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) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER

This Information Statement is being mailed on or about March 18, 2010 to holders of record of common stock, without par value (the “Terra Common Shares”), of Terra Industries Inc., a Maryland corporation (“Terra” or the “Company”), as part of the Solicitation/Recommendation Statement on Schedule 14D-9/A (the “Schedule 14D-9/A”) of Terra with respect to the offer by CF Industries Holdings, Inc., a Delaware corporation (“CF”), through its indirect wholly-owned subsidiary, Composite Merger Corporation, a Maryland corporation (“CF Sub”), as disclosed in the Tender Offer Statement on Schedule TO, dated March 5, 2010 (as amended or supplemented from time to time, the “Schedule TO”), to exchange each outstanding Terra Common Share for the “Per Share Consideration”, which is equal to (i) $37.15 in cash, less any applicable withholding taxes and without interest, and (ii) 0.0953 of a share of common stock, par value $0.01 per share, of CF (together with the associated preferred stock purchase rights) (the “CF Common Stock”), upon the terms and subject to the conditions set forth in (a) the Preliminary Prospectus/Offer to Exchange, dated March 5, 2010 (as amended or supplemented from time to time, the “Exchange Offer”), and (b) the related Letter of Transmittal (which, together with the Exchange Offer and any amendments or supplements thereto from time to time, constitute the “Offer”). You are receiving this Information Statement in connection with the possible election of persons designated by CF to at least a majority of the seats on the Terra 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 or supplemented from time to time, the “Merger Agreement”), among Terra, CF and CF Sub.

The Offer 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 or waived, CF Sub will purchase all Terra Common Shares validly tendered pursuant to the Offer and not validly withdrawn. Copies of the Exchange Offer and the related Letter of Transmittal have been mailed with the Schedule 14D-9/A to Terra stockholders and are filed as exhibits to the Schedule 14D-9/A filed by Terra with the Securities and Exchange Commission (the “SEC”) on March 18, 2010.

The Merger Agreement provides that, upon the payment by CF Sub for Terra Common Shares pursuant to and subject to the conditions of the Offer, CF shall be entitled to designate to serve on the Board such number of directors as will give CF representation equal to that number of directors (rounded up to the next whole number) determined by multiplying (i) the total number of directors on the Board (giving effect to the directors elected pursuant to the right of CF described in this sentence) by (ii) the percentage that (A) the number of Terra Common Shares beneficially owned by CF, CF Sub and their affiliates bears to (B) the number of Terra Common Shares then outstanding. Terra has agreed to take all action necessary to cause CF’s designees to be elected to the Board, including obtaining resignations of incumbent directors. As a result, CF will have the ability to designate a majority of the Board following the consummation of the Offer.

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

The information contained in this Information Statement, including information incorporated herein by reference, concerning CF’s designees has been furnished to Terra by CF, and Terra assumes no responsibility for the accuracy or completeness of such information.

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CF DESIGNEES

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

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

Based solely on the information set forth in Schedule I to the Exchange Offer, and except as described in such schedule, none of the executive officers of CF listed on Schedule I to the Exchange Offer has, during the last ten years, (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws or a finding of any violation of such laws.

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

CERTAIN INFORMATION CONCERNING TERRA

The authorized capital stock of the Company consists of 133,500,000 shares, without par value, of which (i) 133,380,000 shares have been classified as Terra Common Shares and (ii) 120,000 shares have been classified as 4.25% Series A Cumulative 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 A Preferred Stock outstanding.

The Terra Common Shares constitute the only class of securities of the Company that is entitled to vote at a meeting of stockholders of the Company. Each Terra Common Share entitles the record holder to one vote on all matters submitted to a vote of the stockholders.

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CURRENT DIRECTORS AND EXECUTIVE OFFICERS OF TERRA

Directors.

The following sets forth information regarding the members of the Board:

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Executive Officers.

The following sets forth information regarding the executive officers of Terra:

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CORPORATE GOVERNANCE

General.

Terra strives to uphold the highest standards of ethical conduct, to follow corporate governance best practices, to report accurately and transparently and to fully comply with the laws, rules and regulations that govern Terra’s business.

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

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

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

Each Nomination Agreement contains an acknowledgement by CF and the 2009 Director party thereto that all of such 2009 Director’s activities and decisions as a director of Terra will be governed by applicable law and subject to his duties to Terra and, as a result, there is not, and cannot be, any agreement between such 2009 Director and CF that governs the decisions that such 2009 Director will make as a director of Terra.

In consideration of the 2009 Directors’ respective undertakings in each Nomination Agreement, and subject to certain exceptions and limitations, CF agreed to indemnify and hold harmless each 2009 Director from any and all liabilities, losses, claims, damages, suits, actions, judgments and reasonable costs and expenses actually incurred resulting from, based upon, arising out of or relating to (i) serving as a nominee; (ii) being a participant in connection with the Proxy Solicitation; (iii) being otherwise involved in the Proxy Solicitation as a nominee; or (iv) serving as a director of Terra, but (x) such indemnification pursuant to this item (iv) will be extended only to the extent that Terra has declined or failed to indemnify a 2009 Director, or to provide such 2009 Director with liability insurance coverage, to the same extent as other directors of Terra and (y) the indemnification pursuant to this item (iv) will (1) be limited to those matters as to which Terra could provide indemnification to such 2009 Director as a director under applicable law and (2) terminate with respect to occurrences taking place after the earlier of (A) the date that Terra offers to enter into an indemnification agreement with such 2009 Director on substantially the same terms as those made available to Terra’s other directors and (B) the expiration of such 2009 Director’s initial term as a director of Terra.

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Terra has structured its Board to provide separate positions for a non-executive Chairman of the Board and a chief executive officer, because it believes, due to the different and demanding nature of these positions and the skill sets they call for, that this structure provides the most efficient and effective leadership model for the Company. The Board plans to maintain these responsibilities as separate positions.

During 2009, in accordance with the Corporate Governance Guidelines, the independent directors met at regularly scheduled executive sessions of the Board without management. The Chairman of the Board, Henry R. Slack, presided at all these executive sessions, which are held at each of our Board meetings.

The Board currently has three committees: Audit, Compensation, and Nominating and Corporate Governance. A description of each committee and its function appears in the “Board of Directors and Committees” section of this Information Statement under the heading “Committees of the Board”. The Audit, Compensation, and Nominating and Corporate Governance Committees are each composed solely of independent directors as required by the NYSE listing standards. Each committee has its own charter setting forth the qualifications for membership and the committee’s purposes, goals and responsibilities. Each of these committees has the power to hire independent legal, financial or other advisors it deems necessary, without consulting or obtaining the advance approval of any Terra officer.

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

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

Current versions of Terra’s Corporate Governance Guidelines, Code of Ethics and Standards of Business Conduct and committee charters can be found in the “Investors” section under “Governance” on Terra’s Web site at www.terraindustries.com, and are available in print, free of charge, upon request.

Risk Oversight.

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

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

The Board established a policy containing certain limits on management’s ability to hedge natural gas purchase prices in relationship to forward sales commitments of nitrogen products, and receives weekly reports from management on actual transactions and commitments in relation to policy limits. Further review and discussion of these policy limits and actual practice occur at regular and special Board meetings, along with review of other significant risk matters pertaining to the conduct of our business, including reserves for doubtful accounts and working capital needs.

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Communication.

Interested parties who wish to report questionable practices by Terra employees may do so by calling Terra’s toll free, anonymous hotline at 1-866-551-8010 (in the U.S. and Canada) or at 011-44-866-551-8010 (in the U.K.). Interested parties who wish to communicate any message or voice a complaint to the Board, any of its committees or the non-management directors should address their communications to: Henry R. Slack, Chairman of the Board; Terra Industries Inc.; 600 Fourth Street; Sioux City, Iowa 51101. Such communications can also be made by calling 712-277-1340 or by e-mail at boardethics@terraindustries.com.

BOARD OF DIRECTORS AND COMMITTEES

Committees of the Board.

Audit Committee.

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

The Audit Committee reviews Terra’s procedures for reporting financial information to the public. The Audit Committee also reviews Terra’s internal audits, reports and related recommendations. Its members are directly responsible for Terra’s independent accounting firm and have the sole authority to appoint or replace the independent accounting firm. The committee reviews the scope of the annual audit, reviews related reports and recommendations and preapproves any non-audit services provided by the independent registered public accounting firm. In addition, the committee maintains, through regularly scheduled meetings, open lines of communication between the Board and Terra’s financial management, internal auditors and independent registered public accounting firm. See “Audit Committee Report” below.

Compensation Committee.

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

Nominating and Corporate Governance Committee.

The Nominating and Corporate Governance Committee met three times in 2009 and is currently composed of Ms. Hesse (Chairman) and Messrs. Fraser, Lilly and Slack. Each of the members of the committee meets the “independence” requirements of the NYSE listing standards. The committee’s functions include helping the Board fulfill its responsibilities to stockholders by shaping the Company’s corporate governance and enhancing the quality and independence of the Board nominees. In addition, the committee identifies and reviews qualifications of potential Terra director candidates, to include those recommended by stockholders, and makes recommendations to the Board for nomination or election. The Nominating and Corporate Governance Committee generally identifies nominees for new directors based upon outside research and recommendations from directors and officers of the Company. Nominees for director are selected on the basis of broad experience, wisdom, integrity, ability to make independent analytical inquiries, understanding of Terra’s business environment, and willingness to devote adequate time and energy to Board duties. The Board

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

The Nominating and Corporate Governance Committee charter also provides that the committee will review candidates who have been recommended by stockholders. Appropriate materials describing the personal and professional background and experience of candidates recommended by stockholders should be communicated to the Board as set out in the “Corporate Governance — Communication” section above. The committee will evaluate all such stockholder recommended candidates on the basis of the same qualities and characteristics as described in the preceding paragraph.

The Board establishes special Board committees from time to time, determining such committees’ specific functions as they are established. The Board and its committees occasionally take action by unanimous written consent in lieu of a meeting.

Meetings of the Board.

The Board held five regular meetings and 26 special meetings in 2009. Each director attended at least 94 percent of the total meetings of the Board and its committees of which he or she was a member.

Compensation Committee Interlocks and Insider Participation.

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

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SECURITIES OWNERSHIP OF DIRECTORS, MANAGEMENT

AND CERTAIN BENEFICIAL OWNERS

Equity Security Ownership.

Except as set forth below, the following table sets forth certain information with respect 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, all executive officers and directors as a group and the beneficial owners known to Terra of 5% or more of the outstanding Terra Common Shares. Unless otherwise specified, the address for each holder is c/o Terra Industries Inc., 600 Fourth Street, P.O. Box 6000, Sioux City, IA 51102.

* 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 power over 5,879,699 Terra Common Shares. BlackRock reports that on December 1, 2009, BlackRock completed its acquisition of Barclays Global Investors NA from Barclays Bank PLC, and that as a result, substantially all of the Barclays Global Investors entities are now included as subsidiaries of BlackRock for purposes of Schedule 13G filings.

(2)          Based on the Schedule 13G filed jointly by Mason Capital 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 dispositive power over 5,770,062 Terra Common Shares and Mr. Martino and Mr. Garschina hold shared voting and dispositive power as to such Terra Common Shares. Mason Management reports that such Terra Common Shares are directly owned by Mason Capital L.P.

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(“Mason Capital LP”), Mason Capital Master Fund, L.P. (“Mason Capital Master Fund”) and certain other funds and accounts (the “Managed Accounts”). Mason Management reports that it is the investment manager of each of Mason Capital LP, Mason Capital Master Fund and the Managed Accounts, and Mason Management may be deemed to have beneficial ownership over the Terra Common Shares reported on the Schedule 13G by virtue of the authority granted to Mason Management by Mason Capital LP, Mason Capital Master Fund and the Managed Accounts to vote and dispose of such Terra Common Shares. It further reports that Mr. Garschina and Mr. Martino are managing principals of Mason Management.

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

(4)          Includes 606,192 fully vested Terra Common Shares directly held, 19,281 Terra Common Shares indirectly held in Mr. Bennett’s 401(k) plan account (as of March 16, 2010), 1,815 Terra Common Shares indirectly 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 the director.

(6)          Includes 86,475 fully vested Terra Common Shares directly held, 2,024 Terra Common Shares indirectly held in Mr. Greenwell’s 401(k) plan account (as of March 16, 2010) and 21,200 restricted Terra Common Shares directly held.

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

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

(9)          Includes 25,029 fully vested Terra Common Shares directly held, 3,421 Terra Common Shares indirectly held in Mr. Stone’s 401(k) plan account (as of March 16, 2010) and 16,400 restricted Terra Common Shares directly held.

Change in Control.

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

Section 16(a) Beneficial Ownership Reporting Compliance.

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

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EXECUTIVE COMPENSATION AND OTHER INFORMATION

Compensation Discussion and Analysis.

Background.

This compensation discussion and analysis discusses the material elements of compensation of our named executive officers for 2009. In 2009, our named executive 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

As a producer and marketer of nitrogen products for agricultural, industrial and environmental customers, Terra’s operating results are affected by the volatile nature of the nitrogen products industry. During 2009, the nitrogen business was affected by the decline in the global economy, contributing to a lessened demand for our industrial nitrogen products. The credit crisis and volatile crop prices continued to impact the agriculture industry, hampering demand for agricultural nitrogen products. This resulted in a decline in net income as compared to 2008 and 2007, albeit returns on invested capital remained relatively robust. The period of strong growth that we experienced for 2007 and much of 2008 was preceded by a period of approximately six years of difficult market conditions characterized by losses and low returns. We expect that market volatility will continue to be a factor in this industry. We have designed our executive compensation program to reflect these fundamental factors. For additional details regarding the cyclical nature of the nitrogen products industry and our performance in light of these conditions, see the Management’s Discussion and Analysis of Financial Conditions and Results of Operations in our 2009 Annual Report on Form 10-K.

Overview.

Objectives.

The Compensation Committee’s primary objectives in designing our executive compensation program are to (i) provide competitive incentive rewards for the achievement of specific annual goals by Terra; (ii) minimize fixed costs during cyclical downturns; and (iii) provide incentives to manage our North American and United Kingdom asset base as well as new investments to earn returns in excess of our cost of capital over the long term.

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Elements of Compensation.

Our compensation program is comprised of three primary components:

The Compensation Committee’s approach to executive compensation is to review all three elements of compensation together, rather than considering each element separately, and to compare our total compensation levels to a survey comparison group of approximately 400 companies, as described in the next paragraph. On a total compensation basis, the combination of base salaries, annual cash incentive awards and long-term incentives should provide our executive officers with above-average compensation for above-average individual and company performance and below-average compensation for below-average performance.

Analysis of Market Practices.

In implementing our compensation program, our Compensation Committee has reviewed studies conducted by its compensation consultant, Towers Watson (formerly known as Towers Perrin prior to its merger with Watson Wyatt), which compare our compensation practices with respect to the levels of compensation and the mix of types of compensation to those of companies that are similar to us in revenue, market capitalization or industry profile. For 2009, the survey comparison group, which included approximately 400 companies in the 2009 Towers Watson Compensation Data Bank (the “2009 Towers Watson Survey”), was comprised of a combination of “general industry” and “chemical industry” companies. The 2009 Towers Watson Survey is a broad-based, published survey, rather than a survey that was prepared specifically for the Company. The “general industry” group included all companies in the 2009 Towers Watson Survey, other than utilities, energy companies and financial services companies. The purpose of Towers Watson’s review of the group of general industry companies was to provide the Compensation Committee with a broad overview of general market practices. Towers Watson employed regression analysis to normalize the data relative to companies similar in size to Terra to ensure comparability.

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

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The general industry group serves as the Compensation Committee’s main focus for information on market practices. We believe that the broader group is appropriate in our case, because Terra has few direct U.S. competitors, and many of the companies in our industry do not compete with us in executive recruitment. In addition, we recruit executive talent from across a broad range of industries.

The data described above was used to provide the Compensation Committee with a broad understanding of market practices, rather than to compare the Company’s pay practices to those of any specific group. When the Compensation Committee targeted 2009 compensation at particular levels, these levels were based on data regarding general compensation practices.

Internal Pay Equity.

Our Compensation Committee’s approach to determining the compensation of Michael Bennett, our Chief Executive Officer, is generally the same approach that is used to determine the compensation levels of our other senior executives, with two principal exceptions.

First, the performance measure for Mr. Bennett’s annual incentive award differs from those of our other executive officers. The individual goals applicable to Mr. Bennett under our Annual Incentive Plan are based on total company performance, whereas the individual goals of the executives who report directly to Mr. Bennett are generally based on their particular areas of responsibility. This distinction is intended to reflect Mr. Bennett’s level of accountability and influence with respect to overall company performance.

Additionally, in the case of long-term incentive awards, which are comprised of a combination of time-based restricted stock and performance share awards, two-thirds of Mr. Bennett’s awards are comprised of performance shares, whereas half of the other senior executives’ awards are comprised of performance shares. The Compensation Committee believes that Mr. Bennett has a greater ability to influence company performance, and, therefore, his awards should have more upside and downside potential than awards granted to our other executive officers.

Role of Our Compensation Consultant.

In 2005, our Compensation Committee selected and retained Towers Watson to serve as its independent compensation consultant. Towers Watson advises and consults with the Chairman of our Compensation Committee in connection with our compensation programs, including long-term incentive compensation, stock ownership guidelines and executive severance and change in control arrangements. While Towers Watson advises our Compensation Committee in making its decisions, including by providing our Compensation Committee with information about current market practices, our Compensation Committee retains ultimate authority to make all final determinations. Our Vice President, Investor Relations and Human Resources, Joe Ewing, often provides Towers Watson with the necessary data and background information that it needs in order to prepare materials requested by the Compensation Committee.

At the request of our Compensation Committee, Towers Watson also assisted us in preparing the executive compensation disclosure in this Information Statement and in our 2008 and 2009 proxy statements by reviewing the Compensation Discussion and Analysis and, based on data we provided, assisting in the preparation of the tables included in this Information Statement and prior proxy statements.

2009 Executive Compensation Program.

Our Compensation Committee developed a 2009 executive compensation program that provided for the following:

Base Salaries.

For 2009, our executive officers received base salaries at approximately the 25th percentile of the survey comparison group of companies. The Compensation Committee determined that base salaries should be targeted around that level in order to control fixed costs in light of the volatile nature of the nitrogen products

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industry. The Summary Compensation Table below details the annual base salaries paid in 2009 to each of our named executive officers.

In February 2009, Mr. Bennett proposed increases to the base salaries of our named executive officers, based on his evaluation of each of our named executive officer’s performance. The Compensation Committee considered the proposed salary increases for our named executive officers and determined that salary increases were appropriate in order to maintain base salaries at approximately the 25th percentile level. The Compensation Committee also took into account the individual performance of each of the named executive officers when determining the amount of salary increase to award.

Annual Incentive Compensation.

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

Actual payout levels under the Annual Incentive Plan, however, are determined based on individual performance against individual goals. For Messrs. Bennett, Greenwell and Huey, 30% of their individual goals are based on achievement of the Company’s projected annual operating budget as approved by the Board, while 40% of Messrs. Stone and Smith’s individual goals are based on achievement of the Company’s projected annual operating budget. The Compensation Committee determined that the lower weighting of achievement of the Company’s projected annual operating budget was appropriate for Messrs. Bennett, Greenwell and Huey because of the need for them to focus on driving to the optimum decision on the unsolicited acquisition offers made by CF during 2009.

Mr. Bennett prepared a proposal for his own individual performance goals that was reviewed, modified and approved by the Compensation Committee in the first quarter of 2009. In addition, during the first quarter of 2009, each other executive officer worked with Mr. Bennett to establish individual performance goals for 2009, which focused on the executive’s corresponding function, department or business unit and which tracked Mr. Bennett’s own individual goals from an overall corporate perspective. At the same time, during the first quarter of 2009, the Compensation Committee approved the 2009 target annual incentive awards for each of our executive officers.

While funding of the incentive pool for 2009 was dependent on 2009 ROCE, performance by each executive officer against the corresponding individual performance goals (including achievement of the Company’s projected 2009 annual operating budget) based on recommendations by Mr. Bennett was used by the Compensation Committee to determine the executive’s actual award. In its exercise of discretion to determine individual awards under our Annual Incentive Plan, our Compensation Committee applied negative discretion to adjust the amount of certain individual awards downward and also exercised its discretion in some cases to increase the amount of certain individual awards above the amount determined by multiplying the individual’s target award by the incentive pool funding percentage. The aggregate amount of all awards paid, however, was $760,314 less than the funding of the incentive pool. In a similar manner, the Board

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

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

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

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

The Annual Incentive Plan covers our officers and certain other key employees. The size of the pool is determined based on the aggregation of the individual target awards and is funded based on our achievement of ROCE. The funding of the pool for the 2009 Annual Incentive Plan was determined based on the following performance measures:

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

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

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

Under this formula, if Terra had achieved a 2009 ROCE of 12.5%, the incentive pool would have been funded at 100% of the target amount, and with a 2009 ROCE of 19.5%, 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 the funding of the incentive pool with a total amount of $4,497,741, equal to 135.54% of target level.

The Compensation Committee selected achievement of 12.5% ROCE as the target for 100% funding of the incentive pool for 2009, because that level of ROCE, according to outside studies performed by investment bankers at the request of our Chief Financial Officer, was approximately equal to our cost of capital for 2009.

The Compensation Committee’s approach in determining ROCE for purposes of the Annual Incentive Plan is that while annual incentive compensation levels for our executive officers should reflect operating costs incurred during the relevant year, decisions made by the Board about Terra’s capital structure and expenses that are unusual in nature should neither increase nor decrease executive compensation levels. This approach was reflected in the calculation of 2009 ROCE, which excluded expenses related to the CF Industries Holdings, Inc. unsolicited acquisition offers. Also in 2009, after an examination of different scenarios for how the inclusion or exclusion of cash in the denominator of ROCE would impact management’s decisions and

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affect the level of net income required to generate the target levels of ROCE under the Annual Incentive Plan and the long-term incentive program, the Compensation Committee determined that the formula to determine ROCE would include cash.

Long-Term Incentives.

In accordance with our philosophy of tying long-term incentive awards to company performance, the Compensation Committee has designed our long-term incentive program to accomplish the following objectives: (1) reward achievement of return on capital employed (ROCE) targets on a cumulative basis over a three-year period; (2) provide more substantial incentives for achieving returns above the cost of capital; (3) assist with attraction and retention of executives; and (4) align management incentives with shareholder interests through the use of equity awards. To these ends, our long-term incentive compensation is comprised of a combination of performance share awards, which only vest upon achievement of performance goals relating to our return on capital employed (ROCE), and restricted shares, which vest based on continued employment.

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

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

In accordance with applicable disclosure rules, the Summary Compensation Table on page A-29 reflects the aggregate grant-date fair value of the performance-based shares and restricted shares granted in 2009, calculated in accordance with FASB ASC Topic 718, Stock Compensation. When determining the long-term incentive award grants, the Compensation Committee 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 based on achievement of the performance targets described below. The fair market value 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 on page A-36.

2009 Performance Share Awards.

For purposes of the 2009 performance share grants, the number of shares to be issued 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 of good operating and investment decisions by management, is an important measurement for judging success of Terra’s strategic initiatives, and is a critical metric for investors.

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The following table illustrates target and actual achievement of ROCE as of December 31, 2009, with respect to the 2007-2009, 2008-2010 and 2009-2011 performance periods.

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

·                  If Terra’s annualized average ROCE for the period is less than 7.5%, no shares will be delivered.

·                  If Terra’s annualized average ROCE for the period is between 7.5% and 12.5%, 1% of the target number of shares will be delivered for each 0.05% by which annualized average 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’s annualized average ROCE for the period exceeds 12.5%, an additional 1% of the target number of shares will be delivered for each 0.025% by which annualized average ROCE exceeds 12.5%, up to a maximum of 200% of the target number of shares.

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

Achievement of ROCE is the performance goal that determines both the funding of the 2009 Annual Incentive Plan bonus pool and payout of the 2009 performance share awards. In selecting performance metrics for both arrangements, the Compensation Committee considered the objectives of each type of arrangement and set threshold, target and maximum levels for both arrangements accordingly. While achievement of 12.5% ROCE was determined to be the appropriate target level under both arrangements, the Compensation Committee determined that unlike the Annual Incentive Plan, which provides no awards to any participants if the performance for the year is below the level that would fund the target incentive pool at 50%, participants who hold performance shares may earn as few as 1% of the target number of shares for performance that is at the threshold level over the three-year term of the performance period. This approach is intended to ensure that poor performance during an early part of the performance period will not discourage participants by causing the performance measurements to be impossible to achieve but allows participants to earn some portion of the performance shares if performance in the later part of the performance period has improved. In addition, while achievement of ROCE under the Annual Incentive Plan provides for a “straight-line” increase in the percentage at which the bonus pool is funded, the performance share awards provide for a “two tiered” approach, pursuant to which achievement of ROCE above the target level results in a greater increase in the total percentage of shares awarded. The Compensation Committee determined that this distinction was appropriate in order to provide additional incentives to encourage our officers to excel in creating long-term value for our shareholders.

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Performance share grants vest at the end of a three-year performance period, based on achievement of performance goals and assuming that the participant remains employed by Terra. Upon vesting of a performance share grant, the holder is entitled to receive a number of shares ranging from 0% to 200% of the target number of shares subject to the award, based on achievement of ROCE. Individual performance does not play a part in determining the level of vesting. Except in the case of death, total disability or termination of employment without cause or for good reason (both as defined in the award agreement) following a change in control of Terra (as described below) or other special circumstances identified by the Compensation Committee, the performance share grants will be forfeited if employment terminates for any reason prior to vesting. In the event 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 on actual performance prior to death. In the event of termination of employment due to total disability prior to a change in control, performance shares will continue to vest following termination based on achievement of performance goals.

Unlike prior grants of performance shares, which vest automatically upon a change in control at the greater of the target number of shares subject to the award and a number based on actual company performance during the actual quarters completed prior to the change in control, the 2009 performance share grants do not vest automatically upon a change in control of Terra. Instead, for the 2009 performance share grants and grants in future years, following a change in control of Terra, the number of shares that each holder will be entitled to receive will become fixed as of the date of the change in control at the greater of the target number of shares subject to the award and a number based on actual company performance during the actual quarters completed prior to the change in control. Each holder of performance shares will receive such performance shares on the earlier of the date that such award would otherwise vest or the date that such holder is terminated without cause or for good reason (both as defined in the performance share award agreement) or due to death or total disability on or following a change in control.

Under the merger agreement with CF, all performance shares will be canceled at the time CF pays for shares tendered in the Offer in consideration for a cash payment equal to the greater of the target number of shares subject to the award and a number based on actual Company performance during the actual quarters 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 portion of the per share merger consideration and (y) the product of (1) the average closing sales price, rounded to four decimal points, of CF common stock on the NYSE (reported in the Wall Street Journal, New York City edition) for the period of the ten consecutive trading days ending on the second full trading day prior to the time CF pays for shares tendered in the Offer and (2) the portion of the offer price paid in CF common stock. The awards will automatically vest at the time CF pays for shares tendered in the Offer pursuant to their terms because CF has chosen not to assume outstanding performance shares.

2009 Restricted Share Awards.

The restricted shares are subject to cliff vesting with 100% of the award vesting on the third anniversary of the grant date, assuming that the participant remains employed by Terra at such time. Except in the case of death, total disability or termination of employment without cause or for good reason (both as defined in the award agreement) following a change in control of Terra or in other special circumstances identified by the Compensation Committee, the restricted shares will be forfeited if employment terminates for any reason prior to vesting. In the event of termination of employment due to death or total disability, the vesting of restricted shares will accelerate in full. Grants of restricted shares made prior to 2008 vest in full automatically upon a change in control of Terra. In 2008, the Compensation Committee considered the issue of vesting of restricted shares upon a change in control and determined that automatic vesting upon a change in control might not be in the shareholders’ best interests, and that full vesting of the restricted shares upon certain terminations following a change in control of Terra would provide more retention value while still providing appropriate protection to the holder of the restricted shares. As a result, the Compensation Committee decided that, following a change in control of Terra, the vesting of restricted shares granted in 2008 and later years shall only accelerate if the holder is terminated without cause or for good reason.

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

Changes to Incentive Compensation Programs for 2010.

For 2010, in light of the uncertainty created for executives due to the unsolicited acquisition offers by CF, the Compensation Committee decided to approve changes to the annual incentive awards to protect recipients of such awards in the event of a change in control of Terra. In the event of a change in control of Terra during 2010, the performance metric used to calculate the cash awards (ROCE) will become fixed at the greater of target performance and actual performance during the quarters completed through the date of the change in control. Fixing the performance metric in the event of a change in control is consistent with the calculation of the number of performance shares in the event 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 such manner. If a participant’s employment is terminated following a change in control of Terra without cause or for good reason (each as defined in the plan), the participant will be entitled to a prorated bonus for 2010 through the participant’s termination date.

The Compensation Committee selected performance targets for the 2010 Annual Incentive Plan and the 2010 performance share grants that are slightly lower than the levels for the 2009 grants. The Compensation Committee selected a target of 11.5% ROCE for both the 2010 Annual Incentive Plan and the 2010 performance share grants because annualized average ROCE of 11.5% over a cumulative three-year period is approximately equal to our cost of capital, as indicated in outside studies performed by investment bankers.

The funding of the pool for the 2010 Annual Incentive Plan will be determined based on the following performance measures:

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

·                  If Terra’s 2010 ROCE 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 target annual incentive pool will be funded.

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

The performance share grant payouts for the 2010-2012 grant cycle (with a performance period ending December 31, 2012) will be determined based on the following measures:

·                  If Terra’s annualized average ROCE for the period is less than 6.5%, no shares will be delivered.

·                  If Terra’s annualized average ROCE for the period is between 6.5% and 11.5%, 1% of the target number of shares will be delivered for each 0.05% by which annualized average 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’s annualized average ROCE for the period exceeds 11.5%, an additional 1% of the target number of shares will be delivered for each 0.025% by which annualized average ROCE exceeds 11.5%, up to a maximum of 200% of the target number of shares for an annualized average ROCE of 14% or higher.

The Compensation Committee approved an anti-dilution adjustment to the number of outstanding unvested performance shares and to the number of outstanding phantom shares and phantom performance shares (which are held by certain of our employees who are not officers) held as of December 11, 2009, in order to reflect 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 not adjusted. In addition, the Compensation Committee approved an adjustment to the number

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

Severance.

Prior to 2006, we were a party to executive retention agreements with our senior executives that provided for payments and benefits in the event of a termination of employment following a change in control, but no executives were covered by employment agreements or other severance arrangements that established the level of payments and benefits to be provided in connection with a termination that was not related to a change in control. During this period, executive severance was generally determined through individual negotiations, which often led to a variety of inconsistent results. In 2006, the Compensation Committee decided that a standard form of severance agreement covering non-change in control severance was needed to promote additional stability, ensure equitable treatment and avoid the need for individual negotiations. At the same time, the Compensation Committee decided to review its change in control severance practices. In connection with the Compensation Committee’s review of our severance practices, Towers Watson provided the Compensation Committee with information about severance benefits that are generally provided in the event of an involuntary termination of a senior executive’s employment, both in the change in control and non-change in control contexts.

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

All employment severance agreements with our executive officers are identical except that Mr. Bennett’s agreement provides for an initial term of five years rather than three, and the approval of three-quarters of our Board is required in order to terminate Mr. Bennett for “cause”. Our Compensation Committee considered these distinctions appropriate in order to reflect Mr. Bennett’s unique role within our company. For a thorough description of the material terms of the agreements with each of our named executive officers, see the narrative following the Summary Compensation Table beginning on page A-29. For a description and quantification of the payments and benefits that may be provided to the named executive officers under these agreements, see “Post-Employment Payments” beginning on page A-40.

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

In July 2008, the Compensation Committee reviewed the key terms of the employment severance agreements with our executives and the potential impact of the agreements upon a change in control of Terra, including information provided by Towers Watson regarding the potential amounts of excise tax gross-ups that would be payable under different stock price scenarios. The Compensation Committee decided to extend the terms of the agreements (other than Mr. Bennett’s agreement, which expires in 2011) by one year from the originally scheduled expiration date of October 2009, without changes to the key terms of the agreements other than the addition of the willful breach of the Company’s code of conduct and failure to comply with government investigations to the definition of “cause”.

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

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

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Defined Benefit Pension Plans.

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

On January 1, 1992, we adopted a supplemental executive retirement plan, which we refer to as the SERP. The Compensation Committee and the Board established the SERP so that certain management and highly compensated employees would be eligible for the benefits that would have been provided to them under our tax-qualified defined benefit pension plan but for the limits imposed by the Internal Revenue Code and the Employee Retirement Income Security Act. The SERP is an unfunded plan. Participants in the SERP have the status of unsecured creditors of Terra. As of December 31, 2009, the only named executive officer who had accrued benefits under the SERP was Mr. Bennett.

In February 2010, the Compensation Committee and the Board approved the adoption of a rabbi trust, which is intended to provide a source of funds to assist Terra in meeting its liabilities under the SERP. No later than five days following a change in control of Terra, Terra will be obligated to make an irrevocable contribution to the trust in an amount such that the trust will, immediately following such contribution, hold assets sufficient to pay each SERP participant or beneficiary his or her accrued benefits under the SERP as of the consummation of a change in control. The trustee has broad investment powers with respect to the trust assets, but it may not invest in securities or obligations issued by Terra or any affiliate of Terra.

For a description of the benefits accrued by Messrs. Bennett and Stone under our defined benefit pension plans as of December 31, 2009, see the Pension Benefits table on page A-38.

Defined Contribution Plans.

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

Employee Welfare and Fringe Benefit Plans.

Our named executive officers are eligible to participate in our welfare and fringe benefit plans on the same basis as all of our other full-time employees. These benefits 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 care spending accounts. In addition, due to limitations on the level of base salary covered by our primary long-term disability policy and in order to provide executive officers with long-term disability coverage equal to 60% of base salary (which is the rate of coverage provided to all U.S. employees), we maintain supplemental long-term disability policies.

Perquisites.

The named executive officers are provided company-paid memberships in a local country club of their choice. We cover any costs associated with this perquisite, including taxes. This perquisite is provided in order to allow the executives to entertain business associates of Terra, such as partners in joint ventures, customers and suppliers. The named executive officers are also permitted to use the club amenities for personal and family activities.

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Other Matters.

Stock Ownership/Retention Guidelines.

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

Fifty percent of unvested restricted shares will count toward the ownership guidelines prior to vesting. After satisfying the ownership guidelines described above, the executive officers are asked to hold an additional 50% of any shares awarded to them under our long-term incentive programs (including restricted shares and performance share grants) for a minimum of 12 months following vesting.

As of December 31, 2009, Mr. Bennett’s share ownership exceeded 25 times his annual base salary. The other named executive officers, with the exception of Messrs. Stone and Smith, also exceeded their respective guideline multiples as of December 31, 2009. Mr. Stone’s share ownership of approximately 2.64 times his annual base salary as of December 31, 2009 was below the guidelines due to a recent promotion from Vice President to Senior Vice President and Mr. Smith’s share ownership of approximately 0.63 times his annual base salary as of December 31, 2009 was below the guidelines due to the fact that he was only recently hired.

Indemnity Agreements.

Terra’s charter and bylaws provide indemnification for its officers and directors to the maximum extent permitted by law. In general, we will pay the costs of legal defense, settlements or judgments on behalf of the officer or director relating to actions taken in the course of employment or service with Terra, as long as conduct meets applicable standards. We have entered into Indemnity Agreements with the executive officers and directors, including the named executive officers. The agreements provide the maximum indemnity available under Maryland General Corporation Law, which is substantially the same as that provided under our charter and bylaws, and provide for certain procedural requirements in order to obtain indemnification, the timing of required determinations, indemnification payments, advancement of expenses, and the rights of officers and directors in the event that we fail to provide indemnification or to advance expenses.

Role of Executive Officers in Determining Compensation.

Executive officers who are directly involved in administering the executive compensation program include Mr. Bennett and Mr. Ewing, who is our Vice President, Investor Relations and Human Resources. Mr. Bennett is excluded from discussions and decisions regarding his own compensation. Mr. Ewing manages the administrative aspects of the Compensation Committee’s relationship with Towers Watson, as well as the calculation and presentation to the Compensation Committee of proposed executive annual salaries, annual incentive awards, and long-term incentive awards. Mr. Ewing corresponds frequently with Mr. Fraser, the Chairman of our Compensation Committee. Mr. Ewing communicates frequently with Mr. Bennett in all matters relating to executive compensation, other than those matters that relate to Mr. Bennett’s own compensation. Mr. Ewing also occasionally relies on Mr. Greenwell, our Senior Vice President and Chief Financial Officer, to calculate and review Terra’s return on capital employed (ROCE), which is the relevant performance measure under any long-term incentive program and to determine the level of funding of the incentive pool under our Annual Incentive Plan. Mr. Huey, Vice President, General Counsel and Corporate Secretary, is engaged with respect to legal and SEC issues relating to executive compensation, including reporting and disclosure issues.

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Pursuant to its charter, the Compensation Committee is required to meet at least twice annually but will meet more frequently to the extent necessary. In 2009, the Compensation Committee met two times. Generally, executive officers who attend the meetings are Mr. Bennett, Mr. Ewing, and Mr. Huey, who acts as secretary of the meeting. Mr. Bennett and Mr. Ewing present the recommendations for any changes to compensation of our executive officers, except that no recommendations are made with respect to Mr. Bennett. Mr. Bennett makes recommendations to the Compensation Committee regarding the level of annual and long-term incentive awards for executive officers other than himself and reviews the performance of such executive officers with regard to payout levels of incentive awards, but the Compensation Committee makes the final determinations regarding grants and payout levels of awards. Mr. Bennett’s day-to-day knowledge of the performance of the executives of Terra enables him to better evaluate the performance of the executives. The Compensation Committee considers the recommendations of Mr. Bennett as well as market data and the overall compensation objectives of Terra in making its determinations. Final decisions regarding compensation for Mr. Bennett are made by the Compensation Committee in executive session, excluding all members of management. Decisions regarding Mr. Bennett are then communicated by Messrs. Slack and Fraser to Mr. Bennett and subsequently to Mr. Ewing. Mr. Ewing is responsible for implementing all approved changes. Decisions regarding the other executive officers are communicated by Mr. Bennett to Mr. Ewing.

Deductibility of Compensation.

As part of its role, the Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code. Section 162(m) provides that the Company may not deduct compensation of more than $1,000,000 paid in any year to the CEO or any of the three other most highly compensated officers (excluding the Chief Financial 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 performance goals and certain other conditions must be met. We have considered the potential impact of Section 162(m) on Terra’s compensation plans and have determined that it is consistent with Terra’s best interests for the compensation of our executives to qualify for the deduction available under Section 162(m) where possible. 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).

In 2008, the Internal Revenue Service released guidance affecting the deductibility pursuant to Section 162(m) of certain bonuses or other programs if the bonus or program is referred to in the severance formula of an employee’s employment agreement. We considered the impact of this guidance on our plans and programs and on the employment severance agreements described above, and decided to revise the language contained in the employment severance agreements to comply with this guidance.

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Compensation Committee Report.

We have reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in Terra’s Annual Report on Form 10-K and this Information Statement filed pursuant to Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1 thereunder.

Executive Compensation.

Summary Compensation Table

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

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

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

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

(3)          Reflects amount earned for 2009 performance under the annual 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 were earned in 2008 and paid in 2009 and 2007 amounts were earned in 2007 and paid in 2008.

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

(5)          Assumptions used to calculate the actuarial present value of the accrued benefits of the named executive officers are further described in the narrative to the Pension Benefits in Fiscal Year 2009 Table on page A-38. The Change in Pension Value and Non-qualified Deferred Compensation Earnings column also reports the amount of above market earnings on compensation that is deferred outside of  tax-qualified plans. No amount is reported because above market rates are not permitted under the Supplemental Deferred Compensation Plan and no named executive officer has an outstanding balance under such plan.

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

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

All Other Compensation Table

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

(1)          Amounts include only country club dues for each executive.

(2)          Includes company contributions to each executive’s 401(k) account.

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

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

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

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

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

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Grants of Plan-Based Awards in 2009

The following table provides information on awards under the Annual Incentive Plan and restricted share and performance share awards granted in 2009 to each of our named executive officers.