8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 6, 2006

TERRA INDUSTRIES INC.

(Exact name of registrant as specified in its charter)

Maryland
(State or other jurisdiction of incorporation) 1-8520
(Commission File Number) 52-1145429
(IRS Employer Identification No.)

Terra Centre
600 Fourth Street, P.O. Box 6000
Sioux City, Iowa 51102-6000
(712) 277-1340
(Address of Principal Executive Offices, including Zip Code)
(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.01     ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

Amendment to Employment Severance Agreement

     On October 6, 2006, in connection with Mark A. Kalafut’s retirement, Terra Industries Inc. (the “Company”) and Mr. Kalafut amended the employment severance agreement between the Company and Mr. Kalafut to provide that Mr. Kalafut will be obligated to provide up to 50 eight-hour days of consulting services to the Company, such services to be rendered during the one-year period following Mr. Kalafut’s retirement. In consideration for agreeing to provide the consulting services, Mr. Kalafut will receive an amount equal to one-half times Mr. Kalafut’s current base salary, in addition to the payments and other benefits provided for in his employment severance agreement, which amount will be paid subject to the terms and conditions set forth in Mr. Kalafut’s employment severance agreement.

ITEM 9.01     FINANCIAL STATEMENTS AND EXHIBITS.

(c)	Exhibits
	10.1 Amendment to Employment Severance Agreement

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TERRA INDUSTRIES INC.
 

/s/ Joe A. Ewing  

Joe A. Ewing 

Vice President, Investor Relations
and Human Resources 

Date: October 10, 2006

EX-10.1

Exhibit 10.1

October 6, 2006

Mr. Mark A. Kalafut
Sioux City, IA

Amendment to Employment Severance Agreement

Dear Mr. Kalafut:

     This letter memorializes our mutual agreement to amend the Employment Severance Agreement dated October 5, 2006 between you and Terra Industries Inc. (the “Agreement”) by adding the following Section 4A, as follows:

4A. Consulting Services/Additional Compensation

     (a) Executive shall be obligated to provide up to fifty eight-hour days of consulting services to Company at times and upon subjects mutually agreed between the parties. Such duties shall include transitioning duties to the Company’s new General Counsel and providing advice on pending matters. Executive’s obligations to provide consulting services shall terminate one year after the effective date of the Agreement.

     (b) In consideration of Executive agreeing to provide the consulting services stated herein, the Company will provide, in addition to the Severance Pay and other benefits stated in the Agreement, an amount equal to one-half times Executive’s current Base Salary. Such amount shall be payable to Executive according to the provisions of Section 4(c)(ii).

     This amendment is supplemental to the Agreement and nothing herein contained shall be construed as amending or modifying the same except as specifically provided herein.

     Please acknowledge your agreement to the terms of this letter by signing below where indicated.

Sincerely,
 

/s/ Michael L. Bennett  

Michael L. Bennett
President and Chief Executive Officer 

Agreed and Accepted:

/s/ Mark A. Kalafut
Mark A. Kalafut