Item 3.02. Unregistered Sales of Equity Securities.

On September 30 and October 1, 2008 Terra Industries Inc. (the "Company") exchanged a total of 21,500 shares of its 4.25% Series A Cumulative Convertible Perpetual Preferred Shares (the "Preferred Shares") for a total of 2,158,634 shares of the Company's common stock (the "Common Stock"). The exchanges took place in the form of individually negotiated transactions between the Company and each of four holders of the Preferred Stock (each, a "Holder"). The shares of Common Stock were issued based upon a conversion rate of 100.4016 shares of Common Stock per Preferred Share pursuant to the terms set forth in Exhibit I to the Articles of Restatement of the Company ("Exhibit I"). Each Holder also received a cash payment to adjust for dividends and as an inducement for the conversion of such Holder's Preferred Shares. Following these transactions, 1,600 Preferred Shares will remain outstanding. The remaining Preferred Shares are convertible into shares of the Company's Common Stock pursuant to the terms set forth in Exhibit I at a conversion rate of 100.4016 shares of Common Stock per Preferred Share, subject to adjustment as provided therein.

The shares of Common Stock were issued in reliance upon the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended.