SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.   )

Filed by the Registrant x

Filed by a Party other than the Registrant o

Check the appropriate box:

ITT INDUSTRIES, INC.

(Name of Registrant as Specified In Its Charter)

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

Payment of Filing Fee (Check the appropriate box):

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

Steven R. Loranger

Chairman, President and Chief Executive Officer

April 4, 2006

Dear Fellow Shareholders:

Enclosed are the Notice of Annual Meeting and Proxy Statement for ITT Industries’ 2006 Annual Meeting of Shareholders. As has been the case with our previous Annual Meetings, this year’s meeting is intended to address only the business included on the agenda. Details of the business to be conducted at the Annual Meeting are given in the accompanying Notice of Annual Meeting and Proxy Statement, which provides information as required by applicable laws and regulations.

If you are the registered owner of ITT Industries’ stock, you may vote your shares by making a toll-free telephone call or using the Internet. You also may vote your shares by returning your proxy form by mail. Details of these voting options are explained in the Proxy Statement. You also can find useful instructions on the enclosed proxy card.

If you are a beneficial owner and someone else, such as your bank or broker, is the owner of record, the owner of record will communicate with you about how to vote your shares.

We urge you to complete and return the enclosed proxy as promptly as possible. Your vote is important.

April 4, 2006

NOTICE OF 2006 Annual Meeting

Table of Contents

Proxy Statement

Why did I receive these proxy materials? Beginning April 4, 2006, this proxy statement is being mailed to shareholders who were shareholders as of the March 17, 2006 record date, as part of the Board of Directors’ solicitation of proxies for ITT Industries’ 2006 Annual Meeting and any postponements or adjournments thereof. This proxy statement and ITT Industries’ 2005 Annual Report to Shareholders and Annual Report on Form 10-K (which have been mailed to shareholders eligible to vote at the 2006 Annual Meeting) contain information that the Board of Directors believes offers an informed view of the Company and meet the regulations of the Securities and Exchange Commission (the “SEC”) for proxy solicitations.

Who is entitled to vote? You can vote if you owned shares of the Company’s common stock as of the March 17, 2006 record date.

What items of business will I be voting on? You are voting on the following items of business which are described on pages 7 through 17:

Information about Voting

How do I vote? You can either vote in person at the Annual Meeting or by proxy whether or not you attend the Annual Meeting.

Why does the Board solicit proxies from shareholders? Since it is impractical for all shareholders to attend the Annual Meeting and vote in person, the Board of Directors recommends that you appoint the two people named on the accompanying proxy card to act as your proxies at the 2006 Annual Meeting.

How do the proxies vote? The proxies vote your shares in accordance with your voting instructions. If you appoint the proxies but do not provide voting instructions, they will vote as recommended by the Board of Directors. If any other matters not described in this proxy statement are properly brought before the meeting for a vote, the proxies will use their discretion in deciding how to vote on those matters.

What are the proxy voting procedures? Instructions are included on the proxy card. You may vote:

How many votes do I have? You have one vote for every share of ITT Industries common stock that you own.

What if I change my mind? You can revoke your proxy at any time before it is exercised by mailing a new proxy card with a later date or casting a new vote by the Internet or telephone. You can also send a written revocation to the Company Secretary at the address listed on the first page of the proxy statement. If you come to the Annual Meeting you can ask that the proxy you submitted earlier not be used.

If I don’t return the proxy card or vote at the 2006 Annual Meeting what happens to my vote? If your shares are held by a broker, bank or other owner of record, your shares can be voted by the broker for all the scheduled agenda items. If your broker does not have discretion to vote your shares held in street name on a proposed agenda item and you provide no instructions on how to vote, the votes will be broker non-votes. That means the votes will be counted only for the purpose of determining a quorum, but not for or against any agenda item.

How many shares of ITT Industries stock are outstanding? As of the March 17, 2006 record date, 184,810,236 shares of ITT Industries common stock were outstanding.

How many holders of ITT Industries outstanding shares must be present to hold the Annual Meeting? In order to conduct business at the Annual Meeting it is necessary to have a quorum. To have a quorum, a majority of outstanding ITT Industries shares of common stock on the record date must be present in person or by proxy.

How are my votes counted? How many votes are required to elect Directors or approve a proposal? You may vote “for” or “withhold” your vote with respect to any Director standing for reelection. Indiana law, the state in which ITT Industries is incorporated, provides that directors are elected by a plurality of the votes cast. This means that the nine director candidates who receive the highest number of votes will be elected as the Directors of ITT Industries. Our Corporate Governance Principles, which are attached as Appendix I, provide for a review process should any nominee for Director in an uncontested election receive less than 50% of the votes cast. Such Director nominee must promptly provide a written resignation to the Chair of the Nominating and Governance Committee. The Nominating and Governance Committee then considers the resignation and recommends to the independent directors of the Board whether to accept, reject (applicable only in clearly compelling circumstances) or provide an opportunity for cure with respect to the Director nominee who

received less than 50% of the votes cast. The independent directors of the Board must act on the Nominating and Governance Committee’s recommendation at the earlier of its next regularly scheduled Board Meeting or within 90 days after certification of the shareholder vote and must promptly publicly disclose the decision and the Board’s reasons for the decision. More specific information with respect to this process may be found in our Governance Principles at Appendix I, Section II2.

With respect to other agenda items, you may vote for, against or abstain from voting. For all the other items of business to be voted on at the 2006 Annual Meeting the item will be approved if the votes in favor are greater than the votes against the item.

Under Indiana law abstentions and broker non-votes are counted to determine whether there is a quorum, but abstentions and broker non-votes are not counted as votes for or against the election of Directors or other matters to be voted on. Therefore, abstentions and broker non-votes will not impact the election of Directors, ratification of the appointment of auditors, or the proposal to amend ITT Industries’ Restated Articles of Incorporation to change the Company’s name to ITT Corporation.

What is the difference between a beneficial owner and a registered owner? If shares you own are held in an ITT Industries savings plan for salaried or hourly employees, a stock brokerage account, bank or by another holder of record you are considered the “beneficial owner” because someone else holds the shares on your behalf. If the shares you own are registered in your name directly with the Bank of New York, our transfer agent, you are the registered owner and the “shareholder of record”.

How do I vote if I am a participant in ITT Industries’ savings plans for salaried or hourly employees? If you participate in any of the ITT Industries’ savings plans for salaried or hourly employees, your plan trustee will vote the ITT Industries shares credited to your savings plan account in accordance with your voting instructions. The trustee votes the shares on your behalf because you are the beneficial owner, not the record owner of the savings plan shares. The trustee votes the savings plan shares for which no voting instructions are received in the same proportion as the shares for which the trustee receives voting instructions.

I participate in the ITT Industries savings plan for salaried employees and also am a shareholder of record of shares of ITT Industries’ common stock. How many proxy cards will I receive? You will receive only one proxy card. Your savings plan shares and any shares you own as the shareholder of record, including ownership through the Direct Purchase, Sale and Dividend Reinvestment Plan for ITT Industries, Inc. will be set out separately on the proxy card.

How many shares are held by participants in the ITT Industries’ employee savings plans? As of March 17, 2006, the record date, Wells Fargo Institutional Trust Services, as the trustee for the employee salaried savings

plan, held 14,260,479 shares of ITT Industries’ common stock (approximately 7.72% of the outstanding shares) and Northern Trust, as the trustee for the hourly employees savings plan, held 763,580 shares of ITT Industries’ common stock (approximately 0.4% of the outstanding shares).

Who counts the votes? Is my vote confidential? Representatives of the Bank of New York count the votes. Representatives of IVS Associates, Inc. act as Inspectors of Election for the 2006 Annual Meeting. The Inspectors of Election monitor the voting and certify whether the votes of shareholders are kept in confidence in compliance with ITT Industries’ confidential voting policy.

Who pays for the proxy solicitation cost? ITT Industries pays the cost of soliciting proxies from registered owners. ITT Industries has appointed Georgeson & Company to help with the solicitation effort. We will pay Georgeson & Company a fee of $12,500 to assist with the solicitation. We also reimburse brokers, nominees, custodians and other fiduciaries for their costs in sending proxy materials to beneficial owners.

Who solicits proxies? Directors, officers or other regular employees of ITT Industries may also solicit proxies from shareholders in person or by telephone, facsimile transmission or other electronic communication.

What happens if I return my proxy without indicating how I want my shares voted? If you return the proxy without specifying how you want your shares voted, you are giving discretionary authority to the proxies to vote your shares in accordance with the recommendations of the Board of Directors, which are described on pages 7 to 17. If any other matters are properly presented for consideration at the 2006 Annual Meeting, the persons named as proxies will have discretion to vote on these matters according to their best judgment to the same extent as the person delivering the proxy would be entitled to vote. There are three formal items scheduled to be voted upon at the Annual Meeting: election of Directors, ratification of the appointment of the independent auditors, and amendment to the Restated Articles of Incorporation to change the name of the corporation from ITT Industries, Inc. to ITT Corporation, effective July 1, 2006. As of the date of this proxy statement, the Board of Directors is not aware of any business other than as described in this proxy statement that will be presented for a vote at the 2006 Annual Meeting.

How does a shareholder submit a proposal for the 2006 Annual Meeting? Rule 14a-8 of the Securities Exchange Act of 1934, or the “Exchange Act,” establishes the eligibility requirements and the procedures that must be followed for a shareholder’s proposal to be included in a public company’s proxy materials. Under the rule, if a shareholder wishes to include a proposal in ITT Industries’ proxy materials for its next Annual Meeting, those eligibility requirements and procedures must be complied with and the proposal must be received by ITT Industries at its principal executive offices on or before December 5, 2006. An ITT Industries shareholder who wishes to present a matter for action at ITT Industries’ next Annual Meeting, but chooses not to do so under Exchange Act

Rule 14a-8, must deliver to ITT Industries, at its principal executive offices, on or before December 5, 2006 a written notice to that effect. In either case, as well as for shareholder nominations for Directors, the shareholder must also comply with the requirements in the Company’s By-laws with respect to a shareholder properly bringing business before the Annual Meeting. (A copy of the By-laws may be obtained from the Secretary of ITT Industries.)

Can a shareholder nominate Director Candidates? The Company’s By-laws permit shareholders to nominate Directors at the Annual Meeting. In order to make a Director nomination at the 2007 Annual Meeting, it is necessary that you submit a notice with the name of the candidate on or before December 5, 2006. The nomination and notice must meet all other qualifications and requirements of the Company’s Governance Principles, By-laws and Regulation 14A of the Exchange Act. The nominee will be evaluated by the Nominating and Governance Committee of the Board using the same standards as it uses for all Director nominees, which are discussed in further detail below at page 19 under “Information about the Board of Directors-Director Selection and Composition.” No one may be nominated for election as a Director after he or she has reached 72 years of age. (A copy of the nomination requirements may be obtained from the Secretary of ITT Industries.)

Stock Ownership of Directors and Executive Officers

The Board of Directors’ share ownership guidelines currently provide for share ownership levels at five times the annual retainer amount. Directors receive a portion of their retainer in restricted stock and are encouraged to hold such restricted stock until such time as his or her total share ownership meets or exceeds the ownership guidelines. The Company also has share ownership guidelines for corporate officers. These guidelines, described on page 46, were first approved by ITT Industries’ Board of Directors during 2001 and are regularly reviewed. The guidelines specify the desired levels of Company stock ownership and encourage a set of behaviors to enable each officer to reach the guideline levels. The Committee monitors compliance with the guidelines periodically and, as of February 28, 2006, the share ownership levels have been substantially met. More specific information is provided in the Report of the Compensation and Personnel Committee.

The following table shows, as of February 28, 2006, the beneficial ownership of ITT Industries’ common stock and options exercisable within 60 days by each Director, by each of the executive officers named in the Summary Compensation Table, and by all Directors and executive officers as a group. In addition, with respect to Mr. Loranger, we have provided information about ownership of stock-linked instruments that provide economic linkage to the common stock but do not represent actual beneficial ownership of shares. On February 21,

2006 the Company effected a 2:1 split of its common stock. Share ownership in the table below is disclosed on a post-split basis.

The number of shares beneficially owned by each Director or executive officer has been determined under the rules of the SEC, which provide that beneficial ownership includes any shares as to which a person has sole or shared voting or dispositive power, and any shares which the person would have the right to acquire beneficial ownership of within 60 days through the exercise of any stock option or other right.

Unless otherwise indicated, each Director or executive officer has sole dispositive and voting power, or shares those powers with his or her spouse.

As of February 28, 2006, all Directors and executive officers as a group owned .09% of the shares deemed to be outstanding. No individual Director or executive officer owned in excess of one percent of the shares deemed to be outstanding.

Beneficial Ownership of ITT Industries’ Common Stock

Set forth below is information reported to the SEC on the most recently filed Schedule 13G by the following person who owned more than 5% of ITT Industries’ outstanding common stock. This information does not include holdings by the Trustee with respect to individual participants in the ITT Industries Investment and Savings Plan for Salaried Employees.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires that the Company’s executive officers and directors, and any persons beneficially owning more than 10% of a registered class of the Company’s equity securities, file reports of ownership and changes in ownership with the SEC within specified time periods. To the Company’s knowledge, based upon a review of the copies of the reports furnished to the Company and written representations that no other reports were required, all of these filing requirements were satisfied in a timely manner for the year ended December 31, 2005.

Proposals to be voted on at the 2006 Annual Meeting

The Board of Directors has nominated nine individuals for election as Directors at the 2006 Annual Meeting. Each of the nominees is currently serving as a Director of ITT Industries and has agreed to continue to serve if elected until his or her retirement, resignation or death. If unforeseen circumstances arise before the 2006 Annual Meeting and a nominee becomes unable to serve, the Board of Directors could reduce the size of the Board or nominate another candidate for election. If the Board nominates another candidate, the proxies could use their discretion to vote for that nominee. Each Director elected at the 2006 Annual Meeting will be elected to serve as a Director until ITT Industries’ next Annual Meeting.

The Board of Directors recommends that you vote FOR the election of each of the following nine nominees:

Mr. Loranger, 54, was appointed President and Chief Executive Officer and elected a Director of ITT Industries, Inc. on June 28, 2004. He was elected Chairman of the Board of Directors on December 7, 2004. Mr. Loranger previously served as Executive Vice President and Chief Operating Officer of Textron, Inc. from 2002 to 2004, overseeing Textron’s manufacturing businesses, including aircraft and defense, automotive, industrial products and components. From 1981 to 2002, Mr. Loranger held executive positions at Honeywell International Inc. and its predecessor company, AlliedSignal, Inc., including serving as President and Chief Executive Officer of its Engines, Systems and Services businesses. Mr. Loranger is a member of the Business Roundtable and serves on the boards of the National Air and Space Museum and the Congressional Medal of Honor Foundation. Mr. Loranger received Bachelors and Masters degrees in science from the University of Colorado.

Mr. Loranger has been a Director of ITT Industries since 2004.

Dr. Crawford, 58, is President and Chief Executive Officer of XCEO, Inc. From April 1, 2002 to March 31, 2003 he served as President and Chief Executive Officer of Onix Microsystems, a private photonics technology company. He was Chairman of the Board of Directors of ON Semiconductor Corporation from September 1999 until April 1, 2002. Previously, he was President and Chief Executive Officer of ZiLOG, Inc. from 1998 to 2001 and its Chairman from 1999 to 2001. Dr. Crawford is a Director of E.I. DuPont de Nemours and Company, ON Semiconductor Corporation, and Agilysys, Inc. and is a member of the Board of Trustees of DePaul University. He received a B.A. degree in business administration and computer science and an M.A. degree from Governors State University, an M.B.A. from DePaul University and a Ph.D. from Capella University. Governors State University awarded him an honorary doctorate in 1996 and he received an honorary doctorate degree from DePaul University in 1999.

Dr. Crawford has been a Director of ITT Industries since 1996.

Mrs. Gold, 58, was named Senior Executive Vice President, First Data Corp. and President, Western Union Financial Services, Inc., a global leader in money transfer and financial services on May 20, 2002. Prior to joining Western Union she was Chairman, President and Chief Executive Officer of Excel Communications. She was also President and Chief Executive Officer of The Beaconsfield Group and from February 1997 to March 1998, Mrs. Gold was Executive Vice President, global direct selling of Avon Products, Inc. She is a Director of New York Life Insurance Company, The Torstar Corporation and is a member of the President’s Advisory Council of Carleton University. Mrs. Gold is a graduate of Carleton University, Ottawa, Canada.

Mrs. Gold has been a Director of ITT Industries since 1997.

Mr. Hake, 57, was named Chairman and Chief Executive of Maytag Corporation in June of 2001⁽¹⁾. Previously, he was Executive Vice President and Chief Financial Officer for Fluor Corporation, an engineering and construction firm. From 1987 to 1999, Mr. Hake served in various executive capacities at Whirlpool Corporation, including Chief Financial Officer and Senior Executive Vice President for global operations. Mr. Hake serves on the Board of the National Association of Manufacturers, where he is Chairman of that association’s Taxation and Economic Policy Group. Mr. Hake is a 1971 business and economics graduate of the University of Cincinnati and holds an M.B.A. from the University of Chicago.

Mr. Hake has been a Director of ITT Industries since 2002.

Dr. Hamre, 55, was elected President and Chief Executive Officer of CSIS in April of 2000. Prior to joining CSIS, he served as U.S. Deputy Secretary of Defense from 1997 to 2000 and Under Secretary of Defense (Comptroller) from 1993 to 1997. Dr. Hamre is a Director of MITRE Corporation, Choicepoint, Inc. and SAIC, Inc. He received a B.A. degree, with highest distinction from Augustana College in Sioux Falls, South Dakota, was a Rockefeller Fellow at Harvard Divinity School and was awarded a Ph.D., with distinction, from the School of Advanced International Studies, Johns Hopkins University, in 1978.

Dr. Hamre has been a Director of ITT Industries since 2000.

Mr. LeBoeuf, 59, was Chief Executive Officer of PPG Industries from July 1997 to March 31, 2005, was elected a Director of PPG in December 1995 and was its Chairman through June 30, 2005. Mr. LeBoeuf joined PPG Industries in 1980 as its Treasurer and was an Executive Vice President of PPG from 1994 to 1995. He is also a Director of Praxair, Inc. Mr. LeBoeuf is a Board Member of Robert Morris University. Mr. LeBoeuf is a graduate of Northwestern University and holds an M.B.A. from the University of Illinois.

Mr. LeBoeuf has been a Director of ITT Industries since 2000.

Mr. MacInnis, 59, has been Chairman of the Board and Chief Executive Officer of EMCOR Group, Inc. since April 1994. He was also President of EMCOR from April 1994 to April 1997. Mr. MacInnis is also a Director of The Williams Companies, Inc., The Greater New York Chapter of the March of Dimes and ComNet Communications, LLC. Mr. MacInnis received an undergraduate degree from The University of Alberta and is a graduate of The University of Alberta Law School, Alberta, Canada.

Mr. MacInnis has been a Director of ITT Industries since 2001.

Ms. Sanford, 53, was named Senior Vice President, Enterprise on Demand Transformation, IBM in January 2003. Previously, she was Senior Vice President and Group Executive, IBM Storage Systems Group responsible for development of IBM’s Enterprise Storage Server and other storage-related hardware and software. She also has held positions as General Manager, IBM Global Industries and General Manager of IBM’s S/390 Division. Ms. Sanford is a member of the Women in Technology International Hall of Fame and the National Association of Engineers. She is on the Board of Directors of St. John’s University and Rensselaer Polytechnic Institute, serves on the Board of Directors of Partnership for New York City and is Chairperson of the Board of Directors for the Business Council of New York State, Inc. Ms. Sanford is a graduate of St. John’s University and earned an M.S. degree in operations research from Rensselaer Polytechnic Institute.

Ms. Sanford has been a Director of ITT Industries since 1998.

Mr. Tambakeras, 55, has been Executive Chairman to the Board of Directors, Kennametal Inc. since January 1, 2006. Previously he was President and Chief Executive Officer of Kennametal from July 1999 through December 31, 2005. Mr. Tambakeras was named a Director of Kennametal in July 1999, served as its Chairman from July 1, 2002 and has served as its Executive Chairman since January 1, 2006. From 1997 to June 1999, Mr. Tambakeras served as President, Industrial Controls Business of Honeywell Incorporated. Mr. Tambakeras also serves on the Board of Parker Hannifin Corporation, is Chair of the Manufacturers Alliance Board of Trustees and is a member of the President’s Manufacturing Council. Mr. Tambakeras received a B.Sc. degree from the University of Witwatersrand, Johannesburg, South Africa and an M.B.A. from Loyola Marymount University, Los Angeles, CA.

Mr. Tambakeras has been a Director of ITT Industries since 2001.

B. Ratification of Appointment of the Independent Auditors

Subject to shareholders ratification, the Board of Directors has appointed Deloitte & Touche LLP as ITT Industries’ independent auditors (the “Independent Auditor”) for 2006. Deloitte & Touche LLP is registered as a registered public accounting firm by the Public Company Accounting Oversight Board (“PCAOB”).

Representatives of Deloitte & Touche LLP attended all meetings of the Audit Committee during 2005. The Audit Committee reviewed and considered the nature of the non-audit services provided by Deloitte & Touche LLP to ITT Industries in 2005. The Audit Committee discussed these services with Deloitte & Touche LLP and Company management and determined that the services were permitted under the rules and regulations concerning auditor independence promulgated by the SEC to implement the Sarbanes-Oxley Act of 2002, as well as the rules promulgated by the American Institute of Certified Public Accountants.

Representatives of the Independent Auditor will be present at the 2006 Annual Meeting to answer questions. They also will have the opportunity to make a statement if they desire to do so.

Independent Auditor Fees

Aggregate fees billed to the Company for the fiscal years ended December 31, 2005 and 2004 represent fees billed by the Company’s independent auditor, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, “Deloitte & Touche”).

Pre-Approval of Audit and Non-Audit Services

The Audit Committee pre-approves audit services provided by the Independent Auditor and outsourced internal auditor (“Internal Auditor”).

The Audit Committee has also adopted a policy addressing pre-approval of non-audit services provided by the Independent Auditor and non-audit services provided by the Company’s Internal Auditor. The purpose of the policy is to clearly identify circumstances where the Independent Auditor and the Internal Auditor may perform non-audit services and where such services shall require further approval by the Audit Committee. The Audit Committee has determined that, where practical, all non-audit services shall first be placed for competitive bid prior to selection of a service provider. Management may select the party deemed best suited for the particular engagement, which may or may not be the Independent Auditor or the Internal Auditor. Providers other than the Independent Auditor and Internal Auditor shall be preferred in the selection process. The policy and its implementation are reviewed and reaffirmed on a regular basis to assure conformance with applicable rules.

The Audit Committee has approved specific categories of audit-related services and tax services incidental to the normal auditing function which the Independent Auditor may provide without further Audit Committee approval. These categories are:

The Audit Committee has also approved specific categories of audit-related services, including assessment and review of internal controls and effectiveness of those controls, which the Internal Auditor may provide without further approval. However, if fees for any pre-approved non-audit services provided by either of the Independent Auditor or the Internal Auditor exceed a pre-determined threshold during any calendar year, any additional proposed non-audit services provided by that service provider must be submitted for prior approval by the Audit Committee. Other audit-related and tax services are also subject to specific prior approval if the prospective fee exceeds a pre-determined threshold. The Audit Committee reviews the fees paid or committed to the Independent Auditor and the Internal Auditor on at least a quarterly basis.

The Company may not engage the Independent Auditor to provide the services described below:

Employees of the Independent Auditor and the Internal Auditor who are senior manager level or above and have had any involvement with the Company in the independent audit and/or internal audit activities shall not be employed by the Company in any capacity for a period of five years after the termination of their activities on behalf of the Company.

The Board of Directors recommends you vote FOR ratification of appointment of the Company’s Independent Auditor.

C. Amendment to the Restated Articles of Incorporation

The Company’s Board of Directors has adopted, and recommends that shareholders approve at the 2006 Annual Meeting a proposal to amend ARTICLE FIRST of the Company’s Restated Articles of Incorporation to change the name of the corporation to ITT Corporation, to be effective July 1,

2006. This proposal will be approved if more shares are voted in favor of the proposal than against it.

Market research with both internal and external audiences provided compelling evidence that the name “ITT Industries” does not fully reflect the current breadth and scope of the Company’s activities. The Company was incorporated under the name “ITT Industries” in 1995 to distinguish itself from other entities with similar names. Subsequently these other entities have either been acquired by companies that chose not to use the ITT name, or they have chosen new company names that do not incorporate the ITT name. The Company feels that the diverse range of businesses and markets it now serves is best reflected by the proposed name “ITT Corporation.”

The Board of Directors believes that the proposed amendment to the Restated Articles of Incorporation shown below is in the best interest of the Company and its shareholders:

RESTATED ARTICLES OF INCORPORATION

(AS PROPOSED TO BE AMENDED)

ARTICLE FIRST

The name of the corporation is ITT Corporation (the “Corporation”).

The Board of Directors recommends you vote FOR the amendment to the Restated Articles of Incorporation to change the name of the Company from ITT Industries, Inc. to ITT Corporation, to be effective July 1, 2006.

Information about the Board of Directors

Responsibilities of the Board of Directors. The Board of Directors sets policy for ITT Industries and advises and counsels the chief executive officer and the executive officers who manage the Company’s business and affairs. The Board of Directors is responsible for assuring that:

The Board of Directors has adopted principles for governance of the Board (the “Corporate Governance Principles”) and charters for each of its standing committees. The Corporate Governance Principles provide, among other things, that a Coordinating Director shall be selected from the Committee chairs, on a rotating basis, to preside at meetings of the Board of Directors at which the Chairman is not present, including regularly scheduled private sessions of the non-employee Directors. Each Coordinating Director serves until the next regular or special meeting of the Board of Directors, whichever occurs first.

The Corporate Governance Principles further provide that Directors must be able to devote the requisite time for preparation and attendance at regularly scheduled Board and Board Committee meetings, as well as be able to participate in other matters necessary for good corporate governance. To help assure that Directors are able to fulfill their commitments to the Company, the Corporate Governance Principles provide that Directors who are chief executive officers of publicly-traded companies may serve on not more than two public company boards (including the ITT Industries’ Board) in addition to service on their own board and other Directors may not serve on more than four public company boards (including the ITT Industries’ Board).

The Corporate Governance Principles and Committee Charters are reviewed by the Board at least annually and posted on the Company’s website at www.itt.com. The Board’s Corporate Governance Principles are attached as Appendix I to this Proxy Statement. A copy of the Corporate Governance Principles will be provided, free of charge, to any shareholder upon request to the Corporate Secretary.

The Company has also adopted the ITT Industries, Inc. Code of Corporate Conduct which applies to the Company’s chief executive officer, chief financial officer and principal accounting officer. The Code of Corporate Conduct is also posted on the Company’s website at www.itt.com. The Company discloses any changes or waivers from its code of ethics on its website for the Company’s chief executive officer, chief financial officer, principal accounting officer and controller and other executive officers. A copy of the Corporate Conduct will be provided, free of charge, to any shareholder upon request to the Corporate Secretary.

Communication with the Board of Directors. Interested parties may contact the Coordinating Director, all outside Directors as a group or an individual Director by submitting a letter to the desired recipient in a sealed envelope labeled “Coordinating Director”, “Outside Directors” or with the name of a specific director. This letter should be placed in a larger envelope and mailed to the Corporate Secretary, ITT Industries, Inc. 4 West Red Oak Lane, White Plains, NY 10604, USA. The Corporate Secretary will forward the sealed envelope to the designated recipient.

Independent Directors. The Company’s By-laws require that a majority of the Directors must be independent directors. The Corporate Governance Principles define independence and the Charters of the Audit, Compensation and Personnel, and Nominating and Governance Committee require all members to be independent directors.

Under the Corporate Governance Principles and By-laws, an independent director is someone who is free of any relationship that would interfere with the exercise of independent judgment, and within the past 5 years:

With respect to Directors standing for election at the Company’s 2006 Annual Meeting, the Board of Directors has affirmatively determined, after considering all relevant facts and circumstances that no Non-Employee Director has a material relationship with the Company and that all Non-Employee Directors meet the independence standards of the Corporate Governance Principles and By-laws as well as the independence definition in the final New York Stock Exchange corporate governance rules for listed companies. The following are the independent directors standing for election: Drs. Crawford and Hamre, Messrs. Hake, MacInnis, LeBoeuf and Tambakeras, Mrs. Gold and Ms. Sanford.

Director Selection and Composition. Directors of the Company must be persons of integrity, with significant accomplishments and recognized business stature.

To be considered by the Nominating and Governance Committee as a Director candidate, a nominee must meet the requirements of the Company’s By-laws and Corporate Governance Principles. A nominee should also have experience as a board member, chief executive officer or senior officer of a publicly traded or large privately held company, or have achieved recognized prominence in a relevant field as, for example, a distinguished faculty member of a highly regarded educational institution or senior governmental official. In addition to these minimum qualifications, the Nominating and Governance Committee

evaluates each nominee’s skills to determine if those skills are complementary to the skills demonstrated by current Board members. The Nominating and Governance Committee also evaluates the Board’s needs for operational, technical, management, financial, international or other expertise.

Prior to recommending nominees for election as Directors, the Company’s Nominating and Governance Committee engages in a deliberative, evaluative process to assure each nominee possesses the skills and attributes that individually, and collectively will contribute to an effective Board of Directors. Biographical information for each candidate for election as a Director is evaluated and candidates for election participate in interviews with existing Board members and management, and are subject to thorough background checks. Director nominees must be willing to commit the requisite time for preparation and attendance at regularly scheduled Board and Committee meetings and participation in other matters necessary for good corporate governance.

The Nominating and Governance Committee identifies Director candidates through a variety of sources including personal references and business contacts. On occasion the Nominating and Governance Committee utilizes a search firm to identify and screen Director candidates and pays a fee to that firm for each such candidate elected to the Board of the Company.

Committees of the Board of Directors. The four standing Committees of the Board described below perform essential corporate governance functions. The post of Committee Chair rotates every four years and members of each Committee are rotated periodically to assure that fresh points of view are reflected.

Audit Committee

2005 Audit Committee Members:

The Board of Directors has determined that each member of the Audit Committee meets the independence standards set out in the Board’s Corporate Governance Principles and its Audit Committee Charter and the requirements of the New York Stock Exchange currently in effect and Rule 10A-3 of the Exchange Act. The Board of Directors has evaluated the performance of the Audit Committee consistent with the PCAOB requirements.

A copy of the Audit Committee Charter is available on the Company’s website (www.itt.com/profile/govandcharters.asp). The Company will provide, free of charge, a copy of the Audit Committee Charter to any shareholder upon request to the Company Secretary.

Compensation and Personnel Committee

2005 Compensation and Personnel Committee Members:

The Board of Directors has determined that each member of the Compensation and Personnel Committee meets the independence standards set out in the Board’s Corporate Governance Principles and its Compensation and Personnel Committee Charter and the requirements of the New York Stock Exchange currently in effect.

A copy of the Compensation and Personnel Committee Charter is available on the Company’s website (www.itt.com/profile/govandcharters.asp). The Company will provide, free of charge, a copy of the Compensation and Personnel Committee Charter to any shareholder, upon request to the Company Secretary.

Corporate Responsibility Committee

2005 Corporate Responsibility Committee Members:

A copy of the Corporate Responsibility Committee Charter is available on the Company’s website (www.itt.com/profile/govandcharters.asp). The Company will provide, free of charge, a copy of the Corporate Responsibility Committee Charter to any shareholder, upon request to the Company Secretary.

Nominating and Governance Committee

2005 Nominating and Governance Committee Members:

The Board of Directors has determined that each member of the Nominating and Governance Committee meets the independence standards set out in the Board’s Nominating and Governance Committee Charter and Corporate Governance Principles and the requirements of the New York Stock Exchange currently in effect.

A copy of the Nominating and Governance Committee Charter is available on the Company’s website (www.itt.com/profile/govandcharters.asp). The Company will provide, free of charge, a copy of the Nominating and Governance Committee Charter to any shareholder, upon request to the Company Secretary.

During 2005, there were 6 regularly scheduled Board meetings, 2 special Board meetings and 23 meetings of standing Committees. All Directors attended at least 75% of the aggregate of all meetings of the Board and standing Committees on which they served.

It is Company practice that all Directors attend the Company’s Annual Meeting. Eight Directors attended the Company’s 2005 Annual Meeting. Mr. LeBoeuf was unable to attend due to a previously scheduled commitment. For 2006, the Board has scheduled five regular meetings. In conjunction with the regular meetings, those Directors who are not employees of ITT Industries are scheduled to meet privately (without management) following each Board meeting during the year. The Coordinating Director presides over these private meetings.

Compensation of Non-Employee Directors. Shareholders of the Company adopted the ITT Industries, Inc. 2003 Equity Incentive Plan, the “2003 Plan,” pursuant to which restricted shares and options are granted to Non-Employee Directors. Share number and price information discussed below reflects the Company’s February 21, 2006 2:1 stock split.

Under the Non-Employee Director compensation program adopted in 2003 Non-Employee Directors received: $50,000 as a retainer payable in restricted stock, $25,000 in lieu of meeting fees, payable at the election of each Director, in cash, deferred cash or additional restricted stock and a stock option award valued at $25,000. Directors were able to irrevocably elect, on an annual basis, to defer receipt of the cash portion to a future date. Such cash amounts were treated as though invested in an interest bearing account or in a fund that tracks the performance of ITT Industries’ common stock as selected by the Director.

In 2005, the actual number of stock options awarded was calculated by dividing $25,000 by $11.73, the Black-Scholes value of an ITT Industries’ stock option, consistent with the method used for the employee stock option program, rounded to the nearest 10 shares. That number of options, 2140, was received on March 8, 2005, at an exercise price of $45.47 per share, the closing price of ITT shares on that date. Non-Employee Directors also received 1,092 shares of restricted stock on May 10, 2005 as their annual retainer. In lieu of meeting

fees, Drs. Crawford and Hamre, and Mr. Tambakeras elected to receive an additional 546 shares of restricted stock, Ms. Sanford and Mr. Hake elected to receive cash and Mr. LeBoeuf, Mr. MacInnis and Mrs. Gold elected deferred cash.

Effective December 1, 2005, the Board of Directors of ITT Industries, (upon the recommendation of its Nominating and Governance Committee,) approved changes to its Non-Employee Director compensation program. As approved, Non-Employee Directors receive total annual compensation in the amount of $180,000. Such compensation is payable as follows:

Additionally, the Board of Directors of ITT Industries approved (with the Audit Committee Chair abstaining) a supplemental retainer of $10,000 in cash to be paid to the Audit Committee chair, effective as of the Company’s 2006 Annual Meeting.

In order to implement these changes on the December 1, 2005 effective date, the Board of Directors of ITT Industries approved a compensation adjustment for each Non-Employee Director for the 2005-2006 tenure in the amount of $40,000. The compensation adjustment was made in a form consistent with the election previously made for the 2005-2006 tenure by each Non-Employee Director. Drs. Crawford and Hamre, and Mr. Tambakeras each received an additional grant of 874 shares of ITT restricted stock. Mr. Hake and Mrs. Sanford elected to receive payment in cash. Mrs. Gold and Messrs. LeBoeuf and MacInnis elected to receive deferred cash.

On March 6, 2006 each Non-Employee Director was awarded a stock option grant of 3,040 shares at an option exercise price of $52.68 per share, the closing price of shares on that date. In 2006, the actual number of stock options was calculated by dividing $40,000 by $13.18, the binomial lattice valuation model for an ITT Industries’ stock option, consistent with the method used for the employee stock option program, rounded up to the nearest 10 shares.

The number of restricted shares, rounded to the nearest share, granted in May 2005, for all Non-Employee Directors under the Non-Employee Director compensation program adopted in 2003 and for the three Non-Employee Directors receiving restricted shares under the adjustment effective December 1, 2005, was determined by dividing $50,000 and $40,000, for the May 2005 grant and December 2005 grant respectively, by $45.83, the average

of the high and low sales prices per share of ITT Industries’ common stock on the date of the annual meeting or as soon thereafter as legally permissible. Directors receive dividends on the restricted shares and may vote the shares during the restriction period. Restricted stock granted under these programs is held in escrow by the Company until the restrictions lapse. Non-Employee Director stock option grants are priced and awarded on the same day that employee stock options are priced and awarded.

The Board of Directors’ share ownership guidelines currently provide for share ownership levels at five times the annual retainer amount. Directors are encouraged to elect restricted stock as a component of the retainer until such time as his or her total share ownership meets or exceeds the ownership guidelines.

Mr. Loranger, as an employee Director, does not receive compensation for his Board service.

Restricted shares awarded under the ITT Industries’ 1996 Restricted Stock Plan for Non-Employee Directors, which preceded the 2003 Plan, provided that each Director’s restricted shares are held in escrow and may not be transferred in any manner until one of the following events occurs:

Under the 1996 Restricted Stock Plan for Non-Employee Directors, Non-Employee Directors may choose to extend the restriction period for up to two successive five year periods, or until six months and one day following the Non-Employee Director’s termination from service from the Board under certain permitted circumstances. The ITT Industries’ 1996 Restricted Stock Plan for Non-Employee Directors also provided that if a Director ceased serving on the Board under any other circumstances, shares with respect to which the Plan restrictions have not been lifted would be forfeited. Under the 2003 Plan, the Compensation and Personnel Committee determines transfer restrictions and the period of restriction for restricted stock granted pursuant to that Plan. Directors may choose to extend the restriction period for up to two successive five year periods, or until six months and one day following the

Director’s termination of service from the Board under certain permitted circumstances.

ITT Industries, Inc. reimburses Directors for expenses they incur to travel to and from Board, Committee and shareholder meetings and for other Company-business related expenses (including the travel expenses of spouses if they are specifically invited to attend an event for appropriate business purposes). Such travel may include use of the Company aircraft if available and approved in advance by the Chairman of the Board and Chief Executive Officer. Airfare is reimbursed at no greater than first-class travel rates.

Indemnification and Insurance. As permitted by its By-laws, ITT Industries indemnifies its Directors to the full extent permitted by law and maintains insurance to protect the Directors from liabilities, including certain instances where it could not otherwise indemnify them. All Directors are covered under a non-contributory group accidental death and dismemberment policy that provides each of them with $750,000 of coverage. They may elect to purchase additional coverage under that policy. Non-Employee Directors also may elect to participate in an optional non-contributory group life insurance plan that provides $100,000 of coverage.

Report of the Audit Committee

The following Report of the Audit Committee does not constitute soliciting material and the Report should not be deemed filed or incorporated by reference into any other previous or future filings by the Company under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates this Report by reference therein.

• Role of the Audit Committee.

The Audit Committee of the Board of Directors provides oversight on matters relating to the Company’s financial reporting process and assures that the Company develops and maintains adequate financial controls and procedures, and monitors compliance with these processes. This includes responsibility for, among other things:

The Audit Committee also has oversight responsibility for confirming the scope and monitoring the progress and results of internal audits conducted by the Company’s Internal Auditor. The Audit Committee discussed with the Company’s Internal Auditors and Independent Auditors the plans for their respective audits. The Audit Committee met with the Internal Auditors and Independent Auditors, with and without management present, and discussed results of their examinations, their evaluation of the Company’s internal controls, and the Company’s financial reporting.

The Company’s management has primary responsibility for the financial statements, including the Company’s system of disclosure and internal controls. The Audit Committee may investigate any matter brought to its attention. In that regard, the Audit Committee has full access to all books, records, facilities and personnel of the Company and the Audit Committee may retain outside counsel, auditors or other independent experts to assist the Committee in performing its responsibilities. Any individual may also bring matters to the Audit Committee confidentially or on an anonymous basis, by submitting the matter in a sealed envelope addressed to the “Audit Committee” to the

Corporate Secretary who then forwards the sealed envelope to the Audit Committee.

• Sarbanes-Oxley Act of 2002 (“SOX”) Compliance.

The Audit Committee has responsibility for monitoring all elements of the Company’s compliance with Sections 302 and 404 of SOX relating to internal control over financial reporting.

• Audit Committee Charter.

The Board of Directors has adopted a written charter for the Audit Committee, which the Board and the Audit Committee review, and at least annually update and reaffirm. The Charter sets out the purpose, membership and organization, and key responsibilities of the Audit Committee.

• Composition of the Audit Committee.

The Audit Committee is comprised of four members of the Company’s Board. The Board of Directors has determined that each Audit Committee member meets the independence standards set out in the Audit Committee Charter and Corporate Governance Principles and the requirements of the New York Stock Exchange currently in effect, including the audit committee independence requirements of Rule 10A-3 of the Exchange Act. No member of the Audit Committee has any relationship with the Company that may interfere with the exercise of independence from management and the Company. All members of the Audit Committee, in the business judgment of the full Board of Directors, are financially literate and several have accounting or related financial management expertise. The Board of Directors has identified Ralph F. Hake and Raymond W. LeBoeuf as audit committee financial experts.

• Regular Review of Financial Statements.

During 2005, the Audit Committee reviewed and discussed the Company’s 2005 audited financial statements with management. The Audit Committee, management and the Company’s Independent Auditors reviewed and discussed the Company’s unaudited financial statements before the release of each quarter’s earnings report and filing on Form 10-Q, and the Company’s audited financial statements before the annual earnings release and filing on Form 10-K.

• Communications with Independent Auditors.

The Audit Committee has discussed with Deloitte & Touche LLP, the Independent Auditors, the matters required by Statement on Auditing Standards No. 61, Communication with Audit Committees (“SAS 61”), as modified or supplemented by the Auditing Standards Boards of the American Institute of Certified Public Accountants. These discussions included all matters required by SAS 61, including Independent Auditors’ responsibilities

under generally accepted auditing standards in the United States, significant accounting policies and management judgments, the quality of the Company’s accounting principles and accounting estimates. The Audit Committee met privately with the Independent Auditors 6 times during 2005.

• Independence of Independent Auditors.

The Company’s Independent Auditors are directly accountable to the Audit Committee and the Board of Directors. The Audit Committee has received from the Independent Auditors required written disclosures, including a formal written statement, setting out all the relationships between the Company and its Independent Auditors, as required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, as amended by the Independence Standards Board. The Audit Committee has discussed the Independent Auditors’ independence, any disclosed relationships and the impact of those relationships on the Independent Auditors’ independence.

• Recommendation Regarding Annual Report on Form 10-K.

In performing its oversight function during 2005 with regard to financial statements for 2005, the Audit Committee relied on financial statements and information prepared by the Company’s management. It also relied on information provided by the Internal Audit staff as well as the Independent Auditors. The Audit Committee reviewed and discussed with management the Company’s audited financial statements as of and for the year ended December 31, 2005. Based on these discussions, and the information received and reviewed, the Audit Committee recommended to the Company’s Board of Directors that the financial statements be included in the Annual Report on Form 10-K for that year (or the Annual Report to Shareholders if distributed prior to the filing of Form 10-K).

This report is furnished by the members of the 2005 Audit Committee.

Executive Compensation

Compensation Committee Interlocks and Insider Participation

The Compensation and Personnel Committee (the “Committee”) of the Board of Directors of ITT Industries during the last fiscal year consisted of Mr. Tambakeras, Chair, Dr. Crawford, Mr. MacInnis and Ms. Sanford, none of whom is or formerly was an officer or employee of the Company or any of its subsidiaries.

Report of the Compensation and Personnel Committee

As indicated in the Committee’s Charter, available on the Company’s website at www.itt.com/profile/govandcharter.asp, the purpose of the Compensation and Personnel Committee is to provide oversight and review of compensation and benefits provided to the employees of the Company. The Committee evaluates and makes regular reports to the Board of Directors on matters concerning management performance, employee compensation and human resources policies, programs and plans including management development and continuity plans, and approves employee compensation programs and benefit programs. The Committee may select, retain and determine the terms of engagement for independent compensation and benefits consultants and other outside counsel, as needed, to provide independent advice to the Committee with respect to the Company’s current and proposed executive compensation and employee benefit programs. During 2005, the Committee retained an independent compensation consultant.

This report discusses the application of the Company’s compensation policies to ITT Industries’ executive officers in general, and the rationale for the decisions affecting the compensation as reported for 2005 of Steven R. Loranger, each of the four other named executive officers in the Summary Compensation Table who occupied their position on December 31, 2005, as well as Edward W. Williams and Robert L. Ayers, each of whom left their former positions as Chief Financial Officer, ITT Industries, and President, ITT Fluid Technology, respectively, during the year.

ITT Industries is a global, multi-industry engineering and manufacturing company with leading positions in the markets it serves. ITT Industries has approximately 40,900 employees located in 57 countries with 2005 sales of approximately $7.4 billion and assets of approximately $7.1 billion.

Compensation Philosophy

In establishing compensation policies and programs for 2005, the Committee considered compensation and other benefits provided to executives of corporations similar to ITT Industries. These corporations consisted of leading manufacturing companies in the S&P^® Industrials Composite Index. The S&P^® Industrials Composite Index is comprised of a larger number of companies than the S&P^® Industrials Index, the peer group discussed below, and as such is

more representative of the broad labor market in which the Company competes for executives.

ITT Industries’ executive compensation program historically has been designed to attract, reward, and retain capable executives and to provide incentives that vary depending upon the attainment of short-term performance objectives and strategic long-term performance goals. The major objective of the short-term annual incentive program is to link performance to specific performance targets and strategic business goals. The major objective of the long-term incentive program is to provide ITT Industries’ executives with incentives directly linked to the creation of shareholder value. In reviewing ITT Industries’ compensation programs, the Committee has agreed with management’s desire to provide a clear link between compensation and performance. The Company believes that the measures of performance in its compensation programs must be aligned with the measures that are key to the success of its businesses. The strong link between compensation and performance is intended to provide incentives for achieving financial and business objectives and increasing the value of the Company’s stock, thereby increasing value to our shareholders.

The Compensation Program. The executive compensation program of ITT Industries is based on current competitive compensation practices as well as on performance measures and policies that focus on the continued growth of shareholder value. Compensation for ITT Industries’ executives consists of base salary, annual incentives, long-term incentives including stock-based programs, and employee benefits. While the elements of compensation are described separately below, the Committee considers the total compensation package when determining each component of the named executive officer’s compensation. The Company’s philosophy is to target total compensation at the median of its peer group, the companies in the S&P Industrials Index, subject to individual variation based on an executive’s experience and performance, and with the ability to provide for actual compensation to be higher or lower than the target level if performance or contribution to the organization is above or below expectations. The Summary Compensation Table reflects payments and awards made to Steven R. Loranger and each of the four other named executive officers in the Summary Compensation Table who occupied their position on December 31, 2005, as well as Edward W. Williams and Robert L. Ayers, who occupied positions as executive officers during the year.

• Base Salary.

Salaries are set and administered to reflect the value of the job in the marketplace and individual contribution and performance. Based on a recent ITT Industries compensation survey, ITT Industries’ senior executive salaries are at competitive levels. Salaries provide a necessary element of stability in the total pay program. Salary increases are based primarily on merit, and during 2005 the normal interval between salary reviews for all executives was twelve months.

The Committee reviewed the performance of the named executive officers of ITT Industries during 2005. The Committee will continue to review and assess the performance of the Chief Executive Officer and all senior executives and will authorize salary actions it believes are appropriate, commensurate with relevant competitive data and the approved ITT Industries’ salary administration program. As of March 1, 2006, the annual salaries of the officers named in ITT Industries’ Summary Compensation Table were as follows: Mr. Loranger, $1,000,000; Mr. Driesse, $520,000; Mr. Gaffney, $425,000; Mr. Maffeo, $440,000; and Mr. Minnich, $480,000. In connection with setting Mr. Loranger’s base salary, the Committee considered individual and corporate performance as well as external market data. Mr. Williams resigned as Chief Financial Officer on July 1, 2005, and left the Company’s employ at year end. Mr. Ayers resigned as an officer on September 30, 2005 but continues as an active employee through September 30, 2006.

• Annual Incentive Plan.

For 2005, the named executive officers participated in the ITT Industries 1997 Annual Incentive Plan for Executive Officers (the “AIP”) approved by ITT Industries’ shareholders in 1997. Bonus amounts paid under the AIP were based on the financial performance of ITT Industries during 2005 as compared with the annual performance goals established and approved by the Committee at the beginning of the 2005 performance year. The amounts paid with respect to performance year 2005 reflect ITT Industries’ strong overall operational and financial performance during the year. The bonus awards for 2005 shown in the Summary Compensation Table following this report include payments in accordance with the AIP and an additional payment made outside the plan to Mr. Maffeo in the amount of $16,402 to recognize individual performance. For performance year 2005 the approved annual performance goals were based 60% on Return on Invested Capital (“ROIC”), 20% on Revenues and 20% on Quarterly Cash Targets. The Company considers ROIC an easily understood measurement of capital utilization in the Company’s businesses. Additionally, the Committee established individual award targets which varied by position as a percentage of base salary, with the award targets for the Chief Executive Officer and the other named executive officers ranging from 60% to 100% of base salary. Actual payment under the plan is discretionary, may range from zero to a maximum of 200% of target, and may not exceed the approved performance targets established by the Committee.

For performance year 2006, the Committee determined that bonus opportunities under the AIP will be dependent on the same basic corporate performance goals (ROIC, Revenues and Quarterly Cash Targets) with the same weighting as set forth above, except that for the named executive officers in ITT Industries’ commercial businesses (which excludes the defense industry businesses) the first component, ROIC, is set at 40% and the remaining 20% of the first component is dependent on Operating Margin rate, and for the named executive officers in ITT Industries’ Corporate Headquarters, the first

component, ROIC, is set at 40% and the remaining 20% of the first component is dependent on Earnings Before Interest and Taxes (“EBIT”) margin rate performance. This formula change for 2006 is based on the Committee’s determination that Operating Margin rate is an appropriate measure for the performance of the Company’s commercial businesses, and EBIT margin rate is an appropriate measure for Corporate Headquarters. Operating Margin rate and EBIT margin rate are not employed in the defense industry businesses, as these businesses contain components where margin rates often are contractually limited.

For 2006, the Committee determined award targets for the Chief Executive Officer and the other named executive officers ranging from a minimum of 65% to a maximum of 110% of the individual’s base salary. In order for payment to be earned under the AIP for 2006 (“Base Bonus”), achievement of 90% or more of the approved targets at Corporate Headquarters, or at the relevant management company must be achieved. Additionally, the AIP includes a 2006 Bonus Multiplier (“Bonus Multiplier”) which becomes effective based on a growth threshold determined by earnings per share from continuing operations for 2006 over 2005. The Bonus Multiplier will be applied to the individual’s calculated Base Bonus amount under the AIP, and is designed to place additional emphasis on achieving premier earnings growth at the overall enterprise level while encouraging focus on management company and value center performance. The factors identified by the Committee in setting the AIP bonus opportunities reflect our commitment to profitable performance, margin rate expansion (as applicable to non-defense businesses), revenue growth, cash generation and ROIC expansion. The Bonus Multiplier provides a performance factor which encourages all of our businesses to contribute toward the Company’s goal to reach premier status. Actual individual payments under the AIP for 2006 are discretionary and may not exceed the approved performance targets established by the Committee. The combination of the Base Bonus and Bonus Multiplier amount may range from zero to a maximum 250% of target. Discretionary factors may be considered by the Committee when determining the amounts, if any, to be paid for performance year 2006. The Committee may make adjustments to awards within the approved performance guidelines based upon significant events or circumstances, including but not limited to acquisitions, divestitures or changes in accounting principles.

• Long-Term Incentive Award Program.

ITT Industries’ Long-Term Incentive Award Program is based on the competitive market and designed to link incentive awards directly to the creation of shareholder value. The target value of each award is determined based on market data, individual contribution and business performance, and is approved each year by the Committee. For 2005, all executives were eligible to participate in the program through non-qualified stock options. For senior executives, the total award value was split equally between non-qualified stock

options and target cash awards under the Long-Term Incentive Plan (described on page 40).

For 2006, all executives are eligible to participate in the program through restricted stock. For senior executives and approximately fifty-five additional executives in the next management levels, the 2006 total award value is split as follows: 50% in target cash based on total shareholder return; 25% in non- qualified stock options and 25% in restricted shares. Non-qualified stock options granted in 2006 vest and become exercisable three years from the date of grant for senior executives and vest in one-third annual installments on the first, second and third anniversary of the grant date for remaining executives. The option term is seven years. For 2006, unvested options expire upon termination of employment or resignation.

The components of the Long-Term Incentive Award Program, which are Stock-Based awards and Long-Term Incentive Plan awards, are described in detail below.

      • Stock-Based Awards.

Restricted Stock:

Restricted stock is the incentive component utilized for all executive participants in the Company’s Long-Term Incentive Award Program described above. Restricted stock provides long-term incentives that are directly related to the performance of ITT Industries’ common stock and closely align executives’ interests with those of other shareholders. Approximately 392,854 shares of restricted stock were granted effective March 6, 2006 to 428 executives under the ITT Industries, Inc. 2003 Equity Incentive Plan (the “2003 Plan”). Awards to the named executive officers were as follows: Mr. Loranger, 23,706 shares; Mr. Driesse, 5,689 shares; Mr. Gaffney, 4,267 shares; Mr. Maffeo, 3,793 shares; and Mr. Minnich, 5,215 shares. Restricted stock awards are subject to a three-year period of restriction.

Stock Options:

Approximately 543,015 non-qualified stock options were granted effective March 6, 2006 to approximately 108 executives under the ITT Industries Inc. 2003 Plan. Options awarded under the Plan are granted at the closing price of ITT Industries shares on the New York Stock Exchange on the date of grant. Grants to the named executive officers were as follows: Mr. Loranger, 83,612 shares; Mr. Driesse, 20,067 shares; Mr. Gaffney, 17,071 shares; Mr. Maffeo, 13,378 shares; and Mr. Minnich, 18,395 shares. For Messrs. Loranger, Driesse, Gaffney, Maffeo, and Minnich, such options were granted on March 6, 2006 at an option exercise price of $52.68 per share. The options granted to Messrs. Loranger, Driesse, Maffeo and Minnich will vest and become exercisable three years from the date of grant. The options for Mr. Gaffney vest in one-third cumulative annual installments on the first, second and third anniversary of the grant date. The option term for all options granted is seven years.

Non-qualified stock options issued prior to March 8, 2005 had terms of ten years. Stock options awarded to the named executive officers, except for Mr. Gaffney, on and after March 8, 2005 and prior to March 6, 2006 vest upon a 25% appreciation in ITT Industries’ common stock price for ten (10) consecutive trading days. The options may not be exercised, in any event, earlier than three years from the grant date. If the option threshold is not achieved, the options vest six years from the grant date and may be exercised for the remainder of the option term. The option term is seven years. The vesting conditions for Mr. Gaffney’s 2005 options are the same as for the 2006 award described above. The stock option tables on pages 54 to 55 provide information relating to stock options held by the individuals named in the Summary Compensation Table on page 50. Restricted stock and stock option awards closely align the Company’s performance in creating shareholder value.

      • Long-Term Incentive Plan Awards.

The ITT Industries 1997 Long-Term Incentive Plan (the “LTIP”), approved by shareholders in 1997, authorizes performance awards to be made to key employees of ITT Industries at the discretion of the Committee. In 2006 the Company expanded eligibility for participation in this plan to include senior executives and approximately fifty-five additional executives in the next management levels, revising its prior practice that only the most senior executives participate in this plan. Awards granted under the plan are expressed as target cash awards and comprise 50% of the total long-term incentive value. The balance of the total long-term award value is comprised 25% in non-qualified stock options and 25% in restricted stock as discussed above.

The provisions of the LTIP provide that the Committee shall determine the size and frequency of awards, performance measures, performance goals and performance periods. The size of the awards is determined by the Committee in order to meet competitive practice. Payment, if any, of target cash awards generally will be made at the end of the applicable three-year performance period and will be based on ITT Industries’ performance measured against the total shareholder return (“TSR”) performance of other stocks comprising the S&P Industrials Index, the performance measure approved by the Committee prior to the performance period.

Payment, if any, of awards may be made in whole or in part, at the discretion of the Committee, in the form of cash and/or common stock of ITT Industries. The Committee determined that payment for the awards granted in 2003 be made wholly in cash. It is anticipated that future payments under the LTIP will continue to be made entirely in cash.

The Committee granted 2006 target awards under the LTIP to 108 key employees valued at $14,490,500 and one award made outside the LTIP valued at $500,000. The performance period with respect to the 2006 awards is three years beginning January 1, 2006. The 2006 target awards made to each of the individuals named in the Summary Compensation Table are as follows:

Mr. Loranger, $2,000,000; Mr. Driesse, $600,000; Mr. Gaffney, $450,000; Mr. Maffeo, $400,000, and Mr. Minnich, $550,000. Mr. Loranger also received a 2006 target phantom TSR Award of $500,000 which is subject to the same performance thresholds and conditions as awards under the LTIP. The ultimate value, if any, of each of these awards will be determined in accordance with the established performance measurement formula for the target awards granted in 2006. The Committee designated a minimum 35th percentile performance level at which a 50% payout would be earned and fixed a maximum performance payment of 200% earned for performance at or above the 80th percentile. The payout is zero under 35th percentile performance. The award amounts set forth above would be the amounts earned if the formula results in payment at the 100% level. Payment, if any, with respect to the 2006 target awards will be based on the Company’s total shareholder return performance compared with the performance of other stocks comprising the S&P^® Industrials Index.

Messrs. Driesse, Gaffney, Maffeo, Williams, and Ayers received target awards in 2003 under the ITT Industries LTIP. Mr. Loranger received a 2003 target award upon commencement of his employment with the Company. These awards were subject to a three-year performance period ending December 31, 2005 and were subject to achievement of pre-established goals, as approved by the Committee in 2003, measuring ITT Industries’ performance with respect to total shareholder return against the performance of other stocks comprising the S&P^® Industrials Index. LTIP payments were made in strict accordance with the plan as measured for the period January 1, 2003 through December 31, 2005 and are shown in the Summary Compensation Table on page 50. Based on the Company’s performance at the 59.53 percent rank of the S&P^® Industrials Index, payout was at 131.77% of target, which was in accordance with the approved formula. The Committee determined that payment be made wholly in cash.

Payment or vesting of awards made under the Long-Term Incentive Program would be accelerated upon the occurrence of a change in control of ITT Industries as described on pages 57 to 59.

Mr. Loranger’s Compensation Arrangements.

Mr. Loranger entered into an employment agreement (“The Steven R. Loranger Employment Agreement”) with the Company under which he serves as President and Chief Executive Officer, as well as a member of the Board of Directors. The term of Mr. Loranger’s employment agreement is from June 28, 2004 to June 27, 2007, subject to automatic 12-month extensions unless ITT Industries or Mr. Loranger gives at least 180 days prior written notice of non-extension. Mr. Loranger received a base salary of $900,000 under the agreement, subject to increase by the Board of Directors. He is eligible to receive an annual cash bonus under the AIP based upon the achievement of performance targets established by the Committee, with a target bonus equal to 100% of his base salary and a maximum bonus equal to 200% of his base

salary. In March 2006, the Committee set Mr. Loranger’s target AIP bonus at 110% of his base salary for the 2006 performance year, such AIP award, if any to be paid in 2007.

Pursuant to The Steven R. Loranger Employment Agreement, Mr. Loranger received a grant by ITT Industries in the 2005 fiscal year of a long-term incentive award with an aggregate target value of $4,500,000, consisting of (i) a target award in the amount of $1,800,000 granted pursuant to the LTIP for the performance period January 1, 2005 through December 31, 2007 and (ii) a target award in the amount of $450,000 under terms identical to those of the LTIP (but not awarded under the LTIP) (the “Phantom LTIP Award”), to be paid on or before March 30, 2008 in cash, shares or a combination thereof, plus (iii) a non-qualified stock option grant with an aggregate value of $2,250,000 made during the first quarter of 2005 pursuant to the 2003 Plan. Mr. Loranger also participates in the LTIP for the performance periods January 1, 2003 through December 31, 2005 and January 1, 2004 through December 31, 2006, with a target award for each such performance period of $1,800,000. Payment for the 2003 target LTIP awards was made in January 2006 and such amount is included in the Summary Compensation Table on page 50. Mr. Loranger also will be eligible for an additional Phantom LTIP Award in respect of each of the 2003-2005 and 2004-2006 performance periods in the target amounts of $700,000, in accordance with his employment agreement. Mr. Loranger received sign-on awards of 250,000 non-qualified stock options and 250,000 restricted stock units on June 28, 2004, as adjusted to reflect the February 21, 2006 2:1 stock split.

Mr. Loranger is eligible to participate in the Company’s benefit plans on the same basis as other senior executives, may use corporate aircraft for business travel and occasional personal use (when not otherwise scheduled for business use), receives a monthly automobile allowance of $1,300, and may receive reimbursement for the initiation fee and dues for at least one business club.

The agreement provides for a non-qualified pension arrangement if Mr. Loranger’s employment is terminated on or after June 28, 2009. This arrangement provides for an annuity paid monthly over Mr. Loranger’s life, calculated as a percentage of his average annual compensation for the five years in which his compensation was highest, which percentage ranges from 38% if Mr. Loranger is age 57 upon the date of his termination through 50% if Mr. Loranger is at least age 60 on the date of his termination. If Mr. Loranger’s employment is terminated prior to June 28, 2009 by the Company without “cause” or by Mr. Loranger for “good reason” (as each such term is defined in the employment agreement), in either case upon or following a “change of control” (as defined in the employment agreement), Mr. Loranger shall be entitled to receive a lump-sum payment of the actuarial present value of this non-qualified pension. These pension benefits are offset by any benefits to which he is entitled (or which he already has received) under other defined benefit pension arrangements maintained by the Company or any

prior employer. Mr. Loranger is entitled to retiree medical coverage as in effect for persons joining the Company on June 28, 2004 (the effective date of Mr. Loranger’s employment), provided that if his employment is terminated by ITT Industries without cause or by him for good reason on or after June 28, 2005, that termination will be considered a “retirement” under the Company’s retiree medical plan and entitle him to receive benefits under that arrangement.

If Mr. Loranger’s employment terminates due to disability, death or retirement, he (or his estate) will be entitled to receive a pro-rata target bonus for the year of termination and the target award for each outstanding LTIP award and Phantom LTIP Award. If Mr. Loranger’s employment is terminated by the Company without cause or by Mr. Loranger for good reason (other than during the two-year period following a change in control), he will be entitled to receive a pro-rata target bonus for the year of termination, plus continued payment of his base salary and target bonus for a period of two years from the date of termination. If within the two-year period following a change in control the Company terminates Mr. Loranger’s employment without cause or Mr. Loranger terminates his employment for good reason, ITT Industries will pay Mr. Loranger a lump sum payment consisting of (i) a pro-rata target bonus for the year of termination and (ii) a severance payment equal to three times the sum of his base salary and the highest bonus paid to him in the three years prior to the change in control. Mr. Loranger also receives continued health and welfare benefits for up to two years following a termination without cause or for good reason (whether before or after a change in control). If Mr. Loranger’s employment is terminated at the end of the initial term or any successive twelve-month renewal period on account of the Company giving a non-extension notice, such termination will be treated as a termination without cause, except that his base salary and target bonus will only be continued for one year. If any payments to Mr. Loranger are determined to be excess parachute payments under Section 280G of the Internal Revenue Code of 1986, as amended, he will receive a gross-up payment in respect of the excise taxes incurred by him.

All severance payments are conditioned upon Mr. Loranger’s execution of a general release. Mr. Loranger is subject to two-year, post-termination non-compete and non-solicitation covenants. There were no changes to Mr. Loranger’s agreement during 2005.

Mr. Minnich’s Compensation Arrangements.

Mr. Minnich accepted an offer of employment with the Company as its Senior Vice President and Chief Financial Officer, (the “Minnich Letter Agreement”) effective July 1, 2005. The Minnich Letter Agreement provides for, among other things, annual base salary, annual incentive and long-term incentive. Under the Minnich Letter Agreement, Mr. Minnich received an annual base salary of $460,000, and an annual incentive payment calculated in accordance with the ITT Industries AIP for Executive Officers. However, the Minnich

Letter Agreement provides that if the bonus calculated under the plan is less than $345,000 or 75% of annual base salary, a separate payment will be made outside the plan such that the total payment will be no less than $345,000 or 75% of annual base salary for the 2005 performance year. In March, 2006, Mr. Minnich received an AIP payment of $475,000 for 2005. Mr. Minnich also received, under the Minnich Letter Agreement, 50,000 non-qualified stock options granted under the 2003 Plan with an exercise price of $49.27, the closing price of ITT Industries common stock on the first day of his employment, as adjusted to reflect the February 21, 2006 2:1 stock split. The stock options are exercisable upon the earlier of (1) a 25% closing share price appreciation for ten consecutive days as reported by the New York Stock Exchange or (2) six years from the date of grant. However, these options may not be exercised earlier than three years from the grant date and have a term of seven years. Mr. Minnich also received the following target awards under the LTIP: a 2004 target award of $250,000 with a measurement period of January 1, 2004 through December 31, 2006 with payment, if any, to be made in January 2007, and a 2005 target award of $500,000 with a measurement period January 1, 2005 through December 31, 2007 with payment, if any, to be made in January 2008. Mr. Minnich additionally received a restricted stock award of 20,000 shares of restricted stock granted under the ITT Industries 2003 Equity Incentive Plan on his first day of employment, (as adjusted to reflect the February 21, 2006 2:1 stock split). The restricted stock vests in installments of 10,000 shares after three years from the date of grant, and 10,000 shares after five years from the date of grant. Upon termination prior to the vesting date, other than for cause, restrictions with respect to restricted shares lapse and Mr. Minnich will receive these shares without restriction, upon satisfactory payment to ITT Industries of any tax obligation.

Mr. Minnich also receives a monthly automobile allowance of $1,300 and received reimbursement of relocation costs in accordance with Company policy, payment of all appropriate closing costs associated with the purchase of a residence in the White Plains, New York area and a one-month salary as a “settling-in” allowance on a tax-protected basis. Mr. Minnich is covered under the ITT Industries Senior Executive Severance Pay Plan, but will receive a severance benefit equal to two years of base salary if terminated other than for cause. If terminated other than for cause during the first three years of employment, an additional lump sum termination payment of $515,000 will be paid. Mr. Minnich is also covered under the ITT Industries, Inc. Special Senior Executive Severance Pay Plan which provides, in part, for severance pay equal to the sum of three times the highest annual base salary rate paid and three times the highest bonus paid in respect of the three years preceding a change of control. For purposes of this plan, if Mr. Minnich is terminated during the first year of employment the base salary rate shall be the current salary and the bonus for the performance year 2005 will be a target of 75% of said base salary. Mr. Minnich is eligible to participate in the Company’s benefit plans on the

same basis as other senior executives. There were no changes to Mr. Minnich’s agreement during 2005.

Mr. Ayers’ Compensation Arrangements.

On September 7, 2005, the Company and Robert L. Ayers, formerly President of the Company’s Fluid Technology business segment, entered into a Separation Agreement and General Release (the “Ayers Agreement”) effective as of September 30, 2005. The material terms and conditions of the Ayers Agreement provide for, among other things, a one-year Employment Period through September 30, 2006 and a Transition Period, both terms as defined in the Ayers Agreement, commencing October 1, 2006 and ending on September 30, 2008. During the Employment Period, Mr. Ayers will no longer be an officer of the Company or any of its affiliates or subsidiaries, but shall perform such duties, with respect to the Company’s Fluid Technology business segment, as shall be assigned from time to time by the Chief Executive Officer of the Company. Mr. Ayers will continue to receive a base salary of $460,000 and benefits under the Company’s salaried benefit program through September 30, 2008. In addition, during the Employment Period, Mr. Ayers will be entitled to an automobile allowance of $1,300 per month, financial counseling and tax preparation services as well as an annual physical examination to the same extent such services are provided to other senior executives of the Company, and use of a reserved place at a golf facility. Mr. Ayers also received an incentive bonus for the performance year ending 2005 (calculated at the adjusted performance factor for the Company’s Fluid Technology business segment) and will receive a pro-rata bonus for the performance year ending 2006, each such bonus calculated based on a target of 65% of base salary.

Subject to the achievement of applicable Company performance targets established under the LTIP, Mr. Ayers is eligible to receive payment, if any, under the LTIP determined as if Mr. Ayers’ employment with the Company terminated on December 31, 2005. Payment for Mr. Ayers’ 2003 target award was calculated based on a 100% (36 month) performance period ending on December 31, 2005; he received a payment of $572,014 for his 2003 award. Any payment for his 2004 target award will be calculated based on 91.6% of the performance period ending on December 31, 2006 and any payment for his 2005 target award will be calculated based on 58.3% of the performance period ending on December 31, 2007.

During the Employment Period and Transition Period, Mr. Ayers agreed that the payments and benefits provided by the Company are contingent upon his not becoming an employee of any other entity, and during the Employment Period not engaging in any self-employment for remuneration. During the Transition Period, Mr. Ayers may engage in non-competitive self-employment with respect to any personal or family business in which he has a significant financial interest. Mr. Ayers is also subject to certain non-solicitation

restrictions, and agreed to his continued availability to render reasonable assistance to the Company. Effective October 1, 2008, Mr. Ayers will be eligible to receive a standard early retirement and pension benefit under the Company’s tax-qualified and excess defined benefit pension plans, and coverage under the Company’s retiree health and health insurance plans, to the extent such plans are in effect on October 1, 2008. There were no changes to Mr. Ayers employment agreement during 2005.

Mr. Williams’ Compensation Arrangements.

In 2004, the Committee approved the compensation arrangements described below with respect to Mr. Williams’ continued employment through January 1, 2006. Pursuant to those arrangements, Mr. Williams was paid a cash retention bonus of $1 million upon completion of his service.

Long-Term Incentive Awards: Mr. Williams was granted a 2003 target award of $620,200 under the LTIP. Mr. Williams received $817,238 subject to the performance of ITT Industries during the performance period and in accordance with the provisions of the plan. Mr. Williams was also granted a 2004 target award of $566,700. Payment, if any, will be in accordance with the terms of the plan at the end of the performance period. There were no changes to Mr. Williams’ employment agreement during 2005.

• Share Ownership Guidelines.

The Committee maintains share ownership guidelines for corporate officers, which were approved by ITT Industries’ Board of Directors during 2001. These guidelines specify the desired levels of Company stock that each officer should own, and encourage a set of behaviors to enable each officer to reach the guideline levels of ownership.

The approved guidelines require share ownership expressed as a multiple of base salary for all corporate officers. Specifically the guidelines apply as follows: chief executive officer at five times base salary; chief financial officer at three times base salary; senior vice presidents and management company presidents at two times base salary; and all other corporate vice presidents at one times base salary.

In achieving these ownership levels, shares owned outright, Company restricted stock and restricted stock units, shares held in the Company’s dividend reinvestment plan, shares owned in the Company’s investment and savings plan, and “phantom” shares held in the deferred compensation plan are considered. To attain the ownership levels set forth in the guidelines it is expected that any restricted shares that become unrestricted will be held, that all shares earned through any payout of the Company’s LTIP will be held, and that all shares acquired through exercise of stock options will be held, except in all cases to the extent necessary to meet tax obligations. The Committee monitors compliance with the guidelines periodically, and as of February 28, 2006, the share ownership levels have been substantially met.

• Employee Benefits.

Executives also participate in ITT Industries’ broad-based employee benefits program that includes a pension program, an investment and savings plan, group medical and dental coverage, group life insurance, and other benefit plans. The named executive officers also participate in certain other benefit programs that are described on pages 56 through 62. Under the deferred compensation plan, executives with an annual base salary of $200,000 or more may elect to defer receipt of all or a portion of their AIP earned payment. The amount of deferred compensation ultimately received is based on the performance of benchmark investment funds made available under the deferred compensation plan as selected by the executive. Participants in the deferred compensation plan may elect a fund that tracks the performance of ITT Industries common stock.

Although the Committee believes that ITT Industries should strive to structure its compensation program for senior executives in a manner that would permit deductibility under the Internal Revenue Code, it realizes that the evaluation of the overall performance of the senior executives cannot be reduced in all cases to a fixed formula. There may be situations in which the prudent use of discretion in determining pay levels is in the best interest of ITT Industries and its shareholders. Under some circumstances the use of discretion in determining appropriate amounts of compensation may be desirable. In those situations where discretion is used, compensation may not be fully deductible on ITT Industries’ tax return. However, the Committee does not believe that such loss of deductibility would have any material impact on the financial condition of ITT Industries.

This report is furnished by the members of the 2005 Compensation and Personnel Committee.

Performance Graph

Equity Compensation Plan Information

The following sets forth information concerning the shares of common stock that may be issued under equity compensation plans as of December 31, 2005 adjusted to reflect the Company’s February 21, 2006 2:1 stock split.

Compensation of Executive Officers

The following table shows the annual and long-term compensation paid or awarded during the three-year period ended December 31, 2005 to Mr. Loranger, Mr. Williams, Mr. Ayers and the four other most highly paid executive officers of ITT Industries for 2005. Share numbers are adjusted to reflect the Company’s February 21, 2006 2:1 stock split.

Option Grants During 2005

The following table provides information about options granted on March 8, 2005 to Messrs. Loranger, Driesse, Gaffney, Maffeo and Ayers, on October 3, 2005 to Mr. Gaffney, on July 1, 2005 to Mr. Minnich and on March 29, 2005 to Mr. Williams. The options awarded to all named executive officers in the table below, except for those awarded to Mr. Gaffney, will vest and become fully exercisable on the earlier of:

The options awarded to Mr. Gaffney will vest and become exercisable as to one third of the option shares on each of the first, second, and third anniversaries of the respective grant dates.

Options granted during 2005 have a seven year term.

Share number and price per share are adjusted to reflect the Company’s February 21, 2006 2:1 stock split.

Option/SAR Grants in Last Fiscal Year

Aggregated Option/SAR Exercises During Last Fiscal Year and FY-End Option/SAR Values

The table below provides information about:

Share numbers and price per share are adjusted to reflect the Company’s February 21, 2006 2:1 stock split.

Long-Term Incentive Plan — 2005 Awards

The following table provides information about target awards made to each of the named executive officers during 2005 under the LTIP. The final payment value, if any, of the target awards will be determined based on ITT Industries’ total shareholder return performance measured against the TSR performance of the other stocks comprising the S&P^® Industrials Index. Payment, if any, would be made following the completion of the three-year performance period.

Long-Term Incentive Plans — Awards in Last Fiscal Year

Senior Executive Severance Pay Arrangements

Senior executives other than Mr. Loranger, who are U.S. citizens or who are employed in the United States are covered by the ITT Industries, Inc. Senior Executive Severance Pay Plan. If a covered executive is terminated by ITT Industries, that executive would be eligible to receive severance pay unless the executive is terminated for cause, terminated after the executive’s normal retirement date, or in certain divestiture instances where the executive accepts employment or refuses comparable employment. There is no severance in cases where the executive voluntarily leaves the Company. The amount of severance pay depends upon the executive’s base pay and years of service. The amount will not exceed 24 months of base pay, or be greater than two times the executive’s total annual compensation during the year immediately preceding termination. ITT Industries’ obligation to continue severance payments stops if the executive does not comply with non-competition provisions of the plan or with ITT Industries’ Code of Corporate Conduct.

If a covered executive receives or is entitled to receive other compensation from ITT Industries, the amount of that compensation could be used to offset amounts otherwise payable under the plan. During the period in which the executive continues to receive severance payments, the executive will have a limited right to continue to be eligible for participation in certain benefit plans.

Messrs. Driesse, Minnich and Maffeo participate in the plan. Mr. Loranger’s entitlement to severance pay and benefits upon termination from ITT Industries is set forth in his employment agreement described on pages 41 to 43. Mr. Minnich participates in the Senior Executive Severance Pay Plan but will receive entitlement to severance pay and benefits upon termination as set forth in his employment agreement described on pages 43 to 45.

Special Senior Executive Severance Pay Plan

The ITT Industries, Inc. Special Senior Executive Severance Pay Plan provides severance benefits for covered executives whose employment is terminated by the Company other than for cause, or where the covered executive terminates his or her employment for good reason within two years after the occurrence of an acceleration event as defined in the Change of Control Arrangements described below (including a termination due to death or disability during the two-year period if the covered executive had grounds to resign with good reason) and for covered executives who are terminated in contemplation of an acceleration event that ultimately occurs. The plan provides two levels of benefits for covered executives, based on their position within the Company. If an executive was terminated within two years of an acceleration event or in contemplation of an acceleration event that ultimately occurs or the covered

executive terminates his or her employment for good reason within two years of an acceleration event, he or she would be entitled to:

Messrs. Driesse and Maffeo are covered at the highest level of benefits. Mr. Gaffney participates at the next level. Mr. Loranger does not participate in this plan. Mr. Loranger’s entitlement to severance pay and benefits upon a termination from ITT Industries during the two-year period following a change in control is set forth in his employment agreement described on pages 41 to 43. Mr. Minnich is covered under the highest level of benefits but for purposes of this plan certain severance pay and benefits are as set forth in his employment agreement described on pages 43 to 45.

Change of Control Arrangements

The payment or vesting of awards or benefits under the plans listed below would be accelerated upon the occurrence of a change of control of ITT

Industries. There would be a change of control if one of the following acceleration events occurred:

The following ITT Industries plans have change of control provisions:

Salaried Retirement Plan

Most of ITT Industries’ salaried employees who work in the United States participate in the Salaried Retirement Plan. Under the plan, participants have the option, on an annual basis, to elect to be covered under either the Traditional Pension Plan (“TPP”) or a Pension Equity Plan (“PEP”) formula for future pension accruals. While the TPP formula pays benefits on a monthly basis after retirement, the PEP formula enables participants to elect to have benefits paid as a single sum payment upon employment termination, regardless of the participant’s age. The TPP benefit payable to an employee depends upon the date an employee first became a participant of the Plan.

Under the TPP, a participant first employed prior to January 1, 2000, would receive an annual pension that would be the total of:

In addition, under the TPP, a participant first employed on or after January 1, 2000, would receive an annual pension that would equal:

For a participant first employed prior to January 1, 2005, average final compensation (including salary plus approved bonus payments) is the total of:

For a participant first employed on or after January 1, 2005, average final compensation is the average of the participant’s total pension eligible compensation over the five consecutive calendar years of the participant’s final 120 months of employment which would result in the highest average annual compensation amount.

The following table illustrates estimated annual benefits (not including Social Security reductions) that would be payable under the TPP formula to a participant who joined the Company prior to January 1, 2000 and retired at age 65:

Pension Plan Table — Pre-2000 Plan

The following table illustrates estimated annual benefits (not including Social Security reductions) that would be payable under the TPP formula to a participant who first joined the Company on or after January 1, 2000 and who retired at age 65:

Pension Plan Table — Post-2000 Plan

Participants who were first employed prior to January 1, 2000, retire at or after attainment of age 60 and have completed at least 15 years of eligibility service would receive undiscounted early retirement pensions.

Participants first employed on or after January 1, 2000 but prior to January 1, 2005, who retire on or after attainment of age 62 and who have completed 15 years of eligibility service would receive undiscounted early retirement pensions.

At the present time none of the individuals named in the Summary Compensation Table have elected to accrue benefits under the PEP formula.

Participants become vested in their accrued pension benefits after they complete five years of eligibility service.

Federal law limits the amount of benefits that could be paid and the amount of compensation that could be recognized under tax-qualified retirement plans. As a consequence, ITT Industries has established and maintains non-qualified, unfunded Excess Pension Plans to pay retirement benefits that could not be paid from the Salaried Retirement Plan. Benefits under the Excess Pension Plans are generally paid directly by ITT Industries. There also is an excess plan

trust under which excess benefits accrued by certain of the officers are funded. Generally, participating officers may elect, upon retirement, to receive their excess benefit in a single discounted lump sum payment. In the event of a change of control, any excess benefit would be immediately payable and would be paid in a single discounted lump sum.

Mr. Loranger’s employment agreement, described on pages 41 to 43, provides for a non-qualified pension arrangement if his employment terminates on or after June 28, 2009 or under certain circumstances prior to that date.

Mr. Williams retired effective January 1, 2006. In connection with his retirement, he was entitled to a total retirement benefit under the terms of the Salaried Pension Program (including the Salaried Retirement Plan and the Excess Pension Plan) of $250,097 per year. Of this amount, based upon his election under the Excess Pension Plan for an immediate lump sum payment in accordance with the terms of the Plan, he was entitled to receive $2,453,775 as a lump sum following his retirement in lieu of that portion ($181,851) of his annual retirement benefit payable under the excess pension plan. A portion of this amount was paid in January, 2006 with the balance payable in July, 2006. The remainder of Mr. Williams’ total retirement benefit under the Salaried Pension Program, after reduction to reflect a survivorship option for his spouse, will be paid in monthly installments.

In addition to the benefit under the Salaried Pension Program, Mr. Williams is entitled a special pension award pursuant to the agreement entered into on February 5, 2004 between the Company and Mr. Williams. The agreement provided for a special pension award based on his bonus for 2005 performance which was not considered in the determination of his benefit under the Company plans. Under this arrangement, Mr. Williams will be entitled to an annual benefit of $26,719, payable in monthly installments after reduction for a survivorship option in favor of his spouse.

Annex A

ARTICLES OF RESTATEMENT

       ITT Industries, Inc., a corporation organized and existing under the laws of the State of Indiana (the “Corporation”), hereby certifies as follows:

ITT Industries, Inc. was originally incorporated under the name ITT Indiana, Inc. pursuant to its original Articles of Incorporation filed with the Secretary of State for the State of Indiana on September 5, 1995. Effective December 20, 1995, ITT Corporation, a Delaware corporation, was merged with and into the Corporation, and the name of the Corporation was changed to ITT Industries, Inc. The Restated Articles of Incorporation set forth below only restate and integrate the provisions of the Corporation’s Articles of Incorporation as heretofore amended or supplemented, and there is no discrepancy between those provisions and the provisions of these Restated Articles of Incorporation. The text of the Restated Articles of Incorporation as amended or supplemented heretofore is hereby restated to read as herein set forth in full:

RESTATED ARTICLES OF INCORPORATION

of

ITT CORPORATION

(AS PROPOSED TO BE AMENDED)

ARTICLE FIRST

       The name of the corporation is ITT Corporation, (the “Corporation”).

ARTICLE SECOND

       The address of the registered office of the Corporation in the State of Indiana is One North Capitol Avenue, Suite 1180, Indianapolis, Indiana 46204. The name of the registered agent of the Corporation at such address is The Corporation Trust Company.

ARTICLE THIRD

       The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Indiana Business Corporation Law.

ARTICLE FOURTH

       (a) The aggregate number of shares of stock that the Corporation shall have authority to issue is 300,000,000 shares, consisting of 250,000,000 shares designated “Common Stock” and 50,000,000 shares designated “Preferred Stock”. The shares of Common Stock shall have a par value of $1 per share, and the shares of Preferred Stock shall not have any par or stated value, except that, solely for the purpose of any statute or regulation imposing any fee or tax

based upon the capitalization of the Corporation, the shares of Preferred Stock shall be deemed to have a par value of $.01 per share.

       (b) The Board of Directors of the Corporation shall have the full authority permitted by law, at any time and from time to time, to divide the authorized and unissued shares of Preferred Stock into classes or series, or both, and to determine the following provisions, designations, powers, preferences and relative, participating, optional and other special rights and the qualifications, limitations or restrictions thereof for shares of any such class or series of Preferred Stock:

       (c) Such divisions and determinations may be accomplished by an amendment to this ARTICLE FOURTH, which amendment may be made solely by action of the Board of Directors, which shall have the full authority permitted by law to make such divisions and determinations.

       (d) The powers, preferences and relative, participating, optional and other special rights of each class or series of Preferred Stock and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other classes or series at any time outstanding; provided that each series of a class is given a distinguishing designation and that all shares of a series have powers, preferences and relative, participating, optional and other special rights and the qualifications, limitations or restrictions thereof identical with those of other shares of the same series and, except to the extent otherwise provided in the description of the series, with those other series of the same class.

       (e) Holders of shares of Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the payment thereof, dividends at the rates fixed by the Board of Directors for the respective series before any dividends shall be declared and paid, or set aside for payment, on shares of Common Stock with respect to the same dividend period. Nothing in this ARTICLE FOURTH shall limit the power of the Board of Directors to create a series of Preferred Stock with dividends the rate of which is calculated by reference to, and the payment of which is concurrent with, dividends on shares of Common Stock.

       (f) In the event of the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of shares of each series of Preferred Stock will be entitled to receive the amount fixed for such series upon any such event (not in excess of $100 per share in the case of involuntary liquidation, dissolution or winding up) plus, in the case of any series on which dividends will have been determined by the Board of Directors to be cumulative, an amount equal to all dividends accumulated and unpaid thereon to the date of final distribution whether or not earned or declared before any distribution shall be paid, or set aside for payment, to holders of Common Stock. If the assets of the Corporation are not sufficient to pay such amounts in full, holders of all shares of Preferred Stock will participate in the distribution of assets ratably in proportion to the full amounts to which they are entitled or in such order or priority, if any, as will have been fixed in the resolution or resolutions providing for the issue of the series of Preferred Stock. Neither the merger nor consolidation of the Corporation into or with any other corporation, nor a sale, transfer or lease of all or part of its assets, will be deemed a liquidation, dissolution or winding up of the Corporation within the meaning of this paragraph except to the extent specifically provided for herein. Nothing in this ARTICLE FOURTH shall limit the power of the Board of Directors to create a series of Preferred Stock for which the amount to be distributed upon any liquidation, dissolution or winding up of the Corporation is calculated by reference to, and the payment of which is concurrent with, the amount to be distributed to the holders of shares of Common Stock.

       (g) The Corporation, at the option of the Board of Directors, may redeem all or part of the shares of any series of Preferred Stock on the terms and conditions fixed for such series.

       (h) Except as otherwise required by law, as otherwise provided herein or as otherwise determined by the Board of Directors as to the shares of any series of Preferred Stock prior to the issuance of any such shares, the holders of Preferred Stock shall have no voting rights and shall not be entitled to any notice of meetings of shareholders.

       (i) Each holder of shares of Common Stock shall be entitled to one vote for each share of Common Stock held of record on all matters on which the holders of shares of Common Stock are entitled to vote. Subject to the provisions of applicable law and any certificate of designation providing for the issuance of any series of Preferred Stock, the holders of outstanding shares of Common Stock shall have and possess the exclusive right to notice of shareholders’ meetings and the exclusive power to vote. No shareholder will be permitted to cumulate votes at any election of directors.

       (j) Subject to all the rights of the Preferred Stock, the holders of the Common Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the payment thereof, dividends payable in cash, stock or otherwise. Upon any liquidation, dissolution

or winding up of the Corporation, whether voluntary or involuntary, and after the holders of the Preferred Stock of each series shall have been paid in full in cash the amounts to which they respectively shall be entitled or a sum sufficient for such payment in full shall have been set aside, the remaining net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock in accordance with their respective rights and interests, to the exclusion of the holders of the Preferred Stock.

SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK

       A description of such Series A Participating Cumulative Preferred Stock with the designations, voting powers, preferences and relative, participating, optional and other special rights and qualifications, limitations or restrictions relating thereto is as follows: