Document:

<PAGE>

                                                                   EXHIBIT 10.47

                     SECOND AMENDMENT TO LICENSE AGREEMENT
                  BETWEEN TSR, INC AND INTERPLAY PRODUCTIONS

     This Second Amendment To License Agreement is made effective this 8th day
of March, 1998, by and between Interplay Entertainment Corp., as successor in
interest to and doing business as, Interplay Productions, 16815 Von Karman
Avenue, Irvine, California, a Delaware corporation ("Licensee") and TSR, Inc.,
1801 Lind Avenue SW, Renton, Washington, a Wisconsin corporation ("Licensor").

     WHEREAS, Licensor and Licensee entered into a certain License Agreement
date as August 8, 1994 as amended (the "License Agreement"); and

     WHEREAS, Licensor and Licensee mutually wish to further amend the License
Agreement as provided below;

     NOW THEREFORE, in exchange for mutual covenants set forth herein and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

     1.  The License Agreement is hereby amended by inserting a new Schedule E:

     SCHEDULE E:
     ADVANCES:

     [*] due upon execution, which has been paid.

     For each game title initially released for play on on-line, cable,
     satellite, or other electronic transmission systems ("Electronic Product"),
     [*] upon such  initial release and [*] upon any subsequent release of said
     game title other than as an Electronic Product.

     For each game title initially released other than as an Electronic Product,
     [*] upon such initial release.

     If LICENSEE has not paid TSR at least [*] in additional advances (over and
     above the advance due upon execution) [*] after the date of commencement,
     the difference between the amount of additional advances paid by LICENSEE
     and [*].

     [*] due as follows upon notification LICENSEE that it will exercise the 1st
     OPTION TERM:

          [*];
          [*];
          [*].

     [*] due upon notification by LICENSEE that it will exercise the 2nd OPTION
     TERM.

     [*] due upon notification by LICENSEE that it will exercise the 3RD OPTION
     TERM.

     [*] per clue book title due upon initial shipment of that title.

*Portions omitted pursuant to a request for confidential treatment pursuant to
 Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
<PAGE>

     2.  The License Agreement is hereby amended by inserting a new Schedule F:

     SCHEDULE F:
     MINIMUM GUARANTEE:

     [*] for the ORIGINAL TERM.

          The actual royalty earned and received by TSR during the entire first
          calendar quarter of 1999 shall be applied toward the MINIMUM GUARANTEE
          for the ORIGINAL TERM.

     [*] for the 1ST OPTION TERM.

          Only the actual royalty earned and received by TSR during the 1ST
          OPTION TERM minus the royalty amount from the commencement of the 1ST
          OPTION TERM to the end of first calendar quarter of 1999 shall be
          applied toward the MINIMUM GUARANTEE for the 1ST OPTION TERM.

     For the 2ND OPTION TERM, the MINIMUM GUARANTEE shall be based upon
     LICENSEE's election of the LICENSED PROPERTY and shall be as follows:

          [*] for the BALDUR'S GATE game(s); [*] for the NEVERWINTER NIGHTS
          game(s); and [*] for the TORMENT game(s).

     For the 3RD OPTION TERM, the MINIMUM GUARANTEE shall be based upon
     LICENSEE's election of the LICENSED PROPERTY and shall be as follows:

          [*] for the BALDUR'S GATE game(s); [*] for the NEVERWINTER NIGHTS
          game(s); and [*] for the TORMENT game(s).

     3.  The License Agreement is hereby amended by inserting a new Schedule A:

     SCHEDULE A:
     LICENSED PROPERTY:

     For the ORIGINAL TERM, LICENSED PROPERTY shall mean the following:

          An exclusive license to use the PLANESCAPE and FORGOTTEN REALMS
          trademarks and all copyrighted materials, including but not limited
          to, characters, locations and monsters, that are unique to TSR's
          PLANESCAPE and FORGOTTEN REALMS fantasy worlds.

          A non-exclusive license to use, solely in connection with LICENSED
          PRODUCTS bearing the PLANESCAPE or FORGOTTEN REALMS trademarks, the
          trademarks and copyrighted materials associated with, but not unique
          to, the PLANESCAPE and FORGOTTEN REALMS fantasy worlds, including
          without limitation, the ADVANCED DUNGEONS & DRAGONS, AD&D, TSR, and
          TSR Logo trademark.

          An exclusive sublicense to use any computer code for the presently
          existing NEVERWINTER NIGHTS game the copyright for which is owned by
          Strategic

*Portions omitted pursuant to a request for confidential treatment pursuant to
 Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
<PAGE>

          Simulations, Inc. only for so long as the existing NEVERWINTER NIGHTS
          game continues to be made available on the America Online network and
          only for the purpose of continuing the existing NEVERWINTER NIGHTS
          game. This license specifically excludes any other use of said
          computer code and in particular any use of the computer code in any
          modifications of or sequels to the existing NEVERWINTER NIGHTS game.

          This license also specifically excludes any computer code owned by any
          other party, including without limitation America Online, Inc.

     For 1ST OPTION TERM, the term LICENSED PROPERTY shall mean the following:

          An exclusive license to use BALDUR'S GATE as the title of a retail PC
          and/or home video game product and sequels; TORMENT as the title of a
          retail PC and/or home video game product and sequels; and NEVERWINTER
          NIGHTS as the title of a retail PC and/or home video game product,
          with subtitle to be mutually agreed upon.

          A non-exclusive license to use, solely in connection with LICENSED
          PRODUCTS bearing the BALDUR'S GATE, TORMENT, or NEVERWINTER NIGHTS
          trademarks, the trademarks and copyrighted materials associated with,
          but not unique to, the PLANESCAPE and FORGOTTEN REALMS fantasy worlds,
          including without limitation, the ADVANCED DUNGEONS & DRAGONS, AD&D,
          TSR, and TSR Logo trademark; provided, however, that Licensee's rights
          shall be exclusive with respect to computer software games primarily
          located in the Baldur's Gate and Neverwinter areas of the Forgotten
          Realms world.  For purposes of clarification, Licensor may develop,
          manufacture, distribute, promote, license, and sell (and authorize any
          third party to do so) computer software games based in the Forgotten
          Realms world allowing players to venture into the Baldur's Gate or
          Neverw inter areas.  Licensor shall not develop, manufacture,
          distribute, promote, license, or sell (nor authorize any third party
          to do so) any computer software game primarily located, based or
          focused in the Baldur's Gate or Neverwinter areas.

     For 2ND OPTION TERM and 3RD OPTION TERM, the term LICENSED PROPERTY shall
     mean the following:

          Upon written notification to TSR as set forth in Advances and Terms,
          the choice of an exclusive license to use BALDUR'S GATE as the title
          of a retail PC and/or home video game product and sequels; TORMENT as
          the title of a retail PC and/or home video game product and sequels;
          or NEVERWINTER NIGHTS as the title of a retail PC and/or home video
          game product with subtitle to be mutually agreed upon.  All rights to
          the titles not selected by LICENSEE shall expire at the end of the
          applicable Term and revert to TSR.

          Consistent with the titles selected, a non-exclusive license to use,
          solely in connection with LICENSED PRODUCTS bearing the HALDUR'S GATE,
          TORMENT, or NEVERWINTER NIGHTS trademarks, the trademarks and
          copyrighted materials associated with, but not unique to, the
          PLANESCAPE and FORGOTTEN REALMS fantasy worlds, including without
          limitation, the ADVANCED DUNGEONS & DRAGONS, AD&D, TSR, and TSR Logo
          trademark; provided, however, that

*Portions omitted pursuant to a request for confidential treatment pursuant to
 Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
<PAGE>

          Licensee's rights shall be exclusive with respect to computer software
          games primarily located in the Baldur's Gate and Neverwinter areas of
          the Forgotten Realms world. For purposes of clarification, Licensor
          may develop, manufacture, distribute, promote, license, and sell (and
          authorize any third party to do so) computer software games based in
          the Forgotten Realms world allowing players to venture into the
          Baldur's Gate or Neverwinter areas. Licensor shall not develop,
          manufacture, distribute, promote, license, or sell (nor authorize any
          third party to do so) any computer software game primarily located,
          based or focused in the Baldur's Gate or Neverwinter areas.

     4.  The License Agreement is hereby amended by inserting a new Schedule B:

     SCHEDULE B:
     LICENSED PRODUCTS:

     Computer and video fantasy role-playing games for all personal computer and
     video game platforms known or unknown, including without limitation, coin-
     operated, cable, on-line, satellite and other electronic transmission
     Systems.

     For 1ST OPTION TERM, 2ND OPTION TERM, and 3RD OPTION TERM, the term
     LICENSED PRODUCTS shall be mean the following:

          Retail PC and/or home video game products which may include the
          ability for the consumer to utilize the retail game product to play
          the game via modem and over a local area network and shall include the
          right of Licensee to use, execute, transmit, perform and display the
          Licensed Product via an online network to enable users to play the
          Licensed Product free of charge (e.g. a "Battle.net" type network).

     Clue book and "900" telephone numbers containing hints, clues, diagrams,
     maps or other material to assist players for said computer and video games.

     Nothing in this Agreement will prevent TSR from flilly exploiting in any
     other manner its rights in the LICENSED PROPERTY.

     5.  The License Agreement is hereby amended by inserting a new Schedule D:

     SCHEDULE D:
     TERMS:

     Commencing upon the date of the last party to sign the AGREEMENT; expiring
     four (4) years and six (6) months from the date of commencement.  (The file
     period from commencement to such expiration is called the "ORIGINAL TERM").

     LICENSEE, at its option, and provided that LICENSEE is in compliance, and
     continues to comply with the AGREEMENT, may extend the term for three (3)
     additional two (2) year periods (the "1 ST OPTION TERM", "2ND OPTION TERM,"
     and "3RD OPTION TERM," respectively) upon written notice and payment of
     required Advance to TSR at least one (1) year prior to the expiration of:
     (1) the ORIGINAL TERM to accept the 1ST OPTION TERM; (2) the 1ST OPTION
     TERM to accept the 2ND OPTION TERM; and (3) the 2ND OPTION TERM to accept
     the 3RD OPTION TERM.  Notwithstanding the foregoing,

*Portions omitted pursuant to a request for confidential treatment pursuant to
 Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
<PAGE>

     LICENSOR acknowledges that LICENSEE has provided timely notice to accept
     the 1ST OPTION TERM and shall make payment as set forth in Section 1
     herein.

     Notwithstanding anything contained herein to the contrary, LICENSEE's
     rights to manufacture, distribute, promote, and sell each LICENSED PRODUCT
     released during the ORIGINAL TERM or any OEON TERM (if applicable) shall
     extend beyond the ORIGINAL TERM or any OPTION TERM (if applicable) for the
     Active Life of the LICENSED PRODUCT.  "Active Life" shall mean the longer
     of:  (i) two (2) years from the first commercial release of the LICENSED
     PRODUCT, or (ii) until such time as LICENSEE has failed to pay at least
     [*] in Royalties of the LICENSED PRODUCT in the previous calendar year but
     in no event shall the Active Life extend any right to manufacture,
     distribute, promote, or sell any new version or improvement to any LICENSED
     PRODUCT nor shall the Active Life extend the time to manufacture,
     distribute, promote, or sell any LICENSED PRODUCT beyond February 8, 2007.
     For purposes of the definition of the term Active Life, Royalties of the
     LICENSED PRODUCT shall only be considered paid if LICENSEE receives and
     reports as part of Net Sales an amount not less than [*] per stand alone
     unit; provided, however, LICENSED PRODUCT Royalties may be derived from
     other unit sales of LICENSED PRODUCT only if LICENSEE provides LICENSOR
     with a written request and details of such a sales program (e.g. OEM or
     compilations) and receives written approval from LICENSOR for the sales
     program.

     6.  The License Agreement is hereby amended by adding to EXHIBIT H
(ROYALTIES):

     Advertising derived from on-line play of LICENSED PRODUCT  [*]

*Portions omitted pursuant to a request for confidential treatment pursuant to
 Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Second Amendment To
License Agreement by their duly authorized officers as of the date first set
forth above.  Upon expiration of the Agreement, the parties will negotiate
additional renewal terms in good faith.

LICENSOR:                            LICENSEE:

TSR, INC.                            INTERPLAY ENTERTAINMENT CORP.

By:  /Emily Arons/                   By:  /Christopher Kilpatrick/

Emily Arons                          Name:  Christopher Kilpatrick

V.P. Consumer Products               Title:  President

*Portions omitted pursuant to a request for confidential treatment pursuant to
 Rule 24b-2 of the Securities Exchange Act of 1934, as amended.<PAGE>

                                                                    EXHIBIT 4.12

================================================================================

                          REGISTRATION RIGHTS AGREEMENT

                                     among

                             TERRA INDUSTRIES INC.

                                      and

                           TAURUS INTERNATIONAL S.A.

                                      and

                            TAURUS INVESTMENTS S.A.

                           Dated as of July 2, 2001

================================================================================
<PAGE>

                                REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT, dated as of July 2, 2001 (the
"Agreement"), among TERRA INDUSTRIES INC., a Maryland corporation (the
"Company"), and TAURUS INTERNATIONAL S.A. and TAURUS INVESTMENTS S.A., each a
company incorporated in the Grand Duchy of Luxembourg (each a "Shareholder" and
together the "Shareholders").

         WHEREAS the Shareholders have requested the Company to file a
registration statement and to take other steps required by law to facilitate the
sale to the public of certain common shares, without par value, of the Company
("Shares") and the Company believes that it is consistent with the Company's
commercial objectives to do so.

         NOW, THEREFORE, in consideration of the premises, representations and
agreements contained herein, the parties agree as follows:

         1.       Shelf Registration Statement.

                  (a)      Filing; Effectiveness; Expenses. The Company shall:

                           (i) file no later than 60 days following the date of
this Agreement an "evergreen" shelf registration statement on Form S-3 (the
"Shelf Registration") pursuant to Rule 415 under the United States Securities
Act of 1933, as amended (the "Securities Act"), providing for an offering to be
made on a continuous basis of the 5,000,000 Shares (the "Registrable
Securities") purchased by Credit Agricole Lazard Financial Products Bank and
Tokyo-Mitsubishi International plc (each a "Purchaser", and together the
"Purchasers") pursuant to the Purchase Agreement, dated as of March 13, 2000
(the "Purchase Agreement"), among the Shareholders and the Purchasers;

                           (ii) use commercially reasonable efforts to cause the
Shelf Registration to become effective as soon as practicable after such filing;

                           (iii) use commercially  reasonable  efforts to
maintain in effect, supplement and amend, if necessary, the Shelf Registration,
as required by the instructions applicable to such registration form or by the
Securities Act or as reasonably requested by a Shareholder; and

                           (iv) furnish to the Shareholders copies of any
supplement or amendment to such Shelf Registration prior to such supplement,
amendment or document being used and/or filed with the United States Securities
and Exchange Commission (the "Commission").

                  (b) Effective Shelf Registration Statement. (i) If at any time
the Shelf Registration ceases to be effective, then the Company shall use its
best efforts to file and use its
<PAGE>

commercially reasonable efforts to cause to become effective a new "evergreen"
shelf registration statement providing for an offering to be made on a
continuous basis of the Registrable Securities.

                           (ii) If, after the Shelf Registration has become
effective, it is affected by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or authority, then
the Company shall use its commercially reasonable efforts to prevent the
issuance of any stop order suspending the effectiveness of the registration
statement or of any order preventing or suspending the use of any preliminary
prospectus and, if any such order is issued, to obtain the withdrawal of any
such order as soon as reasonably practicable.

                  (c) (i) The Company may at any time furnish to the
Shareholders and the Purchasers a certificate signed by its chairman of the
board, president, chief executive officer, chief financial officer or general
counsel (a "Suspension Notice") stating that (A) in the good faith judgment of
the board of directors of the Company following consultation with the Company's
outside securities counsel, the Company has pending or in process a material
transaction, the disclosure of which would materially and adversely affect the
Company or the market for its securities, (B) in his or her good faith judgment
following consultation with the Company's outside securities counsel, the filing
of an amendment or supplement to the Shelf Registration or a document
incorporated by reference therein is necessary in order to ensure that the Shelf
Registration conforms in all material respects to the requirements of the
Securities Act and does not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, including cases in which such filing
would require disclosure of material information that the Company has a bona
fide business purpose for preserving as confidential or (C) the Company has been
advised in writing by a nationally recognized investment banking firm that a
sale of Registrable Securities would adversely affect a registered offering in
respect of which the Company has commenced preparations.

                  (ii) If at any time prior to the initial filing of the Shelf
Registration the Company shall furnish a Suspension Notice to the Shareholders
and the Purchasers pursuant to clause (A) of Section 1(c)(i), the Company may
postpone the filing (but not the preparation) of the Shelf Registration for not
more than 45 days upon prior notice of such postponement to the Shareholders and
the Purchasers; provided, however, that the Company shall not be permitted to
postpone registration pursuant to this clause (ii) more than once.

                  (iii) No later than three Business Days prior to the exercise
by a Shareholder of a Call Option pursuant to the Call Option Agreement, dated
as of March 13, 2000, between Taurus International S.A. and Credit Agricole
Lazard Financial Products, such Shareholder shall notify the Company of such
Shareholder's intention to exercise such Call

                                      -2-
<PAGE>

Option (such notification, a "Confirmation Request"). Within two Business Days
following receipt of such Confirmation Request the Company shall confirm to the
Shareholders in writing whether or not the Company intends to deliver a
Suspension Notice in accordance with Section 1(c)(i). For purposes of this
Agreement "Business Day" shall mean any day on which banks are generally open
for business in New York, New York.

                  (iv) During any 10 Business Day-day period following the
receipt of a Confirmation Request, the Company shall be obligated to deliver to
the Shareholders and the Purchasers a Suspension Notice immediately upon
discovery by the Company of the condition specified in clause (B) of Section
1(c)(i) and shall be obligated to notify the Shareholders and the Purchasers in
writing (such notice, a "Suspension Withdrawal") once the Shelf Registration has
been supplemented or amended, including by the filing of a document incorporated
therein by reference, in a manner that has corrected the condition that was the
subject of such Suspension Notice.

                  (v) Notwithstanding anything in this Agreement to the
contrary, the Company shall be entitled to deliver only one Suspension Notice
pursuant to clause (B) of Section 1(c)(i) within any period of 180 consecutive
days or with respect to any two consecutive resales for which a Shareholder
delivers Confirmation Requests.

         2.       Registration Expenses.

                  The Shareholders agree to reimburse and to pay or cause to be
paid promptly upon request being made thereof all reasonable and documented
"out-of-pocket" expenses of the Company arising from the preparation and initial
filing of the Shelf Registration and all amendments or commitments thereto
required for effectiveness, including without limitation (a) all Commission and
any National Association of Securities Dealers registration and filing fees and
expenses, (b) all fees and expenses in connection with the qualification of the
Registrable Securities for offering and sale under the State securities and blue
sky laws, including reasonable fees and qualifications, (c) all expenses
relating to the preparation, printing, distribution and reproduction of the
Shelf Registration, each prospectus included therein or prepared for
distribution pursuant hereto, each amendment or supplement to the foregoing, the
certificates representing the Common Shares or other equity securities to be
sold and all other documents relating hereto, (d) fees and expenses of any
escrow agent or custodian, (e) fees, disbursements and expenses of counsel and
independent certified public accountants of the Company and (f) all fees and
expenses (including listing and qualification fees) in connection with the
listing or admission to quotation of the Registrable Securities.

                                      -3-
<PAGE>

         3.       Representations and Warranties by the Company.

                  The Company represents and warrants to, and agrees with, each
                  Shareholder that:

                  (a) each registration statement covering Registrable
Securities and each prospectus (including any preliminary prospectus) and any
further amendments of supplements to any such registration statement or in the
case of an underwritten offering of Registrable Securities, at the time of the
closing under the underwriting agreement relating thereto, will conform in all
material respects to the requirements of the Securities Act and will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading;
and at all times subsequent to the effective date of such registration statement
when a prospectus would be required to be delivered under the Securities Act,
other than from such time as the Company has delivered a Suspension Notice to
the Shareholders and the Purchasers pursuant to clause (B) of Section 1(c)(i)
until such time as the Company has delivered a Suspension Withdrawal to the
Shareholders and the Purchasers, each such registration statement and each
prospectus contained therein, as then amended or supplemented, will conform in
all material respects to the requirements of the Securities Act and will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by a Purchaser or the
Shareholders expressly for use therein;

                  (b) any documents incorporated by reference in any prospectus
referred to in Section 3, when they become or became effective or are or were
filed with the Commission, as the case may be, as then amended or supplemented,
will conform or conformed in all material respects to the requirements of the
Securities Act or the United States Securities Exchange Act of 1934, as amended,
as applicable, and none of such documents will contain an untrue statement of a
material fact or will omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any statements
or omissions made in reliance upon and in conformity with information furnished
in writing to the Company by a Purchaser or the Shareholders expressly for use
therein;

                  (c) the compliance by the Company with all of the provisions
of this Agreement and the consummation of the transactions herein contemplated
will not (i) conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
any subsidiary is a party or by which the Company or any subsidiary is bound or
to which any of the property or assets of the Company or any subsidiary is
subject, or (ii) result in any violation of the provisions of the Articles of
Incorporation or By-Laws of the Company as

                                      -4-
<PAGE>

currently in effect or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Company or any
subsidiary or any of their properties; and no consent, approval, authorization,
order, registration or qualification of or with any such court or governmental
agency or body is required for the consummation by the Company of the
transactions contemplated by this Agreement, except the registration under the
Securities Act of the Registrable Securities and such consents, approvals,
authorizations, registrations or qualifications as may be required under State
Securities or blue sky laws in connection with the offering and distribution of
the Registrable Securities.

         4.       Termination.

                  (a) This Agreement may be terminated at any time by written
consent by each of the Shareholders and the Company. This Agreement shall be
terminated automatically upon the sale, transfer, assignment or other disposal
by the Purchasers to unrelated third parties of all of the Registrable
Securities pursuant to the Shelf Registration or otherwise.

                  (b) Upon termination of this Agreement none of the parties
shall have any further liability hereunder.

         5.       Miscellaneous.

                  (a) No Inconsistent Agreements. The Company represents,
warrants, covenants and agrees that it has not granted, and shall not grant,
registration rights with respect to any Shares, Registrable Securities or any
other securities that would be inconsistent with the terms contained in this
Agreement.

                  (b) Specific Performance. The parties hereto acknowledge that
there would be no determinable amount of damages and no adequate remedy at law
if the Company breached any of the provisions and obligations of the Agreement
and that the Shareholders from time to time may be irreparably harmed. The
parties hereto agree that the Shareholders, in addition to any other remedy to
which they may be entitled at law or in equity, shall be entitled to compel
specific performance of the obligations of the Company under this Agreement in
any court having jurisdiction.

                  (c) Notices. All notices, requests, claims or demands, waivers
and other communications hereunder shall be in writing and shall be deemed to
have been duly given when delivered by hand, when delivered personally or by
courier, three days after being dispatched by express courier, or when received
by facsimile transmission if promptly confirmed by foregoing means to the
following address

                  to Taurus International S.A. and Taurus Investments S.A. at:

                                      -5-
<PAGE>

                 9 rue Sainte Zithe, L-2763, Luxembourg
                 Facsimile: +352 404 110 10
                 Attention: Company Secretary

                 with a copy to Anglo American plc at:
                 20 Carlton House Terrace, London SW1Y 5AN, U.K.
                 Facsimile: +44 207 698 8755
                 Attention: Company Secretary

                 to the Company at:
                 Terra Centre, 600 Fourth Street,
                 Sioux City, Iowa 51102, U.S.A.
                 Facsimile: +1 712 279 8719 Attention:
                 General Counsel

                 with a copy to Kirkland & Ellis at:
                 200 East Randolph Drive, Chicago, Illinois 60601, U.S.A.
                 Facsimile: +1 312 861 2200 Attention:
                 Carter W. Emerson, Esq.

                 (d) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

                 (e) Arbitration. The parties irrevocably agree that any
dispute arising out of or relating to this Agreement shall be settled by
arbitration between the parties in accordance with the arbitration rules of the
International Chamber of Commerce ("ICC") as in effect at the time of submission
of the dispute to such arbitration. Such arbitration shall be the exclusive
method for resolution of the dispute, and the determination of the arbitrators
shall be final and binding. The costs of the arbitration, and the reasonable and
related legal and other costs of the party prevailing in the arbitration, shall
be borne by the party who does not prevail. The arbitral award shall specify
which such party or parties is the "prevailing party" for this purpose. The
number of arbitrators shall be three. The Shareholders on the one hand and the
Company on the other hand shall each act as one party for purposes of appointing
arbitrators under the ICC arbitration rules. The place of arbitration shall be
Toronto, Canada and the arbitration shall be conducted in the English language.
The arbitrators shall decide the merits of such dispute in accordance with the
laws of the State of New York.

                 (f) Assignment. Each of the Shareholders may assign its rights
or obligations hereunder in whole or in part to an affiliate thereof following
prior notice of such assignment to the Company.

                                      -6-
<PAGE>

                  (g) Headings. The descriptive headings of the several Sections
and paragraphs of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.

                  (h) Entire Agreement; Amendments.

This Agreement and the other writings referred to herein or delivered pursuant
hereto which form a part hereof contain the entire understanding of the parties
with respect to its subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) only by a written instrument duly executed by
the Company and the Shareholders.

                  (i) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

                                      -7-
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly executed as of the date first written above.

                                          TERRA INDUSTRIES INC.

                                          By:________________________
                                             Name:
                                             Title:

                                          TAURUS INTERNATIONAL S.A.

                                          By:________________________
                                             Name:
                                             Title:

                                          TAURUS INVESTMENTS S.A.

                                          By:________________________
                                             Name:
                                             Title:

                                      -8-
<PAGE>

                               LETTER AGREEMENT

                                                                   July 2, 2001

Terra Industries Inc.
Terra Centre, 600 Fourth Street
Sioux City, Iowa 51102

Dear Sirs:

          Reference is made to the Registration Rights Agreement, dated as of
the date hereof (the "Registration Rights Agreement"), among Terra Industries
Inc. (the "Company"), Taurus International S.A. and Taurus Investments S.A. in
relation to the Common Shares, without par value, of the Company, a copy of
which is attached hereto as Exhibit A. Capitalized terms not otherwise defined
herein have the same meaning as set forth in the Registration Rights Agreement.

          In consideration of the execution by the Company of the Registration
Rights Agreement, the sufficiency of which is hereby acknowledged, each of
Credit Agricole Lazard Financial Products Bank ("CAL FP") and Tokyo-Mitsubishi
International plc ("TMI" ) hereby agrees that it shall not (i) sell, transfer,
assign, pledge, encumber or otherwise dispose of, whether for value, and whether
directly or indirectly, any of the Registrable Securities or (ii) enter into any
agreements, option contracts, futures contracts, options on futures contracts,
spot or forward contracts, caps, floors, collars or other agreements to purchase
or dispose of, whether directly or indirectly, the economic or other risks of
ownership of the Registrable Securities, or enter into any other hedging
arrangements in respect of its holding of the Registrable Securities (each of
(i) and (ii) a "Transfer"), in each case pursuant to the Registration Statement,
without giving written notice (a "Transfer Notice") to the Company not less than
three Business Days prior to such intended Transfer; provided, however, that it
is understood that no Transfer Notice shall be required in circumstances where
such Transfer is being made in connection with an exercise by a Shareholder of a
Call Option and such Shareholder has delivered to the Company a Confirmation
Request pursuant to Section 1(c)(iii) of the Registration Rights Agreement.
Within two Business Days following receipt of such Transfer Notice the Company
shall confirm to CAL FP and TMI in writing whether or not the Company intends to
deliver a Suspension Notice in accordance with Section 1(c)(i) of the
Registration Rights Agreement. During any 10 Business Day-day period following
the receipt of such Transfer Notice, the Company shall be obligated to
<PAGE>

deliver to CAL FP and TMI a Suspension Notice immediately upon discovery by the
Company of the condition specified in clause (B) of Section 1(c)(i) of the
Registration Rights Agreement. Each of CAL FP and TMI further agrees that upon
receipt by CAL FP or TMI, as the case may be, of a Suspension Notice delivered
by the Company pursuant to clause (B) or (C) of Section 1(c)(i) of the
Registration Rights Agreement, CAL FP or TMI, as the case may be, shall not
Transfer any of the Registrable Securities or any other Shares then held by it,
in each case pursuant to the Shelf Registration or otherwise, until receipt by
it from the Company of a Suspension Withdrawal delivered in accordance with
Section 1(c)(iv) of the Registration Rights Agreement.

          Following the delivery of a Suspension Notice in response to receipt
from CAL FP or TMI of a Transfer Notice, the Company shall be obligated to
deliver to CAL FP and TMI a Suspension Withdrawal once the Shelf Registration
has been supplemented or amended, including by the filing of a document
incorporated therein by reference, in a manner that has corrected the condition
that was the subject of such Suspension Notice.

          Each of CAL FP and TMI agrees that if it commences one or more
Transfers of Registrable Securities in connection with an exercise by a
Shareholder of a Call Option it shall notify the Company within one Business Day
following completion of such Transfer or series of Transfers.

          None of the parties shall, without the prior written consent of the
other, directly or indirectly, make any disclosure with respect to this letter
agreement, except as may be required by applicable law or any order, rule or
regulation of any governmental authority.

          All notices and other communications in relation to this letter
agreement shall be given in the manner contemplated by Section 5(c) of the
Registration Rights Agreement and shall be sent to the following addresses:

          to Credit Agricole Lazard Financial Products Bank at:
          11 Moorfields Highwalk, London EC2Y 9DY, U.K.
          Facsimile: +44 207 815 1966
          Attention: Settlements

          to Tokyo-Mitsubishi International plc at:
          6 Broadgate, London EC2M 2AA, U.K.
          Facsimile: +44 207 577 2872 or + 44 207 577 2894
          Attention: Legal Department/Capital Markets

          to the Company at:
          Terra Centre, 600 Fourth Street, Sioux City, Iowa 51102, U.S.A.

                                      -2-
<PAGE>

          Facsimile: +1 712 279 8719
          Attention: General Counsel

          with a copy to Kirkland & Ellis at:
          200 East Randolph Drive, Chicago, Illinois 60601, U.S.A.
          Facsimile: +1 312 861 2200
          Attention: Carter W. Emerson, Esq.

          This letter agreement shall be governed by and construed in accordance
with the laws of the State of New York. Section 5(e) of the Registration Rights
Agreement is hereby incorporated by reference with full effect as if set forth
in full in this letter agreement, mutatis mutandis.

          If you are in agreement with the foregoing, please so indicate by
signing in the space provided below.

Very truly yours,

CREDIT AGRICOLE LAZARD FINANCIAL PRODUCTS BANK

By:________________________________
Name:
Title:

TOKYO-MITSUBISHI INTERNATIONAL PLC

By:________________________________
Name:
Title:

ACCEPTED AND AGREED:

TERRA INDUSTRIES INC.

By:________________________________
Name:
Title:
(Attachment)

                                      -3-

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