SCHEDULE 14A INFORMATION
                Proxy Statement Pursuant to Section 14(a) of the
                         Securities Exchange Act of 1934

Filed by Registrant:                        [X]
Filed by a Party other than the Registrant  [ ]

Check the appropriate box:

[ ]  Preliminary  Proxy  Statement  [  ]  Confidential,for Use of the Commission
                                          Only as permitted by Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to SS. 240.14a-11(c) or SS. 240.14a-12

--------------------------------------------------------------------------------
                               NL INDUSTRIES, INC.
                (Name of Registrant as Specified in its Charter)
--------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
     1)   Title of each class of securities to which transaction applies:
     2)   Aggregate number of securities to which transaction applies:
     3)   Per unit price or other underlying value of transaction computed
          pursuant  to  Exchange  Act Rule 0-11 (Set  forth  amount on which the
          filing fee is calculated and state how it was determined):
     4)   Proposed maximum aggregate value of transaction:
     5)   Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange  Act Rule
0-11(a)(2)  and  identify  the  filing  for  which the  offsetting  fee was paid
previously.  Identify the previous filing by registration  statement  number, or
the Form or Schedule and the date of its filing.

     1)   Amount Previously Paid:
     2)   Form, Schedule or Registration Statement No.:
     3)   Filing Party:
     4)   Date Filed:



<PAGE>

                               NL Industries, Inc.
                       16825 Northchase Drive, Suite 1200
                              Houston, Texas 77060



                                 March 30, 2001


Dear Shareholder:

     You are cordially invited to attend the 2001 Annual Meeting of Shareholders
of NL Industries,  Inc.,  which will be held on Wednesday,  May 9, 2001 at 10:00
a.m.  (C.D.T.) at the offices of Valhi,  Inc.  located at Three Lincoln  Centre,
5430 LBJ Freeway,  Suite 1700,  Dallas,  Texas. In addition to the matters to be
acted upon at the meeting,  which are described in detail in the attached Notice
of Annual Meeting of Shareholders and Proxy Statement, we will update you on the
Company. I hope that you will be able to attend.

     Whether or not you plan to be at the meeting,  please complete,  date, sign
and return the proxy card or voting  instruction  form  enclosed with this Proxy
Statement  promptly  or  vote  via  the  Internet  or  telephone  following  the
instructions  on the  proxy  card so that your  shares  are  represented  at the
Meeting and voted in accordance  with your wishes.  Your vote,  whether given by
proxy or in person at the Meeting,  will be held in  confidence by the Inspector
of Election for the meeting in accordance with NL's By-Laws.


                                   Sincerely,





                                   J. Landis Martin
                                   President and Chief Executive Officer








<PAGE>



                               NL Industries, Inc.
                       16825 Northchase Drive, Suite 1200
                              Houston, Texas 77060

                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

                             To Be Held May 9, 2001

To the Shareholders of NL Industries, Inc.:

     NOTICE IS HEREBY GIVEN that the 2001 Annual  Meeting of  Shareholders  (the
"Annual  Meeting")  of NL  Industries,  Inc.,  a  New  Jersey  corporation  (the
"Company"  or "NL"),  will be held on  Wednesday,  May 9,  2001,  at 10:00  a.m.
(C.D.T.) at the offices of Valhi, Inc. located at Three Lincoln Centre, 5430 LBJ
Freeway, Suite 1700, Dallas, Texas, for the following purposes:

     1. To elect  seven  directors  to serve  until the 2002  Annual  Meeting of
        Shareholders and until their successors are duly elected and qualified;

     2. To consider  and vote on a proposal to approve  the  Company's  Variable
        Compensation Plan; and

     3. To transact  such other  business as may properly come before the Annual
        Meeting or any adjournment or postponement thereof.

     The Board of  Directors  of the  Company set the close of business on March
23,  2001 as the  record  date (the  "Record  Date")  for the  determination  of
shareholders  entitled  to notice of, and to vote at, the Annual  Meeting.  Only
holders of record of NL's common stock,  $.125 par value per share, at the close
of business  on the Record  Date are  entitled to notice of, and to vote at, the
Annual Meeting.  The Company's stock transfer books will not be closed following
the Record Date.

     You are cordially invited to attend the Annual Meeting.  Whether or not you
expect to attend the Annual Meeting in person,  please complete,  sign, date and
mail the enclosed proxy card or voting instruction form promptly or vote via the
Internet or telephone  following the instructions on the proxy card so that your
shares may be represented and voted at the Annual  Meeting.  You may revoke your
proxy by following the procedures set forth in the accompanying Proxy Statement.
If you  choose,  you may vote in person at the Annual  Meeting  even  though you
previously submitted your proxy.

                                  By order of the Board of Directors,



                                  David B. Garten
                                  Vice President, General Counsel and Secretary


Houston, Texas
March 30, 2001


<PAGE>



                               NL Industries, Inc.
                       16825 Northchase Drive, Suite 1200
                              Houston, Texas 77060

                          -----------------------------
                                 PROXY STATEMENT
                          -----------------------------


                               GENERAL INFORMATION

     This Proxy Statement and the accompanying  proxy card or voting instruction
form are being furnished in connection  with the  solicitation of proxies by and
on behalf of the Board of Directors (the "Board") of NL Industries,  Inc., a New
Jersey corporation (the "Company" or "NL"), for use at the Company's 2001 Annual
Meeting of Shareholders to be held at 10:00 a.m.  (C.D.T.) on Wednesday,  May 9,
2001, at the offices of Valhi,  Inc.  located at Three Lincoln Centre,  5430 LBJ
Freeway,  Suite  1700,  Dallas,  Texas  75240-2697,  and at any  adjournment  or
postponement  thereof  (the  "Annual  Meeting").  This Proxy  Statement  and the
accompanying  proxy card or voting  instruction  form were  first  mailed to the
holders  of the  Company's  common  stock,  $.125 par  value per share  ("Common
Stock"), on or about April 9, 2001.


                            PURPOSE OF ANNUAL MEETING

     At the Annual  Meeting,  shareholders of the Company will consider and vote
upon (i) the  election  of seven  directors  to serve until the  Company's  2002
Annual Meeting of Shareholders  and until their  successors are duly elected and
qualified;  (ii) a proposal to approve the Company's Variable  Compensation Plan
(the  "Variable  Compensation  Plan");  and (iii)  such  other  business  as may
properly come before the Annual  Meeting.  The Company is not aware of any other
business expected to come before the Annual Meeting.


                  QUORUM AND VOTING RIGHTS; PROXY SOLICITATION

     The  presence  in person or by proxy of the  holders of a  majority  of the
votes represented by the outstanding  shares of Common Stock entitled to vote at
the Annual  Meeting  is  necessary  to  constitute  a quorum for the  conduct of
business at the Annual Meeting. Director nominees will be elected by a plurality
of the votes  cast.  Except as may be  provided  in the  Company's  Amended  and
Restated Certificate of Incorporation (the "Certificate"), any other matter that
may be submitted to a shareholder  vote,  including the approval of the Variable
Compensation  Plan, will require the affirmative vote of a majority of the votes
cast at the  Annual  Meeting.  Shares of Common  Stock that are voted to abstain
from business coming before the Annual Meeting and broker/nominee non-votes will
be  counted  as being in  attendance  at the  Annual  Meeting  for  purposes  of
determining whether a quorum is present, but will not be counted as votes for or
against any matter coming before the Annual Meeting. The accompanying proxy card
provides space for a shareholder to withhold  voting for any or all nominees for
the Board.  Because director nominees must receive a plurality of the votes cast
at the Annual Meeting, a vote withheld from a particular nominee will not affect
the election of that nominee.

     The record date for  determination  of shareholders  entitled to notice of,
and to vote at, the Annual  Meeting is the close of  business  on March 23, 2001
(the "Record  Date").  As of the Record Date,  there were issued and outstanding
50,087,284 shares of Common Stock, each of which entitles the holder to one vote
on all matters that come before the Annual Meeting.  Valhi,  Inc.  ("Valhi"),  a
diversified  company  engaged in the  titanium  dioxide  pigments  (through  its
ownership of NL stock),  component products (ergonomic computer support systems,
precision ball bearing slides and security products),  titanium metals products,

<PAGE>

and waste management industries,  and Tremont Corporation ("Tremont"), a holding
company engaged in the titanium metals and titanium dioxide pigments  industries
(through  its  ownership  of NL  stock),  held  approximately  60.2% and  20.4%,
respectively,  of the  outstanding  shares of the Common  Stock as of the Record
Date and have indicated their intention to have their shares  represented at the
Annual  Meeting.  Both Valhi and Tremont are  affiliates of Contran  Corporation
("Contran"). See "Security Ownership" and "Election of Directors." If the shares
of Common Stock held by Valhi and Tremont together or the shares of Common Stock
held by Valhi  alone are  represented  at the Annual  Meeting,  a quorum will be
present.

     All shares of Common Stock  represented by properly  executed proxies will,
unless such proxies have been  previously  revoked,  be voted in accordance with
the  instructions  indicated  in  such  proxies.  If no  such  instructions  are
indicated, such shares will be voted (i) "FOR" the election of each of the seven
nominees for director,  (ii) "FOR" approval of the Variable  Compensation  Plan,
and (iii) to the extent allowed by federal securities laws, in the discretion of
the proxy  holders on any other matter that may properly  come before the Annual
Meeting. Any holder of Common Stock has the unconditional right to revoke his or
her proxy at any time prior to the voting  thereof at the Annual  Meeting by (i)
filing with the Company's Secretary written revocation of his or her proxy, (ii)
giving a duly executed  proxy bearing a later date, or (iii) voting in person at
the Annual  Meeting.  Attendance by a shareholder at the Annual Meeting will not
in and of itself revoke his or her proxy.

     This proxy solicitation is made by and on behalf of the Board. Solicitation
of proxies for use at the Annual  Meeting may be made by mail,  telephone  or in
person, by directors,  officers and employees of the Company.  Such persons will
receive no additional compensation for any solicitation activities.  The Company
will  request  banking  institutions,  brokerage  firms,  custodians,  trustees,
nominees and  fiduciaries  to forward  solicitation  materials to the beneficial
owners of Common Stock held of record by such  entities,  and the Company  will,
upon  the  request  of such  record  holders,  reimburse  reasonable  forwarding
expenses.  The costs of preparing,  printing,  assembling  and mailing the Proxy
Statement,  proxy card or voting  instruction form and all materials used in the
solicitation of proxies from  shareholders of the Company,  and all clerical and
other expenses of such solicitation, will be borne by the Company.

     First Chicago Trust Company, a division of EquiServe ("First Chicago"), the
transfer  agent and registrar for the Common  Stock,  has been  appointed by the
Board to serve as  inspector  of  election  (the  "Inspector  of  Election")  to
determine  the  number of shares of Common  Stock  represented  and voted at the
Annual Meeting. All proxies and ballots delivered to First Chicago shall be kept
confidential  by First  Chicago in  accordance  with the terms of the  Company's
By-Laws.

     IT IS THE INTENTION OF THE AGENTS  DESIGNATED IN THE ENCLOSED PROXY CARD TO
VOTE "FOR" THE ELECTION OF ALL SEVEN NOMINEES FOR DIRECTOR  IDENTIFIED BELOW AND
"FOR" APPROVAL OF THE VARIABLE  COMPENSATION  PLAN, UNLESS AUTHORITY IS WITHHELD
BY THE SHAREHOLDER  GRANTING THE PROXY.  IF ANY NOMINEE  BECOMES  UNAVAILABLE TO
SERVE FOR ANY  REASON,  THE  PROXY  WILL BE VOTED FOR A  SUBSTITUTE  NOMINEE  OR
NOMINEES TO BE SELECTED BY THE BOARD, UNLESS THE SHAREHOLDER WITHHOLDS AUTHORITY
TO  VOTE  FOR  THE  ELECTION  OF  DIRECTORS.   VALHI  AND  TREMONT,  WHICH  HOLD
APPROXIMATELY  60.2% AND 20.4%,  RESPECTIVELY,  OF THE OUTSTANDING COMMON STOCK,
HAVE  INFORMED THE COMPANY THAT THEY INTEND TO VOTE THEIR SHARES IN FAVOR OF THE
NOMINEES SET FORTH IN THIS PROXY  STATEMENT  AND "FOR"  APPROVAL OF THE VARIABLE
COMPENSATION PLAN. VALHI'S AND TREMONT'S VOTES TOGETHER, OR VALHI'S VOTES ALONE,
ARE  SUFFICIENT  TO  ELECT  ALL  SEVEN  NOMINEES  AND TO  APPROVE  THE  VARIABLE
COMPENSATION PLAN.


<PAGE>

                              ELECTION OF DIRECTORS

     The Certificate  provides for a Board consisting of not less than seven and
not more than seventeen persons,  as such number is determined from time to time
by a  majority  of the  entire  Board.  The Board has  determined  that it shall
consist of seven members.

     At the Annual Meeting, holders of Common Stock will be asked to elect seven
nominees  to the  Board,  each to serve for a one-year  term  ending at the 2002
Annual Meeting of  Shareholders  or until his successor  shall have been elected
and  qualified or until his earlier  resignation,  removal or death.  All of the
nominees  are  currently  directors  of the  Company and have agreed to serve if
elected.

     THE BOARD OF  DIRECTORS  RECOMMENDS  A VOTE "FOR" THE  NOMINEES  IDENTIFIED
BELOW.

Nominees for Director

     The information provided below has been provided by the respective nominees
for  election as  directors  for a term  expiring at the 2002 Annual  Meeting of
Shareholders  of the  Company.  Each of the  following  nominees for election is
currently a director of the Company whose term expires at the Annual Meeting.

     J. LANDIS MARTIN, age 55, has been President and Chief Executive Officer of
NL since 1987, and a director of NL since 1986. He has served as Chairman of the
Board, President and Chief Executive Officer of Tremont since prior to 1996. Mr.
Martin also has served as Chairman of the Board and Chief  Executive  Officer of
Titanium Metals Corporation,  an integrated producer of titanium metals products
that is 39% owned by Tremont  ("TIMET"),  since prior to 1996.  Mr.  Martin is a
director  of  Halliburton   Company,  a  diversified  energy  services  company,
Apartment Investment and Management Corporation, a real estate investment trust,
and Crown Castle International Corporation, a telecommunications company.

     KENNETH R. PEAK,  age 55, has been a director of NL since 1989. Mr. Peak is
President and Chief Executive  Officer and Chairman of the Board of Contango Oil
& Gas Company,  an independent oil and gas  exploration and production  company.
Since prior to 1996 to 1999, Mr. Peak was president of Peak Enernomics, Inc., an
energy  industry  consulting  firm. Mr. Peak is a director of Patterson  Energy,
Inc., an oil and gas drilling services  provider.  He serves as Chairman of NL's
Audit Committee and Management  Development and Compensation  Committee and is a
member of NL's Nominations Committee.

     GLENN R. SIMMONS, age 73, has been a director of NL since 1986. Mr. Simmons
is Chairman of the Board of Keystone Consolidated Industries, Inc. ("Keystone"),
a steel  fabricated wire products,  industrial wire and carbon steel rod company
that is affiliated with Contran, and CompX  International,  Inc., a manufacturer
of ergonomic  computer  support  systems,  precision  ball bearing  slides,  and
security products that is affiliated with Valhi ("CompX").  Since prior to 1996,
Mr.  Simmons  has been  Vice  Chairman  of the  Board of Valhi  and  Contran,  a
diversified  holding company which directly and through  related  entities holds
approximately  94% of the  outstanding  common  stock  of  Valhi  and 50% of the
outstanding common stock of Keystone.  Mr. Simmons is also a director of Tremont
and TIMET. Mr. Simmons has been an executive  officer and/or director of various
companies related to Valhi and Contran since 1969. He serves as Chairman of NL's
Nominations Committee. He is a brother of Harold C. Simmons.

     HAROLD  C.  SIMMONS,  age 69,  has been a  director  of NL  since  1986 and
Chairman  of the Board of NL since 1987.  He has been  Chairman of the Board and
Chief  Executive  Officer  of  Valhi  and  Contran  since  prior to 1996 and was
President  of Valhi and  Contran  from 1994 until  1998.  Mr.  Simmons is also a
director of Tremont.  Mr. Simmons has been an executive  officer and/or director
of various companies related to Valhi and Contran since 1961. He is a brother of
Glenn R. Simmons.


<PAGE>

     GENERAL  THOMAS P. STAFFORD  (retired),  age 70, served as a director of NL
from 1984 to 1986 and was re-appointed in February 2000.  General Stafford was a
co-founder of and has been affiliated with Stafford,  Burke and Hecker,  Inc., a
Washington-based  consulting firm, since 1982.  General Stafford  graduated from
the United States Naval Academy in 1952.  He was  commissioned  as an officer in
the United States Air Force ("USAF") and attended the USAF  Experimental  Flight
Test School in 1958. He was selected as an astronaut in 1962,  piloted Gemini VI
in 1965 and  commanded  Gemini IX in 1966. In 1969,  General  Stafford was named
Chief of the Astronaut Office and was the Apollo X commander for the first lunar
module flight to the moon. He commanded the Apollo-Soyuz  joint mission with the
Soviet  cosmonauts  in  1975.  After  his  retirement  from  the USAF in 1979 as
Lieutenant General, he became Chairman of Gibraltar  Exploration Limited, an oil
and gas  exploration and production  company,  and served in that position until
1984, when he joined General  Technical  Services,  Inc., a consulting  firm. In
addition  to serving as a director  of NL,  General  Stafford  is a director  of
TIMET,  Tremont, CMI Corporation,  and The Wackenhut Corp. General Stafford is a
member of NL's Audit Committee and its Management  Development and  Compensation
Committee.

     STEVEN L. WATSON,  age 50, has been a director of NL since  November  2000,
and has served as a director of Valhi since 1998.  Mr. Watson has been president
of Valhi and Contran, and a director of Contran,  since 1998. Mr. Watson is also
a director of CompX,  Keystone,  TIMET and Tremont.  From prior to 1996 to 1998,
Mr.  Watson served as Vice  President  and  Secretary of Valhi and Contran.  Mr.
Watson has served as an executive  officer and/or director of various  companies
related to Valhi and Contran since 1980.

     LAWRENCE  A.  WIGDOR,  age 59,  has  been a  director  and  Executive  Vice
President of NL since 1992.  Dr. Wigdor has been  President and Chief  Executive
Officer of Kronos, Inc. ("Kronos"),  a wholly owned subsidiary of NL involved in
the titanium  dioxide pigments  business,  since prior to 1996 and was President
and Chief Executive Officer of Rheox, Inc. ("Rheox"),  a wholly owned subsidiary
of NL involved in the specialty chemicals business, since prior to 1996 until it
was sold in January 1998.

     See also "Certain Relationships and Transactions."


                             MEETINGS AND COMMITTEES

     The Board held seven meetings and took action by unanimous  written consent
in  lieu of a  meeting  on  eight  occasions  in  2000.  Each  of the  directors
participated  in more than 75% of the total  number of meetings of the Board and
committees  on which he served that were held during  their period of service in
2000.

     The Board has established three standing committees,  an Audit Committee, a
Management  Development and Compensation  Committee and a Nominations Committee,
all of which are composed  entirely of individuals  who are not employees of the
Company.

     Audit Committee. The principal  responsibilities of the Audit Committee are
to serve as an independent and objective party to review the Company's auditing,
accounting,  and financial reporting processes. The Company's Board of Directors
has  adopted  a written  charter  for the  Audit  Committee,  a copy of which is
attached  as  Exhibit  A to this  proxy  statement,  which  describes  the Audit
Committee's  activities  more  specifically.  Each of the  members  of the Audit
Committee  is  independent  within the  meaning  of the New York Stock  Exchange
listing standards.  The Committee held two meetings in 2000. The current members
of the Audit  Committee  are Mr.  Peak  (Chairman)  and  General  Stafford.  See
"Independent Auditor Matters - Audit Committee Report."

<PAGE>

     Management   Development   and   Compensation   Committee.   The  principal
responsibilities of the Management Development and Compensation Committee are to
review and make recommendations  regarding executive  compensation  policies and
periodically review and approve or make  recommendations with respect to matters
involving  executive  compensation,  to  take  action  or  to  review  and  make
recommendations to the Board regarding  employee benefit plans or programs,  and
to serve as a counseling  committee  to the Chief  Executive  Officer  regarding
matters  of key  personnel  selection,  organization  strategies  and such other
matters as the Board may from time to time direct.  The  Management  Development
and Compensation Committee also is responsible for reviewing and approving stock
option and other stock-based  compensation  awards under the Company's incentive
plan and for reviewing and approving the Company's target and performance levels
under  the  Variable   Compensation   Plan.  The  Management   Development   and
Compensation  Committee  held one meeting and took action by written  consent in
lieu of a meeting on four  occasions in 2000.  Its current  members are Mr. Peak
(Chairman) and General Stafford.

     Nominations  Committee.  The principal  responsibilities of the Nominations
Committee are to review and make  recommendations  to the Board  regarding  such
matters  as the size and  composition  of the Board and  criteria  for  director
nominations,  director  candidates,  the term of office of  directors,  and such
other  related  matters  as the  Board  may  request  from  time  to  time.  The
Nominations  Committee  held one  meeting in 2000.  The  current  members of the
Nominations  Committee  are Mr.  Glenn  Simmons  (Chairman)  and Mr.  Peak.  The
Nominations  Committee made its  recommendations  to the Board of Directors with
respect to the  election of  directors at the Annual  Meeting.  The  Nominations
Committee  will consider  recommendations  by  shareholders  of the Company with
respect to  nominees  for  election  as  director  if such  recommendations  are
submitted in writing to the Secretary of the Company and received not later than
December 31 of the year prior to the next annual  meeting of  shareholders,  and
are accompanied by a full statement of  qualifications  and  confirmation of the
recommended nominees' willingness to serve.

     The Board has previously established,  and from time to time may establish,
other committees to assist it in discharging its responsibilities.

                        EXECUTIVE OFFICERS OF THE COMPANY

     Set forth below is certain  information  regarding the Company's  executive
officers.  Biographical  information with respect to Messrs.  Simmons and Martin
and Dr. Wigdor is set forth above under "Election of Directors."

<TABLE>
<CAPTION>

             Name                       Age         Position(s)

<S>                                     <C>   <C>
  Harold C. Simmons...................  69    Chairman of the Board

  J. Landis Martin....................  55    President and Chief Executive Officer

  Dr. Lawrence A. Wigdor..............  59    Executive Vice President; President and
                                              Chief Executive Officer of Kronos

  Susan E. Alderton...................  49    Vice President, Chief Financial Officer
                                              and Treasurer

  David B. Garten.....................  49    Vice President, General Counsel and Secretary

  Robert D. Hardy.....................  40    Vice President, Controller, Assistant Treasurer
                                              and Assistant Secretary
</TABLE>

<PAGE>

     Susan E.  Alderton has been Chief  Financial  Officer of the Company  since
1998 and Vice  President and  Treasurer of the Company since prior to 1996.  Ms.
Alderton has been a director of Tremont since prior to 1996.

     David B. Garten has been Vice  President,  General Counsel and Secretary of
the Company since prior to 1996.

     Robert D. Hardy has been Vice  President,  Controller  of the Company since
March 1999,  Assistant  Treasurer  since prior to 1996 and  Assistant  Secretary
since May 1998.  From prior to 1996 to February  1998,  Mr.  Hardy served as the
Company's Director of Taxes, and from February 1998 to March 1999 served as Vice
President-Tax.

                               SECURITY OWNERSHIP

     Ownership of NL Common Stock.  The following table and  accompanying  notes
set  forth as of the  Record  Date  the  beneficial  ownership,  as  defined  by
regulations of the Securities and Exchange  Commission  (the  "Commission"),  of
Common  Stock  held by (a)  each  person  or  group  of  persons  known by NL to
beneficially  own more than 5% of the  outstanding  shares of Common Stock,  (b)
each  director or nominee for director of NL, (c) each  executive  officer of NL
listed in the Summary  Compensation  Table below, and (d) all executive officers
and directors of NL as a group.  See note (3) below for  information  concerning
individuals  and entities  which may be deemed to  indirectly  beneficially  own
those shares of Common Stock directly beneficially held by Valhi and Tremont, as
reported in the table below. No securities of NL's subsidiaries are beneficially
owned by any  director,  nominee  for  director,  or officer of NL.  Information
concerning  ownership of equity securities of NL's parent companies is contained
in note (3) below  and the  table  under  the  caption  "Ownership  of Valhi and
Tremont  Common  Stock"  below.  All  information  is taken  from or based  upon
ownership  filings  made by such  persons  with the  Commission  or  information
provided by such persons to NL.

<TABLE>
<CAPTION>

                                                                  NL Common Stock
                                                    -----------------------------------------
              Name of                                Amount and Nature of           Percent
         Beneficial Owner                           Beneficial Ownership(1)       of Class(2)
         ----------------                           -----------------------       -----------

<S>                                                    <C>                             <C>
Valhi, Inc.                                            30,135,390 (3)                  60.2%
  Three Lincoln Centre
  5430 LBJ Freeway, Suite 1700
  Dallas, TX 75240
Tremont Corporation                                    10,215,541 (3)                   20.4%
  1999 Broadway, Suite 4300
  Denver, CO 80202
J. Landis Martin                                          348,500 (4)                     --
Kenneth R. Peak                                             9,825 (5)                     --
Glenn R. Simmons                                            7,000 (3)(6)                  --
Harold C. Simmons                                          78,475 (3)(7)                  --
General Thomas P. Stafford (retired)                        3,000 (8)                     --
Steven L. Watson                                            4,000 (3)                     --
Dr. Lawrence A. Wigdor                                    205,400 (9)                     --
Susan E. Alderton                                         116,639 (10)                    --
David B. Garten                                           119,596 (11)                    --
Robert D. Hardy                                            59,344 (12)                    --
All directors and executive officers                      951,779 (3)(4)(5)(6)           1.9%
  of the Company as a group (10 persons)                 (7)(8)(9)(10)(11)(12)
</TABLE>


<PAGE>

(1)     All beneficial ownership is sole and direct unless otherwise noted.

(2)     No percent of class is shown for holdings of less than 1%.

(3)     Tremont Group, Inc. ("TGI") is the holder of approximately  80.0% of the
        outstanding common stock of Tremont ("Tremont Common Stock").  Valhi and
        Tremont  Holdings,  LLC ("TRE Holdings") are the direct holders of 80.0%
        and 20.0%,  respectively,  of the outstanding common stock of TGI. NL is
        the sole  member of TRE  Holdings.  Valhi  and  Tremont  are the  direct
        holders  of  approximately  60.2%  and  20.4%,   respectively,   of  the
        outstanding  Common  Stock.  Valhi Group,  Inc.  ("VGI"),  National City
        Lines,  Inc.  ("National")  and Contran are the holders of approximately
        81.7%,  9.5% and 1.8%,  respectively,  of the outstanding  common stock,
        $.01 par value per share,  of Valhi,  Inc. (the "Valhi  Common  Stock").
        National,  NOA, Inc. ("NOA") and Dixie Holding Company ("Dixie Holding")
        are the holders of approximately  73.3%, 11.4% and 15.3%,  respectively,
        of the outstanding  common stock of VGI. Contran and NOA are the holders
        of  approximately  85.7% and  14.3%,  respectively,  of the  outstanding
        common stock of National.  Contran and Southwest Louisiana Land Company,
        Inc.  ("Southwest")  are the holders of  approximately  49.9% and 50.1%,
        respectively,  of the  outstanding  common  stock  of  NOA.  Dixie  Rice
        Agricultural  Corporation,  Inc. ("Dixie Rice") is the holder of 100% of
        the outstanding common stock of Dixie Holding.  Contran is the holder of
        100% and  approximately  88.9% of the outstanding  common stock of Dixie
        Rice  and  Southwest,  respectively.   Substantially  all  of  Contran's
        outstanding  voting stock is held by trusts  established for the benefit
        of  certain  children  and  grandchildren  of  Harold  C.  Simmons  (the
        "Trusts"),  of which  Harold C.  Simmons  is the sole  trustee.  As sole
        trustee  of the  Trusts,  Harold  C.  Simmons  has the power to vote and
        direct the  disposition  of the shares of Contran  common  stock held by
        each of the Trusts. Mr. Simmons, however, disclaims beneficial ownership
        of all Contran shares held by the Trusts.

        Harold C. Simmons is Chairman of the Board of NL, a director of Tremont,
        and Chairman of the Board and Chief Executive Officer of Contran,  Dixie
        Rice, Southwest,  Dixie Holding,  NOA, National,  TGI, VGI and Valhi. By
        virtue of the  holding  of such  offices,  the stock  ownership  and his
        service as  trustee,  all as  described  above,  (a) Mr.  Simmons may be
        deemed to control such  entities,  and (b) Mr.  Simmons,  and certain of
        such entities may be deemed to possess indirect beneficial  ownership of
        the Common Stock  directly  beneficially  owned by Valhi and Tremont and
        the  shares of Valhi  Common  Stock and  Tremont  Common  Stock  held by
        Contran and its subsidiaries.  However, Mr. Simmons disclaims beneficial
        ownership of the shares of Common Stock,  Valhi Common Stock and Tremont
        Common  Stock  beneficially  owned,  directly  and  indirectly,  by such
        entities.

        Glenn R.  Simmons  and Steven L.  Watson are  directors  of Contran  and
        Valhi. Each of such persons disclaims beneficial ownership of the shares
        of  Common  Stock  that  Valhi  and  Tremont   directly  or   indirectly
        beneficially hold.

        The  Combined  Master   Retirement  Trust  (the  "Master  Trust")  holds
        approximately  0.1% of the  outstanding  shares of Valhi  Common  Stock.
        Valhi  established the Master Trust to permit the collective  investment
        by master  trusts that maintain the assets of certain  employee  benefit
        plans Valhi and related  companies adopt.  Harold C. Simmons is the sole
        trustee  of the  Master  Trust  and a  member  of the  trust  investment
        committee  for the Master Trust.  Valhi's Board of Directors  select the
        trustee and  members of the trust  investment  committee  for the Master
        Trust.  Harold C.  Simmons,  Glenn R.  Simmons  and Steven L. Watson are
        members of Valhi's  Board of Directors  and are  participants  in one or
        more of the  employee  benefit  plans  which  invest  through the Master
        Trust. Each of such persons, however,  disclaims beneficial ownership of
        the shares of Valhi Common Stock held by the Master Trust, except to the
        extent of his individual vested  beneficial  interest in the assets held
        by the Master Trust.

        The  Contran  Deferred  Compensation  Trust  No. 2 (the  "CDCT  No.  2")
        directly holds approximately 0.4% of the outstanding Valhi Common Stock.

<PAGE>

        U.S. Bank National  Association serves as trustee of the CDCT No. 2 (the
        "Trustee").  Contran established the CDCT No. 2 as an irrevocable "rabbi
        trust"  to assist  Contran  in  meeting  certain  deferred  compensation
        obligations that it owes to Harold C. Simmons.  If the CDCT No. 2 assets
        are insufficient to satisfy such  obligations,  Contran must satisfy the
        balance of such  obligations.  Pursuant  to the terms of the CDCT No. 2,
        Contran (i) retains the sole power to vote the Valhi  Common  Stock held
        by the CDCT No. 2, (ii) retains  dispositive power over such shares, and
        (iii)  may be  deemed  the  indirect  beneficial  owner of such  shares.
        However,  Mr. Simmons disclaims such beneficial  ownership of the shares
        beneficially  owned by the CDCT  No.  2,  except  to the  extent  of his
        interest as a beneficiary of CDCT No. 2.

        The Foundation  directly  holds  approximately  0.5% of the  outstanding
        Valhi Common Stock. The Foundation is a tax-exempt  foundation organized
        for charitable purposes.  Harold C. Simmons is the chairman of the board
        and  chief  executive  officer  of the  Foundation  and may be deemed to
        control the  Foundation.  Mr.  Simmons,  however,  disclaims  beneficial
        ownership of any shares held by the Foundation.

        Valmont  Insurance  Company  ("Valmont") and a subsidiary of the Company
        directly own 1,000,000  shares and 1,186,200  shares,  respectively,  of
        Valhi common stock.  Valhi holds 100% of the outstanding common stock of
        Valmont.  Pursuant to  Delaware  law,  Valhi  treats the shares of Valhi
        common  stock  owned by Valmont  and the  subsidiary  of the  Company as
        treasury stock for voting purposes and for the purposes of this footnote
        are not deemed outstanding.

        The business  address of VGI,  National,  TGI, NOA, Dixie  Holding,  the
        CMRT,  the  Foundation  and Contran is Three  Lincoln  Centre,  5430 LBJ
        Freeway,  Suite 1700, Dallas, Texas 75240-2697.  The business address of
        Dixie  Rice is 600  Pasquiere  Street,  Gueydan,  Louisiana  70542.  The
        business  address of Southwest  is 402 Canal  Street,  Houma,  Louisiana
        70360.  The business  address of TRE Holdings is 16825  Northchase  Dr.,
        Suite 1200, Houston, TX 77060.

(4)     The shares of Common Stock shown as  beneficially  owned include 228,600
        shares of Common  Stock which J. Landis  Martin has the right to acquire
        by  exercise  of  options  within 60 days of the  Record  Date under the
        Company's 1989 and 1998 Long-Term  Incentive  Plans (the "1989 Incentive
        Plan" and "1998 Incentive  Plan,"  respectively,  and  collectively  the
        "Incentive Plans").

(5)     The shares of Common Stock shown as beneficially owned include (i) 7,000
        shares of Common Stock which Kenneth R. Peak has the right to acquire by
        exercise of options within 60 days of the Record Date pursuant to the NL
        Industries,  Inc.  1992  Non-Employee  Director  Stock  Option Plan (the
        "Director  Plan")  and the 1998  Incentive  Plan,  and (ii) 21 shares of
        Common  Stock held by Mr.  Peak's  wife with  respect to which Mr.  Peak
        disclaims beneficial ownership.

(6)     The shares of Common Stock shown as  beneficially  owned  include  6,000
        shares  which  Glenn R.  Simmons has the right to acquire by exercise of
        options within 60 days of the Record Date under the 1998 Incentive Plan.

(7)     The  shares of Common  Stock  shown as  beneficially  owned by Harold C.
        Simmons  include  69,475  shares  held by Harold C.  Simmons'  wife with
        respect to which  beneficial  ownership is disclaimed by Mr. Simmons and
        6,000 shares  which Mr.  Simmons has the right to acquire by exercise of
        options within 60 days of the Record Date under the 1998 Incentive Plan.

(8)     The shares of Common Stock shown as  beneficially  owned  include  2,000
        shares  which  General  Thomas P.  Stafford  has the right to acquire by
        exercise  of options  within 60 days of the  Record  Date under the 1998
        Incentive Plan.

(9)     The shares of Common Stock shown as  beneficially  owned include 163,600
        shares of Common  Stock  which Dr.  Lawrence  A. Wigdor has the right to
        acquire by exercise  of options  within 60 days of the Record Date under
        the Incentive Plans.

<PAGE>

(10)    The shares of Common  Stock  shown as  beneficially  owned  include  (i)
        63,000  shares of Common Stock which Susan E.  Alderton has the right to
        acquire by exercise  of options  within 60 days of the Record Date under
        the Incentive Plans,  and (ii) 12,482 shares credited to Ms.  Alderton's
        account under the Savings Plan.

(11)    The shares of Common  Stock  shown as  beneficially  owned  include  (i)
        93,000  shares of Common  Stock  which  David B. Garten has the right to
        acquire by exercise  of options  within 60 days of the Record Date under
        the Incentive Plans,  (ii) 3,261 shares credited to Mr. Garten's account
        under the Savings  Plan,  and (iii) 23,335 shares held by Mr. Garten and
        his wife as joint tenants.

(12)    The shares of Common  Stock  shown as  beneficially  owned  include  (i)
        43,000  shares of Common  Stock  which  Robert D. Hardy has the right to
        acquire by exercise  of options  within 60 days of the Record Date under
        the  Incentive  Plans,  and (ii) 16,344 shares held by Mr. Hardy and his
        wife as joint tenants.

     Ownership  of Valhi and  Tremont  Common  Stock.  The  following  table and
accompanying notes set forth as of the Record Date (i) the beneficial ownership,
as defined above, of Valhi Common Stock held by (a) each director or nominee for
director  of NL,  (b)  each  executive  officer  of NL  listed  in  the  Summary
Compensation  Table below, and (c) all executive officers and directors of NL as
a group, and (ii) the beneficial ownership,  as defined above, of Tremont Common
Stock  held by (a)  each  director  or  nominee  for  director  of NL,  (b) each
executive officer of NL listed in the Summary  Compensation Table below, and (c)
all executive officers and directors of NL as a group. See note (3) to the table
following the caption  "Ownership of NL Common  Stock"  above,  for  information
concerning individuals and entities who may be deemed to indirectly beneficially
own those  shares of Common  Stock  directly  beneficially  held by Tremont  and
Valhi.  Except  as  described  in note (3)  above  and the  table  below and the
accompanying   notes,  no  equity   securities  of  NL's  parent  companies  are
beneficially owned by any director, nominee for director or executive officer of
NL. All  information is taken from or based upon ownership  filings made by such
persons with the Commission or information provided by such persons to NL.


<TABLE>
<CAPTION>

                                        Tremont Common Stock              Valhi Common Stock
                                    ---------------------------    -----------------------------
                                     Amount and                    Amount and
                                      Nature of                     Nature of
            Name of                  Beneficial       Percent      Beneficial         Percent
      Beneficial Owner              Ownership(1)     of Class(2)   Ownership (1)    of Class (2)
      ----------------              ------------     -----------   -------------    ------------

<S>                                     <C>              <C>            <C>              <C>
J. Landis Martin ...................    104,359(3)       1.6%           -0-              --
Kenneth R. Peak ....................        -0-           --            -0-              --
Glenn R. Simmons ...................        534(4)(8)     --          353,183(4)(7)(8)   --
Harold C. Simmons ..................        -0-(4)        --          580,383(4)(7)(9)   --
General Thomas P. Stafford (retired)      4,000(5)        --            -0-              --
Steven L. Watson ...................      4,474(4)        --          318,635(4)(7)      --
Dr. Lawrence A. Wigdor .............        -0-           --            -0-              --
Susan E. Alderton ..................      4,727(10)       --            -0-              --
David B. Garten ....................      9,500(6)        --            -0-              --
Robert D. Hardy ....................        318           --            -0-              --
All directors and executive ........
   officers of the Company .........
   as a group (10 persons) .........    127,912(3)(4)     2.0%      1,252,201(4)(7)      1.1%
                                         (5)(6)(8)(10)               (8)(9)
</TABLE>


<PAGE>

(1)     All beneficial ownership is sole and direct unless otherwise noted.

(2)     No percent of class is shown for  holdings of less than 1%. For purposes
        of  calculating  the  percent of class owned  1,186,200  shares of Valhi
        Common Stock held by a subsidiary  of NL and  1,000,000  shares of Valhi
        Common  Stock  held by  Valmont  are  excluded  from the amount of Valhi
        Common Stock  outstanding.  The Company  understands  that,  pursuant to
        Delaware law, Valhi treats these  excluded  shares as treasury stock for
        voting purposes.

(3)     The shares of Tremont  Common  Stock shown as  beneficially  owned by J.
        Landis Martin  include  60,000 shares of Tremont  Common Stock which Mr.
        Martin has the right to acquire by exercise of options within 60 days of
        the Record Date.

(4)     Excludes certain shares that may be deemed to be indirectly beneficially
        owned by such individual as to which he disclaims beneficial  ownership.
        See note (3) to the  table  following  "Ownership  of NL  Common  Stock"
        above.

(5)     The shares of Tremont Common Stock shown as beneficially owned by Thomas
        P. Stafford include 4,000 shares which General Stafford has the right to
        acquire by exercise of options within 60 days of the Record Date.

(6)     The shares of Tremont Common Stock shown as beneficially  owned by David
        B. Garten include 9,000 shares which Mr. Garten has the right to acquire
        by exercise of options within 60 days of the Record Date.

(7)     Includes  shares  that  such  person  or group  could  acquire  upon the
        exercise of stock options within 60 days of the Record Date. During such
        60-day  period,  options for 500,000  shares of Valhi  Common  Stock are
        exercisable  by Harold C. Simmons,  options for 350,000  shares of Valhi
        Common  Stock are  exercisable  by Glenn R.  Simmons,  and  options  for
        300,000  shares  of Valhi  Common  Stock  are  exercisable  by Steven L.
        Watson,  all of which shares are included in the amount  outstanding for
        purposes of calculating  the percent of class owned by such persons.  In
        addition,   includes  3,035  shares  held  in  Mr.  Watson's  individual
        retirement account.

(8)     Includes  2,383  shares of Valhi  Common Stock and 515 shares of Tremont
        Common Stock held in Glenn R. Simmons'  individual  retirement  account.
        The Valhi shares also  include 800 shares held in a  retirement  account
        for Mr. Simmons' wife, with respect to all of which beneficial ownership
        is disclaimed by Mr. Simmons.

(9)     Includes  77,000 shares of Valhi Common Stock held by Harold C. Simmons'
        wife,  with respect to which  beneficial  ownership is disclaimed by Mr.
        Simmons.

(10)    The shares of Tremont Common Stock shown as beneficially  owned by Susan
        E.  Alderton  include  4,000 shares which Ms.  Alderton has the right to
        acquire by exercise of options  within 60 days of the Record Date and 11
        shares held by the trustee  for the  benefit of Ms.  Alderton  under the
        Savings Plan.

     The Company  understands  that Valhi,  Tremont  and  related  entities  may
consider acquiring or disposing of shares of Common Stock through open-market or
privately   negotiated   transactions,   depending  upon  future   developments,
including,  but not limited to, the  availability and alternative uses of funds,
the performance of the Common Stock in the market, an assessment of the business
of and prospects  for the Company,  financial  and stock market  conditions  and
other factors deemed  relevant by such entities.  The Company does not presently
intend,  and understands that neither Valhi nor Tremont  presently  intends,  to
engage in any  transaction  or series of  transactions  that would result in the

<PAGE>

Common  Stock  becoming  eligible  for  termination  of  registration  under the
Securities  Exchange  Act of 1934,  as  amended,  or  ceasing  to be traded on a
national securities exchange.

                    SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

        Section  16(a)  of the  Securities  Exchange  Act of 1934,  as  amended,
requires  the  Company's  executive  officers,  directors,  and  persons who own
beneficially  more  than  10% of a  registered  class  of the  Company's  equity
securities  to file  reports of  ownership  and  changes in  ownership  with the
Commission,  the New York Stock Exchange,  the Pacific Exchange and the Company.
Based solely on a review of copies of the Section 16(a) reports furnished to the
Company and written  representations by certain reporting  persons,  the Company
believes that all of the  Company's  executive  officers,  directors and greater
than 10% beneficial  owners filed on a timely basis all reports  required during
and with respect to the fiscal year ended  December 31, 2000,  except one filing
by Dr. Wigdor inadvertently omitted a single sale transaction.


                COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
                              AND OTHER INFORMATION

Compensation of Directors

     During 2000, fees were paid to each director who was not an employee of the
Company or a subsidiary of the Company.  Fees consisted of an annual retainer of
$15,000,  payable in  quarterly  installments  and 1,000  shares of Common Stock
granted  pursuant to the 1998 Incentive  Plan,  plus an attendance fee of $1,000
for each  meeting of the Board or a committee at which the director was present.
Such  directors  also  received a fee of $1,000 per day for each day spent on NL
business  at the request of the Board or the  Chairman of the Board,  other than
the day of Board or committee meetings.  Directors are reimbursed for reasonable
expenses incurred in attending Board of Directors and committee meetings. If any
director who is not an officer or employee of NL or any  subsidiary or affiliate
of NL dies while in active service, his designated beneficiary or estate will be
entitled to receive a life insurance  benefit equal to the annual  retainer then
in effect.  Nominees for  election as Director who received  fees for serving on
the Board of Directors in 2000 are Messrs.  Peak,  G. Simmons,  H. Simmons,  and
Watson, and General Stafford.  See "Certain  Relationships and Transactions." In
addition,  General Stafford receives an annual payment of $15,000 as a result of
his service on the Board in the period prior to 1987.

     In 2000, Messrs.  Peak, G. Simmons,  H. Simmons,  and General Stafford were
each granted an option  pursuant to the 1998  Incentive  Plan to purchase  2,000
shares of Common Stock at an exercise price of $14.4375 per share,  representing
the last  reported  sales price of Common  Stock on the New York Stock  Exchange
Composite Tape on the date of the grant.  These options become  exercisable  one
year after the date of grant and expire on the fifth  anniversary  following the
date of the grant.

Summary of Cash and Certain Other Compensation of Executive Officers

     The Summary  Compensation  Table set forth below provides  certain  summary
information  concerning annual and long-term compensation awarded to, earned by,
or paid to or on behalf of the Company's Chief Executive Officer and each of its
other four most highly  compensated  executive  officers for  services  rendered
during the years ended December 31, 2000, 1999 and 1998.


<PAGE>

<TABLE>
<CAPTION>
                                  SUMMARY COMPENSATION TABLE


                                                                          Long-Term
                                   Annual Compensation (1)              Compensation (1)
                               --------------------------------   -------------------------
                                                                            Awards
                                                                            ------
                                                       Other      Restricted     Securities
    Name and                                           Annual       Stock        Underlying      All Other
Principal Position     Year    Salary   Bonus (2)   Compensation    Awards        Options       Compensation
                                 ($)       ($)         (3)($)         ($)           (#)            (5)($)
------------------     ----    ------   ---------   ------------    ------       ---------      ------------

<S>                    <C>      <C>      <C>           <C>            <C>          <C>              <C>
J. Landis Martin       2000     600,000    900,000     13,420         -0-          100,000           96,840
President and Chief    1999     500,000    500,000     17,281         -0-           99,000          125,320
Executive Officer (4)  1998     500,000  2,750,000     19,742         -0-          120,000          328,520

Dr. Lawrence A. Wigdor 2000     750,000  2,625,000      6,815         -0-          100,000          132,038
Executive Vice         1999     650,000    650,000      8,833         -0-           99,000          171,073
President              1998     650,000  2,175,000     11,125         -0-           90,000          277,987

Susan E. Alderton      2000     295,833    443,700      -0-           -0-           45,000           48,579
Vice President,        1999     225,000    225,000      -0-           -0-           45,000           52,944
Chief Financial        1998     212,813    419,200      -0-           -0-           30,000           49,883
Officer and Treasurer

David B. Garten        2000     325,000    987,500      -0-           -0-           45,000          100,252
Vice President,General 1999     325,000    325,000      -0-           -0-           45,000           69,427
Counsel and Secretary  1998     250,000    575,000      -0-           -0-           45,000           84,408

Robert D. Hardy        2000     275,000    662,500      -0-           -0-           30,000           38,061
Vice President and     1999     200,000    147,500      -0-           -0-           30,000           34,531
Controller             1998     170,000    385,300      -0-           -0-           30,000           44,424

</TABLE>


(1)     No payouts under any long-term incentive plans (as defined by applicable
        federal  securities  regulations)  were made during 2000,  1999 or 1998.
        Therefore  the  column  for  such  compensation  otherwise  required  by
        applicable federal securities regulations has been omitted.

(2)     Amounts  paid  with  respect  to  each  year  pursuant  to the  Variable
        Compensation Plan and, for 1998 and 2000, special discretionary bonuses.
        See "Compensation Committee's Report on Executive Compensation" below.

(3)     Amount which exceeds 120% of the applicable  federal long-term  interest
        rate accrued on deferred compensation.

(4)     During  2000,  1999 and 1998,  Mr.  Martin also  served as an  executive
        officer of Tremont  and TIMET.  Mr.  Martin is  expected  to continue to
        serve as an executive officer of NL, TIMET and Tremont in 2001 and to be
        compensated  directly by NL for services to NL and by TIMET for services
        to TIMET and  Tremont.  Mr.  Martin is  expected  to  continue to devote
        approximately  one-half of his working  time to his duties as  President
        and Chief  Executive  Officer  of NL.  See  "Certain  Relationships  and
        Transactions."

(5)     For 2000 represents (i) $9,328, $962, $2,302, and $861 of life insurance
        premiums  paid  by the  Company  for  the  benefit  of Dr.  Wigdor,  Ms.
        Alderton, and Messrs. Garten and Hardy respectively, (ii) a contribution
        of $10,200 to the account of each of the named executive  officers under
        the Savings Plan,  (iii) a  contribution  of $14,110,  $9,350,  $12,240,
        $9,350  and $6,800 to the  Savings  Plan  accounts  of Dr.  Wigdor,  Ms.

<PAGE>

        Alderton and Messrs. Martin, Garten and Hardy respectively, as a pension
        contribution,  and (iv) $98,400,  $28,067,  $74,400, $78,400 and $20,200
        accrued  by the  Company in  unfunded  accounts  for the  benefit of Dr.
        Wigdor,   Ms.   Alderton  and  Messrs.   Martin,   Garten,   and  Hardy,
        respectively,  under  the  NL  Supplemental  Executive  Retirement  Plan
        ("SERP"). For 1999 represents: (i) $6,493, $924, $1,827 and $801 of life
        insurance  premiums  paid by the Company for the benefit of Dr.  Wigdor,
        Ms.  Alderton,  and  Messrs.  Garten  and  Hardy  respectively,  (ii)  a
        contribution  of $6,400 to the  account  of each of the named  executive
        officers  under the  Savings  Plan,  (iii) a  contribution  of  $11,680,
        $7,200,  $9,920,  $7,200 and $4,800 to the Savings Plan  accounts of Dr.
        Wigdor, Ms. Alderton and Messrs Martin,  Garten and Hardy  respectively,
        as a pension contribution, and (iv) $146,500, $38,420, $109,000, $54,000
        and $22,530 accrued by the Company in unfunded  accounts for the benefit
        of Dr.  Wigdor,  Ms.  Alderton,  and Messrs.  Martin,  Garten and Hardy,
        respectively,  under the SERP. For 1998  represents:  (i) $5,207,  $672,
        $1,108 and $574 of life  insurance  premiums paid by the Company for the
        benefit of Dr.  Wigdor,  Ms.  Alderton,  and  Messrs.  Garten and Hardy,
        respectively,  (ii) a  contribution  of  $7,500  to the  account  of Ms.
        Alderton and $9,600 to the account of each of the other named  executive
        officers under the Savings Plan,  and (iii) a  contribution  of $11,680,
        $7,200,  $9,920,  $7,200 and $4,800 to the Savings Plan  accounts of Dr.
        Wigdor, Ms. Alderton and Messrs.  Martin, Garten and Hardy respectively,
        as a pension contribution, and (iv) $251,500, $34,511, $309,000, $66,500
        and $29,450 accrued by the Company in unfunded  accounts for the benefit
        of Dr.  Wigdor,  Ms.  Alderton,  and Messrs.  Martin,  Garten and Hardy,
        respectively, under the SERP.

Stock Option Grants

     The following  table  provides  information  with respect to the individual
stock option grants to the executive officers named in the Summary  Compensation
Table set forth above under the 1998 Incentive Plan during fiscal year 2000.


<TABLE>
<CAPTION>
                                         OPTION GRANTS IN LAST FISCAL YEAR
                                                                                           Potential Realizable Value at
                                                                                               Assumed Rates of Stock
                                              Percent of Total   Exercise                         Appreciation for
                        Number of Securities  Options Granted     or Base                           Option Term (3)
                        Underlying Options    to Employees in    Price(2)     Expiration   -----------------------------
        Name              Granted(#)(1)        Fiscal Year       ($/Share)       Date           5% ($)        10% ($)
       -----            -------------------   ----------------  ---------     ---------        -------       ---------
<S>                          <C>                   <C>             <C>           <C>           <C>            <C>
J. Landis Martin             100,000               23.1%           $14.25        2/9/10        896,175        2,271,083
Lawrence A. Wigdor           100,000               23.1%           $14.25        2/9/10        896,175        2,271,083
Susan E. Alderton             45,000               10.4%           $14.25        2/9/10        403,279        1,021,987
David B. Garten               45,000               10.4%           $14.25        2/9/10        403,279        1,021,987
Robert D. Hardy               30,000                6.9%           $14.25        2/9/10        268,852          681,325
</TABLE>


(1)     Grants of options to purchase shares of Common Stock under the Incentive
        Plan vest over five  years  from the date of grant,  at a rate of 40% on
        the second anniversary of the date of grant, and 20% on each of the next
        three  succeeding  anniversary  dates.  The options  expire on the tenth
        anniversary date of the date of grant.

(2)     Exercise  price is equal to the mean of the high and low  prices  of the
        Common Stock on the New York Stock  Exchange  Composite Tape on the date
        of grant.



<PAGE>

(3)     Pursuant  to the rules of the  Commission,  these  amounts  reflect  the
        calculations at assumed 5% and 10% appreciation rates. Such calculations
        are not  intended to forecast  future  appreciation,  if any, and do not
        necessarily reflect the actual value, if any, that may be realized.  The
        actual value of such  options,  if any,  would be realized only upon the
        exercise of such options and depends upon the future  performance of the
        Common  Stock.  No assurance  can be made that the amounts  reflected in
        these  columns  will be achieved.  The  potential  realizable  value was
        computed as the difference  between the appreciated value (at the end of
        the  ten-year  term of the  options) of the Common  Stock into which the
        listed options are exercisable and the aggregate  exercise price of such
        options. The appreciated value per share at the end of the ten-year term
        would  be  $23.21  and   $36.96  at  the   assumed  5%  and  10%  rates,
        respectively,  with  respect  to  options  granted  to  named  executive
        officers.

Stock Option Exercises and Holdings

     The  following  table  provides  information  with respect to the executive
officers named in the Summary Compensation Table, as set forth above, concerning
the exercise of options during the last fiscal year and the value of unexercised
options held as of December 31, 2000. Each of the executive  officers  exercised
options during 2000 as shown in the table below.  No stock  appreciation  rights
have been granted under the Incentive Plans.



<TABLE>
<CAPTION>
                                  AGGREGATED OPTION EXERCISES IN 2000 AND 12/31/00 OPTION VALUES

                                                                             Number of Securities
                                                                            Underlying Unexercised    Value of Unexercised In-the-
                        Shares Acquired on                                  Options at 12/31/00(#)    Money Options at 12/31/00 ($)
      Name              Exercise (#)(1)        Value Realized ($)         Exercisable/Unexercisable   Exercisable/Unexercisable
      ----              ---------------        ------------------         -------------------------   ----------------------------

<S>                         <C>                   <C>                         <C>                         <C>
J. Landis Martin            355,000               4,667,188                   138,000/316,000             1,137,388/2,910,414
Lawrence A. Wigdor          126,000               1,612,019                    83,800/290,200               606,512/2,745,578
Susan E. Alderton            51,000                 670,009                    31,200/121,800               242,810/1,182,278
David B. Garten              45,000                 599,063                    54,600/137,400               467,575/1,295,527
Robert D. Hardy              25,000                 260,188                    18,000/91,000                112,664/887,103

</TABLE>


(1)     In August 2000, Dr. Wigdor,  Ms. Alderton and Messrs.  Compofelice  (the
        Company's former Vice President and Chief Financial  Officer and, at the
        time,  a member of the Board),  Martin,  Garten and Hardy  entered  into
        agreements  under which NL purchased  37,147 shares of Common Stock from
        Dr.  Wigdor,  15,474  shares of Common Stock from Ms.  Alderton,  65,505
        shares of Common Stock from Mr.  Compofelice,  133,764  shares of Common
        Stock from Mr.  Martin,  18,375 shares of Common Stock from Mr.  Garten,
        and 4,138 shares of Common Stock from Mr. Hardy for an aggregate of $6.2
        million. Under the agreements, the sellers also delivered certain shares
        of Common  Stock to the  Company in payment  of the  exercise  price and
        applicable  required   withholding  taxes  (as  permitted  by  the  1989
        Incentive Plan).


<PAGE>

Pension Plan

     The Retirement  Program of NL Industries,  Inc. for its U.S. employees (the
"Pension Plan") provides lifetime retirement benefits to eligible employees.  In
1996,  the Company  approved the  suspension  of all future  accruals  under the
salaried  component of the Pension Plan.  The Pension Plan covers each executive
officer named in the Summary Compensation Table set forth above. No amounts were
paid  or  distributed  to any of the  named  executive  officers  in  2000.  The
estimated accrued annual benefits payable under the Pension Plan upon retirement
at normal  retirement  age for Dr. Wigdor,  Ms.  Alderton,  and Messrs.  Martin,
Garten,  and  Hardy  are  $29,439,   $34,419,  $50,277,  $26,410,  and  $12,348,
respectively.

Severance Agreements

     Mr.  Martin had an executive  severance  agreement  with the Company  which
expired in December  2000.  The agreement  provided that he may be terminated at
any time by action of the Board of Directors.  The executive severance agreement
also  provided that the  following  payments  would be made to Mr. Martin in the
event Mr.  Martin's  employment was terminated by the Company  without cause (as
defined in the  agreement)  or Mr. Martin  terminated  his  employment  with the
Company  for good  reason  (as  defined  in the  agreement):  (i) two  times Mr.
Martin's  annual base salary plus target bonus (which  target bonus shall not be
less than the  amount of his  annual  salary);  (ii)  accrued  salary  and bonus
through the date of termination; and (iii) certain other benefits.

     Dr.  Wigdor has entered  into an  executive  severance  agreement  with the
Company  which  provides  that he may be terminated at any time by action of the
Board of Directors.  The executive  severance  agreement  also provides that the
following  payments  shall  be made to Dr.  Wigdor  in the  event  Dr.  Wigdor's
employment  is  terminated  by the  Company  without  cause (as  defined  in the
agreement) or Dr. Wigdor  terminates  his  employment  with the Company for good
reason (as defined in the agreement): (i) the greater of two times Dr. Wigdor 's
annual base salary plus target bonus (which  target bonus shall not be less than
the amount of his annual salary) or Dr. Wigdor's actual salary and bonus for the
two years prior to  termination;  (ii) accrued salary and bonus through the date
of termination; (iii) an amount in cash or Common Stock equal to the fair market
value of  outstanding  stock  options  granted  to Dr.  Wigdor  in excess of the
exercise  price and unvested  restricted  stock grants;  (iv) an amount equal to
unvested  Company  contributions  together with an amount equal to the Company's
matching  contributions  to Dr.  Wigdor's  account  under the Savings Plan for a
period of two years; (v) an amount equal to the vested and unvested  portions of
Dr.  Wigdor's  account  under the SERP;  and (vi) certain other  benefits.  This
agreement is automatically  extended for a one-year term commencing each January
1, unless the Company and Dr. Wigdor agree otherwise in writing.


                           INDEPENDENT AUDITOR MATTERS

     Independent Auditors. The firm of PricewaterhouseCoopers LLP served as NL's
independent  auditor for the year ended December 31, 2000, has been appointed to
review NL's quarterly unaudited consolidated financial statements to be included
in its Quarterly  Reports on Form 10-Q for the first three  quarters of 2001 and
to audit NL's  annual  consolidated  financial  statements  for the year  ending
December  31,  2001.  Representatives  of  PricewaterhouseCoopers  LLP  are  not
expected to attend the Meeting.

     Audit Committee  Report.  NL's management is responsible for preparing NL's
consolidated  financial  statements in  accordance  with  accounting  principles
generally  accepted  in  the  United  States.  NL's  independent   auditors  are
responsible for auditing NL's  consolidated  financial  statements in accordance

<PAGE>

with  auditing  standards  generally  accepted in the United  States.  The audit
committee  serves as an independent and objective party to review NL's auditing,
accounting and financial reporting processes.

     The audit  committee has reviewed and discussed  NL's audited  consolidated
financial  statements for the year ended December 31, 2000 with NL's  management
and  independent  auditor.  The audit  committee  discussed with the independent
auditors  the  matters  required  by  Statement  on  Auditing  Standards  No. 61
("Communication  with Audit Committees"),  received written disclosures from the
independent  auditor  required by  Independence  Standards  Board Standard No. 1
("Independence  Discussions  with  Audit  Committees")  and  discussed  with the
independent  auditors their  independence.  The audit  committee also considered
whether the independent  auditors' provision of non-audit services to NL and its
subsidiaries is compatible with such auditors  independence.  Additionally,  the
audit committee  discussed with NL's management and the independent auditor such
other  matters  as  the  committee  deemed  appropriate.   Based  on  the  audit
committee's  review of NL's audited  consolidated  financial  statements and the
audit committee's  discussions with NL's management and independent auditor, the
audit  committee  recommended  to the  Board  of  Directors  that  NL's  audited
consolidated  financial  statements  for the year  ended  December  31,  2000 be
included  in NL's  Annual  Report on Form 10-K for the year ended  December  31,
2000, which has been filed with the Commission.

      Kenneth R. Peak                     General Thomas P. Stafford (retired)
      Chairman of the Audit Committee     Member of the Audit Committee

     Audit and Other Fees.  The aggregate  fees  PricewaterhouseCoopers  LLP has
billed or is expected to bill to the Company for services  rendered for 2000 for
audit fees is $528,611 and for all other fees is  $195,421.  No fees were billed
or  expected  to  be  billed  for  services  performed  in  2000  for  financial
information systems design and implementation.

     The amount for audit fees includes,  without duplication,  (a) fees for the
audit of the Company's  consolidated  financials  statements  for the year ended
December 31, 2000, (b) reviews of the unaudited quarterly consolidated financial
statements  appearing  in the  Company's  Form 10-Q for each of the first  three
quarters    of   2000,    and   (c)   the    estimated    out-of-pocket    costs
PricewaterhouseCoopers  LLP  incurred  in such audits and  reviews.  The Company
reimburses PricewaterhouseCoopers LLP for such out-of-pocket costs.


            COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION

     The Company's Management  Development and Compensation  Committee (the "MDC
Committee")  consists of individuals  who are neither  officers nor employees of
the Company or its  subsidiaries  and who are not eligible to participate in any
of the employee benefit plans administered by the MDC Committee.

     The MDC Committee annually reviews and recommends compensation policies and
practices  related to the  Company's  executive  officers,  including  the Chief
Executive  Officer (the  "CEO").  The MDC  Committee  also was  responsible  for
reviewing  and  approving  all  compensation   actions  during  2000,  including
stock-based compensation,  involving the Company's executive officers.  However,
any action in connection  with the CEO's base salary is reviewed and approved by
the Board after recommendation by the MDC Committee.

     The Company's  executive  compensation system with respect to its executive
officers,  including the CEO,  generally  consists of three primary  components:
base salary,  annual variable compensation provided by the Variable Compensation
Plan, and the grant of stock options, restricted stock and/or stock appreciation
rights.  Through  the use of the  foregoing,  the  Committee  seeks to achieve a

<PAGE>

balanced  compensation  package  that will attract and retain  high-quality  key
executives,  appropriately  reflect  each such  executive  officer's  individual
performance,  contributions,  and general  market  value,  and  provide  further
incentives  to  the  officers  to  maximize  annual  operating  performance  and
long-term shareholder value.

Base Salaries

     The MDC Committee reviews  recommendations  by the CEO regarding changes in
base salaries for executive officers,  including the CEO. These  recommendations
are made by the CEO after  consultation  with the  Chairman  of the Board.  When
recommendations regarding changes in base salary levels are made by the CEO, the
MDC Committee may take such actions,  including any  modifications,  as it deems
appropriate.  The CEO's  recommendations and the MDC Committee's actions in 2000
were based  primarily on a subjective  evaluation of past and  potential  future
individual  performance and  contributions,  and alternative  opportunities that
might be  available  to the  executives  in  question.  The  Committee  also had
available  to it  compensation  data  from  companies  employing  executives  in
positions  similar to those whose salaries were being reviewed as well as market
conditions  for  executives  in general  with  similar  skills,  background  and
performance  levels,  both inside and outside of the  chemicals  industry  (such
companies may have included companies  contained in the peer group index plotted
on the  Performance  Graph  following  this report),  and other  companies  with
similar  financial  and business  characteristics  as the Company,  or where the
executive in question has similar  responsibilities.  In 2000, the MDC Committee
approved a base annual salary increase for Mr. Martin from $500,000 to $600,000,
a base annual salary  increase for Dr. Wigdor from $650,000 to $750,000,  a base
annual  salary  increase  for Ms.  Alderton  from  $225,000 to  $325,000  and an
increase in Mr.  Hardy's  base  annual  salary from  $200,000  to  $275,000.  In
approving these increases the MDC Committee reviewed the  recommendations of the
CEO and an independently prepared compensation survey report that suggested that
each of the  executives  were  compensated  at a base salary level beneath their
peers at comparable companies. The MDC committee also took into account that Mr.
Martin had not received a salary  increase since 1997;  Ms.  Alderton since 1998
(when she assumed the position of CFO);  Dr.  Wigdor  since 1998;  and Mr. Hardy
since  1999.  The MDC  Committee  also  considered  the  Chairman of the Board's
approval of these  increases and the fact that the Company had performed well in
fiscal 1999 as compared to its operating targets.

     No action was taken with  respect to the base  salaries of any of the other
named executive officers of the Company during 2000.

Variable Compensation Plan

     Awards  under the  Variable  Compensation  Plan  constitute  a  significant
portion of an executive's  potential  annual cash  compensation  (between 0% and
150% of base  salary for the CEO and  certain  executive  officers).  Awards are
based primarily on Kronos achieving annual predetermined operating income goals,
and,  secondarily,  in the case of Mr. Hardy for awards with respect to 1999, on
individual  performance.  The Company's management makes  recommendations to the
Board regarding the operating  income plan for the year after  reviewing  market
conditions  and  the  Company's  operations,   competitive  position,  marketing
opportunities,  and strategies for maximizing financial  performance.  The Board
approves this recommendation  with modifications it deems appropriate.  Based on
the business  plan for the year,  the MDC  Committee  sets the Company's and its
business segment's  operating income goals at three levels which are designed to
help focus the  Company's  executives  on achieving  superior  annual  operating
results in light of existing conditions: a threshold level, which is the minimum
operating income level for any award to be made under the Variable  Compensation
Plan (the "Minimum Level"),  a target level (the "Target Level"),  and a maximum
level (the "Maximum Level"). The Variable Compensation Plan, in combination with
base  salary,  is designed to result in executive  officers  and other  eligible
participants  receiving annual cash compensation below competitive  compensation
levels if the Minimum Level is not achieved.


<PAGE>

     Pursuant to the Variable  Compensation  Plan, if operating  income is below
the Minimum  Level,  no variable  compensation  is paid. If the Minimum Level is
met, executive officers are eligible to receive variable  compensation  payments
that in 2000  ranged  between  14% and  60% of  base  salary,  depending  on the
executive.  If the Target Level is reached,  the range of variable  compensation
payments  is higher,  and in 2000 ranged  between  22% and 100% of base  salary,
depending  on the  executive.  If the  Maximum  Level is  reached  or  exceeded,
executives are eligible to receive the highest variable  compensation  payments,
and in 2000 the range of payments for which executives were eligible was between
35%  and  150%  of  base  salary,  depending  on the  executive.  In view of the
achievement of operating  income above the Target Level during 1999, in 2000 the
MDC Committee  approved  Target Level payments  under the Variable  Compensation
Plan to the  executive  officers,  including the CEO. Such awards to the CEO and
the four other highest paid executive  officers under the Variable  Compensation
Plan are  reported  in the bonus  column in the Summary  Compensation  Table set
forth above. In addition,  target levels for operating  income  performance were
utilized by the MDC Committee and the Board, as applicable,  for determining the
contributions by the Company to the accounts of eligible participants, including
the CEO and the executive  officers,  under the Savings Plan,  the Pension Plan,
and the SERP.

Stock-Based Compensation

     The 1998 Incentive Plan further  supports the goal of maximizing  long-term
shareholder value by providing for stock-based compensation,  the value of which
is directly related to increases in shareholder  value.  Stock option grants, in
particular,  are  considered  a  significant  element  of  the  Company's  total
compensation  package  for  the  CEO and the  other  executive  officers  of the
Company.  The  Committee  believes  that  compensation  linked  to  stock  price
performance  helps focus the executives'  attention on management of the Company
from  the  shareholders'  perspective.  While  the  Committee  encourages  share
ownership by the executive officers,  it no longer employs ownership  guidelines
in determining stock-based compensation.

     Option grants are intended to provide  incentives  to increase  shareholder
value in the future and to reward past  performance by the  executive.  In 2000,
the MDC Committee reviewed recommendations by the CEO regarding option grants to
executive  officers  other  than the CEO.  Options  were  granted  to  executive
officers,  including  the  CEO,  in the MDC  Committee's  discretion  based on a
subjective    evaluation    regarding   each    executive's    performance   and
responsibilities.  In 2000,  the MDC  Committee  included  in its  determination
regarding  the  number of  options  to be  granted  to each  executive  officer,
including  the CEO,  the  amount  and  terms  of  options  already  held by such
officers.  Grants made in 2000 are reported in the Option  Grants in Last Fiscal
Year Table set forth above.

     To help assure a focus on long-term  creation of shareholder value, the MDC
Committee  granted ten year  options,  which vest 40%,  60%, 80% and 100% on the
second,  third,  fourth  and  fifth  anniversary  dates  of the  date of  grant,
respectively.  Although permitted under the Incentive Plan, the MDC Committee in
2000  did  not  make  or  recommend  any  grants  of  restricted  stock,   stock
appreciation rights or other equity-based awards.

Special Discretionary Bonuses

     Apart from the Variable  Compensation  Plan,  the MDC  Committee  may award
other bonuses as the  Committee  deems  appropriate  from time to time under its
general  authority  or under a  separate  discretionary  plan.  During  2000 the
Committee  approved awards to Mr. Garten and Mr. Hardy of $500,000 and $250,000,
respectively, in recognition of their performance during the year.


<PAGE>


Tax Code Limitation on Executive Compensation Deductions

     In 1993,  Congress amended the Internal Revenue Code to impose a $1 million
deduction limit on  compensation  paid to the CEO and the four other most highly
compensated   executive  officers  of  public  companies,   subject  to  certain
transition   rules  and  exceptions  for  compensation   received   pursuant  to
non-discretionary   performance-based   plans   approved   by   such   company's
shareholders.  In  1996,  the  Board  and the  Company's  shareholders  approved
amendments to the Company's Variable  Compensation Plan and Incentive Plan which
permit compensation paid or awards or grants made to executives pursuant to such
plans to continue to qualify for deductibility by the Company.

     The foregoing  report on executive  compensation  has been furnished by the
Company's MDC Committee of the Board of Directors.

                         Mr. Kenneth R. Peak (Chairman)
                      General Thomas P. Stafford (retired)




<PAGE>

                                PERFORMANCE GRAPH

     Set  forth  below  is a line  graph  comparing  the  yearly  change  in the
cumulative total  shareholder  return on the Common Stock against the cumulative
total  return of the S & P  Composite  500 Stock  Index and the S & P  Chemicals
Index for the period commencing  December 31, 1995 and ending December 31, 2000.
The graph  shows the value at  December  31 of each year  assuming  an  original
investment  of $100 and  reinvestment  of dividends and other  distributions  to
shareholders.

     [GRAPHIC  OMITTED - GRAPH  DESCRIPTION]  a line graph  plotting  the points
shown in the chart  below which  compares  the yearly  percentage  change in the
cumulative total  shareholder  return on the Common Stock against the cumulative
total return of the S & P Composite 500 Stock Index and S & P Chemical Index for
the period commencing December 31, 1995 and ending December 31, 2000.

<TABLE>
<CAPTION>
                          1995      1996     1997      1998      1999      2000
                          ----      ----     ----      ----      ----      ----
<S>                       <C>       <C>      <C>       <C>       <C>       <C>
NL Industries, Inc.       $100      $92      $115      $121      $130      $216
S & P 500                 $100      $123     $164      $211      $255      $232
S & P Chemicals Index     $100      $132     $162      $148      $193      $162

</TABLE>


               PROPOSAL TO APPROVE THE VARIABLE COMPENSATION PLAN

General

     The Board  believes  short  term  incentive  compensation  is an  important
element of compensation in order to attract and retain high quality  executives,
officers and employees and provide  further  incentives to such  executives  and
employees to maximize the Company's  annual  financial  performance  and thereby
increase  shareholder value. To this end, in 1989 the Board adopted the Variable
Compensation  Plan to provide an annual  incentive to all  participants  in such
plan and it was  approved by the  shareholders  in 1996.  With the  exception of
Certain Executive  Officers (as defined below),  the Variable  Compensation Plan
rewards  employees  based on a combination  of individual  and business  segment
annual performance. Under the federal tax laws, unless the Variable Compensation
Plan is  reapproved  by the  shareholders  every  five  years,  the costs to the
Company of  continuing  the  Variable  Compensation  Plan will be  increased  by
eliminating  the  deductibility  by the Company of annual  compensation  paid to

<PAGE>

Certain  Executive  Officers in excess of $1 million  unless  such  compensation
qualifies as  performance-based  compensation under the Internal Revenue Code of
1986, as amended (the "Code").  Therefore,  the Board has  recommended  that the
Variable  Compensation Plan, a copy of which is attached hereto as Exhibit B, be
submitted to the Company's  shareholders  for approval.  The  description of the
Variable  Compensation  Plan set forth  herein is  qualified  in it  entirety by
reference to the complete text of such plan, a copy of which is attached  hereto
as Exhibit B.

     THE  AFFIRMATIVE  VOTE OF THE  HOLDERS OF A  MAJORITY  OF THE SHARES OF THE
COMMON  STOCK  PRESENT AT THE ANNUAL  MEETING IS  NECESSARY  FOR APPROVAL OF THE
VARIABLE  COMPENSATION  PLAN.  THE BOARD OF  DIRECTORS  RECOMMENDS  A VOTE "FOR"
APPROVAL OF THE NL INDUSTRIES, INC. VARIABLE COMPENSATION PLAN.

Summary Description of the Plan

     Participation and  Administration.  The Company's  management  selects from
among the Company's regular U.S. salaried  employees those who shall participate
in the  Variable  Compensation  Plan and the  award  group in  which  each  such
participant  shall  be  included;  provided,  however,  that the  Committee  (as
described below) determines  participation by the Company's  executive officers.
Approximately  60 employees,  including  the  Company's CEO and other  executive
officers,  currently participate in the plan. Any of the Company's approximately
90 domestic  employees are eligible to be selected as a participant  in the plan
at any time during the year.  Certain  Executive  Officers may be  designated as
participants  under the plan only during the first 90 days of each fiscal  year.
"Certain Executive Officers" means those executive officers of the Company whose
total  non-performance based compensation from the Company would otherwise be in
excess of the amount deductible by the Company pursuant to Section 162(m) of the
Code.  The  Management  Development  and  Compensation  Committee  or such other
committee as is designated by the Board from time to time (the "Committee") will
be responsible for administration of the plan. The Committee will consist of two
or more members who meet the requirements of Section 162(m) of the Code.

     Determination of Variable Compensation Awards. Prior to the 90th day of the
current fiscal year,  the Board shall approve the annual  operating plan for the
Company and each of its business  segments for such year. Based on such approved
annual operating plan, the Committee shall establish financial performance goals
at three  levels,  the minimum,  target and maximum  performance  levels for the
Company and each of its business  segments.  The Committee,  in its  discretion,
establishes  the  applicable   objective  financial   performance  criteria  for
determining  Company  and  business  segment  performance  levels.  To date  the
Committee  has used  operating  income as the  measure  to  determine  financial
performance under the Variable Compensation Plan. During the first 90-day period
of each year, the Committee also shall set the performance percentage applicable
to each  combination  of  individual  performance  level  and  business  segment
performance level that could be achieved under the Variable Compensation Plan by
the participants under the Variable  Compensation Plan; provided,  however, that
the performance  percentages with respect to Certain Executive Officers shall be
set solely by reference to the applicable  business segment  performance levels.
Performance  percentages  for group I participants  range from 2% to 32% of such
participant's  base  salary,  group II  participants  from 9% to 65%,  group III
participants  from 14% to 120%,  and  group  IV  participants  from 50% to 150%,
depending on the applicable business segment performance level achieved.  In the
event that the achieved  performance by a business  segment is below the minimum
business segment  performance  level for such year, no payments shall be made to
that business  segment's  participants  under the plan.  However,  the CEO, with
respect  to  plan  participants  other  than  the  executive  officers,  and the
Committee,  with respect to  executive  officers  other than  Certain  Executive
Officers,  may approve payments of special awards to participants  designated by
the CEO or the Committee, respectively.


<PAGE>

     Within 90 days of the end of each fiscal year, the Committee determines and
approves  the  performance  level  achieved  by each of the  Company's  business
segments for such ended fiscal  year.  Such levels are then used in  determining
the   corresponding   performance   percentage   and  award  for  each  Variable
Compensation  Plan  participant.  Each  participant's  award  under  the plan is
determined by  multiplying  the  applicable  performance  percentage  times such
participant's  base  salary.  The  Committee  approves  payment of the  variable
compensation  awards in the  aggregate  to all  participants  and to each of the
executive  officers  including  the  CEO.  Except  in the case of death or total
disability,  a  participant  must be  employed  by the  Company  on the date the
Committee  approves the awards for the  completed  fiscal year in order for such
participant  to receive an award under the Variable  Compensation  Plan for such
year. No participant may receive payments under the plan in excess of $3 million
annually.

     The  amounts  that  any  participant  in the  Variable  Compensation  Plan,
including  the  Company's  CEO  and  executive  officers,  will  receive  is not
determinable in advance prior to the completion of the Company's fiscal year and
the  determination by the Committee of the actual  performance level achieved by
the Company and applicable  business  segment for such year. As discussed in the
Compensation  Committee's  Report on Executive  Compensation,  benefits  payable
under the Variable  Compensation  Plan vary depending upon whether the Company's
performance  falls  below the  Minimum  level set by the  Committee,  or exceeds
Minimum,  Target,  or Maximum levels.  Payments under the Variable  Compensation
Plan for each level of  performance  are a percentage of the  individual's  base
salary. The table below sets forth the range of payments possible under the Plan
with respect to 2000. Actual  performance in 2000 exceeded the Maximum level and
therefore the benefits  listed under the heading  "Maximum Level" were paid with
respect to 2000 to the listed  executive  officers and such amounts are included
in the Summary Compensation Table.


<TABLE>
<CAPTION>
                                         Plan Benefits
                                  Variable Compensation Plan

                                Below
     Name & Position           Minimum     Minimum Level    Target Level       Maximum Level
     ---------------           -------     -------------    ------------       -------------
<S>                              <C>        <C>              <C>                <C>
Chief Executive Officer          $0           $300,000         $600,000           $900,000

Executive Vice President         $0           $375,000         $750,000         $1,125,000

Vice President, Chief
 Financial Officer, and
 Treasurer                       $0           $147,917         $295,833           $443,750

Vice President, General
 Counsel and Secretary           $0           $162,500         $325,000           $487,500

Vice President and Controller    $0           $137,500         $275,000           $412,500

All current executive officers
 as a group                      $0         $1,122,917       $2,245,833         $3,368,900

All non-executive directors
 as a group                      N/A            N/A              N/A                N/A

Employees, other than
 executive officers, as a group  $0           $723,700       $1,221,949         $1,591,600
</TABLE>


<PAGE>

     Certain Executive Officers.  The Variable  Compensation Plan, as revised in
1996,  includes  various  limitations  required  by  Section  162(m) of the Code
applicable  only to Certain  Executive  Officers.  For  example,  awards made to
Certain  Executive  Officers  shall  be based  strictly  on the  achievement  of
predetermined  business  segment  performance  levels and not on any  individual
performance  criteria.  The salary used to determine awards to Certain Executive
Officers shall be the actual regular salaries at the rate in effect prior to the
90th day of the applicable fiscal year. Furthermore,  Certain Executive Officers
may not become eligible to participate in the Variable  Compensation  Plan after
the 90th  day of a  fiscal  year and  applicable  business  segment  performance
percentages  and  performance  levels with  respect to such  officers may not be
changed after the first 90 days of the fiscal year.  Finally,  no  discretionary
awards or bonuses may be paid to such officers  under the Variable  Compensation
Plan.  However,  the Committee or the Board may approve  awards or bonuses under
their general authority or under any other discretionary plan.

     In the event the Committee  determines,  on the advice of tax counsel, that
Section  162(m) of the Code will not  adversely  affect  the  deductibility  for
federal income tax purposes of any amount paid to Certain Executive  Officers if
the limitations set forth in the plan with respect to Certain Executive Officers
are not applied,  then the  Committee,  in its  discretion,  may disregard  such
limitations.

     Amendments.  The Committee, in its sole discretion,  without notice, at any
time and from time to time, may modify or amend, in whole or in part, any or all
of the provisions of the Variable  Compensation Plan, or suspend or terminate it
entirely.

     Rights of  Participants  and  Nontransferability.  Nothing in the  Variable
Compensation  Plan  shall  interfere  with or limit in any way the  right of the
Company to  terminate  or change a  participant's  employment  at any time,  nor
confer upon any  participant  any right to continue in the employ of the Company
for any period of time or to continue  such  participant's  present or any other
rate of  compensation.  No  participant  in a  previous  fiscal  year,  or other
employee at any time, shall have a right to be selected for participation in the
Variable  Compensation Plan in a current or future year. No right or interest of
any  participant  in the  Variable  Compensation  Plan  shall be  assignable  or
transferable,  or  subject  to  any  lien,  directly,  by  operation  of  law or
otherwise,  including  execution,  levy,  garnishment,  attachment,  pledge, and
bankruptcy.

     Effective Date. The Variable  Compensation Plan in the form attached hereto
as Exhibit B, shall be effective as of January 1, 2001.


                            CERTAIN RELATIONSHIPS AND TRANSACTIONS

Relationships with Related Parties

     As set forth under the caption  "Security  Ownership,"  Harold C.  Simmons,
through  Valhi and  Tremont,  may be deemed to control NL. The Company and other
entities that may be deemed to be controlled by or affiliated  with Mr.  Simmons
sometimes  engage  in  (a)  intercorporate   transactions  such  as  guarantees,
management  and  expense  sharing  arrangements,  shared fee  arrangements,  tax
sharing agreements,  joint ventures,  partnerships,  loans, options, advances of
funds on open  account,  and sales,  leases and  exchanges of assets,  including
securities  issued  by both  related  and  unrelated  parties,  and  (b)  common
investment and acquisition strategies,  business combinations,  reorganizations,
recapitalizations,  securities  repurchases,  and purchases and sales (and other
acquisitions  and  dispositions)  of  subsidiaries,  divisions or other business
units,  which  transactions have involved both related and unrelated parties and
have included  transactions  which  resulted in the  acquisition  by one related
party of a publicly-held  equity interest in another related party.  The Company
from  time to time  considers,  reviews  and  evaluates,  and  understands  that
Contran,  Valhi  and  related  entities  consider,  review  and  evaluate,  such

<PAGE>

transactions.  Depending  upon  the  business,  tax and  other  objectives  then
relevant,  including, without limitation,  restrictions under certain indentures
and other agreements of the Company,  it is possible that the Company might be a
party to one or more such  transactions  in the future.  It is the policy of the
Company to engage in transactions  with related parties on terms, in the opinion
of the Company,  no less  favorable  to the Company than could be obtained  from
unrelated parties.

     Harold C.  Simmons  and Glenn R.  Simmons,  each a director of NL, are also
directors  and  executive  officers of Valhi and Contran.  Each of the foregoing
persons and Mr.  Martin,  General  Stafford,  and Ms.  Alderton are directors of
Tremont. Mr. Martin, the Company's President and Chief Executive Officer, serves
as an executive officer and director of Tremont and TIMET.  General Stafford and
Glenn R. Simmons  serve as  directors of TIMET.  Glenn R. Simmons also serves as
Chairman  of the Board of  Keystone  and  CompX.  Mr.  Watson,  a  director  and
Assistant Secretary of NL, is also an executive officer of Contran and Valhi and
a director of Valhi,  Contran,  Tremont,  TIMET,  Keystone and CompX. Mr. Garten
serves as  assistant  secretary  of Tremont,  and Mr.  Hardy serves as assistant
treasurer of Tremont and TIMET. Such persons served in their current  capacities
in 2000 and expect to continue  to serve in their  current  capacities  in 2001.
Such management interrelationships and the existing intercorporate relationships
may lead to possible  conflicts of interest.  These possible conflicts may arise
from the duties of loyalty owed by persons  acting as corporate  fiduciaries  of
two or more companies under  circumstances where such companies may have adverse
interests.  Mr. Martin devotes approximately  one-half of his working time to NL
and the  remainder  of his  working  time to TIMET  and  Tremont.  See  "Certain
Contractual Relationships and Transactions" below.

     Although no specific  procedures  are in place that govern the treatment of
transactions among the Company,  Valhi, TIMET, Tremont and related entities, the
boards of directors of each of the Company, Valhi, TIMET and Tremont include one
or more  members who are not  officers or directors of any other entity that may
be  deemed  to  be  related  to  the  Company.  Additionally,  under  applicable
principles  of law, in the absence of  shareholder  ratification  or approval by
directors of the Company who may be deemed disinterested, transactions involving
contracts  among the Company and any other  companies  under common control with
the Company must be fair to all companies involved.  Furthermore,  each director
and officer of the Company owes fiduciary  duties of good faith and fair dealing
with  respect to all  shareholders  of the company or  companies  for which they
serve.


Certain Contractual Relationships and Transactions

     Intercorporate Services Agreements.  The Company and Contran are parties to
an intercorporate  services  agreement (the "Contran ISA") whereby Contran makes
available  to the Company the  services of Harold C. Simmons to consult with the
Company  and  assist in the  development  and  implementation  of the  Company's
strategic  plans and  objectives.  The services do not include  major  corporate
acquisitions,  divestitures  and other special projects outside the scope of the
Company's  business  as it has  been  conducted  in the  past.  NL paid  Contran
approximately  $950,000  in 2000 for  services  pursuant  to the Contran ISA and
expects to pay  approximately  the same  amount in 2001 for such  services.  The
Contran  ISA is subject to  automatic  renewal and may be  terminated  by either
party pursuant to a written notice delivered 30 days prior to a quarter-end. The
Company will continue to pay directors'  fees and expenses  separately to Harold
C. Simmons.  See  "Compensation  of Directors  and Executive  Officers and Other
Information" above.

     The Company and Valhi are parties to an intercorporate  services  agreement
(the "Valhi ISA")  whereby  Valhi  rendered  certain  management,  financial and
administrative  services  to  the  Company  and NL  provided  to  Valhi  certain
insurance  and risk  management  services.  The  Company  paid total net fees of
approximately  $211,000 to Valhi for services  provided  during 2000. NL expects
that in 2001 Valhi, in addition to the services  described  above,  will provide
certain insurance and risk management services to NL and that the total net fees

<PAGE>

NL pays in 2001  will be  higher  than in 2000.  The  Valhi  ISA is  subject  to
automatic  renewal and may be terminated  by either party  pursuant to a written
notice delivered 30 days prior to a quarter-end.

     The Company and Tremont are parties to an intercorporate services agreement
(the  "Tremont  ISA")  whereby the Company  made  available  to Tremont  certain
services  with  respect to  Tremont's  tax,  insurance,  risk  management,  real
property and internal audit needs. Tremont paid fees of approximately $78,000 to
the Company for services  pursuant to the Tremont ISA during  2000.  The Tremont
ISA is  subject to  automatic  renewal  and may be  terminated  by either  party
pursuant to a written notice delivered 30 days prior to a quarter-end.  In 2001,
NL will cease providing real property and risk  management  services to Tremont,
and NL expects  that it will  receive a lower  amount from  Tremont for services
provided.

     The Company and TIMET were parties to an intercorporate  services agreement
(the "TIMET ISA") whereby the Company made  available to TIMET certain  services
with respect to TIMET's tax,  insurance,  risk  management,  real property,  and
internal  audit needs.  TIMET paid fees of  approximately  $368,000 for services
pursuant  to the TIMET ISA during  2000.  The TIMET ISA is subject to  automatic
renewal and may be  terminated  by either  party  pursuant  to a written  notice
delivered 30 days prior to a quarter-end.  In 2001 NL will cease  providing real
property  and risk  management  services  to TIMET and NL  expects  that it will
receive a lower amount from TIMET for services provided.

     The Company and CompX were parties to an intercorporate  services agreement
(the "CompX ISA") whereby the Company made  available to CompX certain  services
with respect to CompX's  occupancy,  accounting,  computer  support and internal
audit needs. CompX paid fees of approximately  $180,000 for services pursuant to
the CompX ISA during 2000.  The CompX ISA was terminated in the first quarter of
2001.

     Aircraft.  The Company owns a 25%  undivided  interest in an aircraft.  The
Company  charged  $48,735,  $24,425,  and  $34,260 to TIMET,  Tremont and CompX,
respectively, for use of the aircraft during 2000.

     Insurance Sharing Agreement. An insurance subsidiary of Tremont has assumed
the  obligations of the issuer of certain  reinsurance  contracts that relate to
primary insurance policies issued by a third-party insurance company in favor of
Tremont and the Company.  The Company and the Tremont  insurance  subsidiary are
parties to an  insurance  sharing  agreement  with  respect to such  reinsurance
contracts (the "Insurance Sharing Agreement").  Under the terms of the Insurance
Sharing Agreement,  the Company will reimburse the Tremont insurance  subsidiary
with respect to certain loss payments and reserves  established  by such Tremont
subsidiary that (a) arise out of claims against the Company and its subsidiaries
(the  "NL  Liabilities"),  and (b)  are  subject  to  payment  by  such  Tremont
subsidiary  under  its  reinsurance  contracts  with the  third-party  insurance
company. Also pursuant to the Insurance Sharing Agreement, the Tremont insurance
subsidiary is to credit the Company with respect to certain underwriting profits
or recoveries that such Tremont subsidiary receives from independent  reinsurers
that relate to the NL  Liabilities.  As of December  31,  2000,  the Company had
current  accounts  payable to such  Tremont  subsidiary  of  approximately  $1.9
million with respect to such  Agreement.  At December 31, 2000,  the Company had
$9.7 million of  restricted  cash  equivalents  that  collateralized  letters of
credit  relating to the NL Liabilities  issued and  outstanding on behalf of the
insurance subsidiary of Tremont pursuant to the Insurance Sharing Agreement.

     Insurance Commissions.  An insurance subsidiary of Tremont, Valmont and EWI
RE,  Inc.  ("EWI")  arrange  for or broker  certain of the  Company's  insurance
policies and those of the Company's 50%-owned joint venture. Valmont is a wholly
owned subsidiary of Valhi. Parties related to Contran own all of the outstanding
common stock of EWI.  Through  December  31,  2000,  a  son-in-law  of Harold C.
Simmons  managed the  operations of EWI.  Subsequent to December 31, 2000,  such
son-in-law  provides  advisory  services to EWI as requested by EWI.  Consistent
with insurance industry  practices,  the Tremont  subsidiary,  Valmont,  and EWI
receive  commissions  from the insurance and  reinsurance  underwriters  for the

<PAGE>

policies  that they  arrange or broker.  The Company and its joint  venture paid
approximately $5.7 million for such policies brokered by the Tremont subsidiary,
Valmont  and EWI in  2000.  These  amounts  principally  included  payments  for
insurance  and  reinsurance  premiums paid to third  parties,  but also included
commissions paid to an insurance subsidiary of Tremont, Valmont, and EWI. In the
Company's  opinion,  the amounts that the Company and its joint venture paid for
these insurance policies and the allocation among the Company and its affiliates
of relative insurance premiums are reasonable and the terms are similar to those
the  Company  and its  joint  venture  could  have  obtained  through  unrelated
insurance  companies and/or broker. The Company expects that these relationships
with the Tremont subsidiary, Valmont, and EWI will continue in 2001.

     Tremont Registration Rights Agreement. In connection with the 1991 purchase
by Tremont of 7.8 million shares of Common Stock from Valhi, the Company entered
into a Registration  Rights Agreement pursuant to which Tremont received certain
registration   rights  with  respect  to  the  purchased   shares.   Unless  all
registration  rights are exercised  earlier,  such agreement expires in December
2001.

     Tax  Sharing  Agreement.  Effective  January 1, 2001,  the  Company and its
qualifying  subsidiaries  will be included  in the  consolidated  United  States
federal tax return of Contran  (the  "Contran  Tax  Group").  As a member of the
Contran  Tax Group,  the  Company  is a party to a tax  sharing  agreement  (the
"Contran Tax  Agreement").  The Contran Tax Agreement  provides that the Company
compute its provision for U.S.  income taxes on a  separate-company  basis using
the tax  elections  made by Contran.  Pursuant to the Contran Tax  Agreement and
using the tax  elections  made by Contran,  the Company will make payments to or
receive  payments  from Valhi in amounts it would have paid to or received  from
the Internal  Revenue Service had it not been a member of the Contran Tax Group.
Refunds are limited to amounts previously paid under the Contran Tax Agreement.

     Investment in Tremont.  During 2000 the Company purchased  1,000,000 shares
of Tremont Common Stock in market  transactions for an aggregate of $26 million.
Before the close of business on December 31,  2000,  the Company held 16% of the
outstanding  Tremont  Common  Stock,   including   approximately  36,000  shares
previously  held  by the  Company,  and  Valhi  held  an  additional  64% of the
outstanding  Tremont  Common  Stock.  Effective  with the close of  business  on
December  31, 2000,  the Company  contributed  substantially  all of its Tremont
Common Stock, and Valhi  contributed all of its Tremont Common Stock, to a newly
formed company,  TGI, in return for a 20% and 80% respective  ownership interest
in TGI. After the contributions, TGI held the 80% of Tremont previously owned by
the Company and Valhi. The Company's stock of TGI is redeemable at the option of
the Company for fair value based upon the value of the underlying Tremont Common
Stock.

     Affiliate Loan  Agreement.  In February 2001, NL  Environmental  Management
Services,  Inc., a majority- owned  subsidiary of the Company,  made a revolving
loan of $13.4 million to Tremont.  The amount available under the revolving loan
is reduced from the original principal amount by $250,000 each quarter beginning
June 30, 2001,  bears interest of 2% above the prime rate,  carries a commitment
fee of 1/2 of 1% per annum of the  unused  line and is due March 31,  2003.  The
loan is  collateralized  by 10.2  million  shares  of NL Common  Stock  owned by
Tremont.

     See also Note (1) to the Aggregated Option Exercise Table on page 14.


                  SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING

     In order to be included in the Company's  2001 Proxy  Statement and form of
proxy, shareholder proposals for the 2001 Annual Meeting of Shareholders must be

<PAGE>

received at the principal  executive  offices of the Company,  16825  Northchase
Drive,  Suite 1200,  Houston,  Texas  77060,  Attention:  Mr.  David B.  Garten,
Secretary, not later than December 15, 2001. All such proposals shall be treated
in accordance with applicable rules administered by the Commission.


                         2000 ANNUAL REPORT ON FORM 10-K

     A copy of the Company's  2000 Annual Report on Form 10-K, as filed with the
Commission,  may be  obtained  without  charge by  writing:  Investor  Relations
Department,  NL Industries,  Inc., 16825 Northchase Drive, Suite 1200,  Houston,
Texas  77060.  The  Annual  Report  on Form  10-K  may also be  accessed  on the
Company's website at www.nl-ind.com.


                                  OTHER MATTERS

     The Board does not know of any business except as described above which may
be  presented  for  consideration  at the Annual  Meeting.  If any  business not
described  in this  Proxy  Statement  should  properly  come  before  the Annual
Meeting,  the persons  designated as agents in the enclosed proxy card or voting
instruction  form will vote on those  matters  in  accordance  with  their  best
judgment.


                                            NL INDUSTRIES, INC.




Houston, Texas
March 30, 2001







<PAGE>



                                    EXHIBIT A

                               NL INDUSTRIES, INC.

                             Audit Committee Charter

                                  May 10, 2000

                                ----------------


                                    ARTICLE I
                                     PURPOSE

     The  Audit  Committee  (the  "Committee")  of  NL  Industries,   Inc.  (the
"Corporation")  assists the  Corporation's  Board of Directors in fulfilling its
oversight  responsibilities  relating to the financial  accounting and reporting
practices of the Corporation.  The Committee's primary  responsibilities  are to
serve  as an  independent  and  objective  party  to  review  the  Corporation's
auditing,  accounting  and  financial  reporting  processes.  The  Committee  is
intended  to  facilitate  communications  between  the  Corporation's  Board  of
Directors,  its  management,  and its internal  and  independent  auditors.  The
Committee  will  primarily  fulfill these  responsibilities  by carrying out the
activities enumerated in Article V of this Charter.

                                   ARTICLE II
                     RELATIONSHIP WITH THE OUTSIDE AUDITORS

     The Corporation's outside auditor is ultimately responsible to the Board of
Directors  and the  Committee.  The Board of  Directors,  with the advice of the
Committee, has the ultimate authority and responsibility to select, evaluate and
replace the outside auditors.

     Management  is  responsible  for  preparing  the  Corporation's   financial
statements.  The Corporation's outside auditors are responsible for auditing the
financial statements.  The activities of the Committee are in no way designed to
supersede or alter these traditional responsibilities.

     The Corporation's  outside auditors,  management and internal auditors have
more  available  time  and  information  about  the  Corporation  than  does the
Committee.  Accordingly,  the  Committee's  role does not  provide  any  special
assurances with regard to the Corporation's  financial  statements,  nor does it
involve a professional  evaluation of the quality of the audits performed by the
outside auditors.

                                   ARTICLE III
                                   COMPOSITION

     The Committee  shall be comprised of three or more  directors as determined
by the Board (provided,  however,  that the number may be less than three to the
extent permitted by applicable law and the requirements of any exchange on which
the  Corporation's  securities  are  listed  from  time-to-time).  The  Board of
Directors  shall also  designate a chairperson  of the  Committee.  The Board of
Directors  shall,  in its  business  judgment,  assure  that each  member of the
Committee  individually  and the Committee as a whole  satisfies in all respects
any  requirements  for audit  committee  membership  or  composition,  including
without  limitation any  requirements  with respect to  independence,  financial
literacy, or financial background, imposed under any applicable law or under the
requirements  of any exchange on which the  Corporation's  securities are listed
from time-to-time.


                                             A-1

<PAGE>



                                   ARTICLE IV
                                    MEETINGS

     The Committee  shall meet regularly and as  circumstances  dictate,  all as
determined  by the  Committee.  Regular  meetings of the  Committee  may be held
without  notice  at such  time and at such  place as shall  from time to time be
determined  by the  chairperson  of the  Committee  or by  the  chief  executive
officer,  president  or secretary of the  Corporation.  Special  meetings of the
Committee may be called by or at the request of any member of the Committee, any
of the Corporation's  executive officers, the Corporation's principal accounting
officer,  the  Corporation's  director of internal auditing or the Corporation's
outside  auditors,  in each case on at least  twenty-  four hours notice to each
member of the Committee.

     If the Board of Directors, management of the Corporation, the Corporation's
director of internal  auditing or the  Corporation's  outside auditors desire to
discuss matters in private, the Committee shall meet separately with such person
or group.

     A majority  of the  Committee  members  shall  constitute  a quorum for the
transaction of the Committee's business. Unless otherwise required by applicable
law, the  Corporation's  certificate of  incorporation or bylaws or the Board of
Directors, the Committee shall act upon the vote or consent of a majority of its
members at a duly called meeting at which a quorum is present. Any action of the
Committee may be taken by a written  instrument  signed by all of the members of
the Committee.  Meetings of the Committee may be held at such place or places as
the Committee  shall determine or as may be specified or fixed in the respective
notices or waivers of a meeting.  Members of the  Committee may  participate  in
Committee proceedings by means of conference telephone or similar communications
equipment by means of which all persons  participating  in the  proceedings  can
hear each other, and such participation  shall constitute  presence in person at
such proceedings.

                                    ARTICLE V
                               SPECIFIC ACTIVITIES

Without  limiting the Committee's  authority,  the Committee shall carry out the
following specific activities.

Section 5.1 Review of Documents and Reports

         (a)     Review and reassess this Charter at least annually.

         (b)     Review  of  the  Corporation's  Annual  Report  on  Form  10-K,
                 including  the  Corporation's  year end  financial  statements,
                 before its release each year.  Consider whether the information
                 contained  in the Annual  Report on Form 10-K is  adequate  and
                 consistent  with the  Committee  members'  knowledge  about the
                 Corporation   and  its   operations.   If   determined   to  be
                 appropriate, recommend that the audited financial statements be
                 included in the Annual Report on Form 10-K.

         (c)     Review and discuss with  management of the  Corporation and the
                 Corporation's   outside  auditors  the  Corporation's   interim
                 financial   statements   (which  may  be  satisfied  through  a
                 discussion  between the outside auditors and the chairperson of
                 the Committee.)

         (d)     Review the  internal  reports  to  management  prepared  by the
                 internal auditors and management's response thereto.


                                             A-2

<PAGE>



Section 5.2.  Internal Auditing

         (a)     Review the activities of the Corporation's internal auditors.

Section 5.3.  Outside Auditors

         (a)     Recommend  to the  Board  of  Directors  the  selection  of the
                 outside  auditors,  consider the independence and effectiveness
                 of the  outside  auditors,  and  approve  the  fees  and  other
                 compensation to be paid to the outside auditors.  The Committee
                 shall  receive the written  disclosures  required by  generally
                 accepted auditing standards.  On an annual basis, the Committee
                 shall  require  the outside  auditors to provide the  Committee
                 with a written statement  delineating all relationships between
                 the outside auditors and the  Corporation.  The Committee shall
                 actively  engage in a dialogue  with the outside  auditor  with
                 respect to any  disclosed  relationships  or services  that may
                 impact the objectivity and independence of the outside auditor.
                 The Committee  shall recommend that the Board of Directors take
                 appropriate  action in response to the outside auditors' report
                 to satisfy itself of the outside auditors' independence.

         (b)     Prior  to the  annual  audit,  review  with  management  of the
                 Corporation and the  Corporation's  outside  auditors the scope
                 and approach of the annual audit.

         (c)     After  the  annual  audit,   review  with   management  of  the
                 Corporation and the Corporation's outside auditors their report
                 on the results of the annual audit.

         (d)     Ensure that the outside  auditors  inform the  Committee of any
                 fraud,  illegal  acts or  deficiencies  in internal  control of
                 which  they  become  aware  and  communicate  certain  required
                 matters to the Committee.

         (e)     Review  with  the  outside   auditors  their   performance  and
                 recommend to the Board of Directors  any proposed  discharge of
                 the outside auditors when circumstances warrant.

         (f)     Direct and supervise special audit inquiries by the internal or
                 outside auditors as the Board of Directors or the Committee may
                 request.

Section 5.4.  Financial Reporting Processes

        (a)    Review  significant  accounting and reporting  issues,  including
               recent  professional  and regulatory  pronouncements  or proposed
               pronouncements,  and understand their impact on the Corporation's
               financial statements.

         (b)     Discuss with the  Corporation's  outside auditors the auditors'
                 judgments about the quality, not just the acceptability, of the
                 Corporation's accounting principles as applied in its financial
                 reporting.

Section 5.5.  Process Improvement

        (a)    Ensure that significant  findings and recommendations made by the
               internal and outside  auditors  are  received and  discussed on a
               timely basis with the Committee and management.

        (b)    Review any  significant  disagreement  among  management  and the
               internal or outside  auditors in connection with the execution of
               the annual audit or the preparation of the financial statements.

                                             A-3

<PAGE>




Section 5.6.  Reporting Responsibilities

        (a)    Regularly   update  the  Board  of  Directors   about   Committee
               activities and make appropriate recommendations.

                                   ARTICLE VI
                                  MISCELLANEOUS

        The  Committee  may perform any other  activities  consistent  with this
Charter,  the  Corporation's   certificate  of  incorporation  and  bylaws,  and
governing law, as the Committee or the Board deems necessary or appropriate.


                                             A-4

<PAGE>



                                    EXHIBIT B

                               NL INDUSTRIES, INC.
                           VARIABLE COMPENSATION PLAN


                                    ARTICLE I
                                     GENERAL

1.1.    Establishment and Purpose of the Plan:

NL  Industries,  Inc., a New Jersey  corporation,  hereby  adopts this  Variable
Compensation Plan (the "Plan"). The purpose of the Plan is to attract and retain
high quality  executives,  officers and employees and provide further incentives
to such  executives  and  employees to maximize the Company's  annual  financial
performance and thereby increase shareholder value.

1.2.    Definitions:

Whenever  used in this Plan,  the  following  terms shall have the  meanings set
forth below unless otherwise expressly provided.

(a) "Award Group" means one of the following groups to which Participants may be
designated  as provided in the Plan or such other groups as may be designated by
the Committee from time to time:
               Group I
               Group II
               Group III
               Group IV

(b) Except as provided in Article VI,  "Base  Salary"  means the regular  salary
actually paid during a Plan Year to a  Participant  while  participating  in the
Plan.  Regular salary shall include any salary reduction  contributions  made to
the Company's  401(k) Plan or other deferred  compensation  plans,  but shall be
exclusive  of any Variable  Compensation  Awards under the Plan and of any other
bonuses, incentive pay, or special awards.

(c)  "Board" means the Board of Directors of NL Industries, Inc.

(d)  "CEO" means the Company's Chief Executive Officer.

(e) "Certain  Executive  Officers" means those Executive Officers of the Company
who are designated by the Committee to be Group III or Group IV Participants and
whose  total  non-performance  based  compensation  from  the  Company  for  the
applicable  Plan Year would  otherwise be in excess of the amount  deductible by
the Company pursuant to Section 162(m) of the Code,  including  Qualifying Group
III Participants.

(f)  "Code" means the Internal Revenue Code of 1986, as amended (the "Code").

(g) "Committee" means the Management  Development and Compensation  Committee of
the Board or such other  committee as may be designated from time to time by the
Board,  which shall consist of two or more members who meet the  requirements of
Section 162(m) of the Code.  The members of the Committee  shall be appointed by
the Board, and any vacancy on the Committee shall be filled by the Board.

(h) "Company" means NL Industries, Inc. and its direct or indirect subsidiaries.

                                             B-1

<PAGE>

(i)  "Company  Performance  Level"  means with  respect to each Award  Group the
Minimum Company  Performance Level,  Target Company Performance Level or Maximum
Company  Performance  Level (each as described in Section 4.3 below) achieved or
to be achieved by the Company or  applicable  Company  business  segment for the
applicable Plan Year.

(j)  "Employee" means a regular U.S. salaried employee of the Company.

(k)  "Executive  Officers"  shall have the  meaning  set forth in rule  16a-1(f)
promulgated under section 16(a) of the Securities Exchange Act of 1934.

(l) "401(k) Plan" means an employee welfare plan of the Company  qualified under
the provisions and regulations of Section 401(k) of the Code.

(m) "Individual  Performance Level" with respect to each Participant  (excluding
Certain Executive Officers) means the individual  performance rating assigned by
the  Company  to such  Participant  for the  applicable  Plan  Year.  Individual
performance  rating  initially  shall  consist of a relative  rating  scale from
"outstanding" to "marginal" for all Participants  (excluding  Certain  Executive
Officers)  for any Plan Year.  The Committee  may  terminate,  change or adopt a
different individual  performance rating scale as it determines appropriate from
time to time.

(n) "Participant"  means an Employee selected or designated for participation in
the Plan for a specified Plan Year including Certain Executive Officers.

(o)  "Performance  Percentage"  with  respect  to Award  Groups  I, II,  and III
(excluding  Qualifying  Group III  Participants,  as  defined  below)  means the
percentage  assigned by the Committee to each such Award Group at each different
combination of Individual  Performance  Level and Company  Performance Level for
such Award Group.  With respect to  Participants  in Award Group III whose total
non-performance based compensation from the Company for the applicable Plan Year
otherwise would be in excess of the amount deductible by the Company pursuant to
Section 162(m) of the Code ("Qualifying Group III Participants"),  no Individual
Performance Level shall be assigned to such Qualifying Group III Participants in
determining the applicable  Performance  Percentage for such Plan Year.  Instead
the Performance  Percentage for Qualifying Group III  Participants  shall be the
highest Performance  Percentage  available at the applicable Company Performance
Level for Award Group III  Participants in general.  The Committee,  in its sole
discretion,  may decrease  such  Performance  Percentage  and the  corresponding
Variable   Compensation   Awards   applicable  to  such  Qualifying   Group  III
Participants.   With  respect  to  Award  Group  IV  Participants,  the  initial
Performance  Percentages for the Company Performance Levels shall be as follows:
150% for Maximum Company  Performance Level, 100% for Target Company Performance
Level and 50% for Minimum Company Performance Level. The Performance Percentages
with  respect to each Award Group for any Plan Year may be set or changed by the
Committee during the first ninety (90) days of such Plan Year.

(p)  "Plan Year" means the Company's fiscal year.

(q) "Variable  Compensation  Award" with respect to any Participant for any Plan
Year  means an amount to be paid by the  Company to such  Participant  under the
terms  of the  Plan  equal  to the  product  of (A) the  applicable  Performance
Percentage for such Participant for such Plan Year, times (B) the Base Salary of
such Participant for such Plan Year.

1.3     Gender and Number:

Except when otherwise  indicated by the context,  words in the masculine gender,
when used in the Plan,  shall include the feminine  gender,  the singular  shall
include the plural, and the plural shall include the singular.

                                             B-2

<PAGE>


                                   ARTICLE II
                           ADMINISTRATION OF THE PLAN

2.1     Administration:

(a) The Plan shall be  administered  by the  Committee.  Except with  respect to
Committee's administrative authority regarding Executive Officers, the Committee
may delegate its day-to-day  administrative  authority regarding the Plan to the
CEO.  The CEO may in turn  re-delegate  from  time to time  said  administrative
authority to such officers and employees of the Company as he deems appropriate.
The Company's  management shall assist and provide such  recommendations  to the
Committee as the Committee may request from time to time in connection  with the
administration of the Plan.

(b) Subject to the limitations of the Plan, the Committee  shall:  (i) designate
the Executive  Officers who shall be Participants  and the Award Groups in which
they shall be  included,  (ii)  designate  and approve  Performance  Percentages
applicable  in  determining   Variable   Compensation   Awards  for  payment  to
Participants  in such forms and amounts as it shall determine from time to time,
(iii) impose such limitations,  restrictions,  and conditions upon such Variable
Compensation  Awards as it shall deem  appropriate,  (iv) interpret the Plan and
adopt,  amend, and rescind  administrative  guidelines relating to the Plan, (v)
correct any defects or omissions or reconcile any  inconsistencies  in the Plan,
the  Performance  Percentages  or in any  Variable  Compensation  Award  granted
hereunder,  and (vi) make all other necessary  determinations and take all other
actions necessary or advisable for the  implementation and administration of the
Plan. The  Committee's  determinations  on matters within its authority shall be
conclusive and binding.

(c) All expenses  associated with the Plan shall be borne by the Company subject
to such  allocation  to its  subsidiaries  and  business  segments  as it  deems
appropriate.


                                   ARTICLE III
                          ELIGIBILITY AND PARTICIPATION

3.1     Eligibility and Participation:

The  Company's  management  shall  determine  the  Employees  to be  selected as
Participants  under the Plan and the Award Group in which each such  Participant
may be  included,  except that  participation  by  Executive  Officers  shall be
determined by the Committee.  Any Employee,  except Certain Executive  Officers,
may be designated and selected as a Participant in the Plan at any time during a
Plan Year, including after the ninetieth (90th) day of such Plan Year.


                                   ARTICLE IV
                          VARIABLE COMPENSATION AWARDS

4.1     Designation of Variable Compensation Awards:

The  Company's  management  shall  approve,  or in  case of  Executive  Officers
recommend to the Committee,  the  Performance  Percentage and the  corresponding
Variable  Compensation  Award to be paid to each  Participant in accordance with
the terms of the Plan for the immediately  preceding Plan Year. Within the first
ninety (90) days

                                             B-3

<PAGE>

after  the  end  of  each  Plan  Year,   the   Committee   shall   review   such
recommendations, make any adjustment it deems appropriate in accordance with the
terms of the  Plan,  and  approve  the grant and  payment  of the  corresponding
Variable Compensation Awards in the aggregate and to the Executive Officers.

4.2     Establishment of Performance Percentages:

Management of the Company shall assist and provide to the Committee management's
recommendations   regarding  the  Performance  Percentages  applicable  to  each
combination of Individual  Performance  Level and Company  Performance Level for
Award Groups I, II and III. No later than the ninetieth  (90th) day of each Plan
Year, the Committee shall review such  recommendations,  make any adjustments it
deems  appropriate  in  accordance  with the terms of the Plan,  and approve the
Performance  Percentages  for Award Groups I, II and III for such Plan Year.  At
that same time, the Committee  also shall set the  Performance  Percentages  for
Group IV Participants.  As described in Section 1.2(o),  Performance Percentages
with respect to Award Group III and Award Group IV  Participants  who qualify as
Certain  Executive  Officers shall be based solely on the achievement of Company
Performance  Levels.  In the event the  Committee  takes no action  prior to the
ninetieth  (90th)  day of such  Plan  Year  to  change,  amend  or  rescind  the
Performance  Percentages in effect for the immediately  preceding Plan Year, the
Performance Percentages for such Plan Year shall be deemed to be the Performance
Percentages for said immediately preceding Plan Year.

4.3     Company Performance Levels:

Prior to the ninetieth (90th) day of a Plan Year, the Company's management shall
make  recommendations  to the Board regarding the annual  operating plan for the
Company  and each of the  Company's  business  segments  for such Plan Year (the
"Annual Operating Plan"). The Board shall approve the Annual Operating Plan with
any modifications it deems  appropriate.  Based on the approved Annual Operating
Plan for such Plan Year, the Committee shall establish the financial performance
goals for the  Company and its  applicable  business  segments at the  following
three levels which shall be designed to help focus the  Participants'  attention
on achieving superior annual financial  performance results in light of existing
conditions: a threshold level, which is the minimum financial performance income
level for any award to be made under the Plan (the "Minimum Company  Performance
Level"),  a target  financial  performance  income  level (the  "Target  Company
Performance  Level"),  and a maximum  financial  performance level (the "Maximum
Company Performance Level"). The Committee shall in its discretion establish the
applicable  objective  Company  financial  performance  criteria for determining
Company Performance Levels.

4.4     Determination of Performance Percentages:

Performance  Percentages  for Award  Group I, Award Group II and Award Group III
Participants  (excluding  Qualifying Group III Participants) shall be based upon
the  Performance  Percentage  assigned by the Committee  for such  Participant's
Award Group with respect to each  combination  of achieved  Company  Performance
Level for such Plan Year and the Individual  Performance  Level achieved by such
Participant  for such Plan  Year.  Performance  Percentages  for  Award  Group I
Participants  will range from 2% to 32%; Award Group II  Participants  initially
will range from 9% to 65%; and Group III Participants  initially will range from
14% to  120%.  Variable  Compensation  Awards  for  Group  IV  Participants  and
Qualifying  Group III  Participants  shall be based solely upon the  Performance
Percentage  assigned  by the  Committee  with  respect to the  achieved  Company
Performance Level. Performance Percentages will range from 50% to 150% for Award
Group  IV  Participants   and  from  60%  to  120%  for  Qualifying   Group  III
Participants,  depending on the Company Performance Level achieved. In the event
that the  Company  Performance  Level  achieved  is below  the  Minimum  Company
Performance  Level,  the  Variable  Compensation  Award  for  Group  IV and  for
Qualifying Group III Participants shall be 0%. The Performance  Percentages with
respect  to each  Award  Group  for any Plan Year may be set or  changed  by the
Committee during the first ninety (90) days of such Plan Year.

                                             B-4

<PAGE>

4.5     Adjustment of Company Performance Levels:

Except with respect to Certain Executive  Officers as provided in Article VI, if
during  any Plan  Year  external  or  internal  changes  or other  unanticipated
business  conditions have materially affected the appropriateness of the Company
Performance  Levels,  the  Committee  may,  in its  sole  discretion,  determine
appropriate  increases or decreases to the Company  Performance  Levels for such
Plan Year.

Participants shall not be entitled to any Variable  Compensation Award under the
Plan unless the Company achieves at the corresponding Company Performance Level;
provided,  however,  except as  provided  in Article  VI, the CEO in the case of
Participants  other than  Executive  Officers,  and the Committee in the case of
Executive Officers other than Certain Executive  Officers,  in their discretion,
may approve payment of special awards to designated Participants.

     4.6  Determination  of Company  Performance  Level  Achieved and Payment of
Variable Compensation Awards:

Within  ninety  (90)  days  after  the  end of each  Plan  Year,  the  Company's
management shall report to the Committee the Company  Performance Level achieved
by the  Company and each  applicable  business  segment for such Plan Year.  The
Committee  shall  review  such  report and  certify in writing or set forth in a
resolution  of the  Committee  the  Company  Performance  Level  achieved by the
Company and each applicable  Company  business  segment for such Plan Year. Such
achieved   Company   Performance   Level  shall  be  used  in  determining   the
corresponding  Performance  Percentage and Variable  Compensation Award for such
Plan Year as provided in Sections 4.1 and 4.4 above. The Committee shall approve
the grant and  payment  of the  corresponding  Variable  Compensation  Awards to
Participants  pursuant to terms of the Plan.  Payment of  Variable  Compensation
Awards shall be made  following  certification  by the  Committee of the Company
Performance  Level  achieved  for such  Plan Year and shall be paid in cash in a
lump sum or  shares  of NL  Common  Stock.  Except as  provided  in  Article  5,
Participants must be employed by the Company on the date the Committee  approves
the Variable  Compensation  Awards to receive the  approved  award for such Plan
Year.

4.7     Limitation on Payments:

The amount  payable to a  Participant  pursuant to this Plan with respect to any
Plan Year shall not exceed $3 million.


                                    ARTICLE V
                            TERMINATION OF EMPLOYMENT

     5.1  Termination of Employment  Due to Death,  Disability,  Retirement,  Or
Transfer To Affiliate Not Included In Plan:

In the event a Participant's employment with the Company is terminated by reason
of death,  total and  permanent  disability,  retirement,  or a  Participant  is
transferred  to an  affiliate  which  does  not  participate  in the  Plan,  the
Participant's  Variable  Compensation  Award shall be based on (i) Participant's
actual Base Salary paid through the date of  termination  or transfer,  and (ii)
the applicable Performance Percentage.  The Variable Compensation Award shall be
paid in accordance with Article IV.

"Total and  permanent  disability"  and  "retirement"  shall have the meaning as
defined in the Retirement Programs of NL Industries, Inc.


                                             B-5

<PAGE>

5.2     Termination For Any Other Reason:

Except for  terminations  listed in Section  5.1,  in the event a  Participant's
employment  is  terminated  for  any  other  reason   including   voluntary  and
involuntary  termination  prior to certification by the Committee of the Company
Performance  Level  achieved for such Plan Year,  the  Participant  shall not be
entitled  to a  Variable  Compensation  Award  with  respect  to such Plan Year.
However,  the CEO,  in his sole  discretion,  may  approve  the  payment to such
Participant of a Variable Compensation Award under the Plan with respect to such
Plan Year,  except that in the case of Executive  Officers the CEO may make such
recommendation  to the  Committee,  which shall have sole  discretion to approve
such award.


                                   ARTICLE VI
                           CERTAIN EXECUTIVE OFFICERS

6.1     Applicability Of Article VI:

The  provisions  of this  Article  VI  shall  apply  only to  Certain  Executive
Officers.  In the event of any  inconsistencies  between this Article VI and the
other Plan provisions, the provisions of this Article VI shall control.

6.2     Definition Applicable To Article VI Only:

The following term shall have the meaning set forth below:

(a) "Base Salary" shall mean as to any Plan Year a Participant's  actual regular
salary at the rate in effect prior to the ninetieth  (90th) day of the Plan Year
and not after the date the Company  Performance Levels are established.  Regular
salary shall include any salary  reduction  contributions  made to the Company's
401(k) Plan or other deferred  compensation plans, but exclusive of any Variable
Compensation Awards under this Plan and of any other bonuses,  incentive pay, or
special awards.

6.3     No Partial Plan Year Participation:

A Certain  Executive Officer who becomes eligible after the ninetieth (90th) day
of a Plan  Year may not  participate  in the Plan for such  Plan  Year,  but may
participate in the Plan for the succeeding Plan Year.

6.4     Components Of Individual Awards:

Each  Variable  Compensation  Award  shall be based  strictly  on the  Company's
achievement of predetermined  Company Performance  Levels.  Prior to ninety (90)
days after the  beginning of the Plan Year,  the Committee  shall  determine the
Company Performance Levels for such Plan Year.

6.5     No Mid-Year Change In Award Percentages:

Variable  Compensation  Awards for  Certain  Executive  Officers  shall be based
solely on the  Performance  Percentage for the applicable  Award Group as set by
the Committee during the first ninety (90) days of the Plan Year.

6.6     No Adjustments Of Performance Goals:

Once  established,  Company  Performance  Levels shall not be changed  after the
first  ninety  (90) days of the Plan  Year with  respect  to  Certain  Executive
Officers. Certain Executive Officers shall not receive any Variable

                                             B-6

<PAGE>

Compensation  Award under this Plan when the Company or the  applicable  Company
business  segment  fails to  achieve  at least the  applicable  Minimum  Company
Performance Level.

6.7     Individual Performance and Discretionary Adjustments:

Individual  performance  shall not be  reflected  in the  Variable  Compensation
Awards to  Certain  Executive  Officers.  However,  the  Committee  retains  the
discretion  to eliminate  or decrease  the amount of the  Variable  Compensation
Award otherwise payable to a Certain Executive Officer.

6.8     Possible Modification:

If, on advice of the Company's tax counsel,  the Committee  determines that Code
Section  162(m) and the  regulations  thereunder  will not adversely  affect the
deductibility  for federal  income tax  purposes of any amount paid to a Certain
Executive Officer under the Plan (i) by applying one or more of Sections 1.2(b),
1.2(m),  1.2(o), 3.1, 4.2, 4.4, or 4.5 to such Certain Executive Officer without
regard  to  the  limitations   regarding  Certain  Executive  Officers  in  such
Section(s) or (ii) by not applying one or more Sections of this Article VI, then
the Committee may, in its sole discretion, disregard such limitations.

6.9     No Discretionary Awards or Bonuses:

No discretionary  awards or bonuses shall be paid to Certain Executive  Officers
pursuant  to this Plan.  However,  nothing in this Plan  shall be  construed  as
limiting  the right of the  Committee  or the  Board to make any other  award or
bonus under their general authority or under any other plan.

                                   ARTICLE VII
                             MISCELLANEOUS PROVISION

7.1     Nontransferability:

No right or  interest  of any  Participant  in the Plan shall be  assignable  or
transferable,  or  subject  to  any  lien,  directly,  by  operation  of  law or
otherwise,  including  execution,  levy,  garnishment,  attachment,  pledge, and
bankruptcy.

7.2     Tax Withholding:

The Company  shall have the right to deduct  from all awards or  payments  under
this Plan, whether paid in cash or stock, any foreign,  Federal, state, or local
taxes required by law to be withheld with respect to such payments.

7.3     Amendments:

The Committee, in its sole discretion, without notice, at any time and from time
to time, may modify or amend,  in whole or in part, any or all of the provisions
of this Plan, or suspend or terminate it entirely.

7.4     Indemnification:

Each person who is or shall have been a member of the  Committee or the Board or
who is or shall have been an  Employee  of the  Company  acting on behalf of the
Committee shall be indemnified and held harmless by the Company against and from
any loss, cost, liability,  or expense,  including without limitation,  fees and
expenses  of legal  counsel,  that  may have  been  imposed  upon or  reasonably
incurred by him in connection with or resulting from any claim, action, suit, or
proceeding  to which he may be a party or in which he may be  involved by reason
of any action  taken or failure to act under the Plan and  against  and from any
and all amounts paid by him in

                                             B-7

<PAGE>

settlement thereof,  with the Company's approval, or paid by him in satisfaction
of any judgment in any such action,  suit or proceeding against him, provided he
shall give the Company an opportunity,  at its own expense, to handle and defend
the same before he  undertakes  to handle and defend it on his own  behalf.  The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification  to which  such  person  may be  entitled  under  the  Company's
Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify him or hold him harmless.

7.5     Beneficiary Designation:

Each Participant  under the Plan may name, from time to time, any beneficiary or
beneficiaries  (who  may be  named  contingently  or  successively)  to whom any
benefit under the Plan is to be paid in case of his death before he received any
or all of such benefit.  Each designation will revoke all prior  designations by
the same Participant,  shall be in a form prescribed by the Company, and will be
effective only when filed by the  Participant in writing with the Company during
his  lifetime.  In the  absence of any such  designation,  or if the  designated
beneficiary  is no  longer  living,  benefits  shall  be paid  to the  surviving
member(s) of the following classes of beneficiaries, with preference for classes
in the order listed below:

     (a)  Participant's  spouse  (unless  the parties  were  divorced or legally
separated by court decree);

(b) Participant's children (including children by adoption);

(c) Participant's parents (including parents by adoption);

(d) Participant's executor or administrator.

Payment of benefits,  in accordance with Section 5.1, shall be made  exclusively
to the  member(s)  of the first  class,  in the order  listed  above,  which has
surviving  member(s).  If that class has more than one member,  benefit payments
shall be made in equal shares among members of the class.

7.6     Rights of Participants:

Nothing in this Plan shall  interfere  with or limit in any way the right of the
Company to  terminate  or change a  Participant's  employment  at any time,  nor
confer upon any Participant,  any right to continue in the employ of the Company
for  any  period  of  time or to  continue  his  present  or any  other  rate of
compensation.  No  Participant in a previous Plan Year, or other employee at any
time, shall have a right to be selected for participation in a current or future
Plan Year.

7.7     Governing Law:

The Plan shall be construed in  accordance  with and governed by the laws of the
State of Texas.

7.8     Effective Date:

The Plan shall be deemed effective as of January 1, 2001.


                                             B-8



<PAGE>

                                   APPENDIX A


                               NL INDUSTRIES, INC.

                       16825 NORTHCHASE DRIVE, SUITE 1200
                              HOUSTON, TEXAS 77060

             PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 9, 2001

The undersigned  hereby appoints David B. Garten and Robert D. Hardy and each of
them, the proxy and  attorney-in-fact  for the  undersigned,  with full power of
substitution  in each, to represent the undersigned and to vote on behalf of the
undersigned at the Annual Meeting of Shareholders  of NL Industries,  Inc. to be
held on May 9, 2001,  and at any  adjournment or  postponement  of such meeting
(the  "Annual  Meeting"),  all  shares of Common  Stock of NL  Industries,  Inc.
standing in the name of the undersigned or which the undersigned may be entitled
to vote on the matters described on the reverse side.

THIS PROXY IS SOLICITED  ON BEHALF OF THE BOARD OF  DIRECTORS OF NL  INDUSTRIES,
INC.

You are  encouraged  to specify your voting  choices by marking the  appropriate
boxes on the  reverse  side of this  card but you need not mark any boxes if you
wish to vote in  accordance  with the Board of Directors'  recommendations.  The
above-named  proxies cannot vote your shares unless you sign,  date and promptly
return this card.  Please use the enclosed  return  envelope.  This proxy may be
revoked by a proxy  accepted at a later date or otherwise as set forth in the NL
Proxy Statement that accompanied this proxy card.


                                            SEE REVERSE
                                            SIDE

<PAGE>

/X/          Please mark your votes as in this example

This  proxy,  if  properly  executed,  will be voted as  specified  below by the
shareholder.  If no  direction  is given,  this  proxy  will be voted  "FOR" all
nominees for Director listed below and "FOR" the Variable Compensation Plan.

The Board of Directors  recommends a vote "FOR" all nominees for Director listed
below and "FOR" the Variable Compensation Plan.

1.   Election of Directors.

     For    Withheld  Election of Directors.
    /  /     /   /    Nominees: 01. J. Landis Martin, 02. Kenneth R. Peak,
                                03. Glenn R. Simmons, 04. Harold C. Simmons,
                                05. General Thomas P. Stafford, 06. Steven L.
                                Watson, and 07. Lawrence A. Wigdor


Withhold authority to vote for the following individual nominees:

---------------------------------------------------

2.Proposal to approve the NL Industries, Inc. Variable Compensation Plan.

     For    Against   Abstain
    /  /     /   /     /   /

3.   In their  discretion,  proxies  are  authorized  to vote  upon  other  such
     business as may properly come before the Annual Meeting or any adjournments
     or postponements thereof.

                              Please sign exactly as shareholder's  name appears
                              on this card.  Joint owners should each sign. When
                              signing  as  attorney,  executor,   administrator,
                              trustee  or  guardian,  please  give full title as
                              such. If a corporation or partnership, please sign
                              full  corporate  or  partnership   name  and  sign
                              authorized person's name and title.

                              The  undersigned  shareholder  hereby  revokes all
                              proxies  heretofore  given by the  undersigned  to
                              vote at the Annual Meeting or any  adjournments or
                              postponements thereof.


                                       ----------------------------------------


                                       ----------------------------------------
                                        SIGNATURE(S)               DATE

<PAGE>

Dear Stockholder:

NL Industries,  Inc. encourages you to take advantage of new and convenient ways
by which  you can vote your  shares.  You can vote  your  shares  electronically
through the Internet or the  telephone.  This  eliminates the need to return the
proxy card.

To vote your shares  electronically,  you must use the control number printed in
the box above, just below the perforation.  The series of numbers that appear in
the box above must be used to access the system.

1.   To vote over the Internet:

     Log on to the Internet and go to the Web site http://www/eproxyvote.com/nl.
     Internet voting will be available until 12:01 A.M. on May 9, 2001.

2.   To vote over the telephone:

     On a touch-tone telephone, call 1-877-PRX-VOTE  (1-877-779-8683) 24 hours a
     day, seven days a week. Telephone voting will be available until 12:01 A.M.
     on May 9, 2001.

     Non-U.S. stockholders should call 1-201-536-8073

Your  electronic  vote authorizes the named Proxies in the same manner as if you
marked,  signed,  dated and  returned  the proxy  card.  If you vote your shares
electronically, do not mail back your proxy card.

                  Your vote is important. Thank you for voting.