MEMORANDUM
                                  CONFIDENTIAL

TO:               Robert D. Hardy
DATE:             July 16, 2003
FROM:             Harold C. Simmons
                  Steven L. Watson

RE:               NL Industries, Inc.

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The terms of your separation from NL Industries,  Inc. and its subsidiaries will
be in accordance with the following:

1)   You will  continue  in the  position  of Vice  President,  Chief  Financial
     Officer and  Controller  for each of NL and KII until the respective NL and
     KII 2nd quarter Form 10-Q's and ancillary documents are filed with the SEC.
     Your  responsibilities  will  include  executing  required   certifications
     related to  historical  financial  statements  included  in SEC  filings or
     otherwise for periods during which you have held the  applicable  position.
     You will continue  providing services on a full time basis, as requested by
     our  designee(s),  and be paid salary at an annual rate of $400,000 through
     9/30/03.

2)   From  9/30/03 to  12/31/03  you will serve as a  consultant  to NL on an as
     needed basis consistent with your search for a new employment position. You
     will be paid semi-monthly at an annual rate of $400,000 through 12/31/03.

3)   Lump sum severance/bonus  payments of $200,000 each will be paid on 9/30/03
     and 12/31/03. These payments will extinguish all obligations due to you and
     you will not be entitled to any other severance or bonus payments under any
     agreements, plans or policies.

4)   Stock option and employee benefits, other than severance and bonus plans or
     policies,  will be governed by the terms of the applicable plans, with your
     effective  termination date deemed being (i) with respect to stock options,
     6/30/04,  and (ii) with respect to all other applicable  employee benefits,
     the earlier of 12/31/03 or the date upon which you secure  other  full-time
     employment.

5)   From 1/1/04 through 6/30/04 a consulting retainer will be paid at a rate of
     $15,000 per month, plus  reimbursement of your reasonable  expenses,  which
     will terminate upon your attainment of other full-time employment.  NL will
     be entitled to up to 50 hours of your  services per month in return for the
     retainer. Hours exceeding 50 hours per month will be paid at a rate of $200
     per hour.  Subsequent to the  termination of the consulting  retainer,  you
     agree to provide consulting services as may be reasonably requested,  which
     are  consistent  with your time  availability,  at a rate of $200 per hour,
     plus reimbursement of your reasonable expenses.

6)   It is understood  that your work  performance  during the periods set forth
     above will be consistent with your prior performance.

Acknowledged and Agreed:

By: /s/Robert D. Hardy                                        Date: 07/17/03
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