**Exhibit 99.1**

 

**TERRA INDUSTRIES INC.**

**TERRA CENTRE**

**600 FOURTH STREET, P.O. BOX 6000**

**SIOUX CITY, IOWA 51102-6000**

 

**INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OFTHESECURITIES EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER**

 

ThisInformation Statement is being mailed on or about March 18, 2010 toholders of record of common stock, without par value (the *“Terra Common Shares”*), of TerraIndustries Inc., a Maryland corporation (*“Terra”*or the *“Company”*), as part of theSolicitation/Recommendation Statement on Schedule 14D-9/A (the *“Schedule 14D-9/A”*) of Terra with respectto the offer by CF Industries Holdings, Inc., a Delaware corporation (*“CF”*)*,*throughits indirect wholly-owned subsidiary, Composite Merger Corporation, a Marylandcorporation (*“CF Sub”*)*,*as disclosed in the Tender OfferStatement on Schedule TO, dated March 5, 2010 (as amended or supplementedfrom time to time, the *“Schedule TO”*)*,*to exchange each outstanding TerraCommon Share for the *“Per ShareConsideration”,* which is equal to (i) $37.15 in cash, less anyapplicable withholding taxes and without interest, and (ii) 0.0953 of ashare of common stock, par value $0.01 per share, of CF (together with theassociated preferred stock purchase rights) (the *“CF Common Stock”*)*,*uponthe terms and subject to the conditions set forth in (a) the PreliminaryProspectus/Offer to Exchange, dated March 5, 2010 (as amended orsupplemented from time to time, the *“ExchangeOffer”*), and (b) the related Letter of Transmittal (which,together with the Exchange Offer and any amendments or supplements thereto fromtime to time, constitute the *“Offer”*).You are receiving this Information Statement in connection with the possibleelection of persons designated by CF to at least a majority of the seats on theTerra Board of Directors (the *“Board”*).Such designation is to be made pursuant to the Agreement and Plan of Merger,dated as of March 12, 2010 (as such agreement may be amended orsupplemented from time to time, the *“MergerAgreement”*), among Terra, CF and CF Sub.

 

TheOffer will expire at 12:00 midnight, New York City time, on April 2, 2010,unless CF or CF Sub extends the Offer in accordance with the Merger Agreement.Promptly after that time, if all conditions to the Offer have been satisfied orwaived, CF Sub will purchase all Terra Common Shares validly tendered pursuantto the Offer and not validly withdrawn. Copies of the Exchange Offer and therelated Letter of Transmittal have been mailed with the Schedule 14D-9/A toTerra stockholders and are filed as exhibits to the Schedule 14D-9/A filed byTerra with the Securities and Exchange Commission (the *“SEC”*) on March 18, 2010.

 

TheMerger Agreement provides that, upon the payment by CF Sub for Terra CommonShares pursuant to and subject to the conditions of the Offer, CF shall beentitled to designate to serve on the Board such number of directors as willgive CF representation equal to that number of directors (rounded up to thenext whole number) determined by multiplying (i) the total number ofdirectors on the Board (giving effect to the directors elected pursuant to theright of CF described in this sentence) by (ii) the percentage that (A) thenumber of Terra Common Shares beneficially owned by CF, CF Sub and theiraffiliates bears to (B) the number of Terra Common Shares thenoutstanding. Terra has agreed to take all action necessary to cause CF’sdesignees to be elected to the Board, including obtaining resignations ofincumbent directors. As a result, CF will have the ability to designate amajority of the Board following the consummation of the Offer.

 

ThisInformation Statement is required by Section 14(f) of the SecuritiesExchange Act of 1934, as amended (the *“ExchangeAct”*), and Rule 14f-1 thereunder, in connection with theappointment of CF’s designees to the Board. **Youare urged to read this Information Statement carefully. You are not, however,required to take any action.**

 

Theinformation contained in this Information Statement, including informationincorporated herein by reference, concerning CF’s designees has been furnishedto Terra by CF, and Terra assumes no responsibility for the accuracy orcompleteness of such information.

 

A-1

----

 

**CF DESIGNEES**

 

CFhas informed Terra that it will choose its designees to the Board from theexecutive officers of CF listed in Schedule I to the Exchange Offer, a copy ofwhich is being mailed to Terra stockholders. The information with respect tosuch individuals in Schedule I to the Exchange Offer is incorporated herein byreference. CF has informed Terra that each of the executive officers of CFlisted in Schedule I to the Exchange Offer who may be chosen has consented toact as a director of Terra, if so designated.

 

Basedsolely on the information set forth in the Exchange Offer and Schedule Ithereto, none of the executive officers of CF listed in Schedule I to theExchange Offer (i) is currently a director of, or holds any position with,Terra, or (ii) has a familial relationship with any directors or executiveofficers of Terra. Terra has been advised that, to the best knowledge of CF andCF Sub, except as disclosed in the Exchange Offer, none of the executiveofficers of CF listed in Schedule I to the Exchange Offer beneficially owns anyequity securities (or rights to acquire such equity securities) of Terra andnone have been involved in any transactions with Terra or any of its directors,executive officers, affiliates or associates which are required to be disclosedpursuant to the rules and regulations of the SEC.

 

Basedsolely on the information set forth in Schedule I to the Exchange Offer, andexcept as described in such schedule, none of the executive officers of CFlisted on Schedule I to the Exchange Offer has, during the last ten years, (i) beenconvicted in a criminal proceeding (excluding traffic violations or similarmisdemeanors) or (ii) been a party to any judicial or administrativeproceeding that resulted in a judgment, decree or final order enjoining theperson from future violations of, or prohibiting activities subject to, federalor state securities laws or a finding of any violation of such laws.

 

Itis expected that CF’s designees may assume office at any time following thepayment by CF Sub for Terra Common Shares pursuant to the Offer, which paymentcannot be earlier than April 5, 2010, and that, upon assuming office, CF’sdesignees will thereafter constitute at least a majority of the Board. It iscurrently not known which of the current directors of Terra would resign.

 

**CERTAIN INFORMATION CONCERNING TERRA**

 

Theauthorized capital stock of the Company consists of 133,500,000 shares, withoutpar value, of which (i) 133,380,000 shares have been classified as TerraCommon Shares and (ii) 120,000 shares have been classified as 4.25% Series ACumulative Convertible Perpetual Preferred Shares (the *“Series A Preferred Stock”*). As of March 17,2010, there were 100,165,757 Terra Common Shares outstanding and no shares of Series APreferred Stock outstanding.

 

TheTerra Common Shares constitute the only class of securities of the Company thatis entitled to vote at a meeting of stockholders of the Company. Each TerraCommon Share entitles the record holder to one vote on all matters submitted toa vote of the stockholders.

 

A-2

----

 

**CURRENTDIRECTORS AND EXECUTIVE OFFICERS OF TERRA**

** **

**Directors.**

 

Thefollowing sets forth information regarding the members of the Board:

 
| **Name and Age**    | ** ** | **Present  Positions and Offices with Terra, Other Directorships,********Principal Occupation During the Past Five Years**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | ** ** | **First  Year as********Director;********Class and  Term**  |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------|
| Henry R. Slack (60) |       | Mr. Slack has served  as Chairman of Terra since April 2001 and asthe Managing  Member of Quarterwatch, LLC, a financial advisoryand related  family services company, since 2003. Prior to hisretirement, he  was Chief Executive Officer of Minorco SA, aninternational  mining company, from 1991 until 1999, when thatcompany merged  with Anglo American Corporation to form AngloAmerican plc.  He has also served as a director of E. Oppenheimerand Son  International Limited, a private investment and holdingcompany, since  1979; served as Chairman of First Africa Group, aprivate  investment banking firm, from 2006 until its acquisition in2009; and was  Chairman of Task (USA) Inc., a private investmentfirm, from  September 1999 to June 2002. Mr. Slack was a member ofthe Board of  Directors and the executive committee of AngloAmerican  Corporation, an international mining company, from 1981until 1999. He  has also served on the board of directors of SalomonBrothers Inc.,  a provider of investment banking, securitiesunderwriting  and foreign exchange trading services, from 1982 to1988, SAB  Miller plc., one of the world’s largest brewers, from 1998to 2002, and  for more than twenty years on the board of EngelhardCorporation, a  supplier of catalysts used in the petroleum, chemicaland food  industries, until its acquisition in 2006. The Board selectedMr. Slack  as a director, among other reasons, because of hisextensive  knowledge of Terra and the nitrogen fertilizer businessand industry  gained through serving on the Board for 27 years, aswell as his  broad business acumen and demonstrated ability toserve as  Chairman of the Board. |       | 1983;Class IIDirector, termexpires at the2012 annualmeeting |

 

A-3

----

 
| **Name and Age**        | ** ** | **Present  Positions and Offices with Terra, Other Directorships,********Principal Occupation During the Past Five Years**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** ** | **First  Year as  Director;  Class and  Term**                |
|-------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|
| Michael L. Bennett (56) |       | Mr. Bennett, who has  been employed by the Company for 36 years,has served as  President and Chief Executive Officer of Terra sinceApril 2001  and as Executive Vice President and Chief OperatingOfficer of  Terra from February 1997 to April 2001. Mr. Bennett hasserved as  President of Terra Nitrogen GP Inc. (*“TNGP”*)  (or itspredecessor), a subsidiary of Terra and the General Partner of TerraNitrogen  Company, L.P. (*“TNCLP”*), since  June 1998, as Chairmanof the Board of TNGP since  April 2002 and a director of TNGP (or itspredecessor)  since 1995. Mr. Bennett has served as a director ofAlliant Energy  Corporation (*“Alliant Energy”*),  a public utilityholding company, since 2003  and is a member of the CapitalApproval,  Audit and Executive Committees, the Chairman of theNominating and  Governance Committee and the Lead IndependentDirector.  Mr. Bennett has also served as a director of InterstatePower and  Light Company, Wisconsin Power and Light Companyand Alliant  Energy Resources, Inc., each a first tier subsidiary ofAlliant  Energy, since 2003. The Board selected Mr. Bennett as adirector,  among other reasons, because of his demonstrated abilityas Chief  Executive Officer of Terra and extensive knowledge of thenitrogen  fertilizer business and industry, gained while serving innumerous  positions with Terra over a 36-year career. |       | 2001;Class IDirector, termexpires at the2011 annualmeeting    |
|                    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |       |                                                               |
| David E. Fisher (67)    |       | Mr. Fisher served as a  director of Falcon Oil & Gas Ltd., a globalenergy  company, between 2007 and 2009 and was Chairman of itsAudit  Committee and a member of its Compensation Committee. Mr.Fisher is the  Chairman of Real Associates Limited, a privatecompany which  invests in commercial and residential propertyprincipally  located in Scandinavia, and has served in that capacitysince 2005. He  has over 25 years experience in the natural resourcesand extractive  industries, having served as Finance Director ofMinorco SA, an  international mining company, from 1992 until hisretirement in  1999. The Board selected Mr. Fisher as a director,among other  reasons, because of his over 25 years of experience inthe natural  resources and extractive industries, his extensiveknowledge of  Terra and the nitrogen fertilizer business and industrygained through  serving on the Board for 17 years, as well as hisextensive  financial and accounting expertise, enabling him toeffectively  chair Terra’s Audit Committee and to qualify as an “auditcommittee  financial expert” as that term has been defined by theSEC.                                                                                                                                                                                                                                                                                                        |       | 1993; Class IIIDirector, termexpires at the2010 annualmeeting |

 

A-4

----

 
| **Name and Age**     | ** ** | **Present  Positions and Offices with Terra, Other Directorships,  Principal Occupation During the Past Five Years**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | ** ** | **First  Year as  Director;  Class and  Term**                |
|----------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|
| Dod A. Fraser (59)   |       | Mr. Fraser has served  as President of Sackett Partners Incorporated,a consulting  company he established in 2000, upon retiring from a27-year career  in investment banking. Previously, Mr. Fraser was aGeneral  Partner of Lazard Frères & Co., which he joined in 1978, andmost recently,  from 1995 to 2000, he was with The Chase ManhattanBank, now JP  Morgan Chase, where he was a Managing Directorand Group  Executive leading the global oil and gas group. Mr.Fraser also  has served as a board member of Smith International,Inc. (*“Smith”*), an oilfield service company,  since 2004; Forest OilCorporation (*“Forest Oil”*), an independent oil and  gas company,since 2000; and Acergy S.A.  (*“Acergy”*), a sub-sea  engineering andconstruction company, since  2009. He serves as Chairman of theAudit  Committees of both Smith and Forest Oil, a member of theCompensation  Committee of both Smith and Acergy and a memberof the  Nominating and Corporate Governance Committee of ForestOil. The Board  selected Mr. Fraser as a director, among otherreasons,  because of his extensive energy industry experience, aswell as his  experience as an investment banker and as a director ofSmith, Acergy  and Forest Oil, and his experience with executivecompensation  issues and demonstrated ability to serve as chairmanof various  board committees.                                                                                                                                                                                       |       | 2003; Class IIIDirector, termexpires at the2010 annualmeeting |
|                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |                                                               |
| Martha O. Hesse (67) |       | Ms. Hesse founded,  owned and was President and Chief ExecutiveOfficer of  Hesse Gas Company, a nationwide natural gas marketingcompany, from  1992 to 2003. She served as Chairman of the U.S.Federal Energy  Regulatory Commission from 1986 to 1989, the firstwoman to hold  such position, and previously served as assistantsecretary for  Management and Administration for the U.S.Department of  Energy, as well as Senior Vice President of FirstChicago  Corporation, a multibank holding company. Ms. Hesseserves as  Chairman of the Boards of Enbridge Energy Company,Inc., the  general partner of Enbridge Energy Partners, LP, whichowns and  operates certain crude oil, petroleum and natural gas-related assets in the  United States, and Enbridge EnergyManagement,  LLC, which manages the business and affairs of thepartnership,  and is a member of the Audit, Finance and RiskCommittee of  each. She is also a director of AMEC plc, a supplier ofconsultancy,  engineering and project management services to theenergy, power  and process industries, serving as a member of theAudit  Committee and chair of the Compliance and Ethics Committee,and a director  of Mutual Trust Financial Group, an insurance-basedfinancial  services organization, serving as chair of the AuditCommittee. The  Board selected Ms. Hesse as a director, amongother reasons,  because of her extensive knowledge of the naturalgas industry  and its regulation, as well as her experience withcorporate  governance issues and demonstrated ability to serve aschairman of  various board committees. |       | 2001;Class IDirector, termexpires at the2011 annualmeeting    |

 

A-5

----

 
| **Name and Age**     | ** ** | **Present  Positions and Offices with Terra, Other Directorships,  Principal Occupation During the Past Five Years**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | ** ** | **First  Year as********Director;  Class and  Term**       |
|----------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------|
| Peter S. Janson (62) |       | Mr. Janson retired  from AMEC Inc., an engineering andenvironmental  services firm, in 2002. Mr. Janson served as Chairmanand Chief  Executive Officer of AMEC Inc. and a director of AMECplc from 2000  to 2002 and as President and Chief Executive Officer ofAgra Inc., an  engineering and environmental services firm (whichwas sold to  AMEC Inc. in 2000), from 1999 to 2000. Mr. Janson alsoserves as a  director of Teekay Corporation, a provider ofinternational  crude oil and petroleum product transportationservices,  serving on the Audit and Compensation and HumanResources  Committees. Mr. Janson served as a director of TembecIndustries  Inc., a forest products company, from 2004 to 2008,serving as  Chair of the Environment and Safety Committee, Chair ofthe Special  Committee for Strategic Purposes and a member of theCorporate  Governance and Human Resources Committee. He alsoserved as a  director of ATS Automation Tooling Systems Inc., aprovider of  custom designed, built and installed manufacturingsolutions,  from 2004 to 2007, serving as a member of the HumanResources and  Compensation Committee and the GovernanceCommittee. The  Board selected Mr. Janson as a director, amongother reasons,  because of his extensive energy industry experience,his general business  experience as a chief executive officer of publicand subsidiary  companies, his experience managing projects at asenior  management level and his board experience on audit,compensation  and special committees. |       | 2005;Class IDirector, termexpires at the2011 annualmeeting |
|                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |       |                                                            |
| James R. Kroner (48) |       | Mr. Kroner has been a  private investor since his retirement inDecember 2005.  Mr. Kroner served as Chief Financial Officer andChief  Investment Officer for Endurance Specialty Holdings Ltd.(*“Endurance”*), a publicly traded  insurance and reinsurancecompany, from  December 2001 to December 2005, and as ManagingDirector of  Fox Paine & Company, a private equity firm, fromJanuary 2000  to December 2001. Mr. Kroner served as a director ofEndurance from  2002 to 2003. Mr. Kroner served as a director of WJCommunications  Inc. from 2000 to 2002. Mr. Kroner has served as adirector of  United America Indemnity, Ltd, a specialty property andcasualty  insurer, since 2007, and serves as Chairman of itsInvestment and  Section 162(m) Committees and a member of itsAudit  Committee. The Board selected Mr. Kroner as a director,among other  reasons, based on input from Terra stockholders andbecause of his  past directorships and extensive financial andaccounting  expertise, including that gained from his past experienceas a Managing  Director at Fox Paine & Company, JP Morgan & Co.and Salomon  Smith Barney.                                                                                                                                                                                                                                                                                                                  |       | 2001;Class IDirector, termexpires at the2011 annualmeeting |

 

A-6

----

 
| **Name and Age**    | ** ** | **Present  Positions and Offices with Terra, Other Directorships,  Principal Occupation During the Past Five Years**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | ** ** | **First  Year as  Director;********Class and********Term**    |
|---------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|
| John N. Lilly (56)  |       | Mr. Lilly has been the  President of John Lilly Strategic Insights,LLC, an  advisory service company to the financial servicesindustry,  since 2002. Mr. Lilly was employed by Procter & GambleCompany (*“P&G”*) from 1976 to 1997, working in  the laundry,paper, food and beverage  brands in multiple countries. In 1997, Mr. Lilly joined  the Pillsbury Company as President of Pillsbury NorthAmerican and  then as Chief Executive Officer of the PillsburyCompany  worldwide. After Pillsbury became part of General Mills,Mr. Lilly  started to work as an advisor. He has acted as a senioradvisor to TPG  Capital, Duff & Phelps, Lehman Brothers andCompass  Advisors. Mr. Lilly served on the board of AdamsRespiratory  Therapeutics until it was sold to Reckitt Benckiser PLCin 2008. He is  an advisor to LEK Consulting, LLC and a Trustee ofthe National  Public Radio Foundation. Mr. Lilly brings to the Boardextensive  strategic corporate insight and corporate governanceexpertise  through his consulting and advisory experience, hisexperience as  an officer of P&G, his experience as Chief ExecutiveOfficer of the  Pillsbury Company and his past directorships. |       | 2009;Class IIDirector, termexpires at the2012 annualmeeting   |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |       |                                                               |
| Dennis McGlone (60) |       | Mr. McGlone has been a  private investor since October 2005. Priorto this,  Mr. McGlone served as President, Chief Executive Officerand director  of Copperweld Corp., a major North American producerof steel  tubing and fabricated tubular products, from February 2004to  October 2005; President, Chief Operating Officer, and director ofCopperweld  from October 2002 to February 2004; and Vice Presidentof Copperweld  from July 2001 to October 2002. Mr. McGlone servedas Vice  President, Corporate Officer of Armco Inc./AK Steel, aleading U.S.  producer and international marketer of steel productsfor  automotive, appliance, construction, power generation anddistribution,  and process industries, from 1996 to March 2001. TheBoard selected  Mr. McGlone as a director, among other reasons,based on input  from Terra stockholders and his broad businessacumen,  including that gained in the specialty steel industrymanaging  cyclical price-sensitive commodities that are energy andcapital  intensive.                                                                                                                                                                  |       | 2006; Class IIIDirector, termexpires at the2010 annualmeeting |

 

A-7

----

 
| **Name and Age**         | ** ** | **Present  Positions and Offices with Terra, Other Directorships,  Principal Occupation During the Past Five Years**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | ** ** | **First  Year as  Director;********Class and********Term**   |
|--------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------|
| David A. Wilson (68)     |       | Dr. Wilson has served  as President and Chief Executive Officer ofthe Graduate  Management Admission Council since 1995.Dr. Wilson  was a director of Laureate Education, Inc. (formerlySylvan  Learning Systems, Inc.), from 2002 to 2007 and was Chairmanof the Audit  Committee beginning in 2003. Dr. Wilson wasemployed by  Ernst & Young LLP (and its predecessor, ArthurYoung &  Company) from 1978 to 1994, as an Audit Partner,Managing  Partner, National Director of Professional Development,Chairman of  Ernst & Young’s International ProfessionalDevelopment  Committee and as a director of the Ernst & YoungFoundation.  From 1968 to 1978, Dr. Wilson served as a facultymember at  Queen’s University, the University of Illinois at Urbana-Champaign, the  University of Texas and Harvard University’sGraduate  School of Business. Dr. Wilson brings to the Boardextensive  financial and accounting expertise, including a Masters ofBusiness  Administration, a Ph.D in accounting, professionalaccounting  certifications in the United States and Canada,authorship of  four books on accounting and financial reporting andexperience  gained at Ernst & Young LLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |       | 2009; Class IIDirector, termexpires at the2012 annualmeeting |
|                     |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                                                              |
| Irving B. Yoskowitz (64) |       | Mr. Yoskowitz is  Senior Counsel at the law firm of Dickstein ShapiroLLP and a  Senior Partner of Global Technology Partners, LLC(*“GTP”*), an investment banking and  consulting firm. He also is aCentre  Operating Partner of Centre Partners, LLP, a private equityfirm. From  2005 to 2008, he was Executive Vice President and GeneralCounsel of  Constellation Energy Group, Inc., the parent company ofBaltimore Gas  and Electric Company, an electric and gas publicutility. From  1998 to 2005, Mr. Yoskowitz was a Senior Partner ofGTP, and from  2001 to 2005, Mr. Yoskowitz also served as SeniorCounsel at the  law firm of Crowell & Moring LLP. From 1981 to 1998,Mr. Yoskowitz  served as Executive Vice President and GeneralCounsel of  United Technologies Corporation (*“UTC”*),  where healso was responsible for environmental, health and safety,government  contracts and compliance. Prior to joining UTC in 1979,Mr. Yoskowitz  held a number of positions with InternationalBusiness  Machines Corporation. Mr. Yoskowitz is a director ofRoss  Aviation, Inc. He was a director of Wyle Holdings, Inc. from2006 to  July 2009. He was a director, chair of the Strategic PlanningCommittee and  a member of the Audit and CompensationCommittees of  Darwin Professional Underwriters, Inc. from 2007 to2008, until it  was acquired by Allied World Assurance Company. Hewas the Lead  Independent Director and a member of the Audit andCompensation  Committees of Equant, NV, a global data networkingcompany, from  1998 to 2005; a director of Sirva, Inc., from 2004 to2005, BBA  Group, plc from 1995 to 2004 and Executive RiskInsurance, Inc.  from 1996 to 1999, until it was acquired by Chubb.Mr. Yoskowitz  brings to the Board extensive knowledge of theenergy  industry and broad business experience through his workfor numerous  companies in a variety of industries. |       | 2009; Class IIDirector, termexpires at the2012 annualmeeting |

 

A-8

----

 

**Executive Officers.**

 

Thefollowing sets forth information regarding the executive officers of Terra:

 
| **Name and Age**            | ** ** | **Present  Positions and Offices with Terra and Principal Occupations During the Past  Five Years**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                  | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Michael L. Bennett (56)     |       | See the information  provided for Mr. Bennett above under “Directors.”                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Daniel D. Greenwell (47)    |       | Senior Vice President and  Chief Financial Officer of Terra since July 2007; Vice President,Controller of  Terra from April 2005 to July 2007; Director of TNGP, the General  Partner of TNCLP, since March 2008; Vice President and Chief Financial  Officer of TNGP since February 2008; Vice President and Chief Accounting  Officer of TNGP from April 2006 to February 2008; Corporate  Controller for Belden CDT Inc. from 2002 to 2005; and Chief Financial Officer  of Zoltek Companies Inc. from 1996 to 2002.                                                      |
|                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Joseph D. Giesler (51)      |       | Senior Vice President,  Commercial Operations of Terra since December 2004; Vice Presidentof Industrial  Sales and Operations of Terra from December 2002 to December 2004;  Global Director, Industrial Sales of Terra from September 2001 to  December 2002; Vice President of TNGP, the General Partner of TNCLP,  since April 2006.                                                                                                                                                                                                                                           |
|                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Douglas M. Stone (44)       |       | Senior Vice President,  Sales and Marketing since September 2007; Vice President, CorporateDevelopment  and Strategic Planning from 2006 to September 2007; Director, Industrial  Sales from 2003 to 2006; Manager, Methanol and Industrial Nitrogen from 2000  to 2003; Vice President of TNGP, the General Partner of TNCLP, since  April 2009.                                                                                                                                                                                                                                                |
|                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Edward J. Dillon (42)       |       | Vice President and  Controller of Terra since November 2008; Vice President of TNGP, theGeneral  Partner of TNCLP, since April 2009. In 1998, he joined the General  Electric Company and served in numerous roles including Finance Manager for  the National Broadcasting Company in New York City, progressing to Global  Controller for the Consumer & Industrial segment in Louisville,  Kentucky. He joined INVISTA, a subsidiary of Koch Industries, Inc. (KII)  in 2005 in Wichita as Director of Corporate Finance and in 2007, moved to KII  Corporation as Finance Director. |
|                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Joe A. Ewing (59)           |       | Vice President, Investor  Relations and Human Resources of Terra since December 2004; VicePresident,  Human Resources of Mississippi Chemical Corporation from April 2003 to December 2004;  Vice President, Marketing and Distribution of Mississippi Chemical Corporation  from 1999 to April 2003.                                                                                                                                                                                                                                                                                       |
|                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| John W. Huey (62)           |       | Vice President, General  Counsel and Corporate Secretary of Terra since October 2006; VicePresident,  General Counsel and Corporate Secretary of TNGP, the General Partner of  TNCLP, since October 2006; Counsel with Shughart Thomson &  Kilroy, P.C. from 2005-2006; Attorney with Butler Manufacturing Company from  1978 to 2004, Vice President of Administration from 1993 to 1998, Vice  President, General Counsel and Corporate Secretary from 1998 to 2004.                                                                                                                       |
|                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Geoffrey J. Obeney (52)     |       | Vice President, Information  Technology of Terra since February of 2008, a Director andmember of the  Compensation Committee of Wireless Ronin (RNIN) from April 2008 to present,  Interim CEO of Spirit Computing Ltd from November 2005 to  January 2008; CIO of SEI LLC, a start-up company from October 2004  to October 2005.                                                                                                                                                                                                                                                |
|                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Richard S. Sanders Jr. (52) |       | Vice President,  Manufacturing of Terra since August 2003; Vice President, Manufacturing  of TNGP (or its predecessor), the General Partner of TNCLP, since  October 2003; Plant Manager, Verdigris, Oklahoma manufacturing facility  from 1995 to August 2003.                                                                                                                                                                                                                                                                                                                                  |
|                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Earl B. Smith (50)          |       | Vice President, Business  Development of Terra since March 2008; Registered FinancialAdvisor with  UBS from 2006 to 2008. Various positions with Vulcan Materials Company from 1982  to 2005, serving last as Global Business Manager from 2003 to 2005.                                                                                                                                                                                                                                                                                                                                                   |

 

A-9

----

 

**CORPORATE GOVERNANCE**

 

**General.**

 

Terrastrives to uphold the highest standards of ethical conduct, to follow corporategovernance best practices, to report accurately and transparently and to fullycomply with the laws, rules and regulations that govern Terra’s business.

 

TheBoard currently consists of eleven members. In accordance with its CorporateGovernance Guidelines, the Board has affirmatively determined that David E.Fisher, Dod A. Fraser, Martha O. Hesse, Peter S. Janson, James R. Kroner, JohnN. Lilly, Dennis McGlone, Henry R. Slack, David A. Wilson and Irving B.Yoskowitz each meet the criteria for independence required by the New YorkStock Exchange (*“NYSE”*) listingstandards. The Board’s independence determination was based on informationprovided by our directors and discussions among our officers and directors.Following its evaluation, the Board concluded that none of the non-employeedirectors was involved in any transactions, relationships or arrangements nototherwise disclosed that would impair his or her independence. Mr. Bennettdid not meet the independence standards because he is an employee of Terra andTNGP (or its predecessor), which is the General Partner of TNCLP and anindirect, wholly owned subsidiary of Terra. The Nominating and CorporateGovernance Committee reviews and designates director-nominees in accordancewith the policies and principles of its charter and the Corporate GovernanceGuidelines.

 

Exceptfor Mr. Bennett’s employment described above with TNGP, no occupationcarried on by any director during the past five years was carried on with anycorporation or organization that is a parent, subsidiary or other affiliate ofthe Company. There are no family relationships among any of the directors andany executive officer of the Company. Other than the arrangements between CFand each of Messrs. Lilly, Wilson and Yoskowitz (the *“2009 Directors”*) described in thisInformation Statement, there is not any arrangement or understanding betweenany director, executive officer and any other person pursuant to which thatdirector or executive officer was selected as a director or executive officerof the Company, as the case may be. There are no material proceedings in whichany director or executive officer of the Company is a party adverse to theCompany or any of its subsidiaries, or has a material interest adverse to theCompany or any of its subsidiaries.

 

Each2009 Director entered into a letter agreement (each, a *“Nomination Agreement”*) with CF agreeingto stand for election as a director in CF’s proxy solicitation relating toTerra’s 2009 annual meeting of stockholders (the *“Proxy Solicitation”*) and to serve as a director of theCompany if elected. In consideration of this agreement, CF paid each 2009Director a one-time fee of $50,000 and agreed to reimburse each 2009 Directorfor certain out-of-pocket expenses incurred by him in connection with servingas a nominee.

 

EachNomination Agreement contains an acknowledgement by CF and the 2009 Directorparty thereto that all of such 2009 Director’s activities and decisions as adirector of Terra will be governed by applicable law and subject to his dutiesto Terra and, as a result, there is not, and cannot be, any agreement betweensuch 2009 Director and CF that governs the decisions that such 2009 Directorwill make as a director of Terra.

 

Inconsideration of the 2009 Directors’ respective undertakings in each NominationAgreement, and subject to certain exceptions and limitations, CF agreed toindemnify and hold harmless each 2009 Director from any and all liabilities,losses, claims, damages, suits, actions, judgments and reasonable costs andexpenses actually incurred resulting from, based upon, arising out of orrelating to (i) serving as a nominee; (ii) being a participant inconnection with the Proxy Solicitation; (iii) being otherwise involved inthe Proxy Solicitation as a nominee; or (iv) serving as a director ofTerra, but (x) such indemnification pursuant to this item (iv) willbe extended only to the extent that Terra has declined or failed to indemnify a2009 Director, or to provide such 2009 Director with liability insurancecoverage, to the same extent as other directors of Terra and (y) theindemnification pursuant to this item (iv) will (1) be limited to thosematters as to which Terra could provide indemnification to such 2009 Directoras a director under applicable law and (2) terminate with respect tooccurrences taking place after the earlier of (A) the date that Terraoffers to enter into an indemnification agreement with such 2009 Director onsubstantially the same terms as those made available to Terra’s other directorsand (B) the expiration of such 2009 Director’s initial term as a directorof Terra.

 

A-10

----

 

Terrahas structured its Board to provide separate positions for a non-executiveChairman of the Board and a chief executive officer, because it believes, dueto the different and demanding nature of these positions and the skill setsthey call for, that this structure provides the most efficient and effectiveleadership model for the Company. The Board plans to maintain theseresponsibilities as separate positions.

 

During2009, in accordance with the Corporate Governance Guidelines, the independentdirectors met at regularly scheduled executive sessions of the Board withoutmanagement. The Chairman of the Board, Henry R. Slack, presided at all theseexecutive sessions, which are held at each of our Board meetings.

 

TheBoard currently has three committees: Audit, Compensation, and Nominating andCorporate Governance. A description of each committee and its function appearsin the “Board of Directors and Committees” section of this InformationStatement under the heading “Committees of the Board”. The Audit, Compensation,and Nominating and Corporate Governance Committees are each composed solely ofindependent directors as required by the NYSE listing standards. Each committeehas its own charter setting forth the qualifications for membership and thecommittee’s purposes, goals and responsibilities. Each of these committees hasthe power to hire independent legal, financial or other advisors it deemsnecessary, without consulting or obtaining the advance approval of any Terraofficer.

 

TheBoard has also adopted a Code of Ethics and Standards of Business Conduct,which outlines the principles, policies and laws that govern Terra’s activitiesand which serve as a tool for professional conduct in the workplace. The Codeof Ethics and Standards of Business Conduct applies to Terra’s principalexecutive officer and principal financial officer, as well as all otherofficers, directors and employees of Terra.

 

Itis the Board’s practice to encourage all its members to attend the Company’sannual stockholders meeting, although no written policy has been adopted inthat regard. All Board members attended the Company’s 2009 stockholders meetingheld November 20, 2009, in New York, New York, except for Messrs. Lilly,Wilson and Yoskowitz, who had not yet been elected to the Board.

 

Currentversions of Terra’s Corporate Governance Guidelines, Code of Ethics andStandards of Business Conduct and committee charters can be found in the“Investors” section under “Governance” on Terra’s Web site atwww.terraindustries.com, and are available in print, free of charge, uponrequest.

 

**RiskOversight.**

 

Terra’spolicy is to avoid unnecessary risk and to limit, to the extent practical,risks associated with operating activities. Our management may not engage inactivities that expose us to speculative or non-operating risks and is expectedto limit risks to acceptable levels. The use of derivative financialinstruments is consistent with our overall business objectives. Derivatives areused to manage operating risk within the limits established by our Board, andin response to identified exposures, provided they qualify as hedge activities.As such, derivative financial instruments are used to manage exposure tointerest rate fluctuations, to hedge specific assets and liabilitiesdenominated in foreign currency, to hedge firm commitments and forecastednatural gas purchase transactions, to set a floor for nitrogen selling pricesand to protect against foreign exchange rate movements between differentcurrencies that impact revenue and earnings expressed in U.S. dollars.

 

Theuse of derivative financial instruments subjects us to some inherent risksassociated with future contractual commitments, including market andoperational risks, credit risk associated with counterparties, product location(basis) differentials and market liquidity. We continuously monitor thevaluation of identified risks and adjust the portfolio based on current marketconditions.

 

TheBoard established a policy containing certain limits on management’s ability tohedge natural gas purchase prices in relationship to forward sales commitmentsof nitrogen products, and receives weekly reports from management on actualtransactions and commitments in relation to policy limits. Further review anddiscussion of these policy limits and actual practice occur at regular andspecial Board meetings, along with review of other significant risk matterspertaining to the conduct of our business, including reserves for doubtfulaccounts and working capital needs.

 

A-11

----

 

**Communication.**

 

Interestedparties who wish to report questionable practices by Terra employees may do so bycalling Terra’s toll free, anonymous hotline at 1-866-551-8010 (in the U.S. andCanada) or at 011-44-866-551-8010 (in the U.K.). Interested parties who wish tocommunicate any message or voice a complaint to the Board, any of itscommittees or the non-management directors should address their communicationsto: Henry R. Slack, Chairman of the Board; Terra Industries Inc.; 600 FourthStreet; Sioux City, Iowa 51101. Such communications can also be made by calling712-277-1340 or by e-mail at boardethics@terraindustries.com.

 

**BOARD OF DIRECTORS AND COMMITTEES**

 

**Committeesof the Board.**

 

***Audit Committee.***

 

TheAudit Committee met five times in 2009 and is currently composed of Mr. Fisher(Chairman), Ms. Hesse, Mr. Kroner and Mr. Wilson. The committeeis composed entirely of non-employee directors, each of whom meets the“independence” requirements of the NYSE listing standards. In accordance withTerra’s Audit Committee charter, all members of the committee are financiallyliterate and the Board has determined that Mr. Fisher meets therequirements to be named “audit committee financial expert” as the term hasbeen defined by the SEC. The Audit Committee charter is available on Terra’swebsite as set out in the “Corporate Governance — General” section above.

 

TheAudit Committee reviews Terra’s procedures for reporting financial informationto the public. The Audit Committee also reviews Terra’s internal audits,reports and related recommendations. Its members are directly responsible forTerra’s independent accounting firm and have the sole authority to appoint orreplace the independent accounting firm. The committee reviews the scope of theannual audit, reviews related reports and recommendations and preapproves anynon-audit services provided by the independent registered public accountingfirm. In addition, the committee maintains, through regularly scheduledmeetings, open lines of communication between the Board and Terra’s financialmanagement, internal auditors and independent registered public accounting firm.See “Audit Committee Report” below.

 

***Compensation Committee.***

 

TheCompensation Committee met twice in 2009 and is currently composed of Messrs. Fraser(Chairman), Janson, McGlone and Yoskowitz. Each of the members of the committeemeets the “independence” requirements of the NYSE listing standards. Thecommittee’s functions include establishing the compensation to be paid toTerra’s executive officers. The committee also administers certain employeebenefit plans, establishes and, in consultation with management, administerscompensation guidelines and personnel policies. See the report on “ExecutiveCompensation” below. The Compensation Committee charter is available on Terra’swebsite as set out in the “Corporate Governance — General” section above.

 

***Nominating and Corporate Governance Committee.***

 

TheNominating and Corporate Governance Committee met three times in 2009 and iscurrently composed of Ms. Hesse (Chairman) and Messrs. Fraser, Lillyand Slack. Each of the members of the committee meets the “independence”requirements of the NYSE listing standards. The committee’s functions includehelping the Board fulfill its responsibilities to stockholders by shaping theCompany’s corporate governance and enhancing the quality and independence ofthe Board nominees. In addition, the committee identifies and reviewsqualifications of potential Terra director candidates, to include thoserecommended by stockholders, and makes recommendations to the Board fornomination or election. The Nominating and Corporate Governance Committeegenerally identifies nominees for new directors based upon outside research andrecommendations from directors and officers of the Company. Nominees fordirector are selected on the basis of broad experience, wisdom, integrity, abilityto make independent analytical inquiries, understanding of Terra’s businessenvironment, and willingness to devote adequate time and energy to Boardduties. The Board

 

A-12

----

 

considers directors of diverse backgrounds,in terms of both the individuals involved and their various experiences andareas of expertise. Each Board member must ensure that future commitments(including commitments to serve on boards of other companies) do not materiallyinterfere with the member’s service as a Terra director. The Board hasdetermined that the above mentioned policy has been implemented appropriatelywhen, and has been effective in, determining the qualifications of potentialdirector candidates to the Board. The Nominating and Corporate GovernanceCommittee charter is available on Terra’s website as set out in the “CorporateGovernance — General” section above.

 

TheNominating and Corporate Governance Committee charter also provides that thecommittee will review candidates who have been recommended by stockholders.Appropriate materials describing the personal and professional background andexperience of candidates recommended by stockholders should be communicated tothe Board as set out in the “Corporate Governance — Communication” sectionabove. The committee will evaluate all such stockholder recommended candidateson the basis of the same qualities and characteristics as described in thepreceding paragraph.

 

TheBoard establishes special Board committees from time to time, determining suchcommittees’ specific functions as they are established. The Board and itscommittees occasionally take action by unanimous written consent in lieu of ameeting.

 

**Meetings of the Board.**

 

TheBoard held five regular meetings and 26 special meetings in 2009. Each directorattended at least 94 percent of the total meetings of the Board and itscommittees of which he or she was a member.

 

**Compensation Committee Interlocksand Insider Participation.**

 

TheCompensation Committee is composed of the directors named as signatories to the“Compensation Committee Report” below. No director has any direct or indirectmaterial interest in or relationship with Terra other than shareholdings asdiscussed below and as related to his or her position as a director, except asdescribed under the heading “Executive Compensation and Other Information —Transactions with Related Persons” below. During 2009, no officer or otheremployee of Terra served on the board of directors of any other entity, whereany officer or director of such entity also served on the Board.

 

A-13

----

 

**SECURITIES OWNERSHIP OF DIRECTORS, MANAGEMENT**

**AND CERTAIN BENEFICIAL OWNERS**

 

**EquitySecurity Ownership.**

 

Exceptas set forth below, the following table sets forth certain information withrespect to the beneficial ownership of Terra Common Shares as of March 17,2010 by each of Terra’s directors, certain of Terra’s executive officers, allexecutive officers and directors as a group and the beneficial owners known toTerra of 5% or more of the outstanding Terra Common Shares. Unless otherwisespecified, the address for each holder is c/o Terra Industries Inc., 600 FourthStreet, P.O. Box 6000, Sioux City, IA 51102.

 
| ** **                                                             | ** ** | **Amount  of** | ** ** | ** **      | ** ** |
|------------------------------------------------------------------------|------------|----------------|------------|-----------------|------------|
| ** **                                                             | ** ** | **Beneficial** | ** ** | **Percent  of** | ** ** |
| **Name and Address of Beneficial Owner**                               | ** ** | **Ownership**  | ** ** | **Class**       | ** ** |
| BlackRock Inc.                                                         |       | 5,879,699      | (1)        | 5.9             | %          |
| 55 East 52nd Street                                                    |       |           |       |            |       |
| New York, New York 10055                                               |       |           |       |            |       |
| Mason Capital Management LLC                                           |       | 5,770,062      | (2)        | 5.8             | %          |
| 110 East 59th Street                                                   |       |           |       |            |       |
| New York, New York 10022                                               |       |           |       |            |       |
| TPG-Axon Capital Management, LP                                        |       | 5,000,000      | (3)        | 5.0             | %          |
| 888 Seventh Avenue                                                     |       |           |       |            |       |
| 38th Floor                                                             |       |           |       |            |       |
| New York, New York 10019                                               |       |           |       |            |       |
| Michael L. Bennett, Director, President and Executive Officer          |       | 685,288        | (4)        | *               |       |
| David E. Fisher, Director                                              |       | 51,853         | (5)        | *               |       |
| Dod A. Fraser, Director                                                |       | 37,097         | (5)        | *               |       |
| Martha O. Hesse, Director                                              |       | 54,775         | (5)        | *               |       |
| Peter S. Janson, Director                                              |       | 25,547         | (5)        | *               |       |
| James R. Kroner, Director                                              |       | 25,647         | (5)        | *               |       |
| John N. Lilly, Director                                                |       | 5,055          | (5)        | *               |       |
| Dennis McGlone, Director                                               |       | 23,647         | (5)        | *               |       |
| Hank R. Slack, Director                                                |       | 50,221         | (5)        | *               |       |
| David A. Wilson, Director                                              |       | 5,055          | (5)        | *               |       |
| Irving B. Yoskowitz, Director                                          |       | 5,055          | (5)        | *               |       |
| Daniel D. Greenwell, Senior Vice President and Chief Financial Officer |       | 109,699        | (6)        | *               |       |
| John W. Huey, Vice President, General Counsel and Corporate Secretary  |       | 58,314         | (7)        | *               |       |
| Earl B. Smith, Vice President, Business Development                    |       | 8,500          | (8)        | *               |       |
| Douglas M. Stone, Senior Vice President, Sales & Marketing    |       | 44,850         | (9)        | *               |       |
| Directors and Executive Officers as a group (20 persons)               |       | 1,537,928      |       | 1.5             | %          |

 

----

*Less than 1%

 

(1)          Based on the Schedule 13G filed by BlackRock Inc. (*“BlackRock”*) with the SEC on January 29,2010, which indicates that BlackRock has sole voting and sole dispositive powerover 5,879,699 Terra Common Shares.BlackRock reports that on December 1,2009, BlackRock completed its acquisition of Barclays Global Investors NA fromBarclays Bank PLC, and that as a result, substantially all of the BarclaysGlobal Investors entities are now included as subsidiaries of BlackRock for purposesof Schedule 13G filings.

 

(2)          Based on the Schedule 13G filed jointly by MasonCapital Management LLC (*“Mason Management”*),Kenneth M. Garschina and Michael E. Martino with the SEC on March 15,2010, which indicates that Mason Management holds sole voting and dispositivepower over 5,770,062 Terra Common Shares and Mr. Martino and Mr. Garschinahold shared voting and dispositive power as to such Terra Common Shares. MasonManagement reports that such Terra Common Shares are directly owned by Mason CapitalL.P.

 

A-14

----

 

(*“Mason Capital LP”*), Mason Capital MasterFund, L.P. (*“Mason Capital Master Fund”*)and certain other funds and accounts (the *“ManagedAccounts”*). Mason Management reports that it is the investmentmanager of each of Mason Capital LP, Mason Capital Master Fund and the ManagedAccounts, and Mason Management may be deemed to have beneficial ownership overthe Terra Common Shares reported on the Schedule 13G by virtue of the authoritygranted to Mason Management by Mason Capital LP, Mason Capital Master Fund andthe Managed Accounts to vote and dispose of such Terra Common Shares. Itfurther reports that Mr. Garschina and Mr. Martino are managingprincipals of Mason Management.

 

(3)          Based on the Schedule 13G/A filed by TPG-Axon CapitalManagement, LP (*“TPG-Axon Management”*)with the SEC on February 16, 2010, which indicates that TPG-Axon CapitalManagement shares voting and dispositive power over 5,000,000 Terra CommonShares. TPG-Axon Capital Management reports that it is an investment manager toTPG-Axon Partners, LP (*“TPG-Axon Domestic”*)and TPG-Axon Partners (Offshore), Ltd. (*“TPG-AxonOffshore”*), has the power to direct the disposition and voting ofthe Terra Common Shares held by TPG-Axon Domestic and TPG-Axon Offshore, andfurther that TPG-Axon Partners GP, LP (*“PartnersGP”*)is the general partner of TPG-Axon Domestic and TPG-Axon GP, LLC (*“GPLLC”*) is the general partner ofPartnersGP and TPG-Axon Management. It further reports that Dinakar Singh LLC (*“Singh LLC”*) is a Managing Member of GPLLCand that Mr. Dinakar Singh is the Managing Member of Singh LLC and in suchcapacity may be deemed to control Singh LLC, GPLLC and TPG- Axon Management,and therefore may be deemed the beneficial owner of the securities held byTPG-Axon Domestic and TPG-Axon Offshore.

 

(4)          Includes 606,192 fully vested Terra Common Sharesdirectly held, 19,281 Terra Common Shares indirectly held in Mr. Bennett’s401(k) plan account (as of March 16, 2010), 1,815 Terra Common Sharesindirectly held in Mr. Bennett’s wife’s 401(k) plan account (as of March 16,2010) and 58,000 restricted Terra Common Shares directly held.

 

(5)          All Terra Common Shares are directly held by thedirector.

 

(6)          Includes 86,475 fully vested Terra Common Sharesdirectly held, 2,024 Terra Common Shares indirectly held in Mr. Greenwell’s401(k) plan account (as of March 16, 2010) and 21,200 restrictedTerra Common Shares directly held.

 

(7)          Includes 40,430 fully vested Terra Common Sharesdirectly held, 84 Terra Common Shares indirectly held in Mr. Huey’s 401(k) planaccount (as of March 16, 2010) and 17,800 restricted Terra Common Sharesdirectly held.

 

(8)          Includes 100 fully vested Terra Common Sharesdirectly held and 8,400 restricted Terra Common Shares directly held.

 

(9)          Includes 25,029 fully vested Terra Common Sharesdirectly held, 3,421 Terra Common Shares indirectly held in Mr. Stone’s401(k) plan account (as of March 16, 2010) and 16,400 restrictedTerra Common Shares directly held.

 

**Change in Control.**

 

Exceptas set forth in this Information Statement, the Company is not aware of anyarrangements, including any pledge by any person of securities of the Company,the consummation or operation of which may at a subsequent date result in achange of control of the Company.

 

**Section 16(a) BeneficialOwnership Reporting Compliance.**

 

Section 16(a) ofthe Exchange Act requires Terra’s executive officers, directors and beneficialowners of more than 10 percent of the Terra Common Shares to file initial reportsof beneficial ownership and reports of changes in beneficial ownership of TerraCommon Shares with the SEC and the NYSE. Executive officers and directors arerequired by SEC regulations to furnish Terra with copies of all Section 16(a) reportsthey file. To Terra’s knowledge, all persons who were Terra executive officers,directors and beneficial owners of more than 10 percent of the Terra CommonShares at any time during 2009 filed all reports required under Section 16(a) duringand with respect to 2009 in a timely manner, except Mr. Giesler, whoinadvertently filed one Form 4 late. This conclusion is based solely on areview of the copies of such filings furnished to Terra and of writtenrepresentations from Terra’s executive officers and directors.

 

A-15

----

 

**EXECUTIVE COMPENSATION AND OTHER INFORMATION**

 

**CompensationDiscussion and Analysis.**

 

***Background.***

 

Thiscompensation discussion and analysis discusses the material elements ofcompensation of our named executive officers for 2009. In 2009, our namedexecutive officers were:

 

·                  Michael L.Bennett, President and Chief Executive Officer

 

·                  Daniel D.Greenwell, Senior Vice President and Chief Financial Officer

 

·                  Douglas M.Stone, Senior Vice President, Sales & Marketing

 

·                  John W. Huey,Vice President, General Counsel and Corporate Secretary

 

·                  Earl B. Smith,Vice President, Business Development

 

Asa producer and marketer of nitrogen products for agricultural, industrial andenvironmental customers, Terra’s operating results are affected by the volatilenature of the nitrogen products industry. During 2009, the nitrogen businesswas affected by the decline in the global economy, contributing to a lesseneddemand for our industrial nitrogen products. The credit crisis and volatilecrop prices continued to impact the agriculture industry, hampering demand foragricultural nitrogen products. This resulted in a decline in net income ascompared to 2008 and 2007, albeit returns on invested capital remainedrelatively robust. The period of strong growth that we experienced for 2007 andmuch of 2008 was preceded by a period of approximately six years of difficultmarket conditions characterized by losses and low returns. We expect thatmarket volatility will continue to be a factor in this industry. We havedesigned our executive compensation program to reflect these fundamentalfactors. For additional details regarding the cyclical nature of the nitrogenproducts industry and our performance in light of these conditions, see theManagement’s Discussion and Analysis of Financial Conditions and Results ofOperations in our 2009 Annual Report on Form 10-K.

 

***Overview.***

 

*Objectives**.*

 

TheCompensation Committee’s primary objectives in designing our executivecompensation program are to (i) provide competitive incentive rewards forthe achievement of specific annual goals by Terra; (ii) minimize fixedcosts during cyclical downturns; and (iii) provide incentives to manageour North American and United Kingdom asset base as well as new investments toearn returns in excess of our cost of capital over the long term.

 

A-16

----

 

*Elements ofCompensation**.*

 

Ourcompensation program is comprised of three primary components:

 
| *Base  Salary*          |   | Base salaries are targeted  at the low end of the market range in order tomaintain low  fixed-cash costs during cyclical downturns.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *Annual  Incentives*    |   | Annual incentives are paid  in cash and provide the opportunity duringperiods of  average and cyclically robust performance for management to earn competitive  total cash compensation through a combination of salary and annual incentive  payments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| *Long-Term  Incentives* |   | Long-term incentives are  paid in restricted shares and performance shares inorder to align  the interests of our executive officers with those of ourshareholders.  While a portion is subject to time-based vesting in order topromote  retention, for our most senior officers, a significant portion iscomprised of  performance share grants that will not vest unless Terra meetsspecified  performance goals and will vest at above-target levels in the case ofsuperior  company performance. In particular, the vesting criteria for theperformance  share grants has significant upside potential tied to the ability ofour senior  officers to successfully manage our existing asset base and investin new assets  to generate returns in excess of the cost of capital. Togetherwith base  salary and annual cash incentive awards, long-term incentiveawards are  intended to provide the opportunity for our executive officers toachieve total  compensation at approximately the 50th percentile of companiesin our survey  comparison group if target levels of performance are met. |

 

TheCompensation Committee’s approach to executive compensation is to review allthree elements of compensation together, rather than considering each elementseparately, and to compare our total compensation levels to a survey comparisongroup of approximately 400 companies, as described in the next paragraph. On atotal compensation basis, the combination of base salaries, annual cashincentive awards and long-term incentives should provide our executive officerswith above-average compensation for above-average individual and companyperformance and below-average compensation for below-average performance.

 

*Analysis ofMarket Practices**.*

 

Inimplementing our compensation program, our Compensation Committee has reviewedstudies conducted by its compensation consultant, Towers Watson (formerly knownas Towers Perrin prior to its merger with Watson Wyatt), which compare ourcompensation practices with respect to the levels of compensation and the mixof types of compensation to those of companies that are similar to us inrevenue, market capitalization or industry profile. For 2009, the surveycomparison group, which included approximately 400 companies in the 2009 TowersWatson Compensation Data Bank (the “2009 Towers Watson Survey”), was comprisedof a combination of “general industry” and “chemical industry” companies. The2009 Towers Watson Survey is a broad-based, published survey, rather than asurvey that was prepared specifically for the Company. The “general industry”group included all companies in the 2009 Towers Watson Survey, other thanutilities, energy companies and financial services companies. The purpose ofTowers Watson’s review of the group of general industry companies was toprovide the Compensation Committee with a broad overview of general marketpractices. Towers Watson employed regression analysis to normalize the datarelative to companies similar in size to Terra to ensure comparability.

 

TowersWatson also reviewed publicly available data on the compensation paid to thechief executive officers, chief financial officers and chief legal officers of21 companies in our industry or a related industry, including most of the 10companies included in the Performance Graph that appears on page 29 of our2009 Annual Report on Form 10-K. The purpose of the review of companies inthe chemical industry group and the group of 21 companies was to determinewhether the compensation practices of these groups differed from the generalindustry group in any meaningful respects. For purposes of reviewing 2009compensation, Towers Watson did not identify any meaningful distinctions.

 

A-17

----

 

Thegeneral industry group serves as the Compensation Committee’s main focus forinformation on market practices. We believe that the broader group isappropriate in our case, because Terra has few direct U.S. competitors, andmany of the companies in our industry do not compete with us in executiverecruitment. In addition, we recruit executive talent from across a broad rangeof industries.

 

Thedata described above was used to provide the Compensation Committee with abroad understanding of market practices, rather than to compare the Company’spay practices to those of any specific group. When the Compensation Committeetargeted 2009 compensation at particular levels, these levels were based ondata regarding general compensation practices.

 

*InternalPay Equity**.*

 

OurCompensation Committee’s approach to determining the compensation of MichaelBennett, our Chief Executive Officer, is generally the same approach that isused to determine the compensation levels of our other senior executives, withtwo principal exceptions.

 

First,the performance measure for Mr. Bennett’s annual incentive award differsfrom those of our other executive officers. The individual goals applicable to Mr. Bennettunder our Annual Incentive Plan are based on total company performance, whereasthe individual goals of the executives who report directly to Mr. Bennettare generally based on their particular areas of responsibility. Thisdistinction is intended to reflect Mr. Bennett’s level of accountabilityand influence with respect to overall company performance.

 

Additionally,in the case of long-term incentive awards, which are comprised of a combinationof time-based restricted stock and performance share awards, two-thirds of Mr. Bennett’sawards are comprised of performance shares, whereas half of the other seniorexecutives’ awards are comprised of performance shares. The CompensationCommittee believes that Mr. Bennett has a greater ability to influencecompany performance, and, therefore, his awards should have more upside anddownside potential than awards granted to our other executive officers.

 

***Role of Our Compensation Consultant.***

 

In2005, our Compensation Committee selected and retained Towers Watson to serveas its independent compensation consultant. Towers Watson advises and consultswith the Chairman of our Compensation Committee in connection with ourcompensation programs, including long-term incentive compensation, stockownership guidelines and executive severance and change in controlarrangements. While Towers Watson advises our Compensation Committee in makingits decisions, including by providing our Compensation Committee withinformation about current market practices, our Compensation Committee retainsultimate authority to make all final determinations. Our Vice President,Investor Relations and Human Resources, Joe Ewing, often provides Towers Watsonwith the necessary data and background information that it needs in order toprepare materials requested by the Compensation Committee.

 

Atthe request of our Compensation Committee, Towers Watson also assisted us inpreparing the executive compensation disclosure in this Information Statementand in our 2008 and 2009 proxy statements by reviewing the CompensationDiscussion and Analysis and, based on data we provided, assisting in thepreparation of the tables included in this Information Statement and priorproxy statements.

 

***2009 Executive Compensation Program.***

 

OurCompensation Committee developed a 2009 executive compensation program thatprovided for the following:

 

*BaseSalaries**.*

 

For2009, our executive officers received base salaries at approximately the 25thpercentile of the survey comparison group of companies. The CompensationCommittee determined that base salaries should be targeted around that level inorder to control fixed costs in light of the volatile nature of the nitrogenproducts

 

A-18

----

 

industry. The Summary Compensation Tablebelow details the annual base salaries paid in 2009 to each of our namedexecutive officers.

 

InFebruary 2009, Mr. Bennett proposed increases to the base salaries ofour named executive officers, based on his evaluation of each of our namedexecutive officer’s performance. The Compensation Committee considered the proposedsalary increases for our named executive officers and determined that salaryincreases were appropriate in order to maintain base salaries at approximatelythe 25th percentile level. The Compensation Committee also took into accountthe individual performance of each of the named executive officers whendetermining the amount of salary increase to award.

 
| **Executive** | ** ** | **2008  Base Salary** | ** ** | **2009  Base Salary** | ** ** |
|---------------|------------|-----------------------|------------|-----------------------|------------|
| Bennett       |       | $                     | 600,000    |                  | $          | 650,000 |   |
| Greenwell     |       | $                     | 330,000    |                  | $          | 380,000 |   |
| Stone         |       | $                     | 270,000    |                  | $          | 300,000 |   |
| Huey          |       | $                     | 285,000    |                  | $          | 295,000 |   |
| Smith         |       | $                     | 210,000    |                  | $          | 220,000 |   |

 

*AnnualIncentive Compensation**.*

 

Thecash incentive awards to be paid to our executive officers are allocated froman overall pool of available funds that is established by our CompensationCommittee during the first quarter of each year based on the aggregate value ofthe potential awards payable to all participants in our Annual Incentive Plan.The amount of the overall pool of available funds is determined by ourachievement of return on capital employed (ROCE) targets, as described below.Beginning in 2008, the Compensation Committee decided to use ROCE targets fordetermining the funding of the incentive pool because ROCE is a betterindicator of the operating and investment decisions of management and requiresmanagement to be disciplined in the use of Terra’s capital.

 

Actualpayout levels under the Annual Incentive Plan, however, are determined based onindividual performance against individual goals. For Messrs. Bennett,Greenwell and Huey, 30% of their individual goals are based on achievement ofthe Company’s projected annual operating budget as approved by the Board, while40% of Messrs. Stone and Smith’s individual goals are based on achievementof the Company’s projected annual operating budget. The Compensation Committeedetermined that the lower weighting of achievement of the Company’s projectedannual operating budget was appropriate for Messrs. Bennett, Greenwell andHuey because of the need for them to focus on driving to the optimum decisionon the unsolicited acquisition offers made by CF during 2009.

 

Mr. Bennettprepared a proposal for his own individual performance goals that was reviewed,modified and approved by the Compensation Committee in the first quarter of2009. In addition, during the first quarter of 2009, each other executiveofficer worked with Mr. Bennett to establish individual performance goalsfor 2009, which focused on the executive’s corresponding function, departmentor business unit and which tracked Mr. Bennett’s own individual goals froman overall corporate perspective. At the same time, during the first quarter of2009, the Compensation Committee approved the 2009 target annual incentiveawards for each of our executive officers.

 

Whilefunding of the incentive pool for 2009 was dependent on 2009 ROCE, performanceby each executive officer against the corresponding individual performancegoals (including achievement of the Company’s projected 2009 annual operatingbudget) based on recommendations by Mr. Bennett was used by theCompensation Committee to determine the executive’s actual award. In itsexercise of discretion to determine individual awards under our AnnualIncentive Plan, our Compensation Committee applied negative discretion toadjust the amount of certain individual awards downward and also exercised itsdiscretion in some cases to increase the amount of certain individual awardsabove the amount determined by multiplying the individual’s target award by theincentive pool funding percentage. The aggregate amount of all awards paid,however, was $760,314 less than the funding of the incentive pool. In a similarmanner, the Board

 

A-19

----

 

evaluates Mr. Bennett’sperformance at the end of each year and determines the extent to which he hasmet his performance goals and sets his actual bonus.

 

Thefollowing table, which sets forth the target and actual annual incentive awardfor each of our named executive officers under our 2006, 2007, 2008 and 2009Annual Incentive Plans, reflects how the cyclical nature of our businessaffected our Annual Incentive Plan payouts. Our performance for 2009 wasbetween target and the maximum level, and our performance 2007 and 2008exceeded the maximum level, while our performance for 2006 was below target.

 
| ** **    | ** ** | **Target 2006** | ** ** | **Actual 2006** | ** ** | **Target 2007** | ** ** | **Actual**      | ** ** | **Target 2008** | ** ** | **Actual 2008** | ** ** | **Target 2009** | ** ** | **Actual 2009** | ** ** |
|---------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|
| ** **    | ** ** | **Annual**      | ** ** | **Annual**      | ** ** | **Annual**      | ** ** | **2007 Annual** | ** ** | **Annual**      | ** ** | **Annual**      | ** ** | **Annual**      | ** ** | **Annual**      | ** ** |
| **Executive** | ** ** | **Incentives**  | ** ** | **Incentives**  | ** ** | **Incentives**  | ** ** | **Incentives**  | ** ** | **Incentives**  | ** ** | **Incentives**  | ** ** | **Incentives**  | ** ** | **Incentives**  | ** ** |
| Bennett       |       | $               | 575,000    |            | $          | 0               |       | $               | 825,000    |            | $          | 1,468,500       |       | $               | 900,000    |            | $          | 1,710,000 |   | $ | 975,000 |   | $ | 955,927 |   |
| Greenwell     |       | $               | 116,000    |            | $          | 0               |       | $               | 150,000    |            | $          | 300,000         |       | $               | 198,000    |            | $          | 396,000 |   | $ | 285,000 |   | $ | 400,000 |   |
| Stone         |       | $               | 42,500     |            | $          | 0               |       | $               | 110,000    |            | $          | 210,000         |       | $               | 162,000    |            | $          | 324,000 |   | $ | 225,000 |   | $ | 250,000 |   |
| Huey          |       | $               | 132,500    | *               | $          | 0               |       | $               | 137,500    |            | $          | 265,000         |       | $               | 142,500    |            | $          | 275,000 |   | $ | 147,500 |   | $ | 180,000 |   |
| Smith         |       | N/A             |       | N/A             |       | N/A             |       | N/A             |       | $               | 105,000    |            | $          | 200,000         |       | $               | 110,000    |   | $ | 125,000 |   |

 

----

*Mr. Huey’s 2006 target incentive amount was prorated to reflect that hewas hired on October 25, 2006.

 

Thetarget individual award to each of the executive officers under the AnnualIncentive Plan is determined as a percentage of the executive officer’s basesalary. The target awards to each of our named executive officers pursuant tothe 2009 Annual Incentive Plan were 150% for Mr. Bennett, 75% for each of Messrs. Greenwelland Stone and 50% for Messrs. Huey and Smith. These target awards werechosen to allow our executive officers to achieve total compensation atapproximately the 50th percentile if target levels of performance are met. Thetarget awards for Messrs. Bennett, Huey and Smith are identical to theirtarget awards under the 2008 Annual Incentive Plan, while the target awards forMessrs. Greenwell and Stone were increased from 60% under the 2008 AnnualIncentive Plan to 75% under the 2009 Annual Incentive Plan.

 

TheAnnual Incentive Plan covers our officers and certain other key employees. Thesize of the pool is determined based on the aggregation of the individualtarget awards and is funded based on our achievement of ROCE. The funding ofthe pool for the 2009 Annual Incentive Plan was determined based on thefollowing performance measures:

 

·                  If Terra’s 2009ROCE was less than 9%, the incentive pool would not have been funded.

 

·                  If Terra’s 2009ROCE was equal to 9%, 50% of the target annual incentive pool would have beenfunded.

 

·                  For each 0.07%by which Terra’s 2009 ROCE was greater than 9%, an additional 1% of the targetannual incentive pool would have been funded.

 

Underthis formula, if Terra had achieved a 2009 ROCE of 12.5%, the incentive poolwould have been funded at 100% of the target amount, and with a 2009 ROCE of19.5%, the incentive pool would have been funded at the maximum level of 200%of the target amount. The actual 2009 ROCE was 14.988%, resulting in thefunding of the incentive pool with a total amount of $4,497,741, equal to135.54% of target level.

 

TheCompensation Committee selected achievement of 12.5% ROCE as the target for100% funding of the incentive pool for 2009, because that level of ROCE,according to outside studies performed by investment bankers at the request ofour Chief Financial Officer, was approximately equal to our cost of capital for2009.

 

TheCompensation Committee’s approach in determining ROCE for purposes of theAnnual Incentive Plan is that while annual incentive compensation levels forour executive officers should reflect operating costs incurred during therelevant year, decisions made by the Board about Terra’s capital structure andexpenses that are unusual in nature should neither increase nor decreaseexecutive compensation levels. This approach was reflected in the calculationof 2009 ROCE, which excluded expenses related to the CF Industries Holdings, Inc.unsolicited acquisition offers. Also in 2009, after an examination of differentscenarios for how the inclusion or exclusion of cash in the denominator of ROCEwould impact management’s decisions and

 

A-20

----

 

affect the level of netincome required to generate the target levels of ROCE under the AnnualIncentive Plan and the long-term incentive program, the Compensation Committeedetermined that the formula to determine ROCE would include cash.

 

*Long-TermIncentives**.*

 

Inaccordance with our philosophy of tying long-term incentive awards to companyperformance, the Compensation Committee has designed our long-term incentiveprogram to accomplish the following objectives: (1) reward achievement ofreturn on capital employed (ROCE) targets on a cumulative basis over athree-year period; (2) provide more substantial incentives for achievingreturns above the cost of capital; (3) assist with attraction andretention of executives; and (4) align management incentives withshareholder interests through the use of equity awards. To these ends, ourlong-term incentive compensation is comprised of a combination of performanceshare awards, which only vest upon achievement of performance goals relating toour return on capital employed (ROCE), and restricted shares, which vest basedon continued employment.

 

Eachyear, the Compensation Committee sets an annual target award for each executiveofficer who participates in our long-term incentive plan. For 2009, in the caseof executive officers other than Mr. Bennett, target grants were 130% ofannual base salary. Mr. Bennett’s target grant was set at 300% of hisannual base salary. The Compensation Committee determined that these targetlevels were appropriate for 2009 based on market data with respect to thecomparison group of companies and the objective of setting long-termcompensation to allow our executive officers to achieve total compensation atapproximately the 50th percentile if target levels of performance are met. Thetarget value of the long-term incentive awards for 2009 for each of the namedexecutive officers (expressed as a percentage of base salary) is set forth inthe narrative following the Summary Compensation Table on page A-29.

 

TheCompensation Committee determined that in the case of executive officers otherthan Mr. Bennett, 50% of the value of the 2009 long-term incentive grantshould be subject to time-based vesting criteria to assist in executiveretention, while the remaining 50% should be subject to performance-basedvesting criteria. As previously noted, Mr. Bennett received one-third ofhis grant in restricted shares and two-thirds in performance share grants. Theperformance share grants for 2009 were approved by the Compensation Committeeon February 17, 2009 and were made on that same day, and the restrictedshare grants for 2009 were approved by the Compensation Committee on July 14,2009 and were made July 15, 2009.

 

Inaccordance with applicable disclosure rules, the Summary Compensation Table on page A-29reflects the aggregate grant-date fair value of the performance-based sharesand restricted shares granted in 2009, calculated in accordance with FASB ASCTopic 718, *Stock Compensation*.When determining the long-term incentive award grants, the CompensationCommittee considered the fair market value of the shares on the grant date and,in the case of performance share awards, the value of potential payouts basedon achievement of the performance targets described below. The fair marketvalue of these awards, based on our stock price of $32.19 per share as of December 31,2009, is set forth in the Outstanding Equity Awards at Fiscal Year End Table onpage A-36.

 

*2009Performance Share Awards.*

 

Forpurposes of the 2009 performance share grants, the number of shares to beissued will depend on Terra’s annualized average return on capital employed(ROCE) over the three-year performance period ending on December 31, 2011.We use ROCE as the performance metric because ROCE is a critical indicator ofgood operating and investment decisions by management, is an importantmeasurement for judging success of Terra’s strategic initiatives, and is acritical metric for investors.

 

A-21

----

 

Thefollowing table illustrates target and actual achievement of ROCE as of December 31,2009, with respect to the 2007-2009, 2008-2010 and 2009-2011 performanceperiods.

 
| ** **                  | ** ** | ** **           | ** ** | ** **                           | ** ** | ** **                            | ** ** | **Level of Payout for**    | ** ** |
|-----------------------------|------------|----------------------|------------|--------------------------------------|------------|---------------------------------------|------------|-------------------------------------------|------------|
| ** **                  | ** ** | ** **           | ** ** | **Actual**                           | ** ** | **Actual Average**               | ** ** | **Performance Share**                | ** ** |
| ** **                  | ** ** | ** **           | ** ** | **Achievement**                      | ** ** | **Annual ROCE (as of** | ** ** | **Awards (as a % of** | ** ** |
| **Performance Period** | ** ** | **Target ROCE** | ** ** | **of ROCE (by year)** | ** ** | **12/31/09)**                         | ** ** | **target)**                               | ** ** |
| 2007-2009                   |       | 9                    | %          | 2007                                 |       | 27.499                                | %          |                                      |       |   |   |
|                        |       |                 |       | 2008                                 |       | 74.121                                | %          |                                      |       |   |   |
|                        |       |                 |       | 2009                                 |       | 30.382                                | %          | 44.404                                    | %          | 200% |   |
|                        |       |                 |       |                                 |       |                                  |       |                                      |       |   |   |
| 2008-2010                   |       | 10                   | %          | 2008                                 |       | 74.121                                | %          |                                      |       |   |   |
|                        |       |                 |       | 2009                                 |       | 30.382                                | %          | 53.750                                    | %          | To be determined after  12/31/10 |   |
|                        |       |                 |       |                                 |       |                                  |       |                                      |       |   |   |
| 2009-2011                   |       | 12.5                 | %          | 2009                                 |       | 14.988                                | %          | 14.988                                    | %          | To be determined after 12/31/11 |   |

 

Theperformance share grant payouts for the 2009 grant cycle (with a performanceperiod ending in 2011) will be determined based on the following measures:

 

·                  If Terra’sannualized average ROCE for the period is less than 7.5%, no shares will bedelivered.

 

·                  If Terra’sannualized average ROCE for the period is between 7.5% and 12.5%, 1% of thetarget number of shares will be delivered for each 0.05% by which annualizedaverage ROCE exceeds 7.5%. Thus, if annualized average ROCE is equal to 12.5%,100% of the target number of shares will be delivered.

 

·                  If Terra’sannualized average ROCE for the period exceeds 12.5%, an additional 1% of thetarget number of shares will be delivered for each 0.025% by which annualizedaverage ROCE exceeds 12.5%, up to a maximum of 200% of the target number ofshares.

 

Annualizedaverage ROCE of 12.5% over a cumulative three-year period was determined by theCompensation Committee to be an appropriate goal, as outside studies performedby investment bankers indicated that it is approximately equal to our cost ofcapital. As noted above in the description of the Annual Incentive Plan, theCompensation Committee believes that while long-term performance awards to ourexecutive officers should reflect operating costs incurred during the relevantperformance period, decisions made by the Board about Terra’s capital structureand expenses that are unusual in nature should not affect executivecompensation levels.

 

Achievementof ROCE is the performance goal that determines both the funding of the 2009Annual Incentive Plan bonus pool and payout of the 2009 performance shareawards. In selecting performance metrics for both arrangements, theCompensation Committee considered the objectives of each type of arrangementand set threshold, target and maximum levels for both arrangements accordingly.While achievement of 12.5% ROCE was determined to be the appropriate targetlevel under both arrangements, the Compensation Committee determined thatunlike the Annual Incentive Plan, which provides no awards to any participantsif the performance for the year is below the level that would fund the targetincentive pool at 50%, participants who hold performance shares may earn as fewas 1% of the target number of shares for performance that is at the thresholdlevel over the three-year term of the performance period. This approach isintended to ensure that poor performance during an early part of theperformance period will not discourage participants by causing the performancemeasurements to be impossible to achieve but allows participants to earn someportion of the performance shares if performance in the later part of theperformance period has improved. In addition, while achievement of ROCE underthe Annual Incentive Plan provides for a “straight-line” increase in thepercentage at which the bonus pool is funded, the performance share awardsprovide for a “two tiered” approach, pursuant to which achievement of ROCEabove the target level results in a greater increase in the total percentage ofshares awarded. The Compensation Committee determined that this distinction wasappropriate in order to provide additional incentives to encourage our officersto excel in creating long-term value for our shareholders.

 

A-22

----

 

Performanceshare grants vest at the end of a three-year performance period, based onachievement of performance goals and assuming that the participant remainsemployed by Terra. Upon vesting of a performance share grant, the holder isentitled to receive a number of shares ranging from 0% to 200% of the targetnumber of shares subject to the award, based on achievement of ROCE. Individualperformance does not play a part in determining the level of vesting. Except inthe case of death, total disability or termination of employment without causeor for good reason (both as defined in the award agreement) following a changein control of Terra (as described below) or other special circumstancesidentified by the Compensation Committee, the performance share grants will beforfeited if employment terminates for any reason prior to vesting. In theevent of termination of employment due to death prior to a change in control,the holder will become entitled to a number of performance shares based onactual performance prior to death. In the event of termination of employmentdue to total disability prior to a change in control, performance shares willcontinue to vest following termination based on achievement of performancegoals.

 

Unlikeprior grants of performance shares, which vest automatically upon a change incontrol at the greater of the target number of shares subject to the award anda number based on actual company performance during the actual quarterscompleted prior to the change in control, the 2009 performance share grants donot vest automatically upon a change in control of Terra. Instead, for the 2009performance share grants and grants in future years, following a change incontrol of Terra, the number of shares that each holder will be entitled toreceive will become fixed as of the date of the change in control at thegreater of the target number of shares subject to the award and a number basedon actual company performance during the actual quarters completed prior to thechange in control. Each holder of performance shares will receive suchperformance shares on the earlier of the date that such award would otherwisevest or the date that such holder is terminated without cause or for goodreason (both as defined in the performance share award agreement) or due todeath or total disability on or following a change in control.

 

Underthe merger agreement with CF, all performance shares will be canceled at thetime CF pays for shares tendered in the Offer in consideration for a cashpayment equal to the greater of the target number of shares subject to theaward and a number based on actual Company performance during the actualquarters completed prior to the time CF pays for shares tendered in the Offer,multiplied by an amount in cash equal to the sum of (x) the cash portionof the per share merger consideration and (y) the product of (1) theaverage closing sales price, rounded to four decimal points, of CF common stockon the NYSE (reported in the Wall Street Journal, New York City edition) forthe period of the ten consecutive trading days ending on the second fulltrading day prior to the time CF pays for shares tendered in the Offer and (2) theportion of the offer price paid in CF common stock. The awards willautomatically vest at the time CF pays for shares tendered in the Offerpursuant to their terms because CF has chosen not to assume outstandingperformance shares.

 

*2009 Restricted Share Awards.*

 

Therestricted shares are subject to cliff vesting with 100% of the award vestingon the third anniversary of the grant date, assuming that the participantremains employed by Terra at such time. Except in the case of death, totaldisability or termination of employment without cause or for good reason (bothas defined in the award agreement) following a change in control of Terra or inother special circumstances identified by the Compensation Committee, therestricted shares will be forfeited if employment terminates for any reasonprior to vesting. In the event of termination of employment due to death ortotal disability, the vesting of restricted shares will accelerate in full.Grants of restricted shares made prior to 2008 vest in full automatically upona change in control of Terra. In 2008, the Compensation Committee consideredthe issue of vesting of restricted shares upon a change in control anddetermined that automatic vesting upon a change in control might not be in theshareholders’ best interests, and that full vesting of the restricted sharesupon certain terminations following a change in control of Terra would providemore retention value while still providing appropriate protection to the holderof the restricted shares. As a result, the Compensation Committee decided that,following a change in control of Terra, the vesting of restricted sharesgranted in 2008 and later years shall only accelerate if the holder isterminated without cause or for good reason.

 

A-23

----

 

Underthe merger agreement with CF, all restricted shares will vest immediately priorto the time CF pays for shares tendered in the Offer and will be treated in thesame manner as vested shares of Terra common stock held by other stockholderspursuant to their terms because CF has chosen not to assume restricted shares.

 

*Changes toIncentive Compensation Programs for 2010.*

 

For2010, in light of the uncertainty created for executives due to the unsolicitedacquisition offers by CF, the Compensation Committee decided to approve changesto the annual incentive awards to protect recipients of such awards in theevent of a change in control of Terra. In the event of a change in control ofTerra during 2010, the performance metric used to calculate the cash awards(ROCE) will become fixed at the greater of target performance and actualperformance during the quarters completed through the date of the change incontrol. Fixing the performance metric in the event of a change in control isconsistent with the calculation of the number of performance shares in theevent of a change in control. A participant who remains employed through December 31,2010 will receive his or her full bonus under the plan calculated in suchmanner. If a participant’s employment is terminated following a change incontrol of Terra without cause or for good reason (each as defined in theplan), the participant will be entitled to a prorated bonus for 2010 throughthe participant’s termination date.

 

TheCompensation Committee selected performance targets for the 2010 AnnualIncentive Plan and the 2010 performance share grants that are slightly lowerthan the levels for the 2009 grants. The Compensation Committee selected atarget of 11.5% ROCE for both the 2010 Annual Incentive Plan and the 2010performance share grants because annualized average ROCE of 11.5% over acumulative three-year period is approximately equal to our cost of capital, asindicated in outside studies performed by investment bankers.

 

Thefunding of the pool for the 2010 Annual Incentive Plan will be determined basedon the following performance measures:

 

·                  If Terra’s 2010ROCE is less than 8%, the incentive pool will not be funded.

 

·                  If Terra’s 2010ROCE is equal to 8%, 50% of the target annual incentive pool will be funded.

 

·                  For each 0.07%by which Terra’s 2010 ROCE is greater than 8%, an additional 1% of the targetannual incentive pool will be funded.

 

Underthis formula, if Terra achieves 2010 ROCE of 11.5%, the incentive pool will befunded at 100% of the target amount, and with 2010 ROCE of 18.5%, the incentivepool will be funded at the maximum level of 200% of the target amount.

 

Theperformance share grant payouts for the 2010-2012 grant cycle (with aperformance period ending December 31, 2012) will be determined based onthe following measures:

 

·                  If Terra’sannualized average ROCE for the period is less than 6.5%, no shares will bedelivered.

 

·                  If Terra’sannualized average ROCE for the period is between 6.5% and 11.5%, 1% of thetarget number of shares will be delivered for each 0.05% by which annualizedaverage ROCE exceeds 6.5%. Thus, if annualized average ROCE is equal to 11.5%,100% of the target number of shares will be delivered.

 

·                  If Terra’sannualized average ROCE for the period exceeds 11.5%, an additional 1% of thetarget number of shares will be delivered for each 0.025% by which annualizedaverage ROCE exceeds 11.5%, up to a maximum of 200% of the target number ofshares for an annualized average ROCE of 14% or higher.

 

TheCompensation Committee approved an anti-dilution adjustment to the number ofoutstanding unvested performance shares and to the number of outstandingphantom shares and phantom performance shares (which are held by certain of ouremployees who are not officers) held as of December 11, 2009, in order toreflect the payment of the special cash dividend of $7.50 per common share.These awards did not participate in the special dividend. Restricted shares,however, did participate in the special dividend, and therefore were notadjusted. In addition, the Compensation Committee approved an adjustment to thenumber

 

A-24

----

 

of shares available under the TerraIndustries Inc. 2007 Omnibus Incentive Compensation Plan in connection with thespecial dividend. The Grants of Plan-Based Awards in 2009 Table onpage A-31, the Outstanding Equity Awards at 2009 Fiscal Year End Table onpage A-36 and the Options Exercised and Stock Vested Table beginning onpage A-37 all reflect this adjustment to our equity-based awards.

 

*Severance**.*

 

Priorto 2006, we were a party to executive retention agreements with our seniorexecutives that provided for payments and benefits in the event of atermination of employment following a change in control, but no executives werecovered by employment agreements or other severance arrangements thatestablished the level of payments and benefits to be provided in connectionwith a termination that was not related to a change in control. During thisperiod, executive severance was generally determined through individualnegotiations, which often led to a variety of inconsistent results. In 2006,the Compensation Committee decided that a standard form of severance agreementcovering non-change in control severance was needed to promote additionalstability, ensure equitable treatment and avoid the need for individualnegotiations. At the same time, the Compensation Committee decided to reviewits change in control severance practices. In connection with the CompensationCommittee’s review of our severance practices, Towers Watson provided theCompensation Committee with information about severance benefits that aregenerally provided in the event of an involuntary termination of a seniorexecutive’s employment, both in the change in control and non-change in controlcontexts.

 

Basedon the Compensation Committee’s review, on October 5, 2006, we enteredinto employment severance agreements with each individual who was an executiveofficer of Terra at that time. In addition, we entered into an employmentseverance agreement with Mr. Huey in October 2006 when he became anexecutive officer and with Mr. Smith in March 2008 when he became anexecutive officer.

 

Allemployment severance agreements with our executive officers are identicalexcept that Mr. Bennett’s agreement provides for an initial term of fiveyears rather than three, and the approval of three-quarters of our Board isrequired in order to terminate Mr. Bennett for “cause”. Our CompensationCommittee considered these distinctions appropriate in order to reflect Mr. Bennett’sunique role within our company. For a thorough description of the materialterms of the agreements with each of our named executive officers, see thenarrative following the Summary Compensation Table beginning on page A-29.For a description and quantification of the payments and benefits that may beprovided to the named executive officers under these agreements, see“Post-Employment Payments” beginning on page A-40.

 

TheCompensation Committee selected the severance multiples and levels of benefitsbased on information that Towers Watson provided in 2006 regarding currentmarket practices relating to executive severance. Annually, the CompensationCommittee considers and may extend the term of the agreements by one year.Should the Compensation Committee decide not to extend their terms, theagreements will expire one year thereafter.

 

InJuly 2008, the Compensation Committee reviewed the key terms of theemployment severance agreements with our executives and the potential impact ofthe agreements upon a change in control of Terra, including informationprovided by Towers Watson regarding the potential amounts of excise taxgross-ups that would be payable under different stock price scenarios. TheCompensation Committee decided to extend the terms of the agreements (otherthan Mr. Bennett’s agreement, which expires in 2011) by one year from theoriginally scheduled expiration date of October 2009, without changes tothe key terms of the agreements other than the addition of the willful breachof the Company’s code of conduct and failure to comply with governmentinvestigations to the definition of “cause”.

 

InJuly 2009, the Compensation Committee considered whether to extend theterms of the agreements (other than Mr. Bennett’s agreement, which expiresin 2011) by one year from the scheduled expiration date of October 2010and decided to defer any action relative to the extension of such agreements.

 

Theextent and nature of the severance compensation and benefits are identified andquantified in the disclosure entitled “Post-Employment Payments”, beginning on page A-40.

 

A-25

----

 

*DefinedBenefit Pension Plans**.*

 

Wedo not offer defined benefit pension plans to our employees who were hired onor after July 1, 2003. We do, however, maintain the Terra Industries Inc.Employees’ Retirement Plan, which is a tax-qualified defined benefit pensionplan maintained for the benefit of all U.S. employees hired before July 1,2003 (which includes Mr. Bennett and Stone). In 2003, Mr. Stoneelected to receive the direct company contribution under the 401(k) Planinstead of accruing additional benefits after July 1, 2003 under theRetirement Plan.

 

OnJanuary 1, 1992, we adopted a supplemental executive retirement plan,which we refer to as the SERP. The Compensation Committee and the Boardestablished the SERP so that certain management and highly compensatedemployees would be eligible for the benefits that would have been provided tothem under our tax-qualified defined benefit pension plan but for the limitsimposed by the Internal Revenue Code and the Employee Retirement IncomeSecurity Act. The SERP is an unfunded plan. Participants in the SERP have thestatus of unsecured creditors of Terra. As of December 31, 2009, the onlynamed executive officer who had accrued benefits under the SERP was Mr. Bennett.

 

InFebruary 2010, the Compensation Committee and the Board approved theadoption of a rabbi trust, which is intended to provide a source of funds toassist Terra in meeting its liabilities under the SERP. No later than five daysfollowing a change in control of Terra, Terra will be obligated to make anirrevocable contribution to the trust in an amount such that the trust will,immediately following such contribution, hold assets sufficient to pay eachSERP participant or beneficiary his or her accrued benefits under the SERP asof the consummation of a change in control. The trustee has broad investmentpowers with respect to the trust assets, but it may not invest in securities orobligations issued by Terra or any affiliate of Terra.

 

Fora description of the benefits accrued by Messrs. Bennett and Stone underour defined benefit pension plans as of December 31, 2009, see the PensionBenefits table on page A-38.

 

*DefinedContribution Plans**.*

 

Wemaintain a 401(k) plan, which is a tax-qualified defined contribution planmaintained for the benefit of all U.S. employees, including our named executiveofficers. The 401(k) plan permits employees to contribute a portion oftheir pay to the plan on a pre-tax basis. We also provide for a companymatching contribution as well as a direct company contribution in the case ofemployees who are not eligible to participate in the Terra Industries Inc.Employees’ Retirement Plan. The amount of our 2009 contribution to the 401(k) onbehalf of each of our named executive officers is set forth in the explanationof the All Other Compensation column of the Summary Compensation Table.

 

*EmployeeWelfare and Fringe Benefit Plans**.*

 

Ournamed executive officers are eligible to participate in our welfare and fringebenefit plans on the same basis as all of our other full-time employees. Thesebenefits include our medical, dental and vision plans, life insurance,short-term and long-term disability plans, business travel accident insurance,tuition reimbursement, healthcare spending accounts, and dependent carespending accounts. In addition, due to limitations on the level of base salarycovered by our primary long-term disability policy and in order to provideexecutive officers with long-term disability coverage equal to 60% of basesalary (which is the rate of coverage provided to all U.S. employees), wemaintain supplemental long-term disability policies.

 

*Perquisites**.*

 

Thenamed executive officers are provided company-paid memberships in a localcountry club of their choice. We cover any costs associated with thisperquisite, including taxes. This perquisite is provided in order to allow theexecutives to entertain business associates of Terra, such as partners in jointventures, customers and suppliers. The named executive officers are alsopermitted to use the club amenities for personal and family activities.

 

A-26

----

 

***Other Matters.***

 

*Stock Ownership/RetentionGuidelines**.*

 

TheCompensation Committee reviewed market data assembled by Towers Watson toarrive at a recommendation with respect to stock ownership by our executiveofficers. The purpose of the guidelines is to encourage our executive officersto own and retain shares of our stock, thereby aligning their interests withthose of our other shareholders. Although these guidelines are not mandatory,executive officers are strongly encouraged to follow them. However, specialcircumstances may require an executive officer to depart from the guidelines onoccasion. Current ownership guidelines are as follows:

 
| Chief Executive Officer |   | 4 times annual base salary |
|-------------------------|--------|----------------------------|
| Senior Vice Presidents  |   | 3 times annual base salary |
| Vice Presidents         |   | 1 times annual base salary |

 

Fiftypercent of unvested restricted shares will count toward the ownershipguidelines prior to vesting. After satisfying the ownership guidelinesdescribed above, the executive officers are asked to hold an additional 50% ofany shares awarded to them under our long-term incentive programs (includingrestricted shares and performance share grants) for a minimum of 12 monthsfollowing vesting.

 

Asof December 31, 2009, Mr. Bennett’s share ownership exceeded 25 timeshis annual base salary. The other named executive officers, with the exceptionof Messrs. Stone and Smith, also exceeded their respective guidelinemultiples as of December 31, 2009. Mr. Stone’s share ownership ofapproximately 2.64 times his annual base salary as of December 31, 2009was below the guidelines due to a recent promotion from Vice President toSenior Vice President and Mr. Smith’s share ownership of approximately0.63 times his annual base salary as of December 31, 2009 was below theguidelines due to the fact that he was only recently hired.

 

*IndemnityAgreements**.*

 

Terra’scharter and bylaws provide indemnification for its officers and directors tothe maximum extent permitted by law. In general, we will pay the costs of legaldefense, settlements or judgments on behalf of the officer or director relatingto actions taken in the course of employment or service with Terra, as long asconduct meets applicable standards. We have entered into Indemnity Agreementswith the executive officers and directors, including the named executiveofficers. The agreements provide the maximum indemnity available under MarylandGeneral Corporation Law, which is substantially the same as that provided underour charter and bylaws, and provide for certain procedural requirements inorder to obtain indemnification, the timing of required determinations,indemnification payments, advancement of expenses, and the rights of officersand directors in the event that we fail to provide indemnification or toadvance expenses.

 

*Role ofExecutive Officers in Determining Compensation**.*

 

Executiveofficers who are directly involved in administering the executive compensationprogram include Mr. Bennett and Mr. Ewing, who is our Vice President,Investor Relations and Human Resources. Mr. Bennett is excluded fromdiscussions and decisions regarding his own compensation. Mr. Ewingmanages the administrative aspects of the Compensation Committee’s relationshipwith Towers Watson, as well as the calculation and presentation to theCompensation Committee of proposed executive annual salaries, annual incentiveawards, and long-term incentive awards. Mr. Ewing corresponds frequentlywith Mr. Fraser, the Chairman of our Compensation Committee. Mr. Ewingcommunicates frequently with Mr. Bennett in all matters relating toexecutive compensation, other than those matters that relate to Mr. Bennett’sown compensation. Mr. Ewing also occasionally relies on Mr. Greenwell,our Senior Vice President and Chief Financial Officer, to calculate and reviewTerra’s return on capital employed (ROCE), which is the relevant performancemeasure under any long-term incentive program and to determine the level offunding of the incentive pool under our Annual Incentive Plan. Mr. Huey,Vice President, General Counsel and Corporate Secretary, is engaged withrespect to legal and SEC issues relating to executive compensation, includingreporting and disclosure issues.

 

A-27

----

 

Pursuantto its charter, the Compensation Committee is required to meet at least twiceannually but will meet more frequently to the extent necessary. In 2009, theCompensation Committee met two times. Generally, executive officers who attendthe meetings are Mr. Bennett, Mr. Ewing, and Mr. Huey, who actsas secretary of the meeting. Mr. Bennett and Mr. Ewing present therecommendations for any changes to compensation of our executive officers,except that no recommendations are made with respect to Mr. Bennett. Mr. Bennettmakes recommendations to the Compensation Committee regarding the level ofannual and long-term incentive awards for executive officers other than himselfand reviews the performance of such executive officers with regard to payoutlevels of incentive awards, but the Compensation Committee makes the final determinationsregarding grants and payout levels of awards. Mr. Bennett’s day-to-dayknowledge of the performance of the executives of Terra enables him to betterevaluate the performance of the executives. The Compensation Committeeconsiders the recommendations of Mr. Bennett as well as market data andthe overall compensation objectives of Terra in making its determinations.Final decisions regarding compensation for Mr. Bennett are made by theCompensation Committee in executive session, excluding all members ofmanagement. Decisions regarding Mr. Bennett are then communicated by Messrs. Slackand Fraser to Mr. Bennett and subsequently to Mr. Ewing. Mr. Ewingis responsible for implementing all approved changes. Decisions regarding theother executive officers are communicated by Mr. Bennett to Mr. Ewing.

 

*Deductibilityof Compensation**.*

 

Aspart of its role, the Compensation Committee reviews and considers thedeductibility of executive compensation under Section 162(m) of theInternal Revenue Code. Section 162(m) provides that the Company maynot deduct compensation of more than $1,000,000 paid in any year to the CEO orany of the three other most highly compensated officers (excluding the ChiefFinancial Officer), to the extent that such compensation is not“performance-based” as defined in Section 162(m). To qualify as“performance-based” compensation, certain pre-established objective performancegoals and certain other conditions must be met. We have considered thepotential impact of Section 162(m) on Terra’s compensation plans andhave determined that it is consistent with Terra’s best interests for thecompensation of our executives to qualify for the deduction available under Section 162(m) wherepossible. Therefore, we have designed certain of our plans and programs,including the 2009 Annual Incentive Plan and the 2009 performance share grants,as described above, to qualify for deductibility under Section 162(m).

 

In2008, the Internal Revenue Service released guidance affecting thedeductibility pursuant to Section 162(m) of certain bonuses or otherprograms if the bonus or program is referred to in the severance formula of anemployee’s employment agreement. We considered the impact of this guidance onour plans and programs and on the employment severance agreements describedabove, and decided to revise the language contained in the employment severanceagreements to comply with this guidance.

 

A-28

----

 

**CompensationCommittee Report.**

 

Wehave reviewed and discussed the Compensation Discussion and Analysis withmanagement. Based on such review and discussions, we recommended to the Boardthat the Compensation Discussion and Analysis be included in Terra’s AnnualReport on Form 10-K and this Information Statement filed pursuant to Section 14(f) ofthe Securities Exchange Act of 1934 and Rule 14f-1 thereunder.

 
|   | Members of the Compensation  Committee of the Board of Directors |
|--------|------------------------------------------------------------------|
|   |                                                             |
|   |                                                             |
|   | Dod A. Fraser, Chairman                                          |
|   | Peter S. Janson                                                  |
|   | Dennis McGlone                                                   |
|   | Irving B. Yoskowitz                                              |

 

**ExecutiveCompensation.**

 

**Summary Compensation Table**

 

Thefollowing table summarizes the compensation of each of our named executiveofficers for the fiscal year ended December 31, 2009. The named executiveofficers are our Chief Executive Officer, Chief Financial Officer and threeother most highly compensated executive officers ranked by their totalcompensation in the table below.

 
| **Name & Principal  Position** | ** ** | **Year** | ** ** | **Salary********($)** | ** **    | **Bonus********($)(1)** | ** ** | **Stock********Awards********($)(2)** | ** ** | **Option  Awards  ($)(2)** | ** **      | **Non-  Equity  Incentive  Plan  Compensation  ($)(3)** | ** ** | **Change  in  Pension  Value &  Nonqualified  Deferred  Compensation  Earnings  ($)(4)(5)** | ** ** | **All  Other********Compensation********($)(6)** | ** **      | **Total  ($)** | ** ** |
|-----------------------------------------|------------|----------|------------|-----------------------|---------------|-------------------------|------------|---------------------------------------|------------|----------------------------|-----------------|---------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|-----------------|----------------|------------|
|                                    |       |     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| **M. Bennett,**                         |       |     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| **President & CEO**                 |       | 2009     |       | $                     | 667,308       |                    | $          |  —                          |       | $                          |  3,435,065 |                                                    | $          |  —                                                                                         |       | $                                                |  955,927   |           | $          |  597,697 |   | $ |  27,681 |   | $ |  5,683,678 |   |
| ** **                              |       | 2008     |       | $                     | 592,308       |                    | $          |  —                          |       | $                          |  3,235,924 |                                                    | $          |  —                                                                                         |       | $                                                |  1,710,000 |           | $          |  184,533 |   | $ |  25,028 |   | $ |  5,747,792 |   |
| ** **                              |       | 2007     |       | $                     | 540,385       |                    | $          |  —                          |       | $                          |  2,945,640 |                                                    | $          |  —                                                                                         |       | $                                                |  1,468,500 |           | $          |  96,713 |   | $ |  24,166 |   | $ |  5,075,404 |   |
| ** **                              |       |     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| **D. Greenwell,**                       |       |     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| **SVP & CFO**                       |       | 2009     |       | $                     | 386,923       |                    | $          |  —                          |       | $                          |  782,567   |                                                    | $          |  —                                                                                         |       | $                                                |  400,000   |           | $          |  — |   | $ |  35,910 |   | $ |  1,605,400 |   |
| ** **                              |       | 2008     |       | $                     | 325,385       |                    | $          |  —                          |       | $                          |  667,642   |                                                    | $          |  —                                                                                         |       | $                                                |  396,000   |           | $          |  — |   | $ |  23,800 |   | $ |  1,412,827 |   |
| ** **                              |       | 2007     |       | $                     | 268,404       |                    | $          |  1,250                           |       | $                          |  552,680   |                                                    | $          |  —                                                                                         |       | $                                                |  298,750   |           | $          |  — |   | $ |  35,285 |   | $ |  1,156,369 |   |
| ** **                              |       |     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| **D. Stone,**                           |       |     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| **SVP  Sales &**                    |       |     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| **Marketing(7)**                        |       | 2009     |       | $                     |  306,923 |                    | $          |  —                          |       | $                          |  617,228   |                                                    | $          |  —                                                                                         |       | $                                                |  250,000   |           | $          |  12,983 |   | $ |  29,492 |   | $ |  1,216,626 |   |
| ** **                              |       | 2008     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| ** **                              |       | 2007     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| ** **                              |       |     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| **J. Huey,**                            |       |     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| **VP, General Counsel &**      |       |     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| **Corporate**                           |       |     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| **Secretary**                           |       | 2009     |       | $                     |  304,808 |                    | $          |  —                          |       | $                          |  605,453   |                                                    | $          |  —                                                                                         |       | $                                                |  180,000   |           | $          |  — |   | $ |  29,999 |   | $ |  1,120,259 |   |
| ** **                              |       | 2008     |       | $                     |  283,462 |                    | $          |  —                          |       | $                          |  582,478   |                                                    | $          |  —                                                                                         |       | $                                                |  275,000   |           | $          |  — |   | $ |  21,403 |   | $ |  1,162,342 |   |
| ** **                              |       | 2007     |       | $                     |  273,077 |                    | $          |  —                          |       | $                          |  564,790   |                                                    | $          |  —                                                                                         |       | $                                                |  265,000   |           | $          |  — |   | $ |  26,919 |   | $ |  1,129,786 |   |
| ** **                              |       |     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| **E. Smith,**                           |       |     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| **VP Corporate Development**            |       |     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| **(7)**                                 |       | 2009     |       | $                     |  226,923 |                    | $          |  —                          |       | $                          |  454,560   |                                                    | $          |  —                                                                                         |       | $                                                |  125,000   |           | $          |  — |   | $ |  238,482 |   | $ |  1,044,966 |   |
| ** **                              |       | 2008     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |
| ** **                              |       | 2007     |       |                  |          |                    |       |                                  |       |                       |            |                                                    |       |                                                                                                 |       |                                             |            |           |       |

 

----

(1)          Represents annual incentive payments in excess of thenamed executive officer’s maximum opportunity under the annual incentive plan.

 

(2)          Represents the grant-date fair value of equity grantsmade during the year under ASC Topic 718, rather than an amount paid to orrealized by the named executive officer. Assumes maximum payout of 200% onperformance share plan grants; see the Company’s Annual Report on Form 10-Kfor other assumptions

 

A-29

----

 

madein determining ASC Topic 718 values. For additional information aboutstock-based grants made in 2009, see the Grants of Plan-Based Awards table andaccompanying footnotes and narrative.

 

(3)          Reflects amount earned for 2009 performance under theannual incentive plan, up to the individual’s maximum incentive opportunity.Amounts in excess of the maximum incentive opportunity are shown in the “Bonus”column. 2009 amounts were earned in 2009 and paid in 2010, 2008 amounts wereearned in 2008 and paid in 2009 and 2007 amounts were earned in 2007 and paidin 2008.

 

(4)          In the case of each of our named executive officers,amounts shown are solely an estimate of the annual increase in the actuarialpresent value of the named executive officer’s age 65 accrued benefit under theTerra Industries Inc. Employees’ Retirement Plan (“Retirement Plan”) and, inthe case of Mr. Bennett, under the Terra Industries Inc. Excess BenefitPlan (“SERP”). No amount is payable under these plans before a participantattains age 55.

 

(5)          Assumptions used to calculate the actuarial presentvalue of the accrued benefits of the named executive officers are furtherdescribed in the narrative to the Pension Benefits in Fiscal Year 2009 Table onpage A-38. The Change in Pension Value and Non-qualified DeferredCompensation Earnings column also reports the amount of above market earningson compensation that is deferred outside of  tax-qualified plans. No amount is reportedbecause above market rates are not permitted under the Supplemental DeferredCompensation Plan and no named executive officer has an outstanding balanceunder such plan.

 

(6)          See “All Other Compensation” disclosure for details.

 

(7)          Messrs. Stone and Smith were not named executiveofficers in 2007 and 2008.

 

**All Other Compensation Table**

 

The following table describes each component of the All OtherCompensation column in the Summary Compensation Table.

 
| ** **                                                       | ** ** | ** **       | ** ** | ** **       | ** ** | **Registrant**        | ** ** | ** **    | ** ** | **Perquisite**      | ** ** | ** **   | ** ** | ** **   | ** ** | ** **           | ** ** |
|------------------------------------------------------------------|------------|------------------|------------|------------------|------------|-----------------------|------------|---------------|------------|---------------------|------------|--------------|------------|--------------|------------|----------------------|------------|
| ** **                                                       | ** ** | **Perquisites**  | ** ** | **Payments/**    | ** ** | **Contributions  to** | ** ** | ** **    | ** ** | **Tax**             | ** ** | ** **   | ** ** | **Taxable**  | ** ** | ** **           | ** ** |
| ** **                                                       | ** ** | **&  Other** | ** ** | **Accruals  on** | ** ** | **Defined**           | ** ** | **Insurance** | ** ** | **Reimbursements/** | ** ** | **Moving**   | ** ** | **Lump-Sum** | ** ** | ** **           | ** ** |
| ** **                                                       | ** ** | **Personal**     | ** ** | **Termination**  | ** ** | **Contribution**      | ** ** | **Premiums**  | ** ** | **Gross-**          | ** ** | **Expenses** | ** ** | **Payments** | ** ** | ** **           | ** ** |
| **Name**                                                         | ** ** | **Benefits(1)**  | ** ** | **Plans**        | ** ** | **Plans********(2)**  | ** ** | **(3)**       | ** ** | **Ups(4)**          | ** ** | **(5)**      | ** ** | **(6)**      | ** ** | **Other********(7)** | ** ** |
|                                                             |       |             |       |             |       |                  |       |          |       |                |       |         |       |         |       |                 |       |
| **M.  Bennett, President & CEO**                        |       | $                | 7,565      |             | $          | —                |       | $             | 11,836     |                | $          | 3,175        |       | $            | 5,045      |                 | $          | — |   | $ | — |   | $ | 60 |   |
|                                                             |       |             |       |             |       |                  |       |          |       |                |       |         |       |         |       |                 |       |
| **D.  Greenwell, SVP & CFO**                            |       | $                | 7,645      |             | $          | —                |       | $             | 22,922     |                | $          | 603          |       | $            | 4,680      |                 | $          | — |   | $ | — |   | $ | 60 |   |
|                                                             |       |             |       |             |       |                  |       |          |       |                |       |         |       |         |       |                 |       |
| **D.  Stone, SVP Sales & Marketing**                    |       | $                | 4,829      |             | $          | —                |       | $             | 21,097     |                | $          | 306          |       | $            | 3,200      |                 | $          | — |   | $ | — |   | $ | 60 |   |
|                                                             |       |             |       |             |       |                  |       |          |       |                |       |         |       |         |       |                 |       |
| **J.  Huey, VP, General Counsel & Corporate Secretary** |       | $                | 3,536      |             | $          | —                |       | $             | 21,215     |                | $          | 2,003        |       | $            | 3,185      |                 | $          | — |   | $ | — |   | $ | 60 |   |
|                                                             |       |             |       |             |       |                  |       |          |       |                |       |         |       |         |       |                 |       |
| **E.  Smith, VP Corporate Development**                          |       | $                | 3,432      |             | $          | —                |       | $             | 15,529     |                | $          | 315          |       | $            | 56,870     |                 | $          | 101,976 |   | $ | 60,300 |   | $ | 60 |   |

 

----

(1)          Amounts include only country club dues for eachexecutive.

 

(2)          Includes company contributions to each executive’s401(k) account.

 

(3)          Includes group life insurance premiums for coveragein excess of $50,000.

 

(4)          Includes tax gross-ups paid by the company in 2009 onperquisites and other benefits from 2008. These gross-ups are based only ontaxes from company payment of country club dues for all of the named executiveofficers, with the exception of Mr. Smith, whose figure includes a $16,482tax gross-up on moving expenses and a $40,388 tax gross-up on losses andcommissions on the sale of his home.

 

(5)          Includes a moving allowance of $18,333, movingexpenses of $24,249, a loss on sale of his home of $36,000 and commissions onsale of his home of $23,394.

 

(6)          Payment to compensate for loss of deferredcompensation at previous employer.

 

(7)          Value of gift card given to each of the namedexecutive officers during 2009.

 

A-30

----

 

**Grants of Plan-Based Awards in 2009**

 

Thefollowing table provides information on awards under the Annual Incentive Planand restricted share and performance share awards granted in 2009 to each ofour named executive officers.

 
| ** **                     | ** ** | ** **  | ** ** | ** **  | ** ** | ** **   | ** ** | ** **                      | ** ** | ** **                    | ** ** | ** **  | ** ** | ** **     | ** ** | ** ** | ** ** | ** **  | ** ** | **All**          | ** ** | ** **  | ** ** | ** **    | ** ** | ** ** | ** ** | ** **    | ** ** |
|--------------------------------|------------|-------------|------------|-------------|------------|--------------|------------|---------------------------------|------------|-------------------------------|------------|-------------|------------|----------------|------------|------------|------------|-------------|------------|------------------|------------|-------------|------------|---------------|------------|------------|------------|---------------|------------|
| ** **                     | ** ** | ** **  | ** ** | ** **  | ** ** | ** **   | ** ** | ** **                      | ** ** | ** **                    | ** ** | ** **  | ** ** | ** **     | ** ** | ** ** | ** ** | ** **  | ** ** | **Other**        | ** ** | ** **  | ** ** | ** **    | ** ** | ** ** | ** ** | ** **    | ** ** |
| ** **                     | ** ** | ** **  | ** ** | ** **  | ** ** | ** **   | ** ** | ** **                      | ** ** | ** **                    | ** ** | ** **  | ** ** | ** **     | ** ** | ** ** | ** ** | ** **  | ** ** | **Stock**        | ** ** | ** **  | ** ** | ** **    | ** ** | ** ** | ** ** | ** **    | ** ** |
| ** **                     | ** ** | ** **  | ** ** | ** **  | ** ** | ** **   | ** ** | ** **                      | ** ** | ** **                    | ** ** | ** **  | ** ** | ** **     | ** ** | ** ** | ** ** | ** **  | ** ** | **Awards:**      | ** ** | **All**     | ** ** | ** **    | ** ** | ** ** | ** ** | ** **    | ** ** |
| ** **                     | ** ** | ** **  | ** ** | ** **  | ** ** | ** **   | ** ** | ** **                      | ** ** | ** **                    | ** ** | ** **  | ** ** | ** **     | ** ** | ** ** | ** ** | ** **  | ** ** | **Number**       | ** ** | **Other**   | ** ** | **Exercise**  | ** ** | ** ** | ** ** | ** **    | ** ** |
| ** **                     | ** ** | ** **  | ** ** | ** **  | ** ** | ** **   | ** ** | ** **                      | ** ** | ** **                    | ** ** | ** **  | ** ** | ** **     | ** ** | ** ** | ** ** | ** **  | ** ** | **of**           | ** ** | **Option**  | ** ** | **or**        | ** ** | ** ** | ** ** | **Grant**     | ** ** |
| ** **                     | ** ** | ** **  | ** ** | ** **  | ** ** | ** **   | ** ** | ** **                      | ** ** | ** **                    | ** ** | ** **  | ** ** | ** **     | ** ** | ** ** | ** ** | ** **  | ** ** | **Shares**       | ** ** | **Awards:** | ** ** | **Base**      | ** ** | ** ** | ** ** | **Date**      | ** ** |
| ** **                     | ** ** | ** **  | ** ** | ** **  | ** ** | ** **   | ** ** | ** **                      | ** ** | ** **                    | ** ** | ** **  | ** ** | ** **     | ** ** | ** ** | ** ** | ** **  | ** ** | **of**           | ** ** | **Number**  | ** ** | **Price**     | ** ** | ** ** | ** ** | **Fair**      | ** ** |
| ** **                     | ** ** | ** **  | ** ** | ** **  | ** ** | ** **   | ** ** | **Estimated  Future Payouts**   | ** ** | **Estimated  Future Payouts** | ** ** | **Stock**   | ** ** | **of**         | ** ** | **of**     | ** ** | **Market**  | ** ** | **Value**        | ** ** |
| ** **                     | ** ** | ** **  | ** ** | ** **  | ** ** | ** **   | ** ** | **Under  Non-Equity Incentive** | ** ** | **Under  Equity Incentive**   | ** ** | **or**      | ** ** | **Securities** | ** ** | **Option** | ** ** | **Price**   | ** ** | **of**           | ** ** |
| ** **                     | ** ** | ** **  | ** ** | **Date of** | ** ** | **Type**     | ** ** | **Plan  Awards(4)**             | ** ** | **Plan  Awards(5)**           | ** ** | **Units**   | ** ** | **Underlying** | ** ** | **Awards** | ** ** | **on**      | ** ** | **Stock  &** | ** ** |
| ** **                     | ** ** | **Grant**   | ** ** | **Action**  | ** ** | **of**       | ** ** | **Threshold**                   | ** ** | **Target**                    | ** ** | **Maximum** | ** ** | **Threshold**  | ** ** | **Target** | ** ** | **Maximum** | ** ** | **(#)**          | ** ** | **Options** | ** ** | **($ /** | ** ** | **Grant**  | ** ** | **Option**    | ** ** |
| **Name**                       | ** ** | **Date(1)** | ** ** | **(2)**     | ** ** | **Award(3)** | ** ** | **($)**                         | ** ** | **($)**                       | ** ** | **($)**     | ** ** | **(#)**        | ** ** | **(#)**    | ** ** | **(#)**     | ** ** | **(6)**          | ** ** | **(#)**     | ** ** | **Sh)**       | ** ** | **Date**   | ** ** | **Awards(7)** | ** ** |
| ** **                     | ** ** | ** **  | ** ** | ** **  | ** ** | ** **   | ** ** | ** **                      | ** ** | ** **                    | ** ** | ** **  | ** ** | ** **     | ** ** | ** ** | ** ** | ** **  | ** ** | ** **       | ** ** | ** **  | ** ** | ** **    | ** ** | ** ** | ** ** | ** **    | ** ** |
| **M.  Bennett,**               |       | 15-Jul-09   |       | 14-Jul-09   |       | RS           |       |                            |       |                          |       |        |       |           |       |       |       |        |       | 25,500           |       | —      |       | NA            |       | $          | 26.71      |          | $          | 681,105 |   |
| **President &  CEO**  |       | 17-Feb-09   |       | 17-Feb-09   |       | PS           |       |                            |       |                          |       |        |       | —         |       | 73,318     |       | 146,636     |       |             |       |        |       |          |       | $          | 22.76      |          | $          | 3,337,425 |   |
|                           |       | 17-Feb-09   |       | —      |       | AI           |       | 487,500                         |       | 975,000                       |       | 1,950,000   |       |           |       |       |       |        |       |             |       |        |       |          |       |       |       | NA            |       |
|                           |       |        |       |        |       |         |       |                            |       |                          |       |        |       |           |       |       |       |        |       |             |       |        |       |          |       |       |       |          |       |
| **D.  Greenwell,**             |       | 15-Jul-09   |       | 14-Jul-09   |       | RS           |       |                            |       |                          |       |        |       |           |       |       |       |        |       | 9,700            |       | —      |       | NA            |       | $          | 26.71      |          | $          | 259,087 |   |
| **SVP &  CFO**        |       | 17-Feb-09   |       | 17-Feb-09   |       | PS           |       |                            |       |                          |       |        |       | —         |       | 13,936     |       | 27,873      |       |             |       |        |       |          |       | $          | 22.76      |          | $          | 634,387 |   |
|                           |       | 17-Feb-09   |       | —      |       | AI           |       | 142,500                         |       | 285,000                       |       | 570,000     |       |           |       |       |       |        |       |             |       |        |       |          |       |       |       | NA            |       |
|                           |       |        |       |        |       |         |       |                            |       |                          |       |        |       |           |       |       |       |        |       |             |       |        |       |          |       |       |       |          |       |
| **D.  Stone,**                 |       | 15-Jul-09   |       | 14-Jul-09   |       | RS           |       |                            |       |                          |       |        |       |           |       |       |       |        |       | 7,600            |       | —      |       | NA            |       | $          | 26.71      |          | $          | 202,996 |   |
| **SVP  Sales & Marketing** |       | 17-Feb-09   |       | 17-Feb-09   |       | PS           |       |                            |       |                          |       |        |       | —         |       | 11,028     |       | 22,056      |       |             |       |        |       |          |       | $          | 22.76      |          | $          | 501,993 |   |
|                           |       | 17-Feb-09   |       | —      |       | AI           |       | 112,500                         |       | 225,000                       |       | 450,000     |       |           |       |       |       |        |       |             |       |        |       |          |       |       |       | NA            |       |
|                           |       |        |       |        |       |         |       |                            |       |                          |       |        |       |           |       |       |       |        |       |             |       |        |       |          |       |       |       |          |       |
| **J.  Huey,**                  |       | 15-Jul-09   |       | 14-Jul-09   |       | RS           |       |                            |       |                          |       |        |       |           |       |       |       |        |       | 7,500            |       | —      |       | NA            |       | $          | 26.71      |          | $          | 200,325 |   |
| **VP,  General Counsel ** |       | 17-Feb-09   |       | 17-Feb-09   |       | PS           |       |                            |       |                          |       |        |       | —         |       | 10,786     |       | 21,571      |       |             |       |        |       |          |       | $          | 22.76      |          | $          | 490,960 |   |
| **& Corporate  Secretary** |       | 17-Feb-09   |       | —      |       | AI           |       | 73,750                          |       | 147,500                       |       | 295,000     |       |           |       |       |       |        |       |             |       |        |       |          |       |       |       | NA            |       |
| ** **                     |       |        |       |        |       |         |       |                            |       |                          |       |        |       |           |       |       |       |        |       |             |       |        |       |          |       |       |       |          |       |
| ** **                     |       |        |       |        |       |         |       |                            |       |                          |       |        |       |           |       |       |       |        |       |             |       |        |       |          |       |       |       |          |       |   |   |
| **E.  Smith,**                 |       | 15-Jul-09   |       | 14-Jul-09   |       | RS           |       |                            |       |                          |       |        |       |           |       |       |       |        |       | 5,600            |       | —      |       | NA            |       | $          | 26.71      |          | $          | 149,576 |   |
| **VP  Corporate**              |       | 17-Feb-09   |       | 17-Feb-09   |       | PS           |       |                            |       |                          |       |        |       | —         |       | 8,119      |       | 16,239      |       |             |       |        |       |          |       | $          | 22.76      |          | $          | 369,599 |   |
| **Development**                |       | 17-Feb-09   |       | —      |       | AI           |       | 55,000                          |       | 110,000                       |       | 220,000     |       |           |       |       |       |        |       |             |       |        |       |          |       |       |       | NA            |       |

 

----

(1)           Reflects thedate grants were actually made.

 

(2)           Reflects thedate grants were approved by the Compensation Committee.

 

(3)           For purposes ofthis table, RS means a grant of Restricted Stock, PS means a grant ofPerformance Stock and AI means a grant under the Annual Incentive Plan.

 

(4)           Reflects grantsmade under Terra’s annual incentive plan. Actual payouts under this plan arebased on performance versus financial targets over the corresponding fiscalyear and individual performance. Cash payouts are made after completion of theone-year performance period. Threshold awards are 50% of target and maximumawards are 200% of target.

 

(5)           Reflects grantsof performance shares made under Terra’s long-term incentive performance plan.Actual payouts under this plan are based on performance versus financialtargets over a three-year period and depend on actual performance versustargets over the performance period, except that in the event of a change incontrol, the number of performance shares will be fixed at the higher of targetor actual performance level for the quarters completed prior to the change incontrol and each holder will receive such performance shares on the earlier ofthe date that such award would otherwise vest or the date that such holder isterminated without cause or for good reason (both as defined in the awardagreement) or due to death or total disability on or following the change incontrol. Threshold award is zero shares and maximum award is 200% of targetedshares. The number of performance shares granted in 2009 were adjusted toreflect the antidilution adjustment for our special cash dividend of $7.50 percommon share paid on December 11, 2009 (as described on pages A-24and A-25 of the “Compensation Discussion and Analysis”).

 

(6)           Reflects grantsof restricted shares that time vest 100% on the third anniversary of the grantdate or immediately upon a change in control and subsequent qualifyingtermination.

 

(7)           Amounts reflectmaximum payouts for the performance share grants and stock price on the date ofgrant.

 

A-31

----

 

Thefollowing is a description of material factors necessary to understand theinformation disclosed in the Summary Compensation Table and the Grants ofPlan-Based Awards Table. This description is intended to supplement theinformation discussed in the Compensation Discussion and Analysis.

 

***Employment Severance Agreements.***

 

*Background**.*

 

OnOctober 5, 2006, we entered into an employment severance agreement witheach of our named executive officers other than Mr. Huey, with whom weentered into an employment severance agreement on October 25, 2006 and Mr. Smith,with whom we entered into an employment and severance agreement on March 3,2008. The employment severance agreements provide for severance and otherbenefits in the event of a termination of employment under circumstances thatare both related to and unrelated to a change in control.

 

*Term**.*

 

Eachemployment severance agreement has a three-year term, with the exception of theagreement with Mr. Bennett, which has a five-year term. The term may beextended for additional one-year periods in the Board’s sole discretion. Theemployment severance agreements may not be terminated during the two-yearperiod following a change in control of Terra without the executive’s consent.Severance and Post-Termination Benefits

 

Theemployment severance agreements provide that the executives will be entitled tocertain compensation and benefits upon a qualifying termination of employment.The extent and nature of the compensation and benefits are identified andquantified in the disclosure entitled “Post-Employment Payments”, beginning on page A-40of this Information Statement.

 

*Excise TaxGross-Up**.*

 

Theemployment severance agreements provide that the executives will be entitled toa gross-up payment to make the executives whole for any excise taxes imposed asa result of Section 280G of the Internal Revenue Code. Entitlement to agross-up payment is not contingent on an executive’s termination of employment.The estimated amount of the excise tax gross-up for each named executiveofficer is quantified in the disclosure entitled “Post-Employment Payments”,beginning on page A-40 of this Information Statement.

 

*RestrictiveCovenants**.*

 

Theemployment severance agreements contain restrictive covenants that applyfollowing termination of a named executive officer’s employment with Terra andare described in the disclosure entitled “Post-Employment Payments”, beginningon page A-40 of this Information Statement.

 

***Annual Incentive Compensation.***

 

*2009Officer and Key Employee Incentive Plan**.*

 

Wemaintain an Annual Incentive Plan in which our officers and other key employeesselected by Mr. Bennett are entitled to participate. As described in theCompensation Discussion and Analysis, the Annual Incentive Plan providesparticipants, including the named executive officers, the opportunity to earnannual cash incentive awards based upon the achievement of certain performancegoals. Awards are paid from a pool established by the Compensation Committee.Funding of the pool for 2009 was based on performance targets relating toreturn on capital employed. A description of performance target levels andcorresponding funding levels is set forth in the Compensation Discussion andAnalysis.

 

Eachnamed executive officer’s threshold, target and maximum incentive award amountsare disclosed in the Grants of Plan-Based Awards table. Annual incentivepayments for the named executive officers other than Mr. Greenwell may notbe increased to an amount greater than the named executive officer’s targetbonus

 

A-32

----

 

times the pool fundingpercentage, but may be decreased in the discretion of the CompensationCommittee. Payment of an annual incentive award is made as soon as practicablefollowing our determination of whether and to what extent performance goalshave been satisfied, subject to approval by the Compensation Committee.Generally, in order to be entitled to receive an annual incentive awardpayment, an employee must be employed during the applicable fiscal year anduntil the date of payment.

 

For2009, our Compensation Committee set the following target annual incentiveaward amounts for the named executive officers:

 

·      Mr. Bennett’starget annual incentive award was equal to 150% of base salary;

 

·      The targetannual incentive award for each of Messrs. Greenwell and Stone was equalto 75% of base salary; and

 

·      The targetannual incentive award for each of Messrs. Huey and Smith was equal to 50%of base salary.

 

In2009, the incentive pool under the Annual Incentive Plan was funded at 135.54%of target level. Each of our named executive officers was eligible to receivean amount of up to 200% of their target annual incentive award amounts. Theactual awards granted to each of our named executive officers was determined byour Compensation Committee, based on its determination of each named executiveofficer’s fulfillment of his individual performance goals. For Mr. Bennett,the Compensation Committee, in its discretion, granted an award that was lessthan his target bonus times his individual performance times the pool fundingpercentage. For Mr. Greenwell, the Compensation Committee, in itsdiscretion, granted an award that was greater than his target bonus times thepool funding percentage.

 

***Long-Term Incentive Awards.***

 

Wemaintain the Terra Industries Inc. Stock Incentive Plan of 2002, which we referto as the 2002 Plan, and the 2007 Omnibus Incentive Compensation Plan, which werefer to as the 2007 Plan, under which the Compensation Committee may grant tothe named executive officers, as well as other eligible employees, stockoptions, stock appreciation rights, restricted shares, performance shares andother forms of stock-based compensation.

 

*2009Long-Term Incentive Grants**.*

 

For2009, the Compensation Committee granted each of our named executive officersan award based on a combination of restricted shares and performance shares.Each named executive officer’s target grant was determined as a percentage ofbase salary. For 2009, our Compensation Committee set the following targetlong-term incentive award values for the named executive officers:

 

·      Mr. Bennett’starget long-term incentive award was equal to 300% of base salary;

 

·      The targetlong-term incentive award for Messrs. Greenwell, Stone, Huey and Smith wasequal to 130% of base salary.

 

Withthe exception of Mr. Bennett, all executive officers were expected toreceive one half of their grants in the form of restricted shares and the otherhalf in the form of performance share grants. Mr. Bennett receivedone-third of his grant in restricted shares and two-thirds in performance sharegrants. In all cases, the number of shares subject to the grant was calculatedby dividing the target dollar value of the award by the average of Terra’s closingstock price during the twenty trading days prior to the date that the awardswere approved by the Compensation Committee. The average stock price wasrounded to the nearest fifty cents, and the target number of shares was roundedto the nearest 100 shares.

 

Thenumber of shares of Terra common stock subject to each grant and the grant datefair value of these awards is reflected in the Grants of Plan-Based Awardstable.

 

·                  *Restrictedshare grants**.*We granted restricted sharesto each of our named executive officers on July 15, 2009. The principalterms and conditions of these grants are described below.

 

A-33

----

 

·                  *Vesting**.*Each restricted share grant is subject to cliff vesting with respect to100% of the restricted shares subject to the award on the third anniversary ofthe grant date. However, in the event of a termination of employment withoutcause or for good reason following a change in control of Terra (within themeaning of the restricted share award agreements) or termination of employmentdue to death or total disability, all restricted shares will become immediatelyvested. The Compensation Committee has the authority to extend or acceleratethe vesting period at any time, in its discretion.

 

·                  *Forfeiture**.*Upon an executive’s termination of employment for any reason other thandeath, total disability, termination without cause or for good reason followinga change in control of Terra or such other circumstances as determined by theCompensation Committee in its sole discretion, any unvested restricted sharesheld by the executive will be immediately forfeited and terminated.

 

·                  *Votingand Dividend Rights**.*Holders of restrictedshares are entitled to all rights of a shareholder of Terra, including theright to vote and receive dividends with respect to the restricted shares.However, if any distribution is made to our shareholders other than a cashdividend, then any securities or other property received by other shareholderswill be subject to the same restrictions applicable to the restricted shares.

 

·                  *Performanceshare grants**.*We granted performance sharesto each of our named executive officers on February 27, 2009. Theprincipal terms and conditions of these grants are described below.

 

·                  *Vesting**.*Each performance share grant is subject to cliff vesting with respect toall shares subject to the award after December 31, 2011, based onachievement of the performance goals during the period from January 1,2009 through December 31, 2011, as described in the CompensationDiscussion and Analysis.  Upon vesting, aholder will become entitled to receive a number of shares ranging from 0% to200% of the target number of shares subject to the award, based on achievementof performance goals. In the event of a change in control of Terra (within themeaning of the performance share award agreements), the number of shares thateach holder will be entitled to receive will become fixed as of the date of thechange in control at the greater of the target number of shares subject to theaward and a number based on actual company performance during the actualquarters completed prior to the change in control. Each holder of performanceshares will receive such performance shares on the earlier of the date thatsuch award would otherwise vest or the date that such holder is terminatedwithout cause or for good reason (both as defined in the performance shareaward agreement) or due to death or total disability on or following a changein control. In the event of termination of employment due to death prior to achange in control, the holder will become entitled to a number of performanceshares based on actual performance prior to death. In the event of terminationof employment due to total disability prior to a change in control, performanceshares will continue to vest following termination based on achievement ofperformance goals. In special circumstances, as determined by the CompensationCommittee, the Compensation Committee may extend the period for earning all ora portion of a holder’s performance shares.

 

·                  *Forfeiture**.*Upon an executive’s termination of employment prior to the end of theperformance period for any reason other than death, total disability,termination without cause or for good reason following a change in control ofTerra or such other circumstances as determined by the Compensation Committeein its sole discretion, any unvested performance shares held by the executivewill be immediately forfeited and terminated.

 

*Pre-2008Long-Term Incentive Grants**.*

 

Inaccordance with applicable disclosure rules, the Stock Awards column of theSummary Compensation Table reflects the aggregate grant-date fair value of theperformance-based shares and restricted shares granted in each of 2007, 2008and 2009. We granted time-based restricted shares in 2007 and 2008 on terms andconditions that are substantially the same as the grants made in 2009 anddescribed above, except that the grants of restricted shares in 2007 will vestin full upon the change in control of Terra. We also made performance sharegrants in 2007 and 2008. These grants, which were made on February 28,2007 and

 

A-34

----

 

February 22, 2008, weresubject to three-year performance periods ending on December 31, 2009 and December 31,2010, respectively, and will vest automatically upon a change in control at thegreater of the target number of shares subject to the award and a number basedon actual company performance during the actual quarters completed prior to thechange in control.

 

***Retirement Benefits.***

 

*DefinedBenefit Pension Plans**.*

 

Wemaintain a U.S. tax-qualified defined benefit plan, and an excess benefit plan,which we refer to as the SERP which covers certain named executive officers.For a description of the material terms of these plans and the present value ofeach named executive officer’s accumulated benefits under these plans as of December 31,2009, see the Pension Benefit in Fiscal Year 2009 Table and accompanyingdisclosure, beginning on page A-38.

 

*DefinedContribution Plans**.*

 

Wemaintain a 401(k) plan, which is a tax-qualified defined contribution planmaintained for the benefit of all U.S. employees, including each of our namedexecutive officers. The 401(k) plan permits employees to contribute aportion of eligible pay to the plan on a pre-tax basis. During 2009, we matched100% of the first 3% of eligible compensation that an employee contributed tothe 401(k) plan and 60% of the next 3% of pay contributed. In addition, inthe case of employees hired after June 30, 2003 and who are thereforeineligible to participate in the U.S. tax-qualified defined benefit plan, wemade an additional non-elective contribution for 2009 equal to 3.2% of eligiblecompensation. The amount of our 2009 contribution to the 401(k) on behalfof each of our named executive officers is set forth in the explanation of theAll Other Compensation column of the Summary Compensation Table.

 

A-35

----

 

**Outstanding Equity Awards at 2009 Fiscal Year-End**

**Option Awards**

 

Thefollowing table provides information on the holdings of stock option and stockawards by each of our named executive officers as of December 31, 2009.

 
| ** **                          | ** ** | **Option Awards** | ** ** | **Stock Awards** | ** ** |
|-------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                          | ** ** | ** **             | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Equity** | ** ** |
| ** **                          | ** ** | ** **             | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Incentive** | ** ** |
| ** **                          | ** ** | ** **             | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Plan** | ** ** |
| ** **                          | ** ** | ** **             | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Equity** | ** ** | **Awards:** | ** ** |
| ** **                          | ** ** | ** **             | ** ** | ** **            | ** ** | **Equity** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Incentive** | ** ** | **Market or** | ** ** |
| ** **                          | ** ** | ** **             | ** ** | ** **            | ** ** | **Incentive** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Plan Awards:** | ** ** | **Payout** | ** ** |
| ** **                          | ** ** | ** **             | ** ** | ** **            | ** ** | **Plan** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Number** | ** ** | **Value of** | ** ** |
| ** **                          | ** ** | ** **             | ** ** | ** **            | ** ** | **Awards:** | ** ** | ** ** | ** ** | ** ** | ** ** | **Number of** | ** ** | **Market** | ** ** | **of Unearned** | ** ** | **Unearned** | ** ** |
| ** **                          | ** ** | **Number of**     | ** ** | **Number of**    | ** ** | **Number** | ** ** | ** ** | ** ** | ** ** | ** ** | **Shares or** | ** ** | **Value of** | ** ** | **Shares,** | ** ** | **Shares,** | ** ** |
| ** **                          | ** ** | **Securities**         | ** ** | **Securities**        | ** ** | **of Securities** | ** ** | ** ** | ** ** | ** ** | ** ** | **Units of** | ** ** | **Shares or** | ** ** | **Units or** | ** ** | **Units or** | ** ** |
| ** **                          | ** ** | **Underlying**         | ** ** | **Underlying**        | ** ** | **Underlying** | ** ** | ** ** | ** ** | ** ** | ** ** | **Stock ** | ** ** | **Units of** | ** ** | **Other** | ** ** | **Other** | ** ** |
| ** **                          | ** ** | **Unexercised**        | ** ** | **Unexercised**       | ** ** | **Unexercised** | ** ** | **Option** | ** ** | ** ** | ** ** | **That** | ** ** | **Stock That** | ** ** | **Rights That** | ** ** | **Rights That** | ** ** |
| ** **                          | ** ** | **Options**            | ** ** | **Options**           | ** ** | **Unearned** | ** ** | **Exercise** | ** ** | **Option** | ** ** | **Have Not** | ** ** | **Have Not** | ** ** | **Have Not** | ** ** | **Have Not** | ** ** |
| ** **                          | ** ** | **(#)**                | ** ** | **(#)**               | ** ** | **Options** | ** ** | **Price** | ** ** | **Expiration** | ** ** | **Vested** | ** ** | **Vested** | ** ** | **Vested** | ** ** | **Vested** | ** ** |
| **Name**                            | ** ** | **Exercisable**        | ** ** | **Unexercisable**     | ** ** | **(#)** | ** ** | **($)** | ** ** | **Date** | ** ** | **(#)** | ** ** | **($)(1)** | ** ** | **(#)** | ** ** | **($)(1)** | ** ** |
| ** **                          | ** ** | ** **             | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **M.  Bennett,**                    |       |                   |       |                  |       |   |   |   |   |   |   | 20,400 | (2) | $ | 656,676 |   |   |   |   |   |
| **President &  CEO**       |       |                   |       |                  |       |   |   |   |   |   |   | 12,100 | (3) | $ | 389,499 |   |   |   |   |   |
|                                |       |                   |       |                  |       |   |   |   |   |   |   | 25,500 | (4) | $ | 820,845 |   |   |   |   |   |
|                                |       |                   |       |                  |       |   |   |   |   |   |   |   |   |   |   | 67,864 | (5) | $ | 2,184,555 |   |
|                                |       |                   |       |                  |       |   |   |   |   |   |   |   |   |   |   | 146,636 | (6) | $ | 4,720,198 |   |
| ** **                          |       |                   |       |                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **D.  Greenwell,**                  |       |                   |       |                  |       |   |   |   |   |   |   | 7,200 | (2) | $ | 231,768 |   |   |   |   |   |
| **SVP &  CFO**             |       |                   |       |                  |       |   |   |   |   |   |   | 4,300 | (3) | $ | 138,417 |   |   |   |   |   |
|                                |       |                   |       |                  |       |   |   |   |   |   |   | 9,700 | (4) | $ | 312,243 |   |   |   |   |   |
|                                |       |                   |       |                  |       |   |   |   |   |   |   |   |   |   |   | 11,876 | (5) | $ | 382,297 |   |
|                                |       |                   |       |                  |       |   |   |   |   |   |   |   |   |   |   | 27,873 | (6) | $ | 897,228 |   |
| ** **                          |       |                   |       |                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **D.  Stone,**                      |       |                   |       |                  |       |   |   |   |   |   |   | 5,300 | (2) | $ | 170,607 |   |   |   |   |   |
| **SVP  Sales& Marketing**       |       |                   |       |                  |       |   |   |   |   |   |   | 3,500 | (3) | $ | 112,665 |   |   |   |   |   |
|                                |       |                   |       |                  |       |   |   |   |   |   |   | 7,600 | (4) | $ | 244,644 |   |   |   |   |   |
|                                |       |                   |       |                  |       |   |   |   |   |   |   |   |   |   |   | 9,695 | (5) | $ | 312,079 |   |
|                                |       |                   |       |                  |       |   |   |   |   |   |   |   |   |   |   | 22,056 | (6) | $ | 709,980 |   |
| ** **                          |       |                   |       |                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **J.  Huey,**                       |       |                   |       |                  |       |   |   |   |   |   |   | 6,600 | (2) | $ | 212,454 |   |   |   |   |   |
| **VP,  General Counsel &** |       |                   |       |                  |       |   |   |   |   |   |   | 3,700 | (3) | $ | 119,103 |   |   |   |   |   |
| **Corporate  Secretary**            |       |                   |       |                  |       |   |   |   |   |   |   | 7,500 | (4) | $ | 241,425 |   |   |   |   |   |
|                                |       |                   |       |                  |       |   |   |   |   |   |   |   |   |   |   | 10,422 | (5) | $ | 335,485 |   |
|                                |       |                   |       |                  |       |   |   |   |   |   |   |   |   |   |   | 21,571 | (6) | $ | 694,376 |   |
| ** **                          |       |                   |       |                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **E.  Smith,**                      |       |                   |       |                  |       |   |   |   |   |   |   | — | (2) | $ | — |   |   |   |   |   |
| **VP  Corporate Development**       |       |                   |       |                  |       |   |   |   |   |   |   | 2,800 | (3) | $ | 90,132 |   |   |   |   |   |
|                                |       |                   |       |                  |       |   |   |   |   |   |   | 5,600 | (4) | $ | 180,264 |   |   |   |   |   |
|                                |       |                   |       |                  |       |   |   |   |   |   |   |   |   |   |   | 7,514 | (5) | $ | 241,861 |   |
|                                |       |                   |       |                  |       |   |   |   |   |   |   |   |   |   |   | 16,239 | (6) | $ | 522,733 |   |

 

----

(1)   Based on ayear-end closing price of $32.19 per share.

 

(2)   Restrictedshares will time-vest on July 26, 2010 or earlier upon a change incontrol.

 

(3)   Restrictedshares will time-vest on July 18, 2011 or earlier upon a change in controland subsequent qualifying termination.

 

(4)   Restrictedshares will time-vest on July 16, 2012 or earlier upon a change in controland subsequent qualifying termination.

 

(5)   This performanceplan cycle will end December 31, 2010. The actual number of shares paidout subsequent to that time will depend on actual performance versus targetsover the performance period, except that in the event of a change in control,the number of performance shares will be fixed at the higher of target oractual performance level for the quarters completed prior to the change incontrol and each holder will receive such performance shares on the earlier ofthe date that such award would otherwise vest or the date that such holder isterminated without cause or for good reason (both as defined in the awardagreement) or due to death or total disability on or following the change incontrol. The threshold award is zero; therefore, the number of shares andmarket value shown in the Equity Incentive Plan Awards: Market or Payout Valueof Unearned Shares, Units or Other Rights that have not Vested column are basedon performance through December 31, 2009 (200% of target) for the 2008performance plan grant. The number of performance shares is adjusted to reflectthe antidilution adjustment for our special cash dividend of $7.50 per commonshare paid on December 11, 2009 (as described on pages A-24 and A-25of the “Compensation Discussion and Analysis”).

 

(6)   This performanceplan cycle will end December 31, 2011. The actual number of shares paidout subsequent to that time will depend on actual performance versus targetsover the performance period, except that in the event of a change in control,the number of performance shares will be fixed at the higher of

 

A-36

----

 

targetor actual performance level for the quarters completed prior to the change incontrol and each holder will receive such performance shares on the earlier ofthe date that such award would otherwise vest or the date that such holder isterminated without cause or for good reason (both as defined in the awardagreement) or due to death or total disability on or following the change incontrol. The threshold award is zero; therefore, the number of shares andmarket value shown in the Equity Incentive Plan Awards: Market or Payout Valueof Unearned Shares, Units or Other Rights that have not Vested column are basedon performance through December 31, 2009 (200% of target) for the 2009performance plan grant. The number of performance shares is adjusted to reflectthe antidilution adjustment for our special cash dividend of $7.50 per commonshare paid on December 11, 2009 (as described on pages A-24 and A-25of the “Compensation Discussion and Analysis”).

 

**Option Exercises and Stock Vested**

 

Thefollowing table provides information, for each of our named executive officers,on the number of restricted shares and performance share awards that becamevested in 2009 and the value realized before payment of any applicablewithholding taxes and broker commissions.

 
| ** **                                             | ** ** | **Option Awards**         | ** ** | **Stock Awards** | ** ** |
|--------------------------------------------------------|------------|--------------------------------|------------|-----------------------|------------|
| ** **                                             | ** ** | ** **                     | ** ** | **Number of**    | ** ** | ** ** | ** ** |
| ** **                                             | ** ** | **Number of Shares** | ** ** | **Value**             | ** ** | **Shares** | ** ** | ** ** | ** ** |
| ** **                                             | ** ** | **Acquired on**           | ** ** | **Realized on**  | ** ** | **Acquired** | ** ** | **Value Realized** | ** ** |
| ** **                                             | ** ** | **Exercise**                   | ** ** | **Exercise**          | ** ** | **on Vesting** | ** ** | **on Vesting** | ** ** |
| **Name**                                               | ** ** | **(#)(1)**                     | ** ** | **($)(2)**            | ** ** | **(#)** | ** ** | **($)** | ** ** |
| ** **                                             | ** ** | ** **                     | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| **M. Bennett,**                                        |       | —                         |       | —                |       | 77,000 | (3) | 2,286,130 |   |
| **President & CEO**                           |       | —                         |       | —                |       | 167,237 | (4) | 5,383,359 |   |
| ** **                                             |       |                           |       |                  |       |   |   |   |   |
| **D. Greenwell,**                                      |       | —                         |       | —                |       | 21,400 | (3) | 635,366 |   |
| **SVP & CFO**                                 |       | —                         |       | —                |       | 25,207 | (4) | 811,413 |   |
| ** **                                             |       |                           |       |                  |       |   |   |   |   |
| **D. Stone,**                                          |       | —                         |       | —                |       | 18,000 | (3) | 534,420 |   |
| **SVP Sales & Marketing**                     |       | —                         |       | —                |       | 17,936 | (4) | 577,359 |   |
| ** **                                             |       |                           |       |                  |       |   |   |   |   |
| **J. Huey,**                                           |       | —                         |       | —                |       | 24,000 | (3) | 712,560 |   |
| **VP, General Counsel & Corporate Secretary** |       | —                         |       | —                |       | 27,146 | (4) | 873,829 |   |
| ** **                                             |       |                           |       |                  |       |   |   |   |   |
| **E. Smith,**                                          |       | —                         |       | —                |       | — |   | — |   |
| **VP Corporate Development**                           |       | —                         |       | —                |       | — |   | — |   |

 

----

(1)   Reflects stockoptions exercised in 2009.

 

(2)   Based on theintrinsic value of the stock option at date of exercise.

 

(3)   Reflectstime-vesting restricted shares vesting on August 3, 2009, at a price of $29.69.Shares were granted on August 1, 2006, except for Mr. Huey’s shares,which were granted on October 25, 2006.

 

(4)   Performanceshare awards for performance from January 1, 2007 through December 31,2009. Shares were not actually delivered until February 12, 2010 when theCompensation Committee determined the level of performance achieved. Number ofshares based on performance through December 31, 2009 (200% of target) andshare price based on December 31, 2009 closing price of $32.19. The numberof performance shares delivered reflect the antidilution adjustment for ourspecial cash dividend of $7.50 per common share paid on December 11, 2009(as described on pages A-24 and A-25 of the “Compensation Discussion andAnalysis”).

 

A-37

----

 

**Pension Benefits in Fiscal Year 2009**

 

Thefollowing table sets forth information on the pension benefits for each of ournamed executive officers as of December 31, 2009.

 
| ** **                         | ** ** | ** **                    | ** ** | **Number of Years** | ** ** | ** **                     | ** ** | **Payments**         | ** ** |
|------------------------------------|------------|-------------------------------|------------|-------------------------------|------------|--------------------------------|------------|----------------------|------------|
| ** **                         | ** ** | ** **                    | ** ** | **Credited**                  | ** ** | **Present Value of** | ** ** | **During Last** | ** ** |
| ** **                         | ** ** | ** **                    | ** ** | **Service (#)**          | ** ** | **Accumulated Benefit**   | ** ** | **Fiscal Year** | ** ** |
| **Name**                           | ** ** | **Plan Name**            | ** ** | **(1)**                       | ** ** | **($)(2)**                     | ** ** | **($)**              | ** ** |
| ** **                         | ** ** | ** **                    | ** ** | ** **                    | ** ** | ** **                     | ** ** | ** **           | ** ** |
| **M. Bennett,**                    |       | Terra Industries Inc.         |       |                          |       |                           |       |                 |       |
| **President & CEO**       |       | Employees’ Retirement    |       |                          |       |                           |       |                 |       |
|                               |       | Plan                          |       | 37                            |       | $                              | 762,023    |                 | $          | — |   |
|                               |       | Terra Industries Inc.  Excess |       |                          |       |                           |       |                 |       |
|                               |       | Benefit Plan                  |       | 37                            |       | $                              | 1,208,251  |                 | $          | — |   |
| ** **                         |       |                          |       |                          |       |                           |       |                 |       |
| **D. Greenwell,**                  |       | Terra Industries Inc.         |       |                          |       |                           |       |                 |       |
| **SVP & CFO(3)**          |       | Employees’ Retirement    |       |                          |       |                           |       |                 |       |
|                               |       | Plan                          |       | —                        |       | $                              | —     |                 | $          | — |   |
|                               |       | Terra Industries Inc.  Excess |       |                          |       |                           |       |                 |       |
|                               |       | Benefit Plan                  |       | —                        |       | $                              | —     |                 | $          | — |   |
| ** **                         |       |                          |       |                          |       |                           |       |                 |       |
| **D. Stone,**                      |       | Terra Industries Inc.         |       |                          |       |                           |       |                 |       |
| **SVP Sales & Marketing** |       | Employees’ Retirement    |       |                          |       |                           |       |                 |       |
|                               |       | Plan                          |       | 14                            |       | $                              | 46,367     |                 | $          | — |   |
|                               |       | Terra Industries Inc.  Excess |       |                          |       |                           |       |                 |       |
|                               |       | Benefit Plan                  |       | 14                            |       | $                              | —     |                 | $          | — |   |
| ** **                         |       |                          |       |                          |       |                           |       |                 |       |
| **J. Huey,**                       |       | Terra Industries Inc.         |       |                          |       |                           |       |                 |       |
| **VP, General Counsel &** |       | Employees’ Retirement    |       |                          |       |                           |       |                 |       |
| **Corporate Secretary(3)**         |       | Plan                          |       | —                        |       | $                              | —     |                 | $          | — |   |
|                               |       | Terra Industries Inc.  Excess |       |                          |       |                           |       |                 |       |
|                               |       | Benefit Plan                  |       | —                        |       | $                              | —     |                 | $          | — |   |
| ** **                         |       |                          |       |                          |       |                           |       |                 |       |
| **E. Smith,**                      |       | Terra Industries Inc.         |       |                          |       |                           |       |                 |       |
| **VP Corporate Development(3)**    |       | Employees’ Retirement    |       |                          |       |                           |       |                 |       |
|                               |       | Plan                          |       | —                        |       | $                              | —     |                 | $          | — |   |
|                               |       | Terra Industries Inc.  Excess |       |                          |       |                           |       |                 |       |
|                               |       | Benefit Plan                  |       | —                        |       | $                              | —     |                 | $          | — |   |

 

----

(1)          Credited service is the period of the executive’sactual service with Terra.

 

(2)          Actuarial present value for the Retirement Plan andSERP was determined in accordance with the following assumptions:

 

·        Discount rateequals 5.79%.

 

·        Postretirementmortality was projected using the 2009 Static Mortality Table for AnnuitantsPer §1.430(h)(3)-1(e).

 

·        Employees areassumed to have elected benefits in the form of a single life annuity.

 

·        Benefitscommence at age 65.

 

(3)          Messrs. Greenwell, Huey and Smith are notparticipants in the Terra Industries Inc. Employee’s Retirement Plan or ExcessBenefit Plan.

 

Wemaintain a U.S. tax-qualified defined benefit plan (the Terra Industries Inc.Employees’ Retirement Plan or the “Retirement Plan”) for the benefit of allU.S. employees hired before July 1, 2003, including Messrs. Bennettand Stone. In 2003, Mr. Stone elected to receive the additionalnon-elective contribution under the 401(k) plan instead of accruing additionalbenefits under the Retirement Plan. The Retirement Plan is closed to employeeshired on or after July 1, 2003.

 

A-38

----

 

Wealso maintain an excess benefit plan (the “SERP”). The purpose of the SERP is torestore those benefits that a participant would otherwise lose in thetax-qualified plan due to Internal Revenue Code compensation limits and benefitlimits.

 

***Retirement Plan.***

 

*BenefitAccrual Formula**.*

 

TheRetirement Plan provides an unreduced single life annuity at age 65 equal to anamount which:

 

*Multiplies*

 

·                  1.55% of thehighest 60 month average pensionable compensation by

 

·                  Years ofcredited service and

 

*Subtracts*

 

·                  0.6% of thehighest 60 month average pensionable compensation up to the social securitycompensation limit multiplied by years of credited service (up to a maximum of35 years).

 

Priorto 2004, pensionable compensation included total salary and wages paid to theparticipant for services rendered in the period considered as service, includingbonuses, overtime, commissions and salary deferrals under a Section 401(k) orSection 125 plan. Effective January 1, 2004, bonuses are no longerconsidered as part of pensionable compensation.

 

***Vesting.***

 

Anemployee hired prior to July 1, 2003 became eligible to participate oncehe or she had completed a 12 consecutive month period of at least 1,000 hoursof service. Benefits under the Retirement Plan cliff vest after five years ofservice.

 

*EarlyRetirement**.*

 

Eligibilityfor early retirement under the Retirement Plan is age 55 with 5 years ofvesting service. For a participant who commences pension benefits directly fromactive status, the early retirement reductions are 3% per year from age 65, 10%per year from age 60, 8% per year from age 59, 6% per year from age 58 and 5%per year from age 56. All other participants who commence pension benefitsprior to age 65 are subject to an actuarial reduction of 6.67% per year fromage 65 and 3.33% per year from age 60. As of the date of this Information Statement,only Mr. Bennett is eligible for early retirement under the RetirementPlan.

 

*Forms ofBenefit**.*

 

Participantsin the Retirement Plan generally can choose among the following optional formsof benefit:

 

·                  Single lifeannuity;

 

·                  50% joint andsurvivor annuity;

 

·                  75% joint andsurvivor annuity;

 

·                  100% joint andsurvivor annuity;

 

·                  10 year or 15year certain and life annuity; and

 

·                  Social Securitylevel income benefit.

 

Eachoption is provided on an actuarially equivalent basis.

 

A-39

----

 

**SERP.**

 

TheRetirement Plan benefits are limited by various constraints by the InternalRevenue Code. The SERP is an unfunded plan maintained to provide benefits to acertain group of management and highly compensated employees. The terms of theSERP, as they relate to our named executive officers, with respect to benefitaccrual formula, vesting, early retirement and forms of benefit are the same asthe Retirement Plan, except that under the SERP, pensionable compensation isnot subject to the limits imposed by the Internal Revenue Code and deferredcompensation is not excluded from the definition of pensionable compensationunder the SERP. In 2010, the Compensation Committee and the Board approved theadoption of a rabbi trust, which is intended to provide a source of funds toassist Terra in meeting its liabilities under the SERP following a change incontrol.

 

**Post-Employment Payments**

 

Thissection describes and quantifies potential payments that may be made to eachnamed executive officer at, following, or in connection with the resignation,severance, retirement, or other termination of the named executive officer’semployment or a change in control of Terra on December 31, 2009.

 
| ** **                       | ** ** | **M. Bennett, President & CEO** | ** **    |
|----------------------------------|------------|---------------------------------------------------------|---------------|
| ** **                       | ** ** | ** **                                              | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Qualifying** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                       | ** ** | ** **                                              | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Termination** | ** ** | **Change in** | ** ** | **Change in** | ** ** |
| ** **                       | ** ** | ** **                                              | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Unrelated to** | ** ** | **Control** | ** ** | **Control &** | ** ** |
| ** **                       | ** ** | ** **                                              | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **a Change in** | ** ** | **Without** | ** ** | **Qualifying** | ** ** |
| **Benefit**                      | ** ** | **Death**                                               | ** **    | **Disability** | ** ** | **For Cause** | ** ** | **Voluntary** | ** ** | **Control** | ** ** | **Termination** | ** ** | **Termination** | ** ** |
| *Cash Severance*                 |       | $                                                       | —        |   | $ | — |   | $ | — |   | $ | — | * * | *$* | *2,437,500* |   | $ | — | * * | *$* | *3,250,000* | * * |
| Equity                           |       |                                                    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Restricted Shares                |       | $                                                       | 1,867,020     |   | $ | 1,867,020 |   | $ | — |   | $ | — |   | $ | — |   | $ | 656,676 |   | $ | 1,867,020 |   |
| Performance Share Awards         |       | $                                                       | 5,697,630     |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 5,697,630 |   | $ | 5,697,630 |   |
| Unexercisable Options            |       | $                                                       | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Total*                          | * *   | *$*                                                     | *7,564,650*   | * * | *$* | *1,867,020* |   | $ | — |   | $ | — |   | $ | — | * * | *$* | *6,354,306* | * * | *$* | *7,564,650* | * * |
| Retirement Benefits              |       |                                                    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| DB Plan                          |       | $                                                       | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 473,383 |   |
| DC Plan                          |       | $                                                       | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Total*                          |       | $                                                       | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — | * * | *$* | *473,383* | * * |
| *Unvested Deferred Compensation* |       | $                                                       | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Other Benefits*                 |       |                                                    |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Health & Welfare        |       | $                                                       | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | 23,753 |   | $ | — |   | $ | 23,753 |   |
| Outplacement                     |       | $                                                       | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | 78,000 |   | $ | — |   | $ | 78,000 |   |
| Perquisites                      |       | $                                                       | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Long-Term Disability             |       | $                                                       | —        |   | $ | 1,666,384 |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Tax Gross-Ups                    |       | $                                                       | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Total*                          |       | $                                                       | —        | * * | *$* | *1,666,384* |   | $ | — |   | $ | — | * * | *$* | *101,753* |   | $ | — | * * | *$* | *101,753* | * * |
| **Total**                        | ** ** | **$**                                                   | **7,564,650** | ** ** | **$** | **3,533,404** | ** ** | **$** | **—** | ** ** | **$** | **—** | ** ** | **$** | **2,539,253** | ** ** | **$** | **6,354,306** | ** ** | **$** | **11,389,786** | ** ** |

 

----

(1) Please see narrative accompanying thesetables for details and key assumptions.

 

A-40

----

 
| ** **                       | ** ** | **D.  Greenwell, SVP & CFO** | *** ***  |
|----------------------------------|------------|---------------------------------------|---------------|
| ** **                       | ** ** | ** **                            | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | *** *** | **Qualifying** | ** ** | ** ** | *** *** | ** ** | *** *** |
| ** **                       | ** ** | ** **                            | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | *** *** | **Termination** | ** ** | **Change  in** | *** *** | **Change  in** | *** *** |
| ** **                       | ** ** | ** **                            | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | *** *** | **Unrelated  to a** | ** ** | **Control** | *** *** | **Control &** | *** *** |
| ** **                       | ** ** | ** **                            | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | *** *** | **Change  in** | ** ** | **Without** | *** *** | **Qualifying** | *** *** |
| **Benefit**                      | ** ** | **Death**                             | ** **    | **Disability** | ** ** | **For  Cause** | ** ** | **Voluntary** | *** *** | **Control** | ** ** | **Termination** | *** *** | **Termination** | *** *** |
| *Cash Severance*                 |       | $                                     | —        |   | $ | — |   | $ | — |   | $ | — | * * | *$* | *997,500* |   | $ | — | * * | *$* | *1,330,000* | * * |
| Equity                           |       |                                  |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Restricted Shares                |       | $                                     | 682,428       |   | $ | 682,428 |   | $ | — |   | $ | — |   | $ | — |   | $ | 231,768 |   | $ | 682,428 |   |
| Performance Share Awards         |       | $                                     | 1,055,832     |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 1,055,832 |   | $ | 1,055,832 |   |
| Unexercisable Options            |       | $                                     | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Total*                          | * *   | *$*                                   | *1,738,260*   | * * | *$* | *682,428* |   | $ | — |   | $ | — |   | $ | — | * * | *$* | *1,287,600* | * * | *$* | *1,738,260* | * * |
| Retirement Benefits              |       |                                  |          |   |   |   |   |   |   |   |   |   |   |   |   |
| DB Plan                          |       | $                                     | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| DC Plan                          |       | $                                     | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Total*                          |       | $                                     | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Unvested Deferred Compensation* |       | $                                     | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Other Benefits*                 |       |                                  |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Health & Welfare        |       | $                                     | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | 29,674 |   | $ | — |   | $ | 29,674 |   |
| Outplacement                     |       | $                                     | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | 45,600 |   | $ | — |   | $ | 45,600 |   |
| Perquisites                      |       | $                                     | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Long-Term Disability             |       | $                                     | —        |   | $ | 2,155,145 |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Tax Gross-Ups                    |       | $                                     | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 872,768 |   |
| *Total*                          |       | $                                     | —        | * * | *$* | *2,155,145* |   | $ | — |   | $ | — | * * | *$* | *75,274* |   | $ | — | * * | *$* | *948,042* | * * |
| **Total**                        | ** ** | **$**                                 | **1,738,260** | ** ** | **$** | **2,837,573** | ** ** | **$** | **—** | ** ** | **$** | **—** | ** ** | **$** | **1,072,774** |   | **$** | **1,287,600** |   | **$** | **4,016,302** |   |

 

----

(1) Please see narrativeaccompanying these tables for details and key assumptions.

 

A-41

----

 
| ** **                        | ** ** | **D. Stone, SVP Sales & Marketing** | ** **    |
|-----------------------------------|------------|------------------------------------------------------------------|---------------|
| ** **                        | ** ** | ** **                                                       | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Qualifying** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                        | ** ** | ** **                                                       | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Termination** | ** ** | **Change in** | ** ** | **Change in** | ** ** |
| ** **                        | ** ** | ** **                                                       | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Unrelated to a** | ** ** | **Control** | ** ** | **Control &** | ** ** |
| ** **                        | ** ** | ** **                                                       | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Change** | ** ** | **Without** | ** ** | **Qualifying** | ** ** |
| **Benefit**                       | ** ** | **Death**                                                        | ** **    | **Disability** | ** ** | **For Cause** | ** ** | **Voluntary** | ** ** | **in Control** | ** ** | **Termination** | ** ** | **Termination** | ** ** |
| *Cash Severance*                  | ** ** | $                                                                | —        |   | $ | — |   | $ | — |   | $ | — |   | *$* | *720,000* |   | $ | — |   | *$* | *1,050,000* | ** ** |
| Equity                            |       |                                                             |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Restricted  Shares                |       | $                                                                | 527,916       |   | $ | 527,916 |   | $ | — |   | $ | — |   | $ | — |   | $ | 170,607 |   | $ | 527,916 |   |
| Performance  Share Awards         |       | $                                                                | 843,378       |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 843,378 |   | $ | 843,378 |   |
| Unexercisable  Options            |       | $                                                                | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Total*                           | * *   | *$*                                                              | *1,371,294*   | * * | *$* | *527,916* |   | $ | — |   | $ | — |   | $ | — | * * | *$* | *1,013,985* | * * | *$* | *1,371,294* | * * |
| Retirement  Benefits              |       |                                                             |          |   |   |   |   |   |   |   |   |   |   |   |   |
| DB Plan                           |       | $                                                                | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| DC Plan                           |       | $                                                                | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Total*                           |       | $                                                                | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Unvested  Deferred Compensation* |       | $                                                                | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Other  Benefits*                 |       |                                                             |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Health &  Welfare        |       | $                                                                | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | 29,674 |   | $ | — |   | $ | 29,674 |   |
| Outplacement                      |       | $                                                                | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | 36,000 |   | $ | — |   | $ | 36,000 |   |
| Perquisites                       |       | $                                                                | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Long-Term  Disability             |       | $                                                                | —        |   | $ | 631,759 |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Tax Gross-Ups                     |       | $                                                                | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 803,108 |   |
| *Total*                           |       | $                                                                | —        | * * | *$* | *631,759* |   | $ | — |   | $ | — | * * | *$* | *65,674* |   | $ | — | * * | *$* | *868,782* | * * |
| **Total**                         |       | **$**                                                            | **1,371,294** | ** ** | **$** | **1,159,675** | ** ** | **$** | **—** | ** ** | **$** | **—** | ** ** | **$** | **785,674** | ** ** | **$** | **1,013,985** | ** ** | **$** | **3,290,076** |   |

 

----

(1) Please see narrativeaccompanying these tables for details and key assumptions.

 

A-42

----

 
| ** **                       | ** ** | **J. Huey, VP, General Counsel & Corporate Secretary** | ** **    |
|----------------------------------|------------|-----------------------------------------------------------------------------------------------|---------------|
| ** **                       | ** ** | ** **                                                                                    | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Qualifying** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                       | ** ** | ** **                                                                                    | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Termination** | ** ** | **Change in** | ** ** | **Change in** | ** ** |
| ** **                       | ** ** | ** **                                                                                    | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Unrelated to a** | ** ** | **Control** | ** ** | **Control &** | ** ** |
| ** **                       | ** ** | ** **                                                                                    | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Change in** | ** ** | **Without** | ** ** | **Qualifying** | ** ** |
| **Benefit**                      | ** ** | **Death**                                                                                     | ** **    | **Disability** | ** ** | **For Cause** | ** ** | **Voluntary** | ** ** | **Control** | ** ** | **Termination** | ** ** | **Termination** | ** ** |
| *Cash Severance*                 |       | $                                                                                             | —        |   | $ | — |   | $ | — |   | $ | — | * * | *$* | *663,750* |   | $ | — | * * | *$* | *885,000* | * * |
| Equity                           |       |                                                                                          |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Restricted Shares                |       | $                                                                                             | 572,982       |   | $ | 572,982 |   | $ | — |   | $ | — |   | $ | — |   | $ | 212,454 |   | $ | 572,982 |   |
| Performance Share Awards         |       | $                                                                                             | 849,816       |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 849,816 |   | $ | 849,816 |   |
| Unexercisable Options            |       | $                                                                                             | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Total*                          | * *   | *$*                                                                                           | *1,422,798*   | * * | *$* | *527,982* |   | $ | — |   | $ | — |   | $ | — | * * | *$* | *1,062,270* | * * | *$* | *1,422,798* | * * |
| Retirement Benefits              |       |                                                                                          |          |   |   |   |   |   |   |   |   |   |   |   |   |
| DB Plan                          |       | $                                                                                             | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| DC Plan                          |       | $                                                                                             | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Total*                          |       | $                                                                                             | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Unvested Deferred Compensation* |       | $                                                                                             | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Other Benefits*                 |       |                                                                                          |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Health & Welfare        |       | $                                                                                             | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | 18,346 |   | $ | — |   | $ | 18,346 |   |
| Outplacement                     |       | $                                                                                             | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | 35,400 |   | $ | — |   | $ | 35,400 |   |
| Perquisites                      |       | $                                                                                             | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Long-Term Disability             |       | $                                                                                             | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Tax Gross-Ups                    |       | $                                                                                             | —        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 721,485 |   |
| *Total*                          |       | $                                                                                             | —        | * * | *$* | *631,759* |   | $ | — |   | $ | — | * * | *$* | *53,746* |   | $ | — | * * | *$* | *775,231* | * * |
| **Total**                        | ** ** | **$**                                                                                         | **1,422,798** | ** ** | **$** | **572,982** | ** ** | **$** | **—** | ** ** | **$** | **—** | ** ** | **$** | **717,496** | ** ** | **$** | **1,062,270** | ** ** | **$** | **3,083,029** | ** ** |

 

----

(1) Please see narrativeaccompanying these tables for details and key assumptions.

 

A-43

----

 
| ** **                       | ** ** | **E. Smith, VP Corporate Development** | ** **  |
|----------------------------------|------------|------------------------------------------------------------|-------------|
| ** **                       | ** ** | ** **                                                 | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Qualifying** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                       | ** ** | ** **                                                 | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Termination** | ** ** | **Change in** | ** ** | **Change in** | ** ** |
| ** **                       | ** ** | ** **                                                 | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Unrelated to a** | ** ** | **Control** | ** ** | **Control &** | ** ** |
| ** **                       | ** ** | ** **                                                 | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Change in** | ** ** | **Without** | ** ** | **Qualifying** | ** ** |
| **Benefit**                      | ** ** | **Death**                                                  | ** **  | **Disability** | ** ** | **For Cause** | ** ** | **Voluntary** | ** ** | **Control** | ** ** | **Termination** | ** ** | **Termination** | ** ** |
| *Cash Severance*                 |       | $                                                          | —      |   | $ | — |   | $ | — |   | $ | — | * * | *$* | *495,000* |   | $ | — | * * | *$* | *660,000* | * * |
| Equity                           |       |                                                       |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Restricted Shares                |       | $                                                          | 270,396     |   | $ | 270,396 |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 270,396 |   |
| Performance Share Awards         |       | $                                                          | 630,924     |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 630,924 |   | $ | 630,924 |   |
| Unexercisable Options            |       | $                                                          | —      |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Total*                          | * *   | *$*                                                        | *901,320*   | * * | *$* | *270,396* |   | $ | — |   | $ | — |   | $ | — | * * | *$* | *630,924* | * * | *$* | *901,320* |   |
| Retirement Benefits              |       |                                                       |        |   |   |   |   |   |   |   |   |   |   |   |   |
| DB Plan                          |       | $                                                          | —      |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| DC Plan                          |       | $                                                          | —      |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Total*                          |       | $                                                          | —      |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Unvested Deferred Compensation* |       | $                                                          | —      |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| *Other Benefits*                 |       |                                                       |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Health & Welfare        |       | $                                                          | —      |   | $ | — |   | $ | — |   | $ | — |   | $ | 23,752 |   | $ | — |   | $ | 23,752 |   |
| Outplacement                     |       | $                                                          | —      |   | $ | — |   | $ | — |   | $ | — |   | $ | 26,400 |   | $ | — |   | $ | 26,400 |   |
| Perquisites                      |       | $                                                          | —      |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Long-Term Disability             |       | $                                                          | —      |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Tax Gross-Ups                    |       | $                                                          | —      |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 567,561 |   |
| *Total*                          |       | $                                                          | —      |   | $ | — |   | $ | — |   | $ | — | * * | *$* | *50,152* |   | $ | — | * * | *$* | *617,713* | * * |
| **Total**                        | ** ** | **$**                                                      | **901,320** | ** ** | **$** | **270,396** | ** ** | **$** | **—** | ** ** | **$** | **—** | ** ** | **$** | **545,152** | ** ** | **$** | **630,924** | ** ** | **$** | **2,179,033** | ** ** |

 

----

(1) Please see narrativeaccompanying these tables for details and key assumptions.

 

***Named Executive Officers Employed by the Company as of December 31,2009.***

 

Wehave entered into executive severance agreements and maintain certain plansthat will require us to pay compensation and provide certain benefits to eachof our named executive officers at, following, or in connection with theexecutive’s termination of employment or a change in control of Terra. Thematerial terms and conditions relating to these payments and benefits aredescribed below. Unless otherwise specifically noted, the terms described belowapply to each named executive officer on an identical basis.

 

*InvoluntaryTermination Without “Cause” or Voluntary Termination for “Good Reason” onDecember 31, 2009, Other Than During the Two-Year Period Following a“Change in Control”**.*

 

Ifa named executive officer’s employment with Terra had been involuntarilyterminated by Terra without “cause” or voluntarily terminated by the executivefor “good reason” on December 31, 2009, the executive would have beenentitled to the following payments and benefits:

 

·                  A lump-sum cashseverance payment in an amount equal to 1.5 times the sum of his annual basesalary at termination and his target annual incentive award for 2009;

 

·                  Continuation ofmedical and dental benefits until the earlier of two years following the dateof termination or the date the executive becomes covered by another employer’smajor medical plan; and

 

·                  Outplacementservices at our expense until the earlier of the first anniversary oftermination and the date that the executive becomes employed by a new employer.

 

A-44

----

 

*TerminationDue to Death on December 31, 2009**.*

 

Ifa named executive officer’s employment with Terra was terminated due to deathon December 31, 2009, then his estate would have been entitled to thefollowing payments and benefits:

 

·                  Immediatevesting of all unvested restricted shares; and

 

·                  Immediatevesting of all unvested performance shares at a level based on actualperformance during the performance period through December 31, 2009.

 

*TerminationDue to Disability on December 31, 2009**.*

 

Ifa named executive officer’s employment with Terra was terminated due to hisdisability on December 31, 2009, he would have been entitled to thefollowing payments and benefits:

 

·                  Immediatevesting of all unvested restricted shares; and

 

·                  Payment ofmonthly disability benefits.

 

*“Change inControl” Without a Qualifying Termination on December 31, 2009**.*

 

Ifa “change in control” of Terra occurred on December 31, 2009, each namedexecutive officer would have been entitled to the following benefits:

 

·                  Immediatevesting of all unvested restricted shares granted prior to July 2008;

 

·                  Immediatevesting of a number of performance shares granted prior to February 2009equal to the greater of the target number of shares subject to each outstandingperformance share grant and a number based on actual performance during theperformance period through December 31, 2009; and

 

·                  Payment of agross-up to make the executive whole for any excise tax imposed as a result of Section 280Gof the Internal Revenue Code.

 

*InvoluntaryTermination Without “Cause” or Voluntary Termination for “Good Reason” onDecember 31, 2009 During the Two-Year Period Following a “Change inControl”**.*

 

Ifa named executive officer’s employment with Terra was involuntarily terminatedby Terra without “cause” or voluntarily terminated by the executive for “goodreason” on December 31, 2009 and during the two-year period following a“change in control” of Terra, he would have been entitled to the followingpayments and benefits:

 

·                  A lump-sum cashseverance payment in an amount equal to two times the sum of his annual basesalary at termination and the target annual incentive award for 2009 (or, forofficers who are covered by Section 162(m) of the Code, the productof their annual base salary at termination and their target annual incentiveaward opportunity for 2008);

 

·                  Continuation ofmedical and dental benefits until the earlier of two years following the dateof termination or the date the executive becomes covered by another employer’smajor medical plan;

 

·                  Outplacementservices at our expense until the earlier of the first anniversary oftermination and the date that the executive becomes employed by a new employer;

 

·                  Immediatevesting of all benefits accrued under the SERP and two years of additional ageand service credit for purposes of calculating such benefits (only applicableto Mr. Bennett, because Messrs. Greenwell, Stone, Huey, and Smith donot participate in the SERP);

 

·                  Immediatevesting of all unvested restricted shares;

 

·                  Immediatevesting of a number of performance shares equal to the greater of the targetnumber of shares subject to each outstanding performance share grant and anumber based on actual performance during the performance period through December 31,2009; and

 

A-45

----

 

·                  Payment of agross-up to make the executive whole for any excise tax imposed as a result of Section 280Gof the Internal Revenue Code.

 

*MaterialDefined Terms**.*

 

Theterms “cause” and “good reason” as used above are defined under the employmentseverance agreements and mean the following:

 

*“Cause”* means (i) the willfuland continued failure of the executive to perform substantially the executive’sduties with Terra (other than any such failure resulting from incapacity due tophysical or mental illness); (ii) the willful engaging by the executive inillegal conduct or gross misconduct which is materially and demonstrablyinjurious to Terra; (iii) the executive’s willful and material breach ofthe employment severance agreement; (iv) the executive’s willful violationof any material provision of Terra’s code of ethics and standards of businessconduct or (v) the executive’s willful failure to cooperate with agovernment investigation.

 

*“Good Reason”* means, other than during thetwo-year period following a “change in control” (as defined in the employmentseverance agreements), (i) our failure to pay the executive anycompensation when due (other than an inadvertent failure that is remedied within10 business days following notice by the executive) and (ii) delivery byTerra to the executive of a notice to terminate the executive’s employmentother than for “cause” or “permanent disability” (as defined in the employmentseverance agreements).

 

*“Good Reason”* means, during the two-yearperiod following a “change in control” (as defined in the employment severanceagreements), (i) our failure to pay the executive any compensation whendue (other than an inadvertent failure that is remedied within 10 business daysfollowing notice by the executive); (ii) delivery by Terra to theexecutive of a notice to terminate the executive’s employment other than for“cause” or “permanent disability” (as defined in the employment severanceagreements); (iii) a reduction in the executive’s annual base salary of10% or more from the level in effect immediately prior to the “change incontrol”; (iv) the relocation of the executive’s principal place ofemployment to a location more than 50 miles from immediately prior to thechange; (v) a reduction in the executive’s target annual incentive award ofmore than 10% from the level in effect immediately prior to the “change incontrol”; (vi) a material diminution in the executive’s titles, duties,responsibilities or status from those in effect immediately prior to the“change in control”; (vii) the removal of the executive from, or anyfailure to re-elect the executive to, any of the offices the executive heldimmediately prior to the “change in control”; or (viii) any materialreduction in executive’s retirement, insurance or fringe benefits from thelevels in effect immediately prior to the “change in control”.

 

Theterm “*change in control”*, asdefined under the employment severance agreements, means, in general, the occurrenceof any one of the following events: (i) certain changes in the membershipof a majority of the Board; (ii) consummation of certain mergers orconsolidations of Terra with any other corporation following which ourshareholders hold less than 60% of the combined voting power of the survivingentity; (iii) approval by our shareholders of a plan of completeliquidation or dissolution of Terra; or (iv) certain acquisitions by athird-party or third-parties, acting in concert, of at least 25% of our then outstandingvoting securities.

 

Thedefinition of “*change in control”*for purposes of the restricted share agreements and the performance shareagreements is substantially the same as that definition for purposes of theemployment severance agreements.

 

*ReleaseRequiremen**t.*

 

Pursuantto the employment severance agreements, an executive will not be entitled toseverance and other separation benefits unless he executes a release of claimsin favor of Terra and the release becomes effective and irrevocable.

 

*Post-EmploymentCovenants**.*

 

Inexchange for the above described payments and benefits to the extent providedfor under the employment severance agreements, following termination ofemployment, the executive will remain subject to

 

A-46

----

 

confidentiality, cooperation andnon-solicitation/non-competition covenants that are set forth in the employmentseverance agreements. The confidentiality covenant prohibits the executive fromdisclosing “confidential information” as defined under the employment severanceagreements. The cooperation covenant requires the executive to cooperate withTerra in connection with any lawsuit or investigation that related to theexecutive’s employment with Terra. The non-solicitation/non-competitioncovenant prohibits the executive, for a period of one year following histermination of employment, from (i) engaging in any activity that is incompetition with Terra (including any business relating to the production ormarketing of nitrogen products) and (ii) soliciting or hiring any of ouremployees without our consent.

 

***Methodologies and Assumptions used for Calculating Other PotentialPost-Employment Payments.***

 

Forpurposes of quantifying the other potential post-employment payments disclosedin the following tables, we utilized the following assumptions andmethodologies:

 

·                  *Dateof triggering event**.*The date of eachtriggering event is December 31, 2009.

 

·                  *Determinationof cash severance**.*Following aqualifying triggering event, each named executive officer is entitled to cashseverance equal to the sum of the named executive officer’s current base salaryand target annual incentive award multiplied by the appropriate severancemultiple. The severance multiple is 1.5 in the case of a termination other thanwithin two years following a change in control of Terra, and is two in the caseof a termination during the two-year period following a change in control. Inaccordance with this formula, each named executive officer’s cash severance wasdetermined based on the following:

 

·*                 **Mr. Bennett**.*Annual base salary of $650,000 as of December 31, 2009, and 2009target annual incentive award of $975,000.

 

·                  *Mr. Greenwell**.*Annual base salary of $380,000 as of December 31, 2009, and 2009target annual incentive award of $285,000.

 

·*                 **Mr. Stone**.*Annual base salary of $300,000 as of December 31, 2009, and 2009target annual incentive award of $225,000 and solely for the purpose of atermination other than within two years following a change in control, $180,000.

 

·*                 **Mr. Huey**.*Annual base salary of $295,000 as of December 31, 2009, and 2009target annual incentive award of $147,500.

 

·*                 **Mr. Smith**.*Annual base salary of $220,000 as of December 31, 2009, and 2009target annual incentive award of $110,000.

 

·                  *Numberof performance shares subject to vesting in the event of a change in control**.*The performance share award agreements for grants prior to February 2009provide that in the event of a “change in control” of Terra, a number ofperformance shares equal to the greater of the target number of shares subjectto each outstanding performance share grant and a number based on actualperformance during the performance period through December 31, 2009 willbecome vested. For performance share awards granted in 2009, the number ofshares that each holder will receive will become fixed at the greater of thetarget number of shares subject to the award and a number based on actualperformance during the performance period through December 31, 2009. Eachholder will receive such performance shares on the earlier of the date thatsuch award would otherwise vest or the date that such holder is terminatedwithout cause or for good reason (both as defined in the performance shareaward agreement) or due to death or total disability on or following a changein control. Based on company performance as of December 31, 2009, theactual performance number for each of the outstanding performance share grantsis at least equal to the maximum level of performance, and therefore, we haveassumed vesting at the maximum level (200% of target).

 

·                  *Numberof restricted shares subject to vesting in the event of death or disability**.*The restricted share award agreements for the outstanding grants ofrestricted shares provide that in the event of a

 

A-47

----

 

terminationof employment due to death or disability, the restricted shares subject to suchgrant will vest in full.

 

·                  *Numberof performance shares subject to vesting in the event of death**.*The performance share award agreements provide that in the event of atermination of employment due to death prior to a change in control,performance shares will vest at a level based on actual performance during theperformance period through the date of death. Based on company performance asof December 31, 2009, the actual performance number for each of theoutstanding performance share grants is at least equal to the maximum level ofperformance, and therefore, we have assumed vesting at the maximum level (200%of target).

 

·                  *Valueof restricted shares and performance shares subject to vesting**.*The value of each restricted share and performance share that wassubject to vesting upon a triggering event was determined by multiplying thenumber of shares subject to vesting by the closing price of Terra common stockon December 31, 2009, the last trading day of 2009 (i.e., $32.19).

 

·                  *Valueof continuation of health and dental benefits**.*The value of health and dental benefits which are continued for atwo-year period following certain qualifying triggering events was determinedbased on assumptions used for financial reporting purposes under FinancialAccounting Standards Board ASC Topic 715, *RetirementBenefits*.

 

·                  *Valueof post-termination outplacement services**.*The value ofpost-termination outplacement services was determined based on a value equal toapproximately 12% of an executive’s annual base salary as of the date oftermination of employment.

 

·                  *Incrementalvalue of accelerated vesting of SERP benefits and additional age/service creditin the event of a “change in control”**.*These amounts,which are applicable to Mr. Bennett, were calculated by adding two yearsof credited service to the year-end 2009 total pension benefit (i.e., sum oftax-qualified pension and SERP) for the named executive officer and thendetermining the present value of that accrued benefit deferred to the date theexecutive reaches age 63, which is the earliest age at which unreduced pensionbenefits would be available to the executive with an extra two years of age.The actuarial basis for these determinations is the same as the basis used inthe Pension Benefits Table.

 

·                  *Valueof monthly disability benefits**.*The value ofmonthly disability benefits is based on the present value of the excess of eachnamed executive officer’s monthly disability benefit under our long-termdisability plan that covers the executive as of December 31, 2009, overthe monthly disability benefit that would be payable under our long-termdisability plan that is generally available to all employees. Amounts arecalculated using a 7% discount rate and assuming that each named executiveofficer continues to receive monthly disability benefits until age 65.

 

·                  *Determinationof excise tax payments and tax gross-up payments made in connection with achange in control**.*We determinedthe amount of the excise tax payment by multiplying by 20% the “excessparachute payment” that would arise in connection with payments made to theapplicable named executive officers upon either (i) a change in control ofTerra or (ii) a qualifying termination of employment following a change incontrol.The excess parachute payment was determined in accordance with theprovisions of Section 280G of the Internal Revenue Code. We utilized thefollowing key assumptions to determine the applicable named executive officer’stax gross-up payment:

 

·                  Based on ourperformance through December 31, 2009, all of our outstanding performanceshare awards are currently expected to vest at 200% of the target level.Therefore, the amount of the excise tax with respect to the performance shareawards was calculated assuming that all performance goals with respect to theperformance share awards had already been met at the 200% level. The result isthat the amount of the excise tax attributable to both the performance shareawards and the restricted shares is based solely on the value of theaccelerated vesting and the lapse of the obligation to perform future services;

 

A-48

----

 

·                  A statutoryfederal income tax rate of 35%, a Medicare tax rate of 1.45% and a state incometax rate of 8.98%, which is the maximum individual income tax rate for Iowa;

 

·                  Each namedexecutive officer’s Section 280G “base amount” was determined based onaverage W-2 compensation for the period from 2004-2008 (or the period of theexecutive’s employment with Terra, if shorter); and

 

·                  The interestrate assumption was 120% of the applicable federal rate for December 2009.

 

**DirectorCompensation.**

 

Thefollowing table summarizes the compensation of each of our non-employeedirectors for the fiscal year ended December 31, 2009.

 
| ** **        | ** ** | ** **           | ** ** | ** **            | ** ** | ** ** | ** ** | ** **              | ** ** | **Change in** | ** ** | ** **         | ** ** | ** ** | ** ** |
|-------------------|------------|----------------------|------------|-----------------------|------------|------------|------------|-------------------------|------------|--------------------|------------|--------------------|------------|------------|------------|
| ** **        | ** ** | ** **           | ** ** | ** **            | ** ** | ** ** | ** ** | ** **              | ** ** | **Pension**        | ** ** | ** **         | ** ** | ** ** | ** ** |
| ** **        | ** ** | ** **           | ** ** | ** **            | ** ** | ** ** | ** ** | ** **              | ** ** | **Value &**    | ** ** | ** **         | ** ** | ** ** | ** ** |
| ** **        | ** ** | ** **           | ** ** | ** **            | ** ** | ** ** | ** ** | ** **              | ** ** | **Nonqualified**   | ** ** | ** **         | ** ** | ** ** | ** ** |
| ** **        | ** ** | **Fees Earned** | ** ** | ** **            | ** ** | ** ** | ** ** | **Non-Equity**          | ** ** | **Deferred**       | ** ** | ** **         | ** ** | ** ** | ** ** |
| ** **        | ** ** | **or Paid**     | ** ** | ** **            | ** ** | ** ** | ** ** | **Incentive Plan** | ** ** | **Compensation**   | ** ** | **All Other** | ** ** | ** ** | ** ** |
| ** **        | ** ** | **in Cash**     | ** ** | **Stock Awards** | ** ** | **Option** | ** ** | **Compensation**        | ** ** | **Earnings**       | ** ** | **Compensation**   | ** ** | **Total**  | ** ** |
| **Name**          | ** ** | **($)(1)**           | ** ** | **($)(2)(3)**         | ** ** | **Awards** | ** ** | **($)**                 | ** ** | **($)**            | ** ** | **($)**            | ** ** | **($)**    | ** ** |
| **Fisher, D.**    |       | $                    | 83,750     |                  | $          | 164,690    |       | $                       | —     |               | $          | —             |       | $          | —     |   | $ | — |   | $ | 248,440 |   |
| **Fraser, D.**    |       | $                    | 75,250     |                  | $          | 164,690    |       | $                       | —     |               | $          | —             |       | $          | —     |   | $ | — |   | $ | 239,940 |   |
| **Hesse, M.**     |       | $                    | 79,000     |                  | $          | 164,690    |       | $                       | —     |               | $          | —             |       | $          | —     |   | $ | — |   | $ | 243,690 |   |
| **Janson, P.**    |       | $                    | 72,500     |                  | $          | 164,690    |       | $                       | —     |               | $          | —             |       | $          | —     |   | $ | — |   | $ | 237,190 |   |
| **Kroner, J.**    |       | $                    | 72,500     |                  | $          | 164,690    |       | $                       | —     |               | $          | —             |       | $          | —     |   | $ | — |   | $ | 237,190 |   |
| **Lilly, J.**     |       | $                    | 10,625     |                  | $          | 190,656    |       | $                       | —     |               | $          | —             |       | $          | —     |   | $ | — |   | $ | 201,281 |   |
| **McGlone, D.**   |       | $                    | 68,750     |                  | $          | 164,690    |       | $                       | —     |               | $          | —             |       | $          | —     |   | $ | — |   | $ | 233,440 |   |
| **Slack, H.**     |       | $                    | 100,000    |                  | $          | 247,050    |       | $                       | —     |               | $          | —             |       | $          | —     |   | $ | — |   | $ | 347,050 |   |
| **Wilson, D.**    |       | $                    | 10,625     |                  | $          | 190,656    |       | $                       | —     |               | $          | —             |       | $          | —     |   | $ | — |   | $ | 201,281 |   |
| **Yoskowitz, I.** |       | $                    | 10,625     |                  | $          | 190,656    |       | $                       | —     |               | $          | —             |       | $          | —     |   | $ | — |   | $ | 201,281 |   |

 

----

(1)          For information about the nature of the fees earnedduring the fiscal year, see the narrative accompanying this table.

 

(2)          This column sets forth the amount of fees earned byeach director from Terra during 2009. These amounts represent the grant-datefair value of stock-based compensation granted in 2009.

 

(3)          Includes a share award of 8,321 shares to theChairman of the Board (Mr. Slack) on August 3, 2009; share awards of4,025 shares (on December 1, 2009) and 1,030 shares (on December 17,2009) to Messrs. Lilly, Wilson and Yoskowitz, and a share award of 5,547shares (on August 3, 2009) to the other directors. Grants are immediatelyvested.

 

InMay 2003, the board of directors voted to compensate non-employeedirectors using a combination of cash and shares. In 2007, the board ofdirectors again reviewed the compensation plan and structure for non-employeedirectors and made certain revisions thereto while leaving intact the mix ofcash and shares.

 

***Director Fees Paid in Cash.***

 

Underthe director compensation policy, in 2009, Mr. Slack, Chairman of theBoard, received an annual cash retainer of $100,000 (paid quarterly). The othernon-employee directors each received an annual retainer of $27,500 (paidquarterly) and meeting fees of $1,250 per meeting attended, including committeemeetings. Mr. Fisher received an additional annual cash retainer of$10,000 (paid quarterly) for serving as Chairman of the Audit Committee. Ms. Hesse,Chairman of the Nominating and Corporate Governance Committee, and Mr. Fraser,Chairman of the Compensation Committee, each received an additional annual cashretainer of $4,000 (paid quarterly) for serving as committee chairs.

 

A-49

----

 

***Director Stock Awards.***

 

*2009 StockAwards**.*

 

Pursuantto a resolution of the Board of Directors dated August 16, 2006, the Boarddetermined that beginning in 2006 and on a going-forward basis, director stockawards would be delivered in the form of fully vested shares of Terra commonstock. By resolution of the Board of Directors dated October 23, 2007, theBoard determined that new equity grants should be made August 1 (or thefollowing business day) each year, and that starting August 2008, thenumber of shares awarded shall be determined by reference to a fixed dollaramount divided by the share price of Terra shares for the previous 20 tradingdays immediately preceding the date of grant, rounded up to the next wholeshare. The dollar value used in the numerator is $150,000 for all non-employeedirectors except for Mr. Slack, the chairman, in which case the numeratoris the sum of $225,000. This level of stock award was selected based on a priormarket study of compensation paid to non-employee directors of publiccompanies. In addition, the Board determined that each newly elected outsidedirector will receive, simultaneously with his or her election to the Board, aninitial grant of Terra shares that is equivalent to the annual equity grant asdescribed above. On August 3, 2009, each director serving on the Board onthat date other than Mr. Slack received a grant of 5,547 shares of Terracommon stock, and Mr. Slack received a grant of 8,321 shares of Terracommon stock.

 

OnDecember 1, 2009, newly elected directors Messrs. Lily, Wilson andYoskowitz each received a grant of 4,025 shares of Terra common stock upontheir election to the Board. On December 17, 2009, Terra issued asubsequent grant to each such newly elected directors of 1,030 shares of Terracommon stock to ensure that the directors’ initial grant was not diminished asa result of the $7.50 special cash dividend paid by Terra on December 11,2009.

 

*DirectorStock Ownership Guidelines**.*

 

Pursuantto resolution of the Board of Directors dated October 23, 2007, the Boardimplemented, effective immediately, Terra stock ownership guidelines for allnon-employee directors. The guide for all non-employee directors is 20,000shares for all except the Chairman, which guide is 30,000 shares. All newlyelected directors are to be allowed a five year period from election to satisfythe new guidelines.

 

***Other Director Compensation.***

 

Wereimburse all directors for reasonable travel and other necessary business expensesincurred in the performance of their services for Terra. Non-employee directorsdo not receive any additional payments or perquisites. A director who is aTerra employee, such as Mr. Bennett, does not receive any additionalcompensation for service as a director.

 

**Transactionswith Related Persons.**

 

During2009, the Company was engaged in no transactions, nor are any such transactionscurrently proposed, in which a related party, as that term is defined in Title17, Chapter II, Subpart § 229.404 of the Code of Federal Regulations, had orwill have a direct or indirect material interest and which involves an amountexceeding $120,000.

 

**Policies andProcedures.**

 

TheAudit Committee of the Board reviews all material transactions with any relatedperson as identified by management. “Related persons” include any of ourdirectors, executive officers, certain of our stockholders and immediate familymembers of any of the foregoing.

 

Atits February 2008 meeting, the Audit Committee and Board adopted a writtenpolicy for evaluating related person transactions. To identify related persontransactions under such policy, each year we submit and require our directorsand officers to complete Director and Officer Questionnaires identifying anytransactions with us in which the officer or director or their family membershave an interest. Additionally, all material undertakings by the Company arereviewed by management, with a view, in part, to identify if a related person

 

A-50

----

 

is involved. Pursuant to ourpolicy, we periodically compile a list of related persons *(“Related Person List”)* based oninformation gathered from responses to the Director and Officer Questionnairealong with information concerning stockholders who beneficially own more thanfive percent (5%) of the voting securities of Terra, and distribute the list tokey members of management for review. Management is instructed to review theRelated Person List and promptly inform the General Counsel of any current orproposed transactions with any person on the list. The General Counsel is toreport to the Audit Committee any potential related person transaction soidentified. We review related person transactions due to the potential for aconflict of interest. A conflict of interest occurs when an individual’sprivate interest interferes, or appears to interfere, in any way with theCompany’s interest. Our Code of Ethics and Standards of Business Conductrequires all directors, officers and employees who may have a potential orapparent conflict of interest to immediately notify our General Counsel.

 

Weexpect our directors, officers and employees to act and make decisions that arein the Company’s best interests and encourage them to avoid situations which presenta conflict between our interests and their own personal interests. Ourdirectors, officers and employees are prohibited from taking any action thatmay make it difficult for them to perform their duties, responsibilities andservices to Terra in an objective and fair manner. The Nominating and CorporateGovernance Committee is charged with responsibility to bring before the Boardall requests for a waiver of the Company’s Code of Ethics and Standards ofBusiness Conduct.

 

**AUDIT COMMITTEE REPORT**

 

Theresponsibilities of the Audit Committee, which are set forth in the AuditCommittee charter adopted by the Board of Directors, include providingoversight to Terra’s financial reporting process through periodic meetings withTerra’s independent auditors, internal auditors and management to reviewaccounting, auditing, internal controls and financial reporting matters. Terramanagement is responsible for the preparation and integrity of the financialreporting information and related systems of internal controls. The AuditCommittee, in carrying out its role, relies on Terra’s senior management,including its senior financial management, its internal audit function, and itsindependent auditors.

 

TheAudit Committee appointed Deloitte & Touche LLP *(“Deloitte & Touche”)* as theindependent registered public accounting firm for Terra for 2010.

 

TheAudit Committee has reviewed and discussed with senior management Terra’saudited financial statements included in the 2009 Annual Report toStockholders. Management has confirmed to us that the data in such financialstatements (i) has been prepared with integrity and objectivity and ismanagement’s responsibility, and (ii) has been prepared in conformity withgenerally accepted accounting principles.

 

TheAudit Committee has discussed with Deloitte & Touche, Terra’sindependent registered accounting firm, the matters required to be discussed bythe Statement on Auditing Standards No. 61 *(“SAS 61”)* Communications with Audit Committees. SAS 61requires Terra’s independent registered accounting firm to provide us withadditional information regarding the scope and results of their audit ofTerra’s financial statements, including with respect to (i) theirresponsibility under generally accepted auditing standards, (ii) significantaccounting policies, (iii) management judgments and estimates, (iv) anysignificant audit adjustments, (v) any disagreements with management, and (vi) anydifficulties encountered in performing the audit.

 

TheAudit Committee has received from Deloitte & Touche a letter providingthe disclosures required by the applicable requirements of the Public CompanyAccounting Oversight Board regarding Deloitte & Touche’scommunications with the Audit Committee concerning its independence. Deloitte &Touche has discussed its independence with us and has confirmed in such letterthat, in its professional judgment, it is independent of Terra within themeaning of the Federal securities laws and other applicable requirements.Deloitte & Touche has also discussed with us its findings related toits review of Terra’s internal control procedures as required by Section 404of the Sarbanes-Oxley Act.

 

Basedon the review and discussions described above with respect to Terra’s auditedfinancial statements for the year ended December 31, 2009, the AuditCommittee has recommended to the Board of Directors that

 

A-51

----

 

such financial statements be included inTerra’s Annual Report for 2009 on Form 10-K for filing with the SEC.

 

TheAudit Committee has a policy concerning the approval of audit and non-auditservices to be provided by Terra’s independent registered public accountingfirm. A copy of this policy can be found in Terra’s Audit Committee charter onour website at www.terraindustries.com. Select the “Investors” link, followedby “Terra Industries (TRA)” and choose “Governance”. The policy requires thatall services provided by Terra’s independent auditors to Terra, including auditservices and permitted audit-related and non-audit related services, bepre-approved by the Audit Committee.

 

Ingiving our recommendation to the Board of Directors, we have relied on (i) management’srepresentation that the data in such financial statements has been preparedwith integrity and objectivity and in conformity with generally acceptedaccounting principles, and (ii) the report of Terra’s independentregistered accounting firm with respect to such financial statements.

 

 
|   | Members of the Audit  Committee of the Board of Directors |
|--------|-----------------------------------------------------------|
|   |                                                      |
|   |                                                      |
|   | D.E. Fisher,  Chairman                                    |
|   | M.O. Hesse                                                |
|   | J.R. Kroner                                               |
|   | D.A. Wilson                                               |

 

A-52

----