corporation), either at the time of making the initial election or by the time specified in Section 4.4(f), to receive a distribution of benefits entirely or partially in cash or a distribution of benefits in up to 20 annual installments. Elections with respect to any ~~Award~~Units in the Stock Unit Account shall apply to all related Units in a Director’s Dividend Equivalent Stock Account. Payment shall be made or ~~other payment due~~commence as of the later of~~the first Business Day of the month following~~the time specified in Section 4.4(a) or, if necessary to ensure that an exemption is availablepursuant to Rule 16b-3 under the Exchange Act, the first Business Day of the seventh month following such time, and, in the case of installment payments, shall be made on the first Business Day of such month on an annual basis thereafter until all such installment payments have been made. To the extent an installment is payable in cash, the amount of the installment shall be equal to (i) the Fair Market Value of the Units allocated to a ~~Participant under~~Director’s Accounts and subject to a cash distribution election as of the ~~Plan.~~
~~“Total Stockholder Return”last~~fourth ~~means~~Business Day~~of the month~~ preceding the particular installment payment(or, with respect to the ~~Corporation or other entities (if measured on a relative basis),~~first installment payment, the ~~(i) change in~~first Business Day after the ~~market price of its common stock (as quoted in the principal market on which it is traded as~~date of the ~~beginning and ending of the designated period) plus dividends and other distributions paid,~~payment trigger event, if later), divided by (ii) the ~~beginning quoted market price, all~~number of ~~which is adjusted for any changes in equity structure, including but not limited~~installments yet to ~~stock splits and stock dividends.~~be paid.
~~(b)~~ (ii)~~Financial and Accounting Terms~~Special Distribution Rules. ~~Except~~Notwithstanding the foregoing, if the aggregate vested balance in a Director’s Accounts at the date of termination of service as ~~otherwise expressly provided~~a Director has a Fair Market Value equal to or less than $10,000, then the ~~context otherwise requires, financial and accounting terms, including terms defined herein as Performance Goals, are used as defined for purposes of, and~~balance shall be ~~determined~~distributed in a lump sum in cash on the first Business Day of the month following the date of termination of service as a Director. In no event shall any payment made pursuant to the previous sentence be made after March 15 of the calendar year following the year in which the Director has terminated service as a director of the Corporation. In the event of a Change in Control or a Director’s termination of service as a result of death or Disability,or in the event a Director elects to receive an Award on the earlier of termination of service and the March 31 immediately following the first anniversary of the Award Date in accordance with ~~GAAP~~Section 4.4(a),the benefits payable under this Section 4.4 shall be distributed to the Director or the Director’s Beneficiaries in a lump sum in cash.as soon as administratively practicable following such event. A distribution under the preceding sentence in the event of a Change in Control shall be authorized only to the extent the Company determines that the resulting distribution would not subject the Director to liability for interest or tax under Section 409A of the Code.In the event a Director elects to receive an Award on the first Business Day of the month following the earlier of termination of service and the March 31 immediately following the first anniversary of the Award Date in accordance with Section 4.4(a), such benefits shall be distributed to the Director in a lump sum at such time.In the event a Director has elected installment payments in respect of Units held in the Director’s Accounts and prior to the final installment payment the Director dies, the remaining installment payments shall be paid to the Beneficiaries in a lump sum in cashas ~~derived from~~soon as administratively practicable following such death.
(c)Form of Distribution. Stock Units shall be paid and distributed by means of a distribution of (i) an equivalent whole number of shares of Common Stock or (ii) cash in an amount equal to the ~~consolidated financial statements~~Fair Market Value of an equivalent number of shares of Common Stock, in each case valued as of the~~payment time set forth in Section 4.4(a) (or, (a) in~~later of the~~case of installment payments under~~
84     www.lockheedmartin.com/investor
Table of Contents
Appendix A
~~Section 4.4(b)(i), as of the last~~fourth Business Day ~~of the month~~preceding the ~~particular installment~~payment date and the first Business Day after the date of thepayment~~, or (b) in the case of cash distributions as a result of Section 4.4(b)(ii), as of the date of the~~trigger event~~that triggers the payment).~~.Any fractional interest in a Unit shall be paid in cash and only at the time of the final distribution to a Director or his or her Beneficiaries. The Director may elect to have Stock Units credited to the Director’s Stock Unit Account and Dividend Equivalent Stock Account paid and distributed in the form of cash, whole shares of Common Stock or a combination of cash and whole shares of Common Stock by making a written election (on forms provided by the Corporation) as to the percentage the Director elects to receive in the form of cash and the percentage the Director elects to receive in whole shares of Common Stock, which election shall be made on or before the fourth Business Day preceding the initial payment date.
(d)Sub-Accounts. The Board of Directors or a committee of the Board to whom the Board has delegated its authority under this Plan (or any person to whom the Board of Directors or a committee of the Board has further delegated ministerial, bookkeeping or other non-discretionary functions pursuant to Section 6.2) may maintain such sub-accounts within a Director’s Accounts as may be necessary or convenient to determine which Units are subject to any distribution elections under Section 3.2 and Section 4.4.
(e)Limitations of Distributions. Notwithstanding anything herein to the contrary, no distribution may be made in respect of any Units prior to the six-month anniversary of the crediting of the Units to a Director’s Stock Unit Account (or, in the case of Units held in a Director’s Dividend Equivalent Stock Account, prior to the six-month anniversary of the crediting of the related Units to the Director’s Stock Unit Account). Notwithstanding any other provisions of this Plan to the contrary, in the event Section 409A(a)(2)(B)(i) of the Code applies because a Director was a key employee of the Corporation ~~prepared in~~within the ~~ordinary course~~meaning of ~~business and filed with~~that section, any distribution to the ~~Securities and Exchange Commission~~Director under this Plan shall be delayed until six months after separation from ~~time to time.~~service as a Director (or, if earlier, the date of the Director’s death).
~~(c)~~ (f)~~Rules~~Timing of ~~Construction~~Distributions. ~~For purposes~~A Director may change any election as to whether the distribution is to be made in a lump sum or in installment payments, with respect to all of the Director’s Accounts or with respect to one or more specific Awards under this Plan, ~~and~~or any election as to the ~~Award Agreements, unless otherwise expressly provided or the context otherwise requires, the terms defined in this Plan include the plural and the singular, and pronouns~~time of either gender or neuter shall include, as appropriate, the other pronoun forms. For purposes of any Award Agreements, payments that will be made “as soon as practicable” after a specified event must be made within 90 days of the applicable event.
~~SECTION 3. Eligibility.~~
~~Any~~distribution, with respect to one or more Awards ~~may~~under this Plan granted on or after January 1, 2018, by executing and delivering to the Corporation a new election form (on the form prescribed by the Corporation). Any such election must be ~~granted~~made prior to ~~any individual who is an Employee~~the close of business on the ~~Date~~last day on which the Director serves as a member of ~~Grant~~the Board of Directors and ~~who is designated~~at least 12 months before the date the first payment would be due under the Director’s previous election; provided, however, that the first payment must be delayed by at least 60 months from the date the first payment would be due under the Director’s previous election. In the event a change of election does not satisfy the requirements of this Section 4.4(f), the election shall be void and the Director’s Award shall be distributed at the time and in the manner contemplated by the ~~Committee to receive an Award, provided that no individual who beneficially owns Stock possessing five percent or more~~previous valid election of the ~~combined voting power~~Director or, if no such valid election exists, in a lump sum.
4.5 Limitations on Rights Associated with Units. A Director’s Accounts shall be memorandum accounts on the books of ~~all classes~~the Corporation. Units credited to a Director’s Accounts shall be used solely as a device for the determination of ~~stock~~the number of shares of Common Stock or the amount of cash to be distributed to the Director in accordance with this Plan. Units shall not be treated as property or as a trust fund of any kind, and shall not create a security interest in any property of the Corporation or any of its Subsidiaries; provided, however, that the Corporation shall reserve shares of Common Stock to satisfy its obligations under this Plan. All shares of Common Stock or other amounts attributed to the Units shall be ~~eligible~~and remain the sole property of the Corporation, and each Director’s rights in the Units are limited to ~~participate~~the right to receive shares of Common Stock or cash in the future in accordance with this Plan. No Director shall be entitled to any voting or other rights of a stockholder with respect to Units granted under this Plan unless and until shares of Common Stock are distributed to the Director under this Plan. The number of Units credited under this Article shall be subject to adjustment in accordance with Section 7.1.
~~SECTION 4. Awards.~~ARTICLE V
~~(a)~~ ~~Type of Awards. The Committee may grant any of~~STOCK OPTIONS
All Options granted pursuant to this Plan shall be subject to the following ~~types of Awards, either singly or in combination with other Awards:~~terms and conditions:
~~(1)~~5.1 Exercise Price~~Nonqualified Stock Options~~. ~~A Nonqualified Stock Option is an Award in the form of an option to purchase Stock that is not intended to comply with the requirements of Code Section 422 or any successor provision of the Code.~~ The exercise price of each ~~Nonqualified Stock~~ Option granted under this Plan shall be ~~not less than~~equal to 100% of the Fair Market Value of the Stock on the ~~Date~~applicable Award Date.
5.2 Non-transferability of ~~Grant~~Options. Options shall not be assignable or transferable by the Director other than by bequest or by the laws of ~~the Option. All Nonqualified Stock~~descent and distribution. Options shall be ~~treated as Performance-Based Awards subject to~~exercisable during the ~~applicable restrictions under Section 4(b).~~
~~(2)~~~~Incentive Stock Options~~~~. An Incentive Stock Option is an Award in~~Director’s lifetime only by the ~~form~~Director or by his or her guardian or legal representative. The designation of ~~an option to purchase Stock that is intended to comply with the requirements of Code Section 422 or any successor provision of the Code. The exercise price of each Incentive Stock Option granted~~a Beneficiary under this Plan ~~shall~~and the transfer of an Option to a Beneficiary upon a Director’s death is not a prohibited transfer under this Plan.
94~~www.lockheedmartin.com/investor~~
2018 Proxy Statement
      85

Table of Contents
Appendix ~~B: Lockheed Martin Corporation 2011 Incentive Performance Award Plan, as Amended and Restated~~A
~~be not less than the Fair Market Value~~5.3 Vesting; Term of Options; Limitations on Exercisability. Options shall become exercisable as follows: 50% of the ~~Stock~~Options shall become exercisable on June 30 following the applicable Award Date ~~of Grant~~and 50% of the ~~Option. To the extent that the aggregate “fair market value” of Stock with respect to which one or more incentive stock options first~~Options shall become exercisable on December 31 following the applicable Award Date. Notwithstanding the foregoing provisions of this Section 5.3, (i) upon a Change in Control or in the event a Director’s service as a Director terminates by a Participant in any calendar year exceeds $100,000, taking into account both Stock subject to Incentive Stock Options under this Plan and stock subject to incentive stock options under all other plansreason of the ~~Corporation~~Director’s Retirement, death or of other entities referenced in Code Section 422(d)(1), the options shall be treated as Nonqualified Stock Options. For this purpose, the “fair market value” of the Stock subject to options shall be determined as of the Date of Grant of the Options. All Incentive StockDisability, all Options shall ~~be treated as Performance-Based Awards subject~~become exercisable, (ii) all Options awarded pursuant to Section 3.1(b) shall become exercisable on December 31 following the applicable ~~restrictions under Section 4(b).~~
~~(3)~~~~Stock Appreciation Rights~~~~. A Stock Appreciation Right or SAR is an~~Interim Award in the form of a right to receive, upon surrender of the right, but without other payment, an amount based on appreciation in the value of Stock over a base price established in the Award, payable in cash, Stock or such other form or combination of forms of payout, at timesDate and ~~upon conditions as may be approved by the Committee. The minimum base price of a SAR granted under this Plan shall be the Fair Market Value of the underlying Stock on the Date of Grant of the SAR, or,~~(iii) in the case of ~~a SAR related to an Option (whether already outstanding or concurrently granted), the exercise price of the related Option. All SARs shall be treated as Performance-Based Awards subject~~Options awarded prior to the ~~applicable restrictions under Section 4(b).~~
~~(4)~~~~Restricted Stock~~. Restricted Stock is an Award of shares of Stock of the Corporation that are issued, but subject to restrictions on transfer and/or such other restrictions on incidents of ownership as the Committee may determine. Awards of Restricted Stock to Executive Officers that are either granted or vest upon attainment of one or more of the Performance Goals shall only be granted as Performance-Based Awards subject to the applicable restrictions under Section 4(b).
~~(5)~~~~Stock Units~~~~. A Stock Unit is an Award payable in cash or Stock and represented by~~Annual Meeting for a ~~bookkeeping entry~~given year where ~~the amount represented by the bookkeeping entry~~a Director does not stand for each Stock Unit equals the Fair Market Value of a share of Stock on the Date of Grant and which amount shall be subsequently increased or decreased to reflect the Fair Market Value of a share of Stock on any date from the Date of Grant up to the date the Stock Unit is paid to the Participant in cash or Stock. Stock Units are not outstanding shares of Stock and do not entitle a Participant to voting or other rights with respect to Stock; provided, however, that an Award of Stock Units may provide for the crediting of Dividend Equivalents or the crediting of additional Stock Units based on the value of dividends paid on Stock while the Award is outstanding, subject in each case to the vesting, forfeiture and Performance Goals applicable to the underlying Stock Units. Awards of Stock Units to Executive Officers that are either granted orvest upon attainment of one or more of the Performance Goals shall only be granted as Performance-Based Awards subject to the applicable restrictions under Section 4(b).
~~(6)~~~~Cash-Based Awards~~. Cash-Based Awards are Awards that provide Participants with the opportunity to earn a cash payment based upon the level of performance of the Corporation relative to one or more Performance Goals established by the Committee for an award cycle of more than one but not more than five years. For each award cycle, the Committee shall determine the size of the Awards, the Performance Goals, the performance targets as to each of the Performance Goals, the level or levels of achievement necessary for award payments and the weighting of the Performance Goals, if more than one Performance Goal is applicable. Cash-Based Awards to Executive Officers that are either granted or become vested, exercisable or payable based on attainment of one or more Performance Goals shall only be granted as Performance-Based Awards subject to the applicable restrictions under Section 4(b).
~~(b)~~ ~~Special Performance-Based Awards~~. Without limiting the generality of the foregoing, any of the types of Awards listed in Section 4(a) may be granted as awards that satisfy the requirements for “performance-based compensation” within the meaning of Code Section 162(m) (“Performance-Based Awards”), the grant, vesting, exercisability or payment of which depends on the degree of achievement of the Performance Goals relative to pre-established target levels. Notwithstanding anything contained in this Section 4(b) to the contrary, any Option or SAR shall be subject only to the requirements of Section 4(b)(1) and Sections 4(c)(1) and (2) below in order for such Awards to satisfy the requirements for Performance-Based Awards under this Section 4(b) (with such Awards referred to as a “Qualifying Option” or a “Qualifying Stock Appreciation Right,” respectively). With the exception of any Qualifying Option or Qualifying Stock Appreciation Right, an Award that is intended to satisfy the requirements of this Section 4(b) shall be designated as a Performance-Based Awardreelection at the time of grant. Nothing in this Plan shall limit the ability of the Committee to grant Options or SARs with an exercise price or a base price greater than Fair Market Value on the Date of Grant or to make the vesting of the Options or SARs subject to Performance Goals or other business objectives or conditions.
~~(1)~~~~Eligible Class~~~~. The eligible class of persons for Awards under this Section 4(b) shall be all Employees.~~
~~(2)~~~~Performance Goals~~~~. The performance goals for any Awards under this Section 4(b)~~Annual Meeting (other than Qualifying Options and Qualifying Stock Appreciation Rights) shall be, on an absolute, average or relative basis, one or more of the Performance Goals. The specific performance target(s) with respect to Performance Goal(s) will be established by the Committee in advance of the deadlines applicable under Code Section 162(m) and while the performance relating to the Performance Goal(s) remains substantially uncertain.
~~2016 Proxy Statement~~
95

~~Table of Contents~~
~~Appendix B: Lockheed Martin Corporation 2011 Incentive Performance Award Plan, as Amended and Restated~~
~~(3)~~~~Committee Certification~~. Before any Performance-Based Award under this Section 4(b) (other than Qualifying Options and Qualifying Stock Appreciation Rights) is paid, the Committee must certify in writing (by resolution or otherwise) that the applicable Performance Goal(s) and any other material terms of the Performance-Based Award were satisfied; provided, however, that a Performance-Based Award may be paid without regard to the satisfaction of the applicable Performance Goal in the event of a Change in Control as provided in Section 7(b).
~~(4)~~~~Terms and Conditions of Awards; Committee Discretion to Reduce Performance Awards~~. The Committee shall have discretion to determine the conditions, restrictions or other limitations, in accordance with and subject to the terms of this Plan and Code Section 162(m), on the payment of individual Performance-Based Awards under this Section 4(b). To the extent set forth in an Award Agreement, the Committee may reserve the right to reduce the amount payable in accordance with any standards or on any other basis (including the Committee’s discretion), as the Committee may determine.
~~(5)~~~~Adjustments for Material Changes~~. The Committee shall have the right to specify any adjustment that it deems necessary or appropriate to any Performance Goals and/or performance targets to take into account or exclude any extraordinary gain or loss or other event that is considered an extraordinary item under GAAP, provided the Committee exercises this right to specify the adjustment at the time the Performance Goals and/or performance targets are established under this Section 4(b). In addition, the Committee shall have the right to specify any adjustment that it deems necessary or appropriate to take into account or exclude any other gain or loss or event recognized under any accounting policy or practice affecting the Corporation and/or any Performance Goals or performance targets, provided the Committee exercises this right to exclude or take such gain or loss or event into account at the time the related Performance Goals and/or performance targets are established under this Section 4(b).
~~(6)~~~~Interpretation~~. Except as specifically provided in this Section 4(b), the provisions of this Plan and any Award Agreement shall be interpreted and administered by the Committee in a manner consistent with the requirements for qualification of Performance-Based Awards granted to Executive Officers as “performance-based compensation” under Code Section 162(m) and the regulations thereunder.
~~(c)~~ ~~Individual Limits.~~
~~(1)~~~~Share-Based Awards~~. The maximum number of shares of Stock that are issuable under this Plan pursuant to Options, SARs payable in shares of Stock, Restricted Stock and Stock Units payable in shares of Stock (described under Section 4(a)(5)) that are granted as Performance-Based Awards during any calendar year to any Participant shall not exceed 1,000,000, subject to adjustment as provided inSection 7; provided, that the maximum number of shares of Stock that may be granted as Restricted Stock Awards during any calendar year to any Participant under this Plan (including as Performance-Based Awards) shall not exceed 750,000 shares, subject to adjustment as provided in Section 7. Awards that are canceled during the year shall be counted against these limits.
~~(2)~~~~Share Unit and Cash Only SAR Awards~~. The aggregate number of Share Units that are issuable as Stock Units payable in cash only or SARs payable in cash only during any calendar year to any Participant as Performance-Based Awards shall not exceed 300,000, subject to adjustment as provided in Section 7. Awards that are canceled due to expiration or forfeiture during the year shall be counted against this limit.
~~(3)~~~~Cash-Based Award~~s. The aggregate amount of compensation to be paid to any Participant in respect of those Cash-Based Awards that are granted during any calendar year as Performance-Based Awards shall not exceed $10,000,000.
~~(d)~~ ~~Maximum Term of Awards~~. No Award that contemplates exercise or conversion may be exercised or converted to any extent, and no other Award that defers vesting, shall remain outstanding and unexercised, unconverted or unvested more than ten years after the Date of Grant of the Award.
~~(e)~~ ~~Code Section 409A~~. It is the intent of the Corporation that no Award under this Plan be subject to taxation under Section 409A(a)(1) of the Code. Accordingly, if the Committee determines that an Award granted under this Plan is subject to Section 409A of the Code, such Award shall be interpreted and administered to meet the requirements of Sections 409A(a)(2), (3) and (4) of the Code and thus to be exempt from taxation under Section 409A(a)(1) of the Code.
~~(f)~~ ~~Out-of-the-Money Options or Stock Appreciation Rights~~. In no event shall the Corporation pay cash or other consideration for Options where at the time of payment the exercise price of the Option is less than the Fair Market Value of the Stock underlying the Option or pay cash or other consideration for SARs where at the time of payment the base price established in the Award is less than the Fair Market Value of the Stock underlying the SAR.
~~SECTION 5. Shares of Stock and Share Units Available Under Plan.~~
~~(a)~~ ~~Aggregate Share Limit for Share-Based Awards~~. Subject to adjustment as provided in this Section 5 or Section 7, the maximum number of shares of Stock that may be subject to Options (including Incentive Stock Options), SARs payable in shares of Stock, Restricted Stock and Stock Units payable in shares of Stock granted or issued under this Plan is 12,000,000, plus the number of shares of Stock reserved for future awards under the Predecessor Plan as of February 24, 2011, plus the number of shares of Stock subject to awards outstanding under the Predecessor Plan as of February 24, 2011 that thereafter are unexercised, unconverted or
96~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Appendix B: Lockheed Martin Corporation 2011 Incentive Performance Award Plan, as Amended and Restated~~
~~undistributed~~ as a result of ~~termination, expiration~~Retirement, death or ~~forfeiture~~Disability) or stands for reelection but is not elected at the Annual Meeting, one-third of the ~~award, whether or not~~Options shall become exercisable on the individual holding the award received or was credited with benefits of ownership (such as dividends, Dividend Equivalents or voting rights) during the period in which the individual’s ownership was restricted or otherwise not vested, including shares of Stock subject to Restricted Stock Awards that are subsequently reacquired by the Corporation due to termination, expiration or forfeiture.
~~(b)~~ ~~Restriction on Recycling or Reissue of Shares and Share Units~~. Shares of Stock issued upon the exercise of an Award or the vesting of an Award may not be used for a subsequent Award under this Plan. Any unexercised, unconverted or undistributed portion of any Award made under this Plan or any stock-based award under the Predecessor Plan resulting from termination, expiration or forfeiture of that Award shall again be available for Award under Section 5(a), whether or not the Participant has received or been credited with benefits of ownership (such as dividends, Dividend Equivalents or voting rights) during the period in which the Participant’s ownership was restricted or otherwise not vested. Shares of Stock that are issued pursuant to Restricted Stock Awards and subsequently reacquired by the Corporation due to termination, expiration or forfeitureday of the Annual Meeting. Options shall expire on the tenth anniversary of the applicable Award ~~also~~Date; provided, however, that, except as set forth above, if a Director’s service as a Director terminates, all unvested Options shall be ~~available for reissuance under this Plan. Shares~~forfeited.
5.4 Payment of Stock subject to an Award that are reacquired by the Corporation to satisfy a withholding obligation of the Participant shall not be available for reissue. With respect to SARs payable in shares of Stock, the number of shares of Stock subject to an Award shall be counted against the number of shares of Stock available for issuance under this Plan regardless of the number of shares of Stock actually issued to settle the SARs upon exercise.
~~(c)~~ ~~Interpretive Issues~~. Additional rules for determining the number of shares of Stock or Share Units authorized under this Plan or available for grant or issuance from time to time may be adopted by the Committee, as it deems necessary or appropriate.
~~(d)~~ ~~Source of Shares; No Fractional Shares~~. The Stock that may be issued pursuant to an Award under this Plan may be authorized but unissued Stock or Stock acquired by the Corporation or any of its Subsidiaries, subsequently or in anticipation of a transaction under this Plan, in the open market or in privately negotiated transactions. No fractional shares of Stock shall be issued under this Plan, but fractional interests may be accumulated pursuant to the terms of an Award.
~~(e)~~ ~~Consideration~~. The Stock issued under this Plan may be issued (subject to Section 10(d)) for any lawful form of consideration, the value of which equals the par value of the Stock or such greater or lesser value as the Committee, consistent with Sections 10(d), may require.
~~(f)~~ ~~Purchase or~~ Exercise ~~Price; Withholding~~Price. The exercise ~~or purchase~~ price ~~(if any)~~ of ~~the Stock issuable pursuant to any Award and any withholding obligation under applicable tax laws~~Options shall be paid in cash at the time of exercise, except that in lieu of all or ~~subject~~part of the cash, the Director may tender Stock to the Committee’s express authorization and the terms, restrictions, conditions and procedures as the Committee may in its sole discretion impose (subject to Section 10(d)), any one or combination of (i) cash, (ii) the delivery of shares of Stock, (iii)Corporation having a reduction in the number of Shares of Stock issuable or cash payable pursuant to such Award, (iv) the delivery of a promissory note or other obligation for the future payment in money, or (v) in the case of purchase price only, labor or service as an Employee to be performed or actually performed. In the case of a payment by the means described in clause (ii) or (iii) above, the Stock to be so delivered or offset shall be determined by reference to the Fair Market Value ofequal to the ~~Stock on the date as of which the payment or offset is made. Notwithstanding~~exercise price, less any cash paid. In addition to the foregoing, no Insider shall be permitted to satisfy the purchase or exercise price or withholding obligation with respect to an Award by using a method of payment otherwise authorized under this Plan or an Award Agreement if such method of payment would constitute a personal loan under Section 13(k) of the Exchange Act. If an Award Agreement to a Participant who is not an Insider authorizes a method of payment that would constitute a personal loan under Section 13(k) of the Exchange Act and the Participant subsequently becomes an Insider, then the payment method will no longer be available to the Participant and the Committee shall take whatever steps are necessary to make such payment method void as to such Participant, including but not limited to requiring the immediate payment of any note or loan previously obtained in connection with an Award.
~~(g)~~ ~~Cashless Exercise. Subject~~subject to any restrictions ~~on Insiders pursuant to~~contemplated by Section 13(k) of the Exchange Act, the ~~Committee~~Board may permit the exercise of an ~~Award~~Option and payment of any applicable withholding tax in respect of an ~~Award~~Option by delivery of notice, subject to the Corporation’s receipt from a third party of payment (or commitment to make payment) in full in cash for the exercise price and the applicable withholding prior to issuance of Stock, in the manner and subject to the procedures as may be established byfrom time to time. The Fair Market Value of Stock tendered as payment of all or part of the ~~Committee.~~price of Options shall be determined as of the Business Day on which the Options are exercised.
~~SECTION 6. Award Agreements.~~
~~Each Award under this Plan shall be evidenced by an Award Agreement in a form approved by the Committee setting forth, in the case of Share-Based Awards, the number of shares of Stock or Share Units,~~5.5 Rights as applicable, subject to the Award, and the price (if any) and term of the Award and, in the case of Performance-Based Awards (other than a Qualifying Option or a Qualifying Stock Appreciation Right), the applicable Performance Goals. The Award Agreement also shall set forth (or incorporate by reference) other material terms and conditions applicable to the Award as determined by the Committee consistent with the limitations of this Plan.
~~(a)~~ ~~Mandatory Provisions for Options and SARs. Award Agreements for Options and SARs payable in stock shall be deemed to contain the following provisions:~~
~~(1)~~~~Vesting:~~ A provision providing for a minimum vesting schedule pursuant to which no Award of Options may become fully exercisable prior to the third anniversary of the Date of Grant, and to the extent an Award provides for vesting in
~~2016 Proxy Statement~~
97

~~Table of Contents~~
~~Appendix B: Lockheed Martin Corporation 2011 Incentive Performance Award Plan, as Amended and Restated~~
installments over a period of no less than three years, no portion of an Award of Options may become exercisable prior to the first anniversary of the Date of Grant. In the event that the Participant is not an Employee on the date on which an Option would otherwise vest and become exercisable, the Options subject to that vesting date will be forfeited. Notwithstanding the foregoing, (i) any Award Agreement governing Options may provide for any additional vesting requirements, including but not limited to longer periods of required employment or the achievement of Performance Goals; (ii) any Award Agreement may provide that all or a portion of the Options subject to an Award vest immediately or, alternatively, vest in accordance with the vesting schedule but without regard to the requirement for continued employment with the Corporation (or a Subsidiary) in the event of a Change in Control, or in the case of termination of employment with the Corporation (or a Subsidiary) due to death, disability, layoff, retirement or divestiture, or in the case of a vesting period longer than three years, vest and become exercisable or fail to be forfeited and continue to vest in accordance with the schedule in the Award Agreement prior to the expiration of any period longer than three years for any reason designated by the Committee; and (iii) any Award Agreement may provide that employment by another entity be treated as employment by the Corporation (or a Subsidiary) in the event a Participant terminates employment with the Corporation (or a Subsidiary) on account of a divestiture. No Award Agreement may provide for accelerated vesting of Options on account of layoff beyond vesting of up to the portion of the vesting period from the Date of Grant to the date on which a Participant’s employment terminates. The vesting requirements of this Section 6(a) shall also apply to Award Agreements governing SARs.
~~(2)~~~~Option and SAR Holding Period:~~ Subject to the authority of the Committee under Section 7, a minimum six-month period shall elapse between the date of initial grant of any Option or SAR paid in Stock and the sale of the underlying shares of Stock, and the Corporation may impose legend and other restrictions on the Stock issued on exercise of the Options or SARs to enforce this requirement.
~~(3)~~~~No Waivers:~~ ~~A provision that neither the Committee nor the Board of Directors has retained the authority to waive the requirements set forth in Sections 6(a)(1).~~
~~(b)~~ ~~Mandatory Provisions for Restricted Stock and Stock Units Payable in Stock. Award Agreements for Restricted Stock and Stock Units payable in Stock shall be deemed to contain the following provisions:~~
~~(1)~~~~Vesting:~~ Provisions (I) requiring (A) a minimum vesting schedule pursuant to which no Award of Restricted Stock may become fully vested prior to the third anniversary of the Date of Grant, and to the extent an Award provides for vesting in installments over a period of no less than three years, no portion of an Award of Restricted Stock may become vested prior to the six-month anniversary of the Date of Grant, and (B) forfeiture of shares of Restricted Stock that remain unvested pursuant to the terms of the Award Agreement at the time a Participant ceases to be an Employee, (II) prohibiting accelerated immediate full vesting of Restricted Stock on account of layoff and (III) prohibiting the sale or other transfer of any shares of Restricted Stock granted under an Award prior to the date on which such shares become vested pursuant to the terms of the Award Agreement.
Notwithstanding the foregoing, any Award Agreement governing Restricted Stock may provide (i) for any additional vesting or forfeiture requirements, including but not limited to longer periods of required employment or the achievement of Performance Goals; and (ii) that Restricted Stock vests, continues to vest or vests on a pro rata basis and any forfeiture provisions or restrictions on sale of the vested portions of Restricted Stock lapse prior to the third anniversary of the Date of Grant (A) in the event of a termination of employment following a Change in Control (except that vesting may occur upon or following a Change in Control without regard to termination of employment in the case of an employee who immediately prior to the Change in Control was not an officer of the Corporation who had been elected as such by the Board), (B) in the case of termination of employment with the Corporation (or a Subsidiary) due to death, disability, layoff, retirement or divestiture (except that immediate vesting on account of layoff is limited to a pro rata portion of the Award based on the portion of the vesting period from the Date of Grant to the date on which a Participant’s employment terminates), (C) to satisfy any Tax withholding requirement with respect to the Restricted Stock, or (D) in the case of a vesting or forfeiture period longer than three years, prior to the expiration of any period longer than three years for any reason designated by the Committee. Dividends that become payable on Restricted Stock will not be payable to the Participant but shall be accrued and held by the Corporation until such time as the restrictions lapse on the underlying Restricted Stock and the shares become transferrable, at which time the accrued dividends shall be paid to the Participant; provided, however, that an Award Agreement may provide for accelerated vesting of Dividends, Dividend Equivalents, or DDEs associated with Restricted Stock to satisfy a Tax withholding requirement with respect to such Award. The vesting and forfeiture requirements of this Section 6(b) shall also apply to Award Agreements governing Stock Units payable in Stock unless the Stock Units are granted in conjunction with, or are part of, another Award.
~~(2)~~~~No Waivers:~~ ~~A provision that neither the Committee nor the Board of Directors has retained the authority to waive the requirements set forth in Section 6(b)(1).~~
98Stockholder     ~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Appendix B: Lockheed Martin Corporation 2011 Incentive Performance Award Plan, as Amended and Restated~~
~~(c)~~ ~~Mandatory Provisions Applicable to All Award Agreements~~. Award Agreements shall be subject to the terms of this Plan and shall be deemed to include the following terms, unless the Committee in the Award Agreement consistent with applicable legal considerations, provides otherwise:
~~(1)~~~~Non-assignability:~~ ~~The Award shall not be assignable nor transferable, except by will~~A Director or ~~by the laws of descent and distribution, and during the lifetime of a Participant, the Award shall be exercised only by the Participant or by~~ his or her ~~guardian or legal representative. The designation of a~~ Beneficiary ~~hereunder shall not constitute a transfer prohibited by the foregoing provisions.~~
~~(2)~~~~Rights as Stockholder:~~ ~~A Participant~~ shall have no rights as a ~~holder~~stockholder of ~~Stock~~the Corporation with respect to any unissued ~~securities~~shares of Common Stock covered by an ~~Award~~Option until the date the ~~Participant~~Director or Beneficiary exercises the Option and becomes the holder of record of the ~~securities.~~underlying shares of Common Stock. Except ~~in the case of Restricted Stock and except~~ as provided in Section 7,7.1, no adjustment or other provision shall be made for dividends or other rights as a stockholder ~~rights, except to the extent that the Award Agreement provides for Dividend Equivalents or similar economic benefits.~~
~~(3)~~~~Tax Withholding:~~ ~~Each Participant shall be responsible for payment of all Taxes imposed on~~until such Participant with respect to an Award. All withholding Tax obligations shall be satisfied on or prior to the payment of an Award. If the Corporation concludes that any withholding Tax is required with respect to any Award (including with respect to associated Dividends, Dividend Equivalents, or DDEs), and the Participant has not otherwise made arrangements acceptable to the Corporation to satisfy the withholding Tax obligation, the Corporation may (i) offset an amount sufficient to satisfy the withholding Tax obligation against any obligation of the Corporation to the Participant, (ii) reduce the amount of the Award (including associated Dividends, Dividend Equivalents, or DDEs) paid to the Participant by an amount sufficient to satisfy the withholding Tax obligation, or (iii) require the Participanttime as a Director or his or her Beneficiary ~~to pay~~becomes the ~~Corporation an amount in cash equal to~~holder of record of the ~~withholding Tax obligation. The satisfaction~~underlying shares of ~~any withholding Taxes with respect to Share-Based Awards also~~Common Stock.
5.6 No Repricing. No Option may be ~~satisfied by cashless exercise~~re-priced, replaced, re-granted through cancellation, or modified without stockholder approval (except in connection with a change in the Common Stock or the capitalization of the Corporation as provided in ~~Section 5(g).~~
~~(d)~~ ~~Other Provisions. Award Agreements~~Article 7) if the effect would be to reduce the exercise price for the shares underlying such Option. In addition, no Option may ~~include other terms and conditions~~be repurchased or otherwise cancelled in exchange for cash (except in connection with a change in the Common Stock or the capitalization of the Corporation as provided in Article 7) if the ~~Committee shall approve, including but not limited~~exercise price is equal to or less than the Fair Market Value of the Common Stock at the time of such repurchase or exchange. Notwithstanding anything herein to the ~~following:~~contrary, the Board may take any such action set forth in this Section 5.6 subject to the approval of the stockholders of the Corporation.
~~(1)~~ARTICLE VI
~~Other Terms~~ADMINISTRATION
6.1 Administration. This Plan shall be self-executing and ~~Conditions:~~ ~~Any other terms not inconsistent with~~shall operate as a formula plan. To the ~~terms~~extent necessary for the operation of this Plan, ~~as are necessary, appropriate,~~it shall be construed, interpreted and administered by the Board of Directors or ~~desirable to effect an Award to~~ a ~~Participant, including provisions describing the treatment of an Award in the event~~committee of the ~~death, disability, layoff, retirement, divestiture~~Board appointed by the Board to act on its behalf under this Plan. Notwithstanding the foregoing,but subject to Sections5.6,7.1 and 7.2, the Board shall have no authority to change the exercise price of any outstanding Option granted under this Plan and no Director shall participate in any decision relating solely to his or ~~other termination~~her benefits (other than approval of the Award).
6.2 Decisions Final; Delegation; Reliance; and Limitation on Liability. Any determination of the Board of Directors or a ~~Participant’s employment with~~committee of the Board to whom the Board has delegated authority under this Plan shall be conclusive. In performing its duties, the Board of Directors or ~~services~~any such committee of the Board shall be entitled to rely on public records and on information, opinions, reports or statements prepared or presented by officers or employees of the Corporation or other experts believed to be reliable and competent. The Board of Directors or a ~~Subsidiary, any provisions relating to the vesting, exercisability, forfeiture or cancellation~~committee of the ~~Award,~~Board to whom the Board has delegated authority may delegate ministerial, bookkeeping and other non-discretionary functions to individuals who are officers or employees of the Corporation.
Neither the Corporation nor any ~~requirements for continued employment,~~member of the Board of Directors, nor any other ~~restrictions~~person participating in any determination of any question under this Plan, or conditions (including performance requirements and holding periods) of the Award and the method by which the restrictions or conditions lapse, procedures acceptable to the Committee (if any) with respect to the effect on the Award of a Change in Control, subject, in the case of Performance-Based Awards, to the requirements for “performance-based compensation” under Code Section 162(m) and in the case of Options, SARs payable in shares of Stock, Restricted Stock and Stock Units payable in shares of Stock, to the requirements of Sections 6(a), (b) and (7).
~~(2)~~~~Non-competition and non-solicitation clause:~~ ~~A provision~~interpretation, administration or provisions requiring the forfeiture or recoupment of an Award (whether or not vested) on account of activities deemed by the Committee in its sole discretion to be harmful to the Corporation, including but not limited to employment with a competitor, misuse of the Corporation’s proprietary or confidential information, or solicitation of the Corporation��s employees.
~~(3)~~~~Claw-back:~~ A provision entitling the Corporation to recoup any Award (whether or not vested) or value received for an Award under circumstances specified in the Award Agreement or regulations, rules or interpretations of the Securities and Exchange Commission or other applicable law.
~~(e)~~ ~~Contract Rights, Forms and Signatures~~. Any obligation of the Corporation to any Participant with respect to an Award shall be based solely upon contractual obligations created by this Plan and an Award Agreement. Subject to the provisions of Section 8(h), no Award shall be enforceable until the Award Agreement or an acknowledgement of receipt has been signed by the Participant and on behalf of the Corporation by an Executive Officer (other than the recipient) or his or her delegate. By executing the Award Agreement or otherwise providing an acknowledgement of receipt, a Participant shall be deemed to have accepted and consented to the termsapplication of this Plan, ~~and~~shall have any liability to any party for any action taken or not taken in good faith under this Plan ~~by and within~~or for the ~~discretion~~failure of ~~the Committee, the Board~~an Award (or action or payment in respect of ~~Directors~~an Award) to satisfy Code requirements for realization of intended tax consequences, to qualify for exemption or ~~their delegates. Unless the Award Agreement otherwise expressly provides, there shall be no third party beneficiaries of the obligations of the Corporation to the Participant~~relief under Rule 16b-3 under the ~~Award Agreement.~~Exchange Act, or to comply with any other law, compliance with which is not required by the Corporation.
86     www.lockheedmartin.com/investor
Table of Contents
~~SECTION 7. Adjustments; Change in Control; Acquisitions.~~Appendix A
~~(a)~~ ARTICLE VII
PLAN CHANGES AND TERMINATION
7.1 Adjustments upon Changes in Common Stock. If there shall occur any recapitalization, ~~stock dividend,~~ stock split (including a stock split in the form of a stock dividend), reverse stock split, merger, combination, consolidation or other reorganization or any extraordinary dividend or other extraordinary distribution in respect of the Stock (whether in the form of cash, Stock or other property), or any split-up, spin-off, split-off, extraordinary redemption, or exchange of outstanding Stock, or there shall occur any other similar corporate transaction or event in respect of the Stock, or a sale of all or substantially all the assets of the Corporation as an entirety, then the ~~Committee~~Board of Directors or a committee of the Board to whom the Board has delegated authority shall, in the manner and to the extent, if any, as it deems appropriate
~~2016 Proxy Statement~~
99

~~Table of Contents~~
~~Appendix B: Lockheed Martin Corporation 2011 Incentive Performance Award Plan, as Amended~~ and ~~Restated~~
~~and~~ equitable ~~to the Participants~~ and consistent with the terms of this Plan, and taking into consideration the effect of the event on the holders of the Stock as well as on Directors holding Options or Units under this Plan, proportionately adjust any or all of the following:
~~(1)~~(a) the number ~~and type~~ of shares of Stock and ~~Share~~ Units or the type of securities that thereafter may be made the subject of Awards (including the specific maximum and ~~numbers~~number of shares of Stock or ~~Share~~ Units set forth elsewhere in this Plan),;
~~(2)~~(b) the number ~~and type~~ of shares of Stock, ~~Share~~ Units, ~~cash~~other securities or ~~other property~~cash subject to any or all outstanding ~~Awards,~~Awards;
~~(3)~~(c) the ~~grant, purchase or~~ exercise price ~~or conversion ratio~~ of any ~~or all~~ outstanding ~~Awards, or of the Stock, other property or Share Units underlying the Awards,~~Options;
~~(4)~~(d) the securities, cash or other property deliverable upon exercise ~~or conversion~~ of any or all outstanding ~~Awards,~~
~~(5) subject to Section 4(b), the Performance Goals or other standards appropriate to any outstanding Performance-Based Awards,~~Options; or
~~(6)~~(e) any other terms as are affected by the event.
~~Notwithstanding the foregoing, in the case~~The Board of ~~an Incentive Stock Option, no adjustment shall be made that would cause this Plan to violate Section 424(a)~~Directors or a committee of the ~~Code or any successor provisions thereto, without~~Board to whom the ~~written consent of the Participant adversely affected thereby. The Committee~~Board has delegated authority may act prior to an event described in this Section ~~7(a)~~7.1 (including at the time of an Award by means of more specific provisions in the Award Agreement) if deemed necessary or appropriate to permit ~~the Participant~~a Director or his or her Beneficiaries to realize the benefits intended to be conveyed by an Award in ~~respect of the Stock in~~ the case of an event described in this Section ~~7(a).~~7.1.
~~(b)~~ ~~Change in Control~~7.2 Amendments. The ~~Committee~~Board of Directors shall have the right to amend this Plan in whole or in part or to suspend or terminate this Plan, except that no amendment shall be made that would result in liability for interest or tax under Code Section 409A and no amendment, suspension, or termination may cancel or otherwise adversely affect in ~~the Award Agreement, provide for the effect of a Change in Control on an Award. Such provisions may include but are not limited to~~ any ~~one or more of the following~~way, without written consent, any Director’s rights with respect to ~~any~~(i) Stock Units and Dividend Equivalents credited to his or ~~all Awards: (i)~~her Accounts or (ii) Options awarded prior to the ~~specific consequences~~effective date of the amendment, suspension or termination.
7.3 Term. Awards may be made under this Planfor a ~~Change in Control on the Awards; (ii) the acceleration or extension~~period of ~~time periods for purposes of exercising, vesting in, or realizing gain~~10 years from the ~~Awards; (iii) a reservation of the Committee’s right to determine in its discretion~~ Effective Dateat any time on or before December 31, 2028, but continuance of this Plan is not a contractual obligation of the Corporation. In the event that ~~there~~the Board of Directors decides to terminate this Plan, it shall notify the Directors of its action in writing, and this Plan shall be ~~full acceleration or no acceleration~~terminated at the time set by the Board of benefits under the Awards; (iv) that only certain or limited benefits under the Awards shall be accelerated; (v) that the Awards shall be accelerated for a limited time only; or (vi) that acceleration of the Awards shall be subject to additional conditions precedent (such as aDirectors. Notwithstanding any termination of ~~employment following a Change~~this Plan, unless otherwise agreed in ~~Control).~~
~~In addition to any action required or authorized~~writing by the ~~terms of an Award, the Committee may take~~applicable Director or his or her Beneficiaries, any other action it deems appropriate to ensure the equitable treatment of Participants in the event of or in anticipation of a Change in Control, including but not limited to any one or more of the following with respect to any or all Awards: (i) the waiver of conditions on theoutstanding Awards ~~that were imposed for the benefit of the Corporation; (ii) provision for the cash settlement of the Awards for their equivalent cash value, as determined by the Committee,~~ as of the date of a Change in Control; (iii) provisions for the assumption or continuation of the Award and the substitution for shares of stock of a successor entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number of shares, exercise or conversion price and conditions of the Award; or (iv) such other modification or adjustment to the Awards as the Committee deems appropriate to maintain and protect the rights and interests of Participants upon or following a Change in Control. The Committee also may accord any Participant a right to refuse any acceleration of exercisability, vesting or benefits, whether pursuant to the Award Agreement or otherwise, in such circumstances as the Committee may approve.
Notwithstanding the foregoing provisions of this Section 7(b) or any provision in an Award Agreement to the contrary, if any Award to any Insider is accelerated to a date that is less than six months after the Date of Grant, the Committee may prohibit a sale of the underlying Stock (other than a sale by operation of law), and the Corporation may impose legend and other restrictions on the Stock to enforce this prohibition.
~~(c)~~ ~~Change in Control Definition. For purposes~~termination of this Plan ~~a “Change~~shall continue in ~~Control” shall include and be deemed to occur upon one or more of the following events:~~
(1) A tender offer or exchange offer is consummated for the ownership of securities of the Corporation representing 25 percent or more of the combined voting power of the Corporation’s then outstanding voting securities entitled to vote in the election of directors of the Corporation.
(2) The consummation of a merger, combination, consolidation, recapitalization, or other reorganization of the Corporation with one or more other entities that are not Subsidiaries if, as a result of the consummation of the merger, combination, consolidation, recapitalization or other reorganization, less than 75 percent of the outstanding voting securities of the surviving or resulting corporation shall immediately after the event be owned in the aggregate by the stockholders of the Corporation (directly or indirectly), determined on the basis of record ownership as of the date of determination of holders entitled to vote on the action (or in the absence of a vote, the day immediately prior to the event).
(3) Any person (as this term is used in Sections 3(a)(9) and 13(d)(3) of the Exchange Act, but excluding any person described in and satisfying the conditions of Rule 13d-1(b)(1) thereunder), becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 25 percent or more of the combined voting power of the Corporation’s then outstanding securities entitled to vote in the election of directors of the Corporation.
~~100~~     ~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Appendix B: Lockheed Martin Corporation 2011 Incentive Performance Award Plan, as Amended and Restated~~
(4) At any time within any period of two years after a tender offer, merger, combination, consolidation, recapitalization, or other reorganization or a contested director election, or any combination of these events, the “Incumbent Directors” shall cease to constitute at least a majority of the authorized number of members of the Board. For purposes hereof, “Incumbent Directors” shall mean the persons who were members of the Board immediately before the first of these events and the persons who were elected or nominated as their successors or pursuant to increases in the size of the Board by a vote of at least three-fourths of the Board members who were then Board members (or successors or additional members so elected or nominated).
(5) The stockholders of the Corporation approve a plan of liquidation and dissolution of the Corporation, or a sale or transfer of all or substantially all of the Corporation’s business and/or assets as an entirety to an entity that is not a Subsidiary is consummated.
~~Notwithstanding the foregoing, in the event the Committee determines that an Award could be subject to taxation under Section 409A(a)(1) of the Code, a Change in Control shall have no~~ effect on the Award unless the Change in Control also would constitute a change in the ownership or effective control of the Corporation or in the ownership of a substantial portion of the assets of the Corporation within the meaning of Section 409A(a)(2)(A)(v) of the Code.
~~(d)~~ ~~Business Acquisitions. Awards may be granted under this Plan on~~ terms and ~~conditions as the Committee considers appropriate, which may differ from those otherwise required by this Plan,~~subject to the extent necessary to reflect a substitution for or assumption of stock incentive awards held by employees of other entities who become Employees of the Corporation or a Subsidiary as the result of a merger, consolidation or business combination of the employing entity with, or the acquisition of assets or stock of the employing entity by, the Corporation or a Subsidiary, directly or indirectly.
~~SECTION 8. Administration.~~
~~(a)~~ ~~Committee Authority and Structure~~. This Plan and all Awards granted under this Plan shall be administered by the Management Development and Compensation Committee of the Board or such other committee of the Board as may be designated by the Board and constituted so as to permit this Plan to comply with the disinterested administration requirements of Rule 16b-3 under the Exchange Act and the “outside director” requirement of Code Section 162(m). The Board shall designate the members of the Committee. Notwithstanding the foregoing, any action taken under this Plan by the Management Development and Compensation Committee of the Board or such other committee of the Board as may be designated by the Board to administer this Plan and Awards granted under this Plan shall be valid and effective whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membershipconditions set forth in this Plan.
7.4 Distributions in Respect of Units upon Termination. If this Plan terminates pursuant to Section ~~8(a) or otherwise provided in any charter~~7.3, the distribution of the ~~Committee.~~
~~(b)~~ ~~Selection and Grant. The Committee shall have the authority to determine the Employees to whom Awards will be granted under this Plan, the type~~Accounts of ~~Award or Awards to be made, and the nature, amount, pricing, timing, and other terms of Awards to be made to any one or more of these individuals, subject to the terms of this Plan.~~
~~(c)~~ ~~Construction and Interpretation~~. The Committee shall have the power to interpret and administer this Plan and Award Agreements, and to adopt, amend and rescind related rules and procedures. All questions of interpretation and determinations with respect to this Plan, the number of shares of Stock, SARs, or Share Units or other Awards granted, and the terms of any Award Agreements, the adjustments required or permitted by Section 7, and other determinations hereundera Director shall be made at the time provided in Section 4.4 and in a manner consistent with any elections made or deemed to have been made by the ~~Committee and its determination shall be final and conclusive upon all parties~~Director pursuant to Section 4.4.
ARTICLE VIII
MISCELLANEOUS
8.1 Limitation on Directors’ Rights. Participation in ~~interest. In the event of any conflict between an Award Agreement and any non-discretionary provisions of this Plan, the terms of~~ this Plan shall ~~govern.~~
~~(d)~~ ~~Limited Authority of Committee~~not give any Director the right to ~~Change Terms of Awards. In addition~~continue to the Committee’s authority under other provisions of this Plan (including Sections 7 and 9), the Committee shall have the authority to accelerate the exercisability or vesting of an Award, to extend the term or waive early termination provisions of an Award (subject to the maximum ten-year term under Section 4(d)), and to waive the Corporation’s rights with respect to an Award or restrictive conditions of an Award (including forfeiture conditions), in any case in such circumstancesserve as the Committee deems appropriate. Notwithstanding the foregoing, the Committee’s authority under this Section 8(d) is subject to any express limitations of this Plan (including under Sections 6(a), 6(b), 7 and 9) and this Section 8(d) does not authorize the Committee to accelerate exercisability or vesting or waive early termination provisions if that acceleration or waiver would be inconsistent with the mandatory vesting requirements set forth in Sections 6(a)(1) and 6(b)(1).
~~(e)~~ ~~Rule 16b-3 Conditions; Bifurcation of Plan. It is the intent of the Corporation that this Plan and Share-Based Awards hereunder satisfy and be interpreted in~~ a manner, that, in the case of Participants who are or may be Insiders, satisfies any applicable requirements of Rule 16b-3, so that these persons will be entitled to the benefits of Rule 16b-3 or other exemptive rules under Section 16 under the Exchange Act and will not be subjected to avoidable liability thereunder as to Awards intended to be entitled to the benefits of Rule 16b-3. If any provision of this Plan or of any Award would otherwise frustrate or conflict with the intent expressed in this Section 8(e), that provision to the extent possible shall be interpreted and deemed amended so as to avoid such conflict. To the extent of any remaining irreconcilable conflict with this intent, the provision shall be deemed disregarded as to Awards intended as Rule 16b-3 exempt Awards. Notwithstanding anything to the contrary in this Plan, the provisions of this Plan may at any time be bifurcated by the Board or the Committee in any manner so that certain provisions of this Plan or any Award Agreement intended (or required in order) to satisfy the applicable
~~2016 Proxy Statement~~
~~101~~

~~Table of Contents~~
~~Appendix B: Lockheed Martin Corporation 2011 Incentive Performance Award Plan, as Amended and Restated~~
~~requirements of Rule 16b-3 are only applicable to Insiders and to those Awards to Insiders intended to satisfy the requirements of Rule 16b-3.~~
~~(f)~~ ~~Delegation and Reliance~~. The Committee may delegate to the officers or employees of the Corporation the authority to execute and deliver those instruments and documents, to do all acts and things, and to take all other steps deemed necessary, advisable or convenient for the effective administration of this Plan in accordance with its terms and purpose, except that the Committee may not delegate any discretionary authority to grant or amend an Award or with respect to substantive decisions or functions regarding this Plan or Awards as these relate to the material terms of Performance-Based Awards to Executive Officers or to the timing, eligibility, pricing, amount or other material terms of Awards to Insiders. In making any determination or in taking or not taking any action under this Plan, the Board and the Committee may obtain and may rely upon the advice of experts, including professional advisors to the Corporation. No director, officer, employee or agent of the Corporation shall be liable for any such action or determination taken or made or omitted in good faith.
~~(g)~~ ~~Exculpation and Indemnity. Neither the Corporation nor any~~ member of the Board of Directors or ofany rights or interests other than as provided in this Plan. No Director shall have any right to any payment or benefit except to the ~~Committee, nor any other person participating~~extent provided in ~~any determination of any question under~~ this Plan or in any other plan, arrangement or binding contract set forth in a written agreement with the ~~interpretation, administration or application~~Corporation. This Plan shall create only a contractual obligation of the Corporation to provide the benefits described in this Plan and shall not be construed as creating a trust. This Plan has no assets and Directors shall only have ~~any liability to any party~~rights as general unsecured creditors of the Corporation for any ~~action taken~~amounts credited or ~~not taken~~vested and benefits payable under this Plan.
2018 Proxy Statement
      87

Table of Contents
Appendix A
8.2 Beneficiaries.
(a)Beneficiary Designation. Upon forms provided and in ~~good faith~~accordance with procedures established by the Corporation, each Director may designate in writing (and change a previous designation of) the Beneficiary or Beneficiaries (as defined in Section 8.2(b)) that the Director chooses to receive the cash or Common Stock payable under this Plan after his or ~~for~~her death, subject to applicable laws (including any applicable community property and probate laws).
(b)Definition of Beneficiary. A Director’s “Beneficiary” or “Beneficiaries” shall be the ~~failure~~person or persons, including a trust or trusts, validly designated by the Director in writing on a form provided by the Corporation or, in the absence of ~~an Award (or action~~a valid designation, the personal representative of the Director’s estate in ~~respect~~the event of ~~an Award)~~the Director’s death.
8.3 Corporation’s Right to Withhold. The Corporation shall satisfy ~~Code requirements as to incentive stock options~~state and federal income tax withholding obligations, if any, arising upon distribution ofall or ~~to realize other intended tax consequences, to qualify for exemption or relief under Rule 16b-3 or to comply with any other law, compliance with which is not required on the~~a part ofa Director’s Account or arising out of the ~~Corporation.~~
~~(h)~~ ~~Notices, Signature, Delivery. Whenever a signature, notice or delivery~~issuance of ~~a document, or acknowledgement~~shares of ~~receipt~~Common Stock upon the exercise of ~~a document, is required or appropriate~~Options granted under this Plan by withholding cash or pursuant to an Award Agreement, signature, notice, delivery or acknowledgement may be accomplished by paper or written format, or, subject to Section 10(d), by electronic means. In the event electronic means are used for the signature, notice or delivery of a document, or acknowledgement of receipt of a document, the electronic record or confirmation of that signature, notice, delivery or acknowledgement maintained by or on behalf of the Corporation shall for purposes of this Plan and any applicable Award Agreement be treated as if it was a written signature, notice or acknowledgement and was delivered in the manner provided herein for a written document.
~~SECTION 9. Amendment and Termination of this Plan.~~
The Board of Directors may at any time terminate, suspend or discontinue this Plan. The Board of Directors may amend this Plan at any time, provided that any material amendment to this Plan will not be effective unless approved by the Corporation’s stockholders. For this purpose, a material amendment is any amendment that would (i) materially increasereducing the number of shares of Common Stock ~~available~~otherwise deliverable to the Director or his or her Beneficiary or Beneficiaries by the appropriate number of shares (based on the Fair Market Value on the date of the distribution or, in the case of the exercise of Options, on the day on which the Options are exercised) required to satisfy such tax withholding obligation. If the Corporation, for any reason, cannot satisfy the tax withholding obligation in accordance with the preceding sentence, the Director shall pay or provide for payment in cash of the amount of any taxes that the Corporation may be required to withhold with respect to the benefits hereunder.
8.4 Benefits Not Assignable; Obligations Binding Upon Successors. Except as provided in Section 8.2, benefits of a Director under this Plan shall not be assignable or transferable and any purported transfer, assignment, pledge or other encumbrance or attachment of any payments or benefits under this Plan, or ~~issuable to a Participant (other than a change in~~any interest therein, shall not be permitted or recognized. Obligations of the number of shares made pursuant to Section 7); (ii) change the types of awards that may be granted under this Plan; (iii) expand the class of persons eligible to receive awards or otherwise participate in this Plan; (iv) reduce the price at which an Option is exercisable or the base price of a SAR, either by amendment of an Award Agreement or by substitution of a new Award at a reduced price (other than as permitted in Section 7); or (v) require stockholder approval pursuant to the New Stock Exchange Listed Company Manual (so long as the Corporation ~~is a listed company on the New York Stock Exchange) or applicable law. The Committee may at any time alter or amend any or all Award Agreements~~ under this Plan ~~in any manner that would~~shall be ~~authorized for a new Award under~~binding upon successors of the Corporation.
8.5 Governing Law; Severability. The validity of this Plan ~~including but not limited to~~or any ~~manner set forth~~of its provisions shall be construed, administered and governed in ~~Section 8(d) (subject to any applicable limitations thereunder), so long as such an amendment would not require approval~~all respects under and by the laws of the ~~Corporation’s stockholders, if such amendment was made~~State of Maryland without regard to conflict of laws provisions of Maryland law. If any provisions of this ~~Plan. Notwithstanding~~Plan shall be held by a court of competent jurisdiction to be invalid or unenforceable, the ~~foregoing, no such action by the Board or the Committee~~remaining provisions hereof shall ~~in any manner adverse~~continue to a Participant other than as expressly permitted by the terms of an Award Agreement, affect any Award then outstanding and evidenced by an Award Agreement without the consent in writing of the Participant or a Beneficiary who has become entitled to an Award thereunder.be fully effective.
~~SECTION 10. Miscellaneous.~~8.6 Compliance With Laws
~~(a)~~ ~~Unfunded Plan~~. This Plan shall be unfunded. Neither the Corporation, the Board of Directors nor the Committee shall be required to segregate any assets that may at any time be represented by Awards made pursuant to this Plan. Neither the Corporation, the Board of Directors, nor the Committee shall be deemed to be a trustee of any amounts to be paid or securities to be issued under this Plan.
~~(b)~~ ~~Rights of Employees~~.
~~(1)~~~~No Right to an Award~~. Status as an Employee shall not be construed as a commitment that any one or more Awards will be made under this Plan to an Employee or to Employees generally. Status as a Participant shall not entitle the Participant to any additional future Awards.
~~(2)~~~~No Assurance of Employment~~. Nothing contained in this Plan (or in any other documents related to this Plan or to any Award) shall confer upon any Employee or Participant any right to continue in the employ or other service of the Corporation or any Subsidiary or constitute any contract (of employment or otherwise) or limit in any way the right of the Corporation or any Subsidiary to change a person’s compensation or other benefits or to terminate the employment of a person with or without cause.
~~102~~     ~~www.lockheedmartin.com/investor~~

~~Table of Contents~~
~~Appendix B: Lockheed Martin Corporation 2011 Incentive Performance Award Plan, as Amended and Restated~~
~~(c)~~ ~~Effective Date; Duration~~. This Plan has been adopted by the Board of Directors of the Corporation and shall become effective upon and shall be subject to the approval of the Corporation’s stockholders. This Plan shall remain in effect until any and all Awards under this Plan have been exercised, converted or terminated under the terms of this Plan and applicable Award Agreements. Notwithstanding the foregoing, no Award may be granted under this Plan after April 27, 2021. Notwithstanding the foregoing, any Award granted under this Plan on or prior to April 27, 2021 may be amended after such date in any manner that would have been permitted prior to such date, except that no such amendment shall increase the number of shares of Stock or Stock Units subject to, comprising or referenced in such Award (other than in accordance with Section 7(a)).
~~(d)~~ ~~Compliance with Laws. This Plan, Award Agreements,~~ and the ~~grant, exercise, conversion, operation and vesting of Awards, and the~~offer, issuance and delivery of shares of Common Stock and/~~or other securities or property~~ or the payment and deferral of ~~cash~~compensation under this Plan ~~Awards or Award Agreements,~~ are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal reporting, registration, insider trading ~~registration, reporting~~ and other securities ~~laws and federal margin requirements)~~laws) and to such approvals by any stock exchange, listing agency or regulatory or governmental authority as may, in the opinion of counsel for the Corporation, be necessary or advisable ~~to comply with all legal requirements.~~in connection therewith. Any securities delivered under this Plan shall be subject to such restrictions, ~~(and~~and the person acquiring ~~such~~the securities shall, if requested by the Corporation, provide such ~~evidence, assurance~~assurances and representations to the Corporation as ~~to compliance with any thereof) as counsel to~~ the Corporation may deem necessary or desirable to assure compliance with all applicable legal requirements.
~~(e)~~ ~~Applicable Law~~8.7 Plan Construction. It is the intent of the Corporation that this Plan satisfy and be interpreted in a manner that satisfies the applicable requirements of Rule 16b-3 under the Exchange Act so that Directors will be entitled to the benefits of Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act and will not be subjected to liability thereunder. This Plan ~~Award Agreements~~also is intended to comply with the requirements of Section 409A of the Code and any ~~related documents and matters shall be governed by and in accordance with the laws of the State of Maryland (without regard~~regulations or other guidance issued thereunder so that Directors are not subject to ~~its provisions regarding choice of law), except as to matters of federal law.~~
~~(f)~~ ~~Awards to Participants Outside the United States. Notwithstanding~~liability for interest or tax under Section 409A. If any provision of this Plan is determined not to conform to the requirements of Section 409A of the Code, this Plan shall be interpreted to omit the offending provision. Any interpretation contrary ~~in order~~ to ~~comply with~~ the ~~laws of other countries in which the Corporation and its Subsidiaries operate or have employees, the Committee~~foregoing shall have the authority to modify the terms and conditions of Awards granted to Employees outside the United States to comply with applicable foreign laws and to take any action, before or after an Award is made, that it deems necessary or advisable to obtain approval or comply with local government, regulatory, tax, exemption, approval or other requirements.be avoided.
~~(g)~~ ~~Non-Exclusivity~~8.8 Headings Not Part of Plan. ~~Nothing~~Headings and subheadings in this Plan ~~shall limit or~~are inserted for reference only and are not to be ~~deemed~~considered in the interpretation of any provisions of this Plan.
~~This~~The 2009Plan~~has been~~, as it is proposed to ~~limit the authority of the Corporation,~~be amended and restated, wasapproved by the Board of Directors on February~~28, 2008 ●~~22, 2018, and,if approved by the stockholders of the Corporation at the 20018 annual meeting of stockholders shall be effective as of~~January 1, 2009~~the Restatement Date.
88     www.lockheedmartin.com/investor
Table of Contents
Appendix B: Definition of Non-GAAP (Generally Accepted Accounting Principles) Measures
This Proxy Statement contains non-GAAP financial measures (as defined by SEC Regulation G). While we believe that these non-GAAP financial measures may be useful in evaluating Lockheed Martin, this information should be considered supplemental and isnot a substitute for financial information prepared in accordance with GAAP. In addition, our definitions for non-GAAP measures may differ from similarly titled measures used by other companies or analysts.
Segment Operating Profit
Segment Operating Profit represents the ~~Committee~~total earnings from our business segments before unallocated income and expense, interest expense, other non-operating income and expense, and income tax expense. This measure is used by our senior management inevaluating the performance of our business segments. The caption “Total Unallocated Items” reconciles Segment Operating Profit to ~~grant awards or authorize any other compensation, with or without reference~~Consolidated Operating Profit. We use Segment Operating Profit as a performance goal in the annual incentive plan.
2017
($M) Profit
Segment Operating Profit       $     5,115
Total Unallocated Items 806
Consolidated Operating Profit $ 5,921
Return on Invested Capital (ROIC)
ROIC is defined as net earnings plus after-tax interest expense divided by average invested capital (total equity plus debt) after adjusting total equity by adding back adjustments related to the ~~Stock, under any other plan or authority.~~Corporation’s post-retirement benefit plans. We use ROIC as a performance measure for LTIP and PSUs.
ROIC Calculation ($M) Three-Year
2015–2017
Net Earnings^(a) 3,636
Adjustments for DTA Charge and ASU 2016-09^(g) 514
Adjusted Net Earnings   $ 4,150
Interest Expense (multiplied by 65%)^(a)(b) 381
Return $ 4,531
Average Debt^(c)(d) $ 12,495
Average Equity^(d)(e) 2,488
Average Benefit Plan Adjustments^(d)(f) 11,507
Average Invested Capital $ 26,490

ROIC 17.1 %

(a)
Three-year 2015-2017 values for Net Earnings and Interest Expense reflect average values over the period.
(b)
Represents after-tax interest expense utilizing the federal statutory rate of 35 percent. Interest expense is added back to net earnings as it represents the return to debt holders. Debt is included as a component of average invested capital.
(c)
Debt consists of long-term debt, including current maturities, and short-term borrowings (if any).
(d)
The three-year averages are calculated using thirteen quarter point balances at the start of the plan performance period and at the end of each quarter for each of the three-years in the performance period.
(e)
Equity includes non-cash adjustments, primarily to recognize the funded/unfunded status of the Corporation’s benefit plans; and also to normalize for the one time impact of the deferred tax asset (DTA) charge noted in footnote (g) below.
(f)
Average Benefit Plan Adjustments reflect the cumulative value of entries identified in the Corporation’s Consolidated Statements of Equity.
(g)
Net earnings was adjusted to normalize the ROIC calculation for the $270 million tax benefit associated with the adoption of Accounting Standards Update No. 2016-09 and for the $1.8 billion DTA charge realized in December 2017 as a result of the Federal Government’s enactment of the Tax Cuts and Jobs Act.

~~2016~~2018 Proxy Statement
~~103~~      89

Table of Contents
Appendix B
Performance Cash
Performance Cash represents the Corporation’s Cash from Operations adjusted to exclude: (1) the difference between actual and planned pension funding under the Corporation’s Long-Range Plan and (2) unplanned tax payments or benefits on divestitures of business units. This definition is used in our annual incentive plan for performance limitation testing and in our award agreements for RSUs, LTIP and PSUs. The performance limitation is described on page 38.
Cash Flow ($M) 2017 2015–2017
Cash from Operations       $ 6,476      $ 16,766

Pension Funding Adjustment
Actual Pension Funding 142 347
Planned Pension Funding 46 155
       Delta 96 192
Adjustment for Unplanned Tax Payments / (Benefits) on Divestitures (4 ) (65 )
Net Adjusting Items $ 92 $ 127
Performance Cash $ 6,568 $ 16,893

90     www.lockheedmartin.com/investor
Table of Contents
Disclosure Regarding Forward-Looking Statements
Disclosure Regarding Forward-Looking Statements
This Proxy Statement contains statements that, to the extent they are not recitations of historical fact, constitute forward-looking statements within the meaning of the federal securities laws, and are based on Lockheed Martin’s current expectations and assumptions. The words “believe,” “estimate,” “anticipate,” “project,” “intend,” “expect,” “plan,” “outlook,” “scheduled,” “forecast” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may differ materially due to factors such as:
●
the Corporation’s reliance on contracts with the U.S. Government, which are conditioned upon the availability of funding and can be terminated by the U.S. Government for convenience, and the Corporation’s ability to negotiate favorable contract terms;
● budget uncertainty, any failure to further raise the debt ceiling, and the potential for a government shutdown; affordability initiatives; the implementation of automatic sequestration under the Budget Control Act of 2011 or Congressional actions intended to replace sequestration;
● risks related to the development, production, sustainment, performance, schedule, cost and requirements of complex and technologically advanced programs including the Corporation’s largest, the F-35 program;
● economic, industry, business and political conditions including their effects on governmental policy;
● the Corporation’s success expanding into and doing business in adjacent markets and internationally; the differing risks posed by international sales, including those involving commercial relationships with unfamiliar customers and different cultures; our ability to recover investments which is frequently dependent upon the successful operation of ventures that we do not control; and changes in foreign national priorities, and foreign government budgets;
● the competitive environment for the Corporation’s products and services, including increased pricing pressures, competition from outside the aerospace and defense industry, and increased bid protests;
● planned production rates for significant programs; compliance with stringent performance and reliability standards; materials availability;
● the performance and financial viability of key suppliers, teammates, ventures, venture partners, subcontractors and customers;
● the timing and customer acceptance of product deliveries;
● the Corporation’s ability to continue to innovate and develop new products and to attract and retain key personnel and transfer knowledge to new personnel; the impact of work stoppages or other labor disruptions;
● the impact of cyber or other security threats or other disruptions to the Corporation’s businesses;
● the Corporation’s ability to implement and continue capitalization changes such as share repurchases and dividend payments (including the availability of sufficient net earnings to permit such distributions under Maryland law), pension funding as well as the pace and effect of any such capitalization changes;
● the Corporation’s ability to recover certain costs under U.S. Government contracts and changes in contract mix;
● the accuracy of the Corporation’s estimates and projections;
● movements in interest rates and other changes that may affect pension plan assumptions, equity, the level of the FAS/CAS adjustment and actual returns on pension plan assets;
● realizing the anticipated benefits of acquisitions or divestitures, ventures, teaming arrangements or internal reorganizations, and the Corporation’s efforts to increase the efficiency of its operations and improve the affordability of its products and services;
● risk of an impairment of goodwill, investments or other longterm assets, including the potential impairment of goodwill, intangible assets and inventory recorded as a result of the Sikorsky acquisition if Sikorsky does not perform as expected, has a deterioration of projected cash flows, negative changes in market factors, including oil and gas trends, or a significant increase in carrying value of the reporting unit;
● the adequacy of the Corporation’s insurance and indemnities;
● the effect of changes in (or the interpretation of): legislation, regulation or policy, including those applicable to procurement (including competition from fewer and larger prime contractors), cost allowability or recovery, accounting, taxation (including the impact of the Tax Cuts and Jobs Act), or export; and
● the outcome of legal proceedings, bid protests, environmental remediation efforts, government investigations or government allegations that we have failed to comply with law, other contingencies and U.S. Government identification of deficiencies in the Corporation’s business systems.
These are only some of the factors that may affect the forward-looking statements contained in this Proxy Statement. For a discussion identifying additional important factors that could cause actual results to vary materially from those anticipated in the forward-looking statements, see the Corporation’s filings with the SEC including, but not limited to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in the Corporation’s Annual Report on Form 10-K for the year ended Dec. 31, 2017 and subsequent quarterly reports on Form 10-Q. The Corporation’s filings may be accessed through the Investor Relations page of its website,www.lockheedmartin.com/investor, or through the website maintained by the SEC atwww.sec.gov.
The Corporation’s actual financial results likely will be different from those projected due to the inherent nature of projections. Given these uncertainties, forward-looking statements should not be relied on in making investment decisions. The forward-looking statements contained in this Proxy Statement speak only as of the date of its filing. Except where required by applicable law, the Corporation expressly disclaims a duty to provide updates to forward-looking statements after the date of this Proxy Statement to reflect subsequent events, changed circumstances, changes in expectations, or the estimates and assumptions associated with them. The forward-looking statements in this Proxy Statement are intended to be subject to the safe harbor protection provided by the federal securities laws.

2018 Proxy Statement
      91

Table of Contents
JOIN US ~~FOR~~AT THE ANNUAL MEETING
Lockheed Martin Center for
Leadership
Excellence Auditorium
6777 Rockledge Drive
Bethesda, Maryland 20817

Parking Garage
6720-C Rockledge Drive
Bethesda, Maryland 20817
(Parking will be validated and shuttles will transport
stockholders to the Auditorium.)

No parking is available at the Center for Leadership Excellence. If you plan to drive, proceed to the parking garage and a shuttle will take you to the Auditorium. Please plan additional time in your schedule for the shuttle. Shuttle service will begin at 7:15 a.m. The Annual Meeting will begin promptly at 8:00 a.m.


DIRECTIONS FROM LOCAL AIRPORTS

From Dulles International Airport
●
Dulles Airport Access Road to VA-267 E
●
Merge onto I-495 N toward Baltimore/Bethesda
●
Take exit 38 for I-270 ~~SPUR~~Spur N toward Rockville/Frederick
●
Take exit 1 for Democracy Blvd E
●
Turn left at Fernwood Road
●
Turn right at Rockledge Drive
●
Turn right to Parking Garage at 6720-C Rockledge Drive

From Ronald Reagan National Airport

●
George Washington Pkwy N
●
Exit onto I-495 N toward Baltimore/Bethesda
●
Exit onto I-270 Spur N toward Rockville/Frederick
●
~~Exit onto I-270 SPUR N toward Rockville/Frederick~~
●
Take exit 1 for Democracy Blvd E
●
Turn left at Fernwood Road
●
Turn right at Rockledge Drive
●
Turn right to Parking Garage at 6720-C Rockledge Drive


From Baltimore/Washington International
Airport

●
I-195 W onto I-95 South towards Washington
●
Exit onto I-495 W toward Silver Spring/Bethesda
●
Merge onto I-270 ~~SPUR~~Spur N toward Frederick
●
Take exit 1B toward Rockledge Drive
●
Turn left at Rockledge Drive
●
Turn right at Rockledge Drive
●
Turn ~~right~~left to Parking Garage at 6720-C Rockledge Drive

Table of Contents

IMPORTANT ANNUAL MEETING INFORMATION

Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead ofmailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxy votes submitted by Internet or telephone must be received by 1:00 a.m., Eastern Daylight ~~Savings~~ Time, on April ~~28, 2016 (except as otherwise set forth on the reverse of this card).~~26, 2018.
Vote by Internet
●
Go towww.investorvote.com
●
~~Or scan the QR Code with your smartphone.~~
●
Follow the steps outlined on the secure website.

Vote by telephone
●
Call toll free 1-800-652-VOTE (8683) within the U.S., ~~U.S. territories &~~ Canada and Puerto Rico any time on a touch tone telephone. There isNO CHARGEto you for the call.
●
Or ~~dial~~call 1-781-575-2300 from outside the U.S.
●
Follow the instructions provided by the recorded message.

Using ablack ink pen, mark your votes with anX as shown in this example. Please do not write outside the designated areas.


Annual Meeting Proxy Card
▼ IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼

A     Proposal: Election of Directors (see below):The Board of Directors recommends a voteFOR all the nominees.

1. Nominees:    For    Against    Abstain       For    Against    Abstain       For    Against    Abstain
     01 - Daniel F. Akerson ☐ ☐ ☐ 05 - ~~Bruce A. Carlson~~James O. Ellis, Jr. ☐ ☐ ☐ 09 - ~~James M. Loy~~Jeh C. Johnson ☐ ☐ ☐
02 - Nolan D. Archibald ☐ ☐ ☐ 06 ~~- James O. Ellis, Jr.~~ ☐ ☐ ☐ ~~10 - Joseph W. Ralston~~ ☐ ☐ ☐
~~03 - Rosalind G. Brewer~~ ☐ ☐ ☐ 07 - Thomas J. Falk ☐ ☐ ☐ 10 - Joseph W. Ralston ☐ ☐ ☐
03 - David B. Burritt ☐ ☐ ☐ 07 - Ilene S. Gordon ☐ ☐ ☐ 11 - ~~Anne Stevens~~James D. Taiclet, Jr. ☐ ☐ ☐
04 - ~~David B. Burritt~~Bruce A. Carlson ☐ ☐ ☐ 08 - Marillyn A. Hewson ☐ ☐ ☐

B     Proposals:The Board of Directors recommends a voteFORProposals2 and 3 and 4.
   For    Against    Abstain
2. Ratification of Appointment of Ernst & Young LLP as Independent Auditors for ~~2016~~2018 ☐ ☐ ☐

3. ~~Advisory Vote~~Management Proposal to Approve the ~~Compensation of our Named Executive Officers (Say-on-Pay)~~Lockheed Martin Corporation Amended and Restated Directors Equity Plan ☐ ☐ ☐

4. ~~Management Proposal~~Advisory Vote to ~~Re-Approve Performance Goals for~~Approve the ~~2011 Incentive Performance Award Plan~~Compensation of our Named Executive Officers (Say-on-Pay) ☐ ☐ ☐
The Board of Directors recommends a voteAGAINSTProposal5.
   For    Against    Abstain
5. Stockholder Proposal ~~on Special Meeting Stock Ownership Threshold~~to Adopt Stockholder Action By Written Consent ☐ ☐ ☐

C     Non-Voting Items
Change of Address— Please print your new address below.      Comments— Please print your comments below.      Meeting Attendance
Check this box to pre-register and request an admission ticket.
If a family member will accompany you, provide his/her name and address in the Comments box. ☐


<STOCK#>               ~~029M7B~~02REVC

Table of Contents

Admission to the Annual Meeting
~~Whether or not you plan to attend the Annual Meeting, you~~You can be sure that your shares are represented at the ~~meeting~~Annual Meeting by promptly voting your shares via the Internet, by telephone or mail as described on the other side of this form.
If you plan to attend the Annual Meeting on Thursday, April ~~28, 2016~~26, 2018 at 8:00 a.m. (Eastern Daylight ~~Savings~~ Time), we must receive your request for an admission ticket no later than Friday, April ~~22, 2016.~~20, 2018. All attendees will be required to present valid, government-issued photographic identification with the admission ticket and enter through a security check point. Cameras, cell phones, and other electronic devices will not be permitted.
Meeting Location Parking Garage
Lockheed Martin Center for Leadership Excellence Auditorium 6720-C Rockledge Drive
6777 Rockledge Drive Bethesda, Maryland 20817
Bethesda, Maryland 20817 (Parking will be validated and shuttles will transport
stockholders to the Auditorium.)

▼ IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼

LOCKHEED MARTIN CORPORATION

Proxy Card For ~~2016~~2018 Annual Meeting of Stockholders

The undersigned hereby appoints Daniel F. Akerson, Nolan D. Archibald, ~~David B. Burritt~~ and Thomas J. Falk, each of them proxies (Proxies) of the undersigned with respect to common stock of Lockheed Martin Corporation (Corporation) owned by the undersigned, with full power of substitution, to vote and act for the undersigned at the Annual Meeting of Stockholders ~~(Annual Meeting)~~ of the Corporation to be held at 8:00 a.m., Eastern Daylight ~~Savings~~ Time, on April ~~28, 2016,~~26, 2018, at Lockheed Martin Center for Leadership Excellence Auditorium, 6777 Rockledge Drive, Bethesda, Maryland 20817, and at any adjournments or postponements thereof. The Proxies shall vote in accordance with the instructions indicated on this card, and are authorized to vote in their discretion on other business that may properly come before the meeting and any adjournments or postponements.The Proxies will vote as the Board of Directors recommends where a choice is not specified.
~~If the undersigned is a participant in a 401(k) or defined contribution plan(s) with a Lockheed Martin stock account~~ ~~for which State Street Bank and Trust Company is not a Trustee~~, the undersigned hereby instructs the Trustee of that plan(s) to vote such shares of stock in accordance with the instructions on the reverse side of this card. Plan shares must be voted no later than 11:59 p.m. Eastern Daylight Savings Time on April 25, 2016.
Please mark, date and sign this card and return it promptly in the enclosed envelope. To vote by Internet or telephone, see the instructions on the reverse side.This proxy is solicited on behalf of the Corporation’s Board of Directors.
To vote in accordance with the Board of Directors’ recommendations, please sign and date below; no boxes need to be checked.
D     Authorized Signatures — Date and sign below.This section must be completed for your vote to be counted.
Please sign this proxy as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian, please give full title as such. The signer hereby revokes all previous proxies given by the signer to vote at the Annual Meeting or any adjournments thereof.

Date (mm/dd/yyyy) — Please print date below.        Signature 1 — Please keep signature within the box.        Signature 2 — Please keep signature within the box.
/      /

IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - D ON BOTH SIDES OF THIS CARD.

Table of Contents

IMPORTANT ANNUAL MEETING INFORMATION

Using ablack ink pen, mark your votes with anX as shown in this example. Please do not write outside the designated areas.


Annual Meeting Proxy Card
▼ PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼

A     Proposal: Election of Directors (see below):The Board of Directors recommends a voteFOR all the nominees.

1. Nominees:    For    Against    Abstain       For    Against    Abstain       For    Against    Abstain
     01 - Daniel F. Akerson ☐ ☐ ☐ 05 - ~~Bruce A. Carlson~~James O. Ellis, Jr. ☐ ☐ ☐ 09 - ~~James M. Loy~~Jeh C. Johnson ☐ ☐ ☐
02 - Nolan D. Archibald ☐ ☐ ☐ 06 ~~- James O. Ellis, Jr.~~ ☐ ☐ ☐ ~~10 - Joseph W. Ralston~~ ☐ ☐ ☐
~~03 - Rosalind G. Brewer~~ ☐ ☐ ☐ 07 - Thomas J. Falk ☐ ☐ ☐ 10 - Joseph W. Ralston ☐ ☐ ☐
03 - David B. Burritt ☐ ☐ ☐ 07 - Ilene S. Gordon ☐ ☐ ☐ 11 - ~~Anne Stevens~~James D. Taiclet, Jr. ☐ ☐ ☐
04 - ~~David B. Burritt~~Bruce A. Carlson ☐ ☐ ☐ 08 - Marillyn A. Hewson ☐ ☐ ☐

B     Proposals:The Board of Directors recommends a voteFORProposals2, 3 and 4.
   For    Against    Abstain
2. Ratification of Appointment of Ernst & Young LLP as Independent Auditors for ~~2016~~2018 ☐ ☐ ☐

3. ~~Advisory Vote~~Management Proposal to Approve the ~~Compensation of our Named Executive Officers (Say-on-Pay)~~Lockheed Martin Corporation Amended and Restated Directors Equity Plan ☐ ☐ ☐

4. ~~Management Proposal~~Advisory Vote to ~~Re-Approve Performance Goals for~~Approve the ~~2011 Incentive Performance Award Plan~~Compensation of our Named Executive Officers (Say-on-Pay) ☐ ☐ ☐
The Board of Directors recommends a voteAGAINSTProposal5.
   For    Against    Abstain
5. Stockholder Proposal ~~on Special Meeting Stock Ownership Threshold~~to Adopt Stockholder Action By Written Consent ☐ ☐ ☐

IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.

~~029M8B~~
                      02REWC

Table of Contents

~~▼ PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼~~

LOCKHEED MARTIN CORPORATION

Proxy Card For ~~2016~~2018 Annual Meeting of Stockholders

The undersigned hereby appoints Daniel F. Akerson, Nolan D. Archibald, ~~David B. Burritt~~ and Thomas J. Falk, each of them proxies (Proxies) of the undersigned with respect to common stock of Lockheed Martin Corporation (Corporation) owned by the undersigned, with full power of substitution, to vote and act for the undersigned at the Annual Meeting of Stockholders ~~(Annual Meeting)~~ of the Corporation to be held at 8:00 a.m., Eastern Daylight ~~Savings~~ Time, on April ~~28, 2016,~~26, 2018, at Lockheed Martin Center for Leadership Excellence Auditorium, 6777 Rockledge Drive, Bethesda, Maryland 20817, and at any adjournments or postponements thereof. The Proxies shall vote in accordance with the instructions indicated on this card, and are authorized to vote in their discretion on other business that may properly come before the meeting and any adjournments or postponements.The Proxies will vote as the Board of Directors recommends where a choice is not specified.
~~If the undersigned is a participant in a 401(k) or defined contribution plan(s) with a Lockheed Martin stock account~~ ~~for which State Street Bank and Trust Company is not a Trustee~~, the undersigned hereby instructs the Trustee of that plan(s) to vote such shares of stock in accordance with the instructions on the reverse side of this card. Plan shares must be voted no later than 11:59 p.m. Eastern Daylight Savings Time on April 25, 2016.
Please mark, date and sign this card and return it promptly in the enclosed envelope.This proxy is solicited on behalf of the Corporation’s Board of Directors.

To vote in accordance with the Board of Directors’ recommendations, please sign and date below; no boxes need to be checked.
C     Authorized Signatures — Date and sign below.This section must be completed for your vote to be counted.
Please sign this proxy as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian, please give full title as such. The signer hereby revokes all previous proxies given by the signer to vote at the Annual Meeting or any adjournments thereof.

Date (mm/dd/yyyy) — Please print date below.        Signature 1 — Please keep signature within the box.        Signature 2 — Please keep signature within the box.
/      /

IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.

Table of Contents

IMPORTANT ANNUAL MEETING INFORMATION

Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead ofmailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.

Voting directions submitted by Internet or telephone must be received by 11:59 p.m., Eastern Daylight ~~Savings~~ Time, on April ~~25, 2016~~23, 2018 for participants in one of the Corporation’s 401(k) or defined contribution plans with Lockheed Martin common stock allocated to his or her account(s).
Vote by Internet
●
Go towww.investorvote.com
●
~~Or scan the QR Code with your smartphone.~~
●
Follow the steps outlined on the secure website.

Vote by telephone
●
Call toll free 1-800-652-VOTE (8683) within the U.S., ~~U.S. territories &~~ Canada and Puerto Rico any time on a touch tone telephone. There isNO CHARGEto you for the call.
●
Or ~~dial~~call 1-781-575-2300 from outside the U.S.
●
Follow the instructions provided by the recorded message.

Using ablack ink pen, mark your votes with anX as shown in this example. Please do not write outside the designated areas.


Annual Meeting Proxy Voting Direction Card
▼ IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼

A     Proposal: Election of Directors (see below):The Board of Directors recommends a voteFOR all the nominees.

1. Nominees:    For    Against    Abstain       For    Against    Abstain       For    Against    Abstain
     01 - Daniel F. Akerson ☐ ☐ ☐ 05 - ~~Bruce A. Carlson~~James O. Ellis, Jr. ☐ ☐ ☐ 09 - ~~James M. Loy~~Jeh C. Johnson ☐ ☐ ☐
02 - Nolan D. Archibald ☐ ☐ ☐ 06 - ~~James O. Ellis, Jr.~~Thomas J. Falk ☐ ☐ ☐ 10 - Joseph W. Ralston ☐ ☐ ☐
03 - ~~Rosalind G. Brewer~~David B. Burritt ☐ ☐ ☐ 07 - ~~Thomas J. Falk~~Ilene S. Gordon ☐ ☐ ☐ 11 - ~~Anne Stevens~~James D. Taiclet, Jr. ☐ ☐ ☐
04 - ~~David B. Burritt~~Bruce A. Carlson ☐ ☐ ☐ 08 - Marillyn A. Hewson ☐ ☐ ☐

B     Proposals:The Board of Directors recommends a voteFORProposals2, 3 and 4.
   For    Against    Abstain
2. Ratification of Appointment of Ernst & Young LLP as Independent Auditors for ~~2016~~2018 ☐ ☐ ☐

3. ~~Advisory Vote~~Management Proposal to Approve the ~~Compensation of our Named Executive Officers (Say-on-Pay)~~Lockheed Martin Corporation Amended and Restated Directors Equity Plan ☐ ☐ ☐

4. ~~Management Proposal~~Advisory Vote to ~~Re-Approve Performance Goals for~~Approve the ~~2011 Incentive Performance Award Plan~~Compensation of our Named Executive Officers (Say-on-Pay) ☐ ☐ ☐
The Board of Directors recommends a voteAGAINSTProposal5.
   For    Against    Abstain
5. Stockholder Proposal ~~on Special Meeting Stock Ownership Threshold~~to Adopt Stockholder Action By Written Consent ☐ ☐ ☐

C     Non-Voting Items
Change of Address— Please print your new address below.      Comments— Please print your comments below.      Meeting Attendance
Check this box to pre-register and request an admission ticket.
If a family member will accompany you, provide his/her name and address in the Comments box. ☐


<STOCK#>               ~~029M7B~~02REXB

Table of Contents
Admission to the Annual Meeting
~~Whether or not you plan to attend the Annual Meeting, you~~You can be sure that your shares are represented at the ~~meeting~~Annual Meeting by promptly voting your shares via the Internet, by telephone or mail as described on the other side of this form.
If you plan to attend the Annual Meeting on Thursday, April ~~28, 2016~~26, 2018 at 8:00 a.m. (Eastern Daylight ~~Savings~~ Time), we must receive your request for an admission ticket no later than Friday, April ~~22, 2016.~~20, 2018. All attendees will be required to present valid, government-issued photographic identification with the admission ticket and enter through a security check point. Cameras, cell phones, and other electronic devices will not be permitted.
Meeting Location Parking Garage
Lockheed Martin Center for Leadership Excellence Auditorium 6720-C Rockledge Drive
6777 Rockledge Drive Bethesda, Maryland 20817
Bethesda, Maryland 20817 (Parking will be validated and shuttles will transport
stockholders to the ~~Auditorium)~~Auditorium.)

IMPORTANT NOTICE TO PARTICIPANTS WITH LOCKHEED MARTIN CORPORATION COMMON STOCK ALLOCATED TO ACCOUNTS IN CERTAIN COMPANY SPONSORED SAVINGS PLANS:
Dear Plan Participant:
State Street Bank and Trust Company (State Street) is the Trustee with respect to the Lockheed Martin Corporation common stock held in the following plans:
Lockheed Martin Corporation Salaried Savings Plan
Lockheed Martin Corporation Hourly Employee Savings Plan Plus
Lockheed Martin Corporation Capital Accumulation Plan
Lockheed Martin Corporation Capital Accumulation Plan for Hourly Employees
Lockheed Martin Corporation Operations Support Savings Plan
Lockheed Martin Corporation Performance Sharing Plan for Bargaining Employees
Lockheed Martin Corporation Basic Benefit Plan for Hourly Employees
This voting direction card is used for the purpose of providing confidential voting directions to State Street with respect to the shares held in the plans listed above. All matters to be voted upon at the Annual Meeting of Stockholders are extremely important and are described in the Proxy Statement.
Sincerely,
State Street Bank and Trust Company, Trustee
▼ IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼

LOCKHEED MARTIN CORPORATION

Proxy Voting Direction Card For ~~2016~~2018 Annual Meeting of Stockholders
State Street Bank and Trust Company, as Trustee of the plans listed above, is directed to vote the shares of Lockheed Martin Corporation (Corporation) common stock allocated to my account(s) in one or more of the plans listed above, at the Annual Meeting of Stockholders ~~(Annual Meeting)~~ of the Corporation to be held at 8:00 a.m., Eastern Daylight ~~Savings~~ Time, on April ~~28, 2016,~~26, 2018, at Lockheed Martin Center for Leadership Excellence Auditorium, 6777 Rockledge Drive, Bethesda, Maryland 20817, with respect to the election of directors and the proposals and at any adjournments or postponements. State Street will vote in accordance with the directions indicated on this card.State Street will vote signed cards that are returned in accordance with recommendations of the Board of Directors where voting directions are not specified.If no voting direction is received or if this proxy voting direction card is returned unsigned, the shares allocated to my account(s) will be voted by State Street in proportion to those shares allocated to accounts of participants for which timely directions were received, unless contrary to ERISA. Plan Participants are requested to mark, date and sign this card and return it promptly in the enclosed envelope. To vote by Internet or telephone, see instructions on the reverse side.This proxy is solicited on behalf of the Corporation’s Board of Directors.

D     Authorized Signatures — Date and sign below.This section must be completed for your vote to be counted.
Please sign this proxy voting direction card as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian, please give full title as such. The signer hereby revokes all previous proxies given by the signer to vote at the Annual Meeting or any adjournments thereof.

Date (mm/dd/yyyy) — Please print date below.        Signature 1 — Please keep signature within the box.        Signature 2 — Please keep signature within the box.
/      /

IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - D ON BOTH SIDES OF THIS CARD.

Table of Contents

~~[[company_logo]]~~
~~Lockheed Martin Corporation~~
~~Annual Meeting of Stockholders~~
~~April 28, 2016 at 8:00 a.m. Eastern Daylight Savings Time~~
~~Lockheed Martin Center for Leadership~~
~~Excellence Auditorium~~
~~6777 Rockledge Drive~~
~~Bethesda, Maryland 20817~~
~~Control Number:[[SingleControlNumber]]~~
~~To: [[Registration]]~~
Lockheed Martin Corporation’s 2016 Annual Meeting Materials including the 2015 Annual Report and 2016 Proxy Statement are now available online. You may also vote your shares online for the Annual Stockholders Meeting.
~~To view the Proxy Statement visit:~~
~~http:~~
~~To view the Annual Report visit:~~
~~http:~~
~~To cast your vote, please visitwww.investorvote.com~~ and follow the on-screen instructions. You will be prompted to enter the Proxy Login Control Number above in this e-mail to access this voting site. Note that votes submitted through this site must be received by 1:00 a.m. Eastern Daylight Savings Time, April 28, 2016.
You may also vote your shares by telephone by calling (800) 652-8683 within the U.S., Canada and Puerto Rico and (781) 575-2300 from other countries. Follow the instructions provided by the recorded message. You will need the Proxy Login Control Number above in this e-mail for voting identification purposes.
~~Thank you for submitting your very important vote.~~
~~Questions? For additional assistance regarding your account please visit www.computershare.com/ContactUs where you will find useful FAQs, phone numbers and our secure online contact form.~~
~~Please do not reply to this email. This mailbox is not monitored and you will not receive a response.~~

~~Table of Contents~~
~~LOCKHEED MARTIN CORPORATION~~
~~ANNUAL MEETING FOR HOLDERS AS OF 2/26/16~~
~~TO BE HELD ON 4/28/16~~
~~Your vote is important. Thank you for voting.~~
~~Read the Proxy Statement and have the voting instruction form below at hand. Please note that the telephone and Internet voting turns off at 11:59 p.m. ET the night before the meeting or cutoff date.~~
~~Vote by Internet:~~      ~~www.proxyvote.com~~
~~Vote by Phone:~~ ~~1-800-454-8683~~
~~Vote by Mail:~~ ~~Use the envelope enclosed~~

~~TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:~~ ~~E02570-P73799~~
~~Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting. The following materials are available at www.proxyvote.com:~~
~~Notice and Proxy Statement and Annual Report~~

~~The Board of Directors recommends you vote FOR the following director-nominees:~~
1. ~~Election of Directors~~
~~Nominees:~~ ~~For~~ ~~Against~~ ~~Abstain~~
~~1a.~~ ~~Daniel F. Akerson~~ ☐ ☐ ☐
~~1b.~~ ~~Nolan D. Archibald~~ ☐ ☐ ☐
~~1c.~~ ~~Rosalind G. Brewer~~ ☐ ☐ ☐
~~1d.~~ ~~David B. Burritt~~ ☐ ☐ ☐
~~1e.~~ ~~Bruce A. Carlson~~ ☐ ☐ ☐
~~1f.~~ ~~James O. Ellis, Jr.~~ ☐ ☐ ☐
~~1g.~~ ~~Thomas J. Falk~~ ☐ ☐ ☐
~~1h.~~ ~~Marillyn A. Hewson~~ ☐ ☐ ☐
~~1i.~~ ~~James M. Loy~~ ☐ ☐ ☐
~~1j.~~ ~~Joseph W. Ralston~~ ☐ ☐ ☐
~~1k.~~ ~~Anne Stevens~~ ☐ ☐ ☐
~~PLEASE "X" HERE ONLY IF YOU PLAN TO ATTEND THE MEETING AND VOTE THESE SHARES IN PERSON~~ ☐

~~The Board of Directors recommends you vote FOR~~
~~proposals 2, 3 and 4:~~ ~~For~~ ~~Against~~ ~~Abstain~~
2. ~~Ratification of Appointment of Ernst & Young LLP as Independent Auditors for 2016~~ ☐ ☐ ☐
3. ~~Advisory Vote to Approve the Compensation of our Named Executive Officers (Say-on-Pay)~~ ☐ ☐ ☐
4. ~~Management Proposal to Re-Approve Performance Goals for the 2011 Incentive Performance Award Plan~~ ☐ ☐ ☐
~~The Board of Directors recommends you vote AGAINST proposal 5:~~
5. ~~Stockholder Proposal on Special Meeting Stock Ownership Threshold~~ ☐ ☐ ☐
~~NOTE:~~~~Such other business as may properly come before the meeting or any adjournment thereof.~~

~~Signature [PLEASE SIGN WITHIN BOX]~~ ~~Date~~

~~Table of Contents~~

DATE:       March ~~16, 2016~~19, 2018

TO: Lockheed Martin Savings Plan Participants

FROM: Maryanne R. Lavan, Senior Vice President, General Counsel and Corporate Secretary

SUBJECT: Important Notice Regarding Availability of Lockheed Martin Proxy Materials

Lockheed Martin employees are the largest holders of our common stock (representing approximately ~~14%~~13 percent of our outstanding shares). As a Lockheed Martin savings plan participant, you are entitled to vote your shares held through the Lockheed Martin savings plans on the matters to be voted upon at the Corporation’s Annual Meeting of Stockholders on April ~~28, 2016.~~26, 2018.
Tomorrow, you will receive an email from Computershare Trust Company, N.A.(~~cpucommunications.com~~cpucommunications.com), our independent registrar and transfer agent, with a subject line of “Important Notice Regarding Availability of Lockheed Martin Proxy Materials.” The email will include a link to the Corporation’s ~~2015~~2017 Annual Report and ~~2016~~2018 Proxy Statement (together, the Proxy Materials). It will also contain information on how to vote your shares confidentially through the Internet or by telephone.
Your vote is very important. Please ~~watch~~look for your email from Computershare and vote promptly. Note that you may receive multiple proxy packages and voting instructions (electronically and/or by mail). These materials may not be duplicates as you may hold shares of Lockheed Martin stock in multiple accounts. Please be sure to voteall of your sharesin each of your accounts in accordance with the directions on the proxy card(s) and/or voting instruction form(s) you receive.
A hard copy of the Proxy Materials can be requested by calling toll free 1-877-223-3863 ~~(toll free)~~ or 1-267-468-0767, if outside the U.S. Requests will be fulfilled until 3:00 p.m. Eastern Daylight ~~Savings~~ Time on April ~~18, 2016.~~16, 2018.
Please note: ~~Computer~~computer settings vary and unknown email addresses, such as those from Computershare, may sometimes be directed to your “Junk Email” folder. ~~These items can be recovered by dragging and dropping~~If you do not see the email from Computershare in your inbox, check your “Junk Email” ~~folder to your “Inbox.”~~folder.

Table of Contents
Email to Employee Plan Participants(to be sent 03/~~17/16)~~20/18)
Email subject will be:
Important Notice Regarding Availability of Lockheed Martin
Proxy Materials

Annual Report, Proxy Statement and Voting Instructions for the Lockheed Martin Corporation Annual Meeting of Stockholders on April ~~28, 2016~~26, 2018
Proxy Login Control Number:
To:      Lockheed Martin Corporation Savings Plan Participants
You are receiving this email because you are a participant in a Lockheed Martin Corporation savings plan. Instead of receiving your ~~2015~~2017 Annual Report and ~~2016~~2018 Proxy Statement (Proxy Materials) by mail, you can conveniently access your Proxy Materials and vote online at~~www.investorvote.com~~.atwww.investorvote.com. To view the Proxy Materials and cast your vote, enter the Proxy Login Control Number above (without any spaces) and follow the on-screen instructions.
To obtain a hard copy of Proxy Materials (free of charge):
~~To obtain a hard copy of Proxy Materials (free of charge):~~
●
Call ~~toll free~~ 1-877-223-3863 within the U.S.
● Call 1-267-468-0767 from outside the U.S.
●
Requests must be received by 3:00 p.m., Eastern Daylight ~~Savings~~ Time, on April ~~18, 2016~~
16, 2018

Voting deadline:
~~Voting deadline:~~
●
11:59 p.m., Eastern Daylight ~~Savings~~ Time, on Monday, April ~~25, 2016~~
23, 2018
Please note that you may receive multiple proxy packages and voting instructions (electronically and/or by mail). These materials may not be duplicates as you may hold shares of Lockheed Martin stock in multiple accounts. Please be sure to voteall of your sharesin each of your accounts in accordance with the directions on the proxy card(s) and/or voting instruction form(s) you receive.
Please cast your vote today!
Computershare Trust Company, N.A.
Independent Registrar and Transfer Agent for Lockheed Martin Corporation

Table of Contents
Email Reminder to Employee Plan Participants ~~(to~~(to be sent 04/~~01/16~~03/18 and 04/~~15/16)~~12/18)
Email will have date when sent
Email subject will be:
Reminder Notice - Important Notice Regarding Availability of Lockheed Martin
Proxy Materials

Annual Report, Proxy Statement and Voting Instructions for the Lockheed Martin Corporation Annual Meeting of Stockholders on April ~~28, 2016~~26, 2018
Proxy Login Control Number:
To:      Lockheed Martin Corporation Savings Plan Participants
You are receiving this email because you are a participant in a Lockheed Martin Corporation savings plan. Instead of receiving your ~~2015~~2017 Annual Report and ~~2016~~2018 Proxy Statement ~~(“Proxy Materials”)~~(Proxy Materials) by mail, you can conveniently access your Proxy Materials and vote online at~~www.investorvote.com~~.atwww.investorvote.com. To view the Proxy Materials and cast your vote, enter the Proxy Login Control Number above (without any spaces) and follow the on-screen instructions.
To obtain a hard copy of Proxy Materials (free of charge):
~~To obtain a hard copy of Proxy Materials (free of charge):~~
● Call 1-877-223-3863 within the U.S.
●
~~Call toll free 1-877-223-3863 within the U.S.~~
●
Call 1-267-468-0767 from outside the U.S.
●
Requests must be received by 3:00 p.m., Eastern Daylight ~~Savings~~ Time, on April ~~18, 2016~~
16, 2018

Voting deadline:
~~Voting deadline:~~
●
11:59 p.m., Eastern Daylight ~~Savings~~ Time, on Monday, April ~~25, 2016~~
23, 2018
Please note that you may receive multiple proxy packages and voting instructions (electronically and/or by mail). These materials may not be duplicates as you may hold shares of Lockheed Martin stock in multiple accounts. Please be sure to voteall of your sharesin each of your accounts in accordance with the directions on the proxy card(s) and/or voting instruction form(s) you receive.
Please cast your vote today!
Computershare Trust Company, N.A.
Independent Registrar and Transfer Agent for Lockheed Martin Corporation

Table of Contents
~~EVERCORE TRUST COMPANY, N.A.~~
~~IMPORTANT NOTICE TO PARTICIPANTS WITH LOCKHEED~~
~~MARTIN CORPORATION COMMON STOCK ALLOCATED~~
~~TO THEIR ACCOUNT~~[[company_logo]]
~~Dear Plan Participant:~~
~~The enclosed 2016 proxy materials have been prepared at the direction of the Board of Directors of~~ Lockheed Martin Corporation (“
Annual Meeting of Stockholders
April 26, 2018 at 8:00 a.m. Eastern Daylight Time
Lockheed ~~Martin”) in connection with its solicitation of proxies~~Martin Center for Leadership
Excellence Auditorium
6777 Rockledge Drive
Bethesda, Maryland 20817
Control Number:[[SingleControlNumber]]
To: [[Registration]]
Lockheed Martin Corporation’s 2018 Annual Meeting Materials including the 2017 Annual Report and 2018 Proxy Statement are now available online. You may also vote your shares online for the Annual Meeting of ~~Stockholders to be held on April 28, 2016.~~Stockholders.
~~Evercore Trust Company, N.A. (“EVERCORE”), is~~To view the ~~voting trustee with respect to the shares of Lockheed Martin Corporation common stock (“Common Stock”) held in theSANDIA CORPORATION SAVINGS AND INCOME PLAN~~ ~~(the “Plan”). The enclosed Annual Meeting~~ Proxy Card (the “proxy card”) is used for the purpose of giving voting instructions to EVERCORE with respect to shares held in the Plan. This letter provides information concerning the voting of Common Stock held in the Plan.Statement visit:

~~The recommendations of the Board of Directors with respect to matters to be voted upon at~~To view the Annual ~~Meeting of Stockholders are printed on the proxy card. If you want to~~Report visit:

To cast your vote, please visitwww.investorvote.comand follow the ~~Board’s recommendations on all matters, you can do so~~on-screen instructions. You will be prompted to enter the Proxy Login Control Number above in this e-mail to access this voting site. Note that votes submitted through this site must be received by ~~signing, dating and returning the proxy card in the enclosed postage-paid envelope without checking any of the boxes on the proxy card.~~ 1:00 a.m. Eastern Daylight Time, April 26, 2018.
You may also ~~provide voting instructions electronically~~vote your shares by ~~Internet or touch-tone~~ telephone ~~as explained below.~~
~~All matters to be voted upon at this meeting are extremely important~~by calling (800) 652-8683 within the U.S. and ~~are described in the enclosed proxy materials. You should carefully read these materials~~Canada and ~~follow~~(781) 575-2300 from other countries. Follow the instructions ~~below to complete and return the proxy card or provide voting instructions electronically by Internet or telephone.~~
~~VOTING DEADLINE~~
~~In order to ensure that your voting instructions to EVERCORE are tabulated in a timely fashion, your proxy card, Internet or telephone instructions must be receivedno later than 11:59 p.m. Eastern Daylight Savings Time on April 25, 2016.~~
~~If you wish to provide voting instructions by returning the proxy card, you must complete, sign, date and return your proxy card in the envelope~~ provided ~~in time for it to be received~~ by the ~~voting deadline. Please return~~recorded message.
Thank you for submitting your ~~proxy card in the envelope provided which is addressed to Computershare Trust Company, N.A. the confidential vote tabulator for EVERCORE.~~

~~Table of Contents~~very important vote.
~~EVERCORE’S RESPONSIBILITIES~~Questions? For additional assistance regarding your account please visit www.computershare.com/ContactUs where you will find useful FAQs, phone numbers and our secure online contact form.
As the voting trustee with respect to the Lockheed Martin Corporation Common Stock held in the SANDIA Plan, EVERCORE’s responsibilities include providing proxy materials to participants, ensuring the confidentiality of participants’ voting instructions, voting shares in accordance with participant instructions, and voting shares for which no instructions are received from participants.
~~HOW TO GIVE VOTING INSTRUCTIONS~~
~~These instructions explain how you may give voting instructions to EVERCORE with respect to shares of Lockheed Martin Corporation Common Stock held in the Plan.~~
Only EVERCORE can vote the shares of Common Stock held by the Plan. However, under the terms of the Plan, each participant is entitled to instruct EVERCORE on how to vote all shares allocated to his or her account. You may instruct EVERCORE to vote~~“for”~~or~~“against”any particular matter or to abstain from voting on that matter. If you sign, date and return the proxy card but~~Please do not ~~check any boxes on the card, EVERCORE will vote the shares in accordance with the Board’s recommendations on the proxy card.~~
~~You mayalso~~ ~~provide voting instructions~~reply to ~~EVERCORE by using the Internet or a touch-tone telephone. Simply accesswww.investorvote.com~~ on the Internet, scan the QR code included in the proxy materials or dial 1-800-652-8683 on a touch-tone telephone and follow the directions. You must have your proxy card available when you vote by Internet or telephone. If you return the proxy card and also provide voting instructions by Internet and/or telephone, EVERCORE will follow your latest instructions. For this ~~purpose, the date on your proxy card will be the date for those instructions. If it~~email. This mailbox is not ~~possible to determine which voting instructions are the latest, EVERCORE will follow your latest dated electronic voting instructions.~~
~~Failure to Provide Instructions~~
Ifmonitored and you ~~fail to sign, date and return the proxy card or vote by Internet or telephone, EVERCORE will vote shares allocated to your account in its sole discretion.~~
~~CONFIDENTIALITY~~
~~Your voting instructions to EVERCORE are confidential. EVERCORE~~ will not ~~disclose how you voted or if you voted, unless required to do so by law. You should feel free to instruct EVERCORE to vote in the manner you think is best.~~receive a response.
~~QUESTIONS~~
If you have any questions about your voting rights under the Plan, the proxy card or the confidentiality of your vote, please contact EVERCORE between the hours of 8:30 a.m. and 4:00 p.m. Pacific time at 1-888-296-2891.
~~EVERCORE TRUST COMPANY, N.A.~~
~~VOTING TRUSTEE~~
~~Dated March 11, 2016~~

☑	Filed by the Registrant ~~[X]~~
☐	Filed by a Party other than the Registrant ~~[ ]~~

CHECK THE APPROPRIATE BOX:

~~Check the appropriate box:~~

~~[ ]~~☐		Preliminary Proxy Statement
~~[ ]~~☐		Confidential, ~~for~~For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
~~[X]~~☑		Definitive Proxy Statement
~~[ ]~~☐		Definitive Additional Materials
~~[ ]~~☐		Soliciting Material ~~Pursuant to §240.14a-12~~Under Rule 14a-12

~~Payment of Filing Fee (Check the appropriate box)~~PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
~~[X]~~☑	No fee required.
~~[ ]~~☐	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

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

	2)		Aggregate number of securities to which transaction applies:

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

	4)		Proposed maximum aggregate value of transaction:

	5)		Total fee paid:
☐
~~[ ]~~	Fee paid previously with preliminary ~~materials.~~materials:
☐
~~[ ]~~	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the ~~Form~~form or ~~Schedule~~schedule and the date of its filing.

	1)		Amount ~~Previously Paid:~~
			previously paid:
		2)		Form, Schedule or Registration Statement No.:

	3)		Filing Party:

	4)		~~Date Filed:~~
			4) Date Filed:

●	Election of 11 directors
~~DATE:~~		~~Thursday, April 28, 2016~~

~~TIME:~~		~~8:00 a.m. Eastern Daylight Savings Time~~

~~PLACE:~~		~~Lockheed Martin Center for Leadership Excellence Auditorium~~ ~~6777 Rockledge Drive, Bethesda, Maryland 20817~~

You can vote in the following ways:
		Via the Internet: www.investorvote.com

		By Telephone: In the United States, Canada and Puerto Rico, call 1-800-652-8683; outside the United States call 1-781-575-2300.

		By Mail: Mark, date and sign your proxy card or voting instruction form and return it in the accompanying postage prepaid envelope.

		In Person:Attend the meeting to vote in person.

Important Notice Regarding the Availability of Proxy Materials for the 2018 Annual ~~Meeting to be Held on April 28, 2016:~~ Meeting: The ~~2016~~2018 Proxy Statement and ~~2015~~2017 Annual Report are available atwww.lockheedmartin.com/investor.

				~~LOCKHEED MARTIN CORPORATION~~
	~~(Name of Registrant as Specified In Its Charter)~~


	~~(Name of Person(s) Filing Proxy Statement, if other than the Registrant)~~

1.		~~Election of 11 director-nominees to serve on the Board for a one-year term ending at next year’s Annual Meeting;~~

2.	●	Ratification of the appointment of Ernst & Young LLP, ~~an independent registered public accounting firm,~~ as our independent auditors for ~~2016;~~2018

3.●	Management Proposal to approve the Lockheed Martin Corporation Amended and Restated Directors Equity Plan

●	Advisory vote to approve the compensation of our named executive ~~officers;~~officers (Say-on-Pay)

4.		~~Management proposal to re-approve the performance goals for the 2011 Incentive Performance Award Plan;~~

5.	●	Consideration of a stockholder proposal, ~~described in the accompanying Proxy Statement,~~ if properly presented ~~at the Annual Meeting; and~~

6.	●	Consideration of any other matters that may properly come before the ~~meeting.~~meeting

PROXY STATEMENT	51

PROXY SUMMARY	51

CORPORATE GOVERNANCE	95
Corporate Governance Guidelines	95
Board Role in Strategic Planning	95
Independent Lead Director	106
Positions of Chairman and ~~Chief Executive Officer~~CEO	106
Board ~~Evaluation~~Effectiveness, Evaluations and Refreshment	116
Director Overboarding Policy	128
Majority Voting Policy for Director Elections	128
Management Succession Planning	139
Board Role in Enterprise Risk Management	139
Effective Stockholder Engagement	10
Stockholder Right to Amend Bylaws	10
Proxy Access	10
Stockholder Right to Call Special Meeting	1410
No Poison Pill	1411
Director Independence	1411
Related Person Transaction Policy	1511
Certain Relationships and Related Person Transactions of
Directors, Executive Officers and 5 Percent Stockholders	1512

ETHICS AND SUSTAINABILITY	1713
Governance Structure	1713
Ethics Program	1713
Sustainability Program	1814
Supplier and Community Engagement	1814

COMMITTEES OF THE BOARD OF DIRECTORS	1915
~~2015~~2017 Membership on Board Committees	1915
~~Audit Committee Report~~	21

PROPOSAL 1: ELECTION OF DIRECTORS	2218
Board ~~Meeting~~ Attendance	2218
Board Composition, Qualifications and Diversity	2218
Director-Nominees	20

PROPOSAL 2: RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS	2924
Pre-Approval of Independent Auditors Services	2925
Fees Paid to Independent Auditors	2925

Audit Committee Report	26

PROPOSAL 3: ~~ADVISORY VOTE~~ MANAGEMENT PROPOSAL TO APPROVE THE LOCKHEED MARTIN CORPORATION AMENDED AND RESTATED DIRECTORS EQUITY PLAN
~~COMPENSATION OF OUR NAMED EXECUTIVE~~
~~OFFICERS (SAY-ON-PAY)~~	3127

PROPOSAL 4: ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NEOS (SAY-ON-PAY)	30

EXECUTIVE COMPENSATION	3231
Compensation Committee Report	3231
Compensation Discussion and Analysis (CD&A)	3231
Summary Compensation Table	5448
~~2015~~2017 Grants of Plan-Based Awards	5852
Outstanding Equity Awards at ~~2015~~2017 Fiscal Year-End	6054
Option Exercises and Stock Vested During ~~2015~~2017	6155
~~Retirement Plans~~2017 Pension Benefits	6155
~~2015 Pension Benefits~~	62
2017 Nonqualified Deferred Compensation	6357
Potential Payments Upon Termination or
Change in Control	6660
CEO Pay Ratio	64
Equity Compensation Plan Information	70

~~PROPOSAL 4: MANAGEMENT PROPOSAL~~
~~TO RE-APPROVE THE PERFORMANCE~~
~~GOALS FOR THE 2011 INCENTIVE~~
~~PERFORMANCE AWARD PLAN~~	7164

DIRECTOR COMPENSATION	7765

SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS	7967

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE	68

~~REPORTING COMPLIANCE~~PROPOSAL 5: STOCKHOLDER PROPOSAL TO ADOPT STOCKHOLDER ACTION BY WRITTEN CONSENT	8069

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING	72

~~STOCKHOLDER PROPOSAL 5~~	81

~~QUESTIONS AND ANSWERS ABOUT THE~~
~~ANNUAL MEETING~~	83

ATTENDING THE ANNUAL MEETING	8979

~~APPENDIX~~ADDITIONAL INFORMATION AND OTHER MATTERS	80
Appendix A: ~~DEFINITION OF NON-GAAP~~Lockheed Martin Corporation Amended and
~~(GENERALLY ACCEPTED ACCOUNTING~~Restated Directors Equity Plan	80
Appendix B: Definition of Non-GAAP (Generally Accepted
~~PRINCIPLES) MEASURES~~Accounting Principles) Measures	9089

~~APPENDIX B: LOCKHEED MARTIN CORPORATION~~
~~2011 INCENTIVE PERFORMANCE AWARD PLAN, AS~~
~~AMENDED AND RESTATED~~Disclosure Regarding Forward-Looking Statements	9291

2015 Financial Measures*	~~2015 Goals~~ ~~($)~~	~~Reported~~ ~~Results~~ ~~($)~~	~~2015~~ ~~Annual~~ ~~Incentive~~ ~~Assessment~~
~~Orders~~	~~43,500 – 45,000M~~	~~50,229M~~	~~Significantly Exceeded~~
~~Sales~~	~~43,500 – 45,000M~~	~~46,132M~~	~~Significantly Exceeded~~
Segment Operating Profit*	~~5,100 – 5,250M~~	~~5,486M~~	~~Significantly Exceeded~~
~~Cash from Operations~~	~~≥ 5,000M~~	~~5,101M~~	~~Exceeded~~Voting Matters and Board Recommendations

*	Proposal 1	Election of 11 Director-Nominees The Board recommends a vote FOR each of the director-nominees. ●Diverse slate of directors with broad leadership and customer experience. ●All nominees are independent, except the Chairman. ●Average director tenure is seven years with five new directors in four years. See pages 18-23 for further information.
	Proposal 1		We use the following non-GAAP terms in this Proxy Statement – “Segment Operating Profit,” “Return on Invested Capital (ROIC),” and “Performance Cash” – which are defined in Appendix A. Please refer to Appendix A for an explanation of these terms as well as our disclosure regarding forward-looking statements concerning future performance or goals for future performance.

~~2016 Proxy Statement~~	5Proposal 2	Ratification of Ernst & Young LLP as the Independent Auditors for 2018 The Board recommends a vote FOR ratification of Ernst & Young LLP for 2018. ●Independent accounting firm with the breadth of knowledge, support and expertise of its national office and access to that expertise. ●Significant industry and government contracting expertise. ●Periodic mandated rotation of the audit firm’s lead engagement partner. See pages 24-26 for further information.
	5Proposal 2

	Proposal 3	Approval of Lockheed Martin Corporation Amended and Restated Directors Equity Plan The Board recommends a vote FOR the approval of the Amended and Restated Plan. ●Director pay reviewed and benchmarked against our peers with the assistance of an independent consultant. ●Separate plan for directors with low burn rate (fewer than 200,000 shares used in ten years). ●The equity component of director pay aligns the Board with stockholder interests. See pages 27-30 for further information.
	Proposal 3

	Proposal 4	Advisory Vote on the Compensation of the Named Executive Officers (Say-on-Pay) The Board recommends a vote FOR our Say-on-Pay proposal. ●Independent oversight by Management Development and Compensation Committee with the assistance of an independent consultant. ●Executive compensation targets are set by reference to 50th percentile of peers with actual payouts dependent on performance. ●More than 94% of votes cast at the 2017 annual meeting approved Say-on-Pay. See page 30 for further information.
	Proposal 4

	Proposal 5	Stockholder Proposal to Adopt Stockholder Action by Written Consent The Board recommends a vote AGAINST proposal 5. ●Stockholders have the right to call a special meeting at any time. ●Written consent circumvents the deliberative process and lacks procedural safeguards. ●Existing corporate governance policies and practices provide stockholders with multiple means to express their views (for example, proxy access). See pages 69-71 for further information.
	Proposal 5

Board Independence	Board ~~Tenure~~Refreshment	Age Mix

Independent Lead Director	Five New Directors Since 2014	Mandatory Retirement at Age 75

~~Gender~~		~~Age Mix~~
CEO Leadership Experience

~~2016 Proxy Statement~~

	71-YEAR TOTAL STOCKHOLDER RETURN OUTPERFORMED MOST MAJOR INDICES	3-YEAR TOTAL STOCKHOLDER RETURN OUTPERFORMED MAJOR INDICES


	2017 ANNUAL INCENTIVE PROGRAM PAYOUT = 171% OF TARGET*	2015-2017 LONG-TERM INCENTIVE PERFORMANCE AWARD PAYOUT = 144.9% OF TARGET*

*Accountability to Stockholders*
✔	Annual election of directors
✔	Majority voting for directors with resignation policy
✔	Proxy access
✔	Stockholder right to call special meeting
✔	No poison pill and commitment to seek stockholder vote within one year if poison pill adopted

*Effective Board Structure*
✔	Refreshment ongoing – five new directors in four years
✔	Board composition balances government/customer/ industry experience with public company experience
✔	NYSE-mandated committees (governance, compensation, audit) comprised of independent directors
✔	Overboarding policy
✔	Annual board self-assessment

*Responsiveness to Stockholders*
✔	Effective, year-round engagement with stockholders
✔	Bylaws changed to allow amendment by stockholders
✔	Annual Say-on-Pay advisory vote
✔	Policy prohibiting hedging and pledging of company stock by directors, officers and employees

*Strong, Independent Board Leadership*
✔	Independent Lead Director with defined duties
✔	All directors are independent except the Chairman

*Incentive Compensation Structures Align With Strategy*
✔	Short-term and long-term incentive targets derived from long-range plan

*Voting Rights are Proportional to Economic Interests*
✔	One class of stock
✔	One share, one vote

Global Experience	~~Senior Leadership Experience~~		Financial Experts		Government Experience	Veterans of the U.S. Armed Forces
Global Experience	78Directors ~~directors~~ are current or former ~~Chief Executive Officers~~CEOs who add to the effectiveness of the Board through ~~their~~ leadership experience in large, complex organizations and ~~their~~ expertise in corporate governance, ~~international business operations,~~ strategic planning and risk management.		73Directors ~~directors~~ have board leadership experience with multinational companies or in international markets.		5Directorsmeet the Securities and Exchange Commission’s criteria as “audit committee financial experts.”
		~~Global Experience~~4		~~Government/Military Experience~~
	8 ~~directors have broad leadership experience with multinational companies or in international markets.~~	5Directors ~~directors~~ have served in senior government or ~~senior~~ military positions and provide industry experience and insight into ~~our industry and working with~~ our core customers and governments around the world.			6Directorsare military veterans.

Best Practices in Our Programs		Practices We Do Not Engage In or Allow
✓Pay aligns with performance ✓Market-based (50^thpercentile) approach for determining NEO target pay levels ✓Caps on annual and long-term incentives, including when TSR is negative ✓Clawback policy on variable pay ✓Double-trigger provisions for change in control ✓Robust stock ownership requirements ✓Low burn rate ✓Incentive payouts deteriorate more rapidly between minimum and target as compared to target and maximum		✗No employment agreements ✗No option backdating, cash out of underwater options or repricing ✗No excise tax assistance upon a change in control ✗No individual change in control agreements ✗No automatic acceleration of unvested incentive awards in the event of termination ✗No enhanced retirement formula or inclusion of LTI in pensions ✗No enhanced death benefits for executives

*	See non-GAAP terms in Appendix B for an explanation of “Segment Operating Profit,” “Return on Invested Capital (ROIC),” and “Performance Cash” and our forward-looking statements concerning future performance or goals for future performance.
**	For the three-year performance period ended December 31, 2017, actual ROIC was 17.1% compared to our pre-established target of 17.7% and generated a 0.0% payout factor which, pursuant to the award agreement formula, was negatively impacted by the debt issuance associated with our acquisition of Sikorsky Aircraft Corporation.

Proposal	Description	Board Voting Recommendations	Page
1	Election of Directors	FOR ALL DIRECTOR-NOMINEES	22
2	Ratification of Appointment of Independent Auditors	FOR	29
3	Advisory Vote to Approve the Compensation of our Named Executive Officers (Say-on-Pay)	FOR	31
4	Management Proposal to Re-Approve the Performance Goals for the 2011 Incentive Performance Award Plan	FOR	71
5	Stockholder Proposal on Special Meeting Stock Ownership Threshold	AGAINST	81



~~Via the Internet~~ ~~Visit~~ ~~www.investorvote.com~~	~~By Telephone~~ ~~In the United States,~~ ~~Canada and Puerto Rico, call~~ ~~1-800-652-8683; outside the~~ ~~United States call~~ ~~1-781-575-2300.~~	~~By Mail~~ ~~Mark, date and sign your~~ ~~proxy card or voting~~ ~~instruction form and return it~~ ~~in the accompanying~~ ~~postage prepaid envelope.~~	~~In Person~~ ~~Attend the meeting to vote~~ ~~in person.~~

●	~~The~~the role of the Board and director responsibilities;
●	~~The~~the role and responsibilities of the Lead Director;
●	~~Application~~application of our Code of Ethics and Business Conduct (the Code of Conduct) to the Board;
●	~~Director~~director nomination procedures and qualifications;
●	~~Director~~director independence standards;
●	~~Policies~~director overboarding;
●	policies for the review, approval and ratification of related person transactions;
●	~~Director~~director orientation and continuing education;
●	~~Procedures~~review by the Governance Committee of any change in job responsibilities of an incumbent director;
●	procedures for annual performance evaluations of the Board and its committees;
●	~~Director~~director stock ownership guidelines (currently, an amount equal to five times the cash portion of the annual retainer);
●	Aa clawback policy for executive incentive compensation; ~~and~~
●	~~Anti-hedging~~a policy prohibiting hedging and ~~anti-pledging transactions involving our stock.~~ pledging of company stock; and
●	majority voting for the election of directors and resignation procedures for directors who fail to receive a majority vote.

●	the Strategic Affairs Committee of the Board reviews the progress and challenges to the Corporation’s strategy and approves specific initiatives, including acquisitions and divestitures over a certain monetary threshold;
●	the Board (or the appropriate committee) reviews trends identified as significant risks and topical items of strategic interest such as human capital strategy and cybersecurity on a regular basis;
●	at least annually, the Board meets at a Corporation facility where directors can tour the operations and engage directly with employees; and
●	each business segment executive vice president presents an operations review to the Board and each business segment financial officer presents a financial review to the Audit Committee on a rotating basis.

●	~~Preside~~preside as ~~Chair~~chair at Board meetings while in executive sessions of the non-management members of the Board or executive sessions of the independent directors or if the Chairman is ~~ill, absent, incapacitated or otherwise unable to carry out the duties of Chairman;~~not present;
●	~~Determine~~determine the frequency and timing of executive sessions of non-management directors and report to the Chairman on all relevant matters arising from those ~~sessions and invite the Chairman to join executive sessions for further discussion as appropriate;~~sessions;
●	~~Consult~~consult with the Chairman ~~and CEO~~ and committee chairs regarding the topics for and schedules of the meetings of the Board and committees and approve the topics for and schedules of Board meetings;
●	~~Review~~review and approve all Board and committee agendas and provide input to management on the scope and quality of information sent to the Board;
●	~~Assist~~assist with recruitment of director candidates and, along with the Chairman, ~~may~~ extend ~~an invitation~~invitations to a potential ~~director~~directors to join the Board;
●	~~Act~~act as liaison between the Board and management and among the directors and the committees of the Board;
●	~~Serve~~serve as a member of the Executive Committee of the Board;
●	~~Serve~~serve as an ex-officio member of each committee if not otherwise a member of the committee;
●	~~Serve~~serve as the point of contact for stockholders and others to communicate with the Board;
●	~~Recommend~~recommend to the Board and committees the retention of advisors and consultants who report directly to the Board;
●	~~Call~~call a special meeting of the Board or of the independent directors at any time, at any place and for any purpose; and
●	~~Perform~~perform all other duties as may be assigned by the Board from time to time.

●	~~Trends in governance~~Board Effectiveness, Evaluations and ~~in stockholder proposals for separating the roles;~~
●	~~The limited support for stockholder proposals requiring the separation of the roles at the Corporation in prior years;~~
●	The role of the independent directors in the governance of the Corporation, including the scheduling of an executive session of the independent directors at every Board meeting, regular Board review and consideration of the CEO succession plan, the scope of the duties of the Lead Director and the oversight of the CEO’s compensation by the Management Development and Compensation Committee (Compensation Committee), a committee composed entirely of independent directors that is advised by an outside independent compensation consultant;
●	~~Ms. Hewson’s strong performance as a leader since her election as CEO;~~ Refreshment

Board Refreshment Elements
~~Annual Performance~~ Governance ~~Assessment~~Committee Review of Board Candidates		The Board conducts a self-assessment of its performance and effectiveness as well as that of its committees on an annual basis. The self-assessments help track progress in certain areas targeted for improvement from year to year and to identify ways to enhance the Board’s and committees’ effectiveness. For 2015, each director completed a written questionnaire. The questions were open-ended to solicit candid feedback. The collective ratings and comments are compiled, summarized and presented to the Governance Committee and the full Board.
~~Governance~~ ~~Committee Review~~		Each year the Governance Committee recommends to the Board the slate of directors to propose as nominees for election by the stockholders at the Annual Meeting. The process for identifying and evaluating candidates to be nominated to the Board starts with an evaluation of a candidate by the Chairman of the Governance Committee followed by the entire Governance Committee and the Chairman of the Board. The Governance Committee has retained a third party firm to assist in the identification and evaluation of potential director candidates. The Board seeks a diverse group of candidates who, at a minimum, possess the background, skills, expertise and time to make a significant contribution to the Board, the Corporation and its stockholders. The Governance Guidelines list criteria against which candidates may be judged. ~~The~~In addition, the Governance Committee considers, among other things: ●~~Input~~input from the Board’s self-assessment process to prioritize areas of expertise that were identified; ●~~Investor~~investor feedback and perceptions; ●~~The~~the candidates’ skills and competencies to ensure they are aligned to the Corporation’s future strategic challenges and opportunities; ●~~The future~~the needs of the Board in light of recent and anticipated ~~director retirements;~~Board vacancies; and ●Aa balance between public company and government customer-related experience. During the process of identifying and selecting director nominees, the Governance Committee screens and recommends candidates for nomination by the full Board. The Bylaws provide that the size of the Board may range from 10 to 14 members. Director candidates also may be identified by stockholders and will be evaluated under the same criteria applied to other director nominees and considered by the Governance Committee. Information on the process and requirements for stockholder nominees may be found in Sections 1.10 and 1.11 of our Bylaws on the Corporation’s website atwww.lockheedmartin.com/corporate-governance.
Board Committee Assignments		In February of each year, the Governance Committee reviews the membership, tenure, leadership and ~~leadership~~commitments of each of the committees and considers possible changes given the ~~additional~~ qualifications and skill sets of ~~newer~~ members on the Board or a desire for committee rotation or refreshment. The Governance Committee also takes into consideration the membership requirements and responsibilities set forth in each of the respective committee charters and the Governance Guidelines as well as any upcoming vacancies on the Board due to our mandatory retirement age. The Governance Committee recommends to the Board any proposed changes to committee assignments and leadership to be made effective at the next annual meeting of stockholders.
~~Nominees by~~ ~~Stockholders~~		~~Director candidates~~ The Governance Committee also ~~may be identified by stockholders~~reviews the operation of the Board generally and ~~will be evaluated and considered by~~based upon its recommendation, the ~~Governance Committee. Stockholder proposals for nominations for~~Board approved the ~~2017 Annual Meeting should be submitted between~~consolidation of the ~~dates of October 12, 2016 and November 11, 2016, inclusive, to:~~ Nominating and Corporate Governance Committee ~~c/o Senior Vice President, General Counsel~~ and ~~Corporate Secretary, Lockheed Martin Corporation, 6801 Rockledge Drive, Bethesda, MD 20817. Additional information can be found~~the Ethics and Sustainability Committee effective immediately following the Annual Meeting.
Refreshment		The Board has added five new directors in ~~Section 1.10~~the past four years. Mr. Loy will retire at the Annual Meeting and Messrs. Archibald and Ralston will retire in April 2019, providing further opportunity for refreshment. At the same time, obtaining a detailed understanding of ~~our Bylaws on~~ the Corporation’s ~~website at~~~~www.lockheedmartin.com/corporate-governance.~~business takes time. We believe that implementing term limitations may prevent the Board from taking advantage of insight that longer tenure brings.
Annual Performance Assessment		The Board conducts a self-assessment of its performance and effectiveness as well as that of its committees on an annual basis. The self-assessment helps the Governance Committee to track progress in certain areas targeted for improvement from year-to-year and to identify ways to enhance the Board’s and its committees’ effectiveness. For 2017, each director completed a written questionnaire. The questions were open-ended to solicit candid feedback. The collective ratings and comments are compiled and summarized and then discussed by the Governance Committee and the full Board.
Onboarding and Continuing Education		~~Upon joining the Board,~~New directors are provided with an orientation about the Corporation, including our business operations, strategy and governance. Directors ~~may~~are encouraged to attend outside director continuing education programs sponsored by educational and other institutions to assist them in staying abreast of developments in corporate governance and critical issues relating to the operation of public company boards. Members of our senior management regularly review with the Board the operating plan of each of our ~~Business Segments~~business segments and the Corporation as a whole. The Board also conducts periodic visits to our facilities as part of its regularly scheduled Board meetings.

Our Tenure Guidelines
Mandatory Retirement Age		Directors must retire at ~~age 75.~~the annual meeting following his or her 75^thbirthday.
Employment Change		Directors ~~must offer~~should expect to resign upon any ~~substantial~~significant change in principal ~~employment.~~employment or responsibilities.
Failed Election		Directors must offer to resign as a result of a failed stockholder vote.

●	A director may not serve on the boards of more than four other public ~~companies;~~companies.
●	If the director is an active chief executive officer or equivalent of another public company, the director may not serve on the boards of more than two other public ~~companies;~~companies. For this purpose, the Board considers public company board positions required for disclosure by the U.S. rules on proxy statements. We use this definition because it is consistent with the Securities and Exchange Commission (SEC) requirement for disclosure of board service. For companies organized outside of the U.S., the Board considers the time commitment of the particular board and other relevant factors to determine if these should be taken into account in an overboarding assessment.
●	No member of the Audit Committee may serve on more than two other public company audit ~~committees; and~~committees.
●	No member of the Management Development and Compensation Committee (Compensation Committee) may serve on more than three other public company compensation committees.

●	~~The~~the qualifications of the director whose resignation has been tendered;
●	~~The~~the director’s past and expected future contributions to the Corporation;
●	~~The~~the overall composition of the Board and its committees;
●	~~Whether~~whether accepting the tendered resignation would cause the Corporation to fail to meet any applicable rule or regulation (including NYSE listing standards and the federal securities laws); and
●	~~The~~the percentage of outstanding shares represented by the votes cast at the ~~Annual Meeting.~~ annual meeting.

Risk Governance
Board Committee		Risk Mitigation Purview
Audit		Financial and compliance ~~risk~~risks and risk identification process
Classified Business and Security		Classified programs and security of personnel, facilities and data related risks including ~~cyber~~cybersecurity
Ethics and Sustainability		Employee safety and health and ethical conduct ~~risk~~and culture risks; environmental risks
Compensation		Talent, workforce and incentive ~~performance~~ compensation risks
Strategic Affairs		Risks related to business strategy and identified ~~enterprise~~Enterprise risks
Governance		Board composition and corporate governance function and process risks