1995 Long-Term Incentive Plan

Eljer Industries, Inc.

May 1995































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Contents
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                                                                         Page

Article 1. Establishment, Purpose, and Duration                            1

Article 2. Definitions                                                     1

Article 3. Administration                                                  4

Article 4. Eligibility and Participation                                   5

Article 5. Establishment of Phantom Stock Units                            6

Article 6. Grant of Phantom Stock Units                                    6

Article 7. Termination of Employment                                       7

Article 8. Change in Control                                               8

Article 9. Payout of Phantom Stock Units                                   8

Article 10. Rights of Participants                                         8

Article 11. Miscellaneous Provisions                                       9

Article 12. Requirements of Law                                           10


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Eljer Industries, Inc.
1995 Long-Term Incentive Plan

Article 1. Establishment, Purpose, and Duration
     1.1  Establishment  of  the  Plan.  Eljer  Industries,   Inc.,  a  Delaware
corporation  (hereinafter  referred to as the "Company"),  hereby establishes an
incentive  compensation  plan to be known as the "Eljer  Industries,  Inc.  1995
Long-Term Incentive Plan" (hereinafter  referred to as the "Plan"), as set forth
in this document.

     The Plan  shall  become  effective  as of April 18,  1995  (the  "Effective
Date"), and shall remain in effect as provided in Section 1.3 herein.

     1.2 Purposes. The  purposes  of  the Plan are to promote the achievement of
long-term  financial  objectives by linking the long-term incentive compensation
of key executives to increases in value of the  Company;  to attract  and retain
executives  of  outstanding  competence;  and  to  encourage  teamwork among key
executives.

     1.3 Duration of the Plan. The Plan shall commence on the Effective Date, as
described in Section 1.1 herein,  and shall remain in effect until terminated by
the Board of  Directors  pursuant  to Section 3.3  herein.  Notwithstanding  the
foregoing, no Award may be granted under the Plan after December 31, 2005.

Article 2. Definitions
     Whenever used in the Plan, the following  terms shall have the meanings set
forth below and, when the meaning is intended, the initial letter of the word is
capitalized:

     2.1 "Accrued Value" means the  appreciation in the worth of a Phantom Stock
Unit  from  the  date of  grant  up to and  including  the  Valuation  Date,  as
determined  by the  Committee  pursuant to a  Valuation.  The  Accrued  Value of
Phantom Stock Units shall not include the Initial Value of such Units.

     2.2 "Award" means,  individually or collectively,  a grant of Phantom Stock
Units under the Plan.

     2.3 "Award  Agreement"  means an agreement  entered into by and between the
Company and each Participant,  setting forth the terms and provisions applicable
to Phantom Stock Units granted under the Plan.

     2.4 "Beneficial Owner" shall have the meaning ascribed to such term in Rule
13d-3 of the General Rules and Regulations under the Securities  Exchange Act of
1934, as amended.


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     2.5 "Board of Directors" or "Board" means the Board of Directors of
the Company.

     2.6 "Change in  Control"  of the Company  means and shall be deemed to have
occurred  as of the first day that any one or more of the  following  conditions
shall have been satisfied:

     (a)   Any  Person (other than those Persons in control of the Company as of
           the  Effective  Date,  or  other  than  a  trustee or other fiduciary
           holding  securities under an employee benefit plan of the Company, or
           a corporation owned directly or indirectly by the stockholders of the
           Company  in  substantially the same proportions as their ownership of
           stock  of  the  Company),  becomes  the Beneficial Owner, directly or
           indirectly,  of  securities  of  the Company representing twenty-five
           percent  (25%)  or more of the combined voting power of the Company's
           then outstanding securities; or

     (b)   During any period of two (2)  consecutive  years (not  including  any
           period prior to the Effective Date of this Plan),  individuals who at
           the  beginning  of such  period  constitute  the  Board  (and any new
           Director,  whose election by the Company's  stockholders was approved
           by a vote of at least two-thirds (2/3) of the Directors then still in
           office who either were  Directors  at the  beginning of the period or
           whose election or nomination for election was so approved), cease for
           any reason to constitute a majority thereof; or

     (c)   The  stockholders  of  the  Company  approve:  (i) a plan of complete
           liquidation  of  the  Company;  or  (ii) an agreement for the sale or
           disposition  of  all  or  substantially  all the Company's assets; or
           (iii) a merger, consolidation, or  reorganization of the Company with
           or   involving   any   other   corporation,  other  than  a   merger,
           consolidation,  or  reorganization  that  would  result in the voting
           securities  of  the  Company  outstanding  immediately  prior thereto
           continuing  to represent (either by remaining outstanding or by being
           converted  into  voting  securities of the surviving entity) at least
           fifty  percent  (50%)  of  the  combined  voting  power of the voting
           securities  of  the  Company  (or  such surviving entity) outstanding
           immediately after such merger, consolidation, or reorganization.

           However,  in no event  shall a Change  in  Control  be deemed to have
     occurred,  with respect to a Participant,  if such Participant is part of a
     purchasing group which  consummates the  Change-in-Control  transaction.  A
     Participant  shall be deemed "part of a  purchasing  group" for purposes of
     the preceding  sentence if such Participant is an equity participant in the
     purchasing company or group (except for:





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     (i) passive  ownership of less than three  percent (3%) of the stock of the
     purchasing  company;  or (ii)  ownership  of  equity  participation  in the
     purchasing  company  or  group  which  is  otherwise  not  significant,  as
     determined  prior to the Change in Control by a majority of the nonemployee
     continuing Directors).

           Further,  notwithstanding  any other  provision  of this Plan,  in no
     event  shall a Change in  Control  be deemed to have  occurred  as a direct
     result of the contribution by the Company of common stock of the Company in
     the United States Brass  Corporation  ("U.S.  Brass") Chapter 11 bankruptcy
     case to settle,  defend,  release, or otherwise resolve any liability of or
     claim  against the Company  arising in  connection  with the  manuyfacture,
     marketing  or sale of  polybutylene  plumbing  systems  by U.S.  Brass,  as
     determined by the Committee in its sole discretion.

     2.7 "Committee" shall mean the Compensation Committee of the Board.

     2.8  "Company"  means  Eljer  Industries,   Inc.,  a  Delaware  corporation
(including any and all subsidiaries),  and any successor thereto, as provided in
Section 11.5 hereof.

     2.9 "Director" means an individual who is a member of the Board of
Directors of the Company.

     2.10 "Disability" means permanent and total disability,  within the meaning
of Code Section 22(e)(3), as determined by the Committee in the exercise of good
faith and  reasonable  judgment,  upon receipt of and in reliance on  sufficient
competent  medical  advice  from  one  or  more  individuals,  selected  by  the
Committee, who are qualified to give professional medical advice.

     2.11 "Initial Value" means the value of a Phantom Stock Unit on the date of
grant, as determined by the Committee pursuant to Section 5.2 hereof.

     2.12 "Key Employee" means a key officer or selected  manager of the Company
who is in a  position  to  directly  or  indirectly  make  or  influence  policy
decisions which materially impact the Company's continued growth and development
and its long-term financial success, as determined by the Committee.

     2.13 "Normal Retirement" shall mean the date a Participant attains age 65.

     2.14 "Participant"  means a Key Employee of the Company who has received an
Award under this Plan.


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     2.15  "Performance  Period" means the time period  beginning on the date of
grant of Phantom Stock Units and ending three years following the date of grant,
or such other period specified by the Committee for each Award.

     2.16 "Phantom Stock Unit" or "Unit" means an Award granted to a Participant
as a measure of  participation  under the Plan, and having a value which changes
in direct  relation to changes in the value of the Company's  common  stock,  as
determined pursuant to a Valuation.

     2.17  "Person"  shall  have the  meaning  ascribed  to such term in Section
3(a)(9) of the Securities Exchange Act of 1934, as amended,  and used in Section
13(d) and 14(d) thereof, including a "group" as defined in Section 13(d).

     2.18 "Plan" means the Eljer Industries, Inc. 1995 Long-Term Incentive Plan,
as set forth herein.

     2.19 "Plan Year" means the Company's fiscal year.

     2.20  "Valuation"  means an appraisal of the worth of a Phantom  Stock Unit
based on changes in the value of the Company's  common  stock,  as determined by
the Committee pursuant to Article 5 hereof; provided, however, that for purposes
of conducting a Valuation  hereunder,  the Value of the  Company's  common stock
shall be based on the average of the high and the low selling price of shares of
common stock of the Company on the principal  securities  exchange on which such
shares are publicly traded for the ten (10) trading days  immediately  preceding
and following the Valuation Date.

     2.21 "Valuation Date" means the last day of the Performance  Period or such
other date on which the  Committee  authorizes  the Valuation of a Phantom Stock
Unit pursuant to the terms and conditions of this Plan.

Article 3. Administration
     3.1 The Committee. The Plan shall be administered by the Committee.

     3.2 Authority of the Committee. Subject to the provisions herein, except as
limited by law or by the  Company's  Articles of  Incorporation  or Bylaws,  the
Committee  shall have full power to: (i) select Key Employees to  participate in
the Plan; (ii) determine the size and frequency of grants (which need not be the
same for each  Participant);  (iii)  determine the terms and  conditions of each
grant in a manner  consistent with the provisions of the Plan; (iv) construe and
interpret the Plan and any agreement or instrument  entered into under the Plan;
(v) establish, amend, rescind, or waive rules and regulations for the


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Plan's  administration;  and (vi)  (subject  to the  provisions  of Section  3.3
herein) amend,  modify,  and/or terminate the Plan. Further, the Committee shall
have the full power to make all other  determinations  which may be necessary or
advisable for the  administration  of the Plan to the extent consistent with the
Plan.

     Except as limited by applicable law, the Committee, at its discretion,  has
the right to delegate any or all of its administrative duties to any employee or
employees  of  the  Company;  and  to  rely  on  outside  counsel,   independent
accountants,  or  other  consultants  to  render  advice  and/or  assistance  in
fulfilling any of its administrative duties hereunder.

     3.3  Amendment,  Modification,  and  Termination.  The  Committee,  at  its
discretion, without prior 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 Plan, or may
suspend or terminate the Plan at any time.

     Notwithstanding the foregoing, other than as permitted by the Plan, no such
amendment,  modification,  suspension,  or  termination  by the Committee or the
Board may materially  adversely affect any outstanding Phantom Stock Unit or the
rights  attached  thereto,  without the written consent of the Participant (or a
Participant's beneficiary, as appropriate).

     3.4  Decisions  Binding.  All  determinations  and  decisions  made  by the
Committee  pursuant  to the  provisions  of the Plan and all  related  orders or
resolutions of the Board of Directors shall be final, conclusive, and binding on
all persons, including the Company, its employees,  Participants,  and any other
person claiming an interest under the Plan.

Article 4. Eligibility and Participation
     4.1 Eligibility. Eligibility for participation in the Plan shall be limited
to Key Employees, as determined by the Committee, at its sole discretion.

     4.2  Participation.  Subject  to the  provisions  of the  Plan,  the  Chief
Executive  Officer of the Company will identify and the Committee  shall approve
which,  if any,  Key  Employees  shall  receive a grant of Phantom  Stock  Units
hereunder.  The Chief Executive Officer may be nominated for participation  only
by the Committee Chairperson or a majority of the members of the Committee.

     As soon as practicable  following selection and approval for participation,
each Participant shall execute an Award Agreement with the Company,  as provided
in Section  6.3  herein,  which  shall  contain a  description  of the number of
Phantom Stock Units granted,  and all material terms and conditions to which the
Phantom Stock Units are subject.



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Article 5. Establishment of Phantom Stock Units
     5.1 Number of Phantom  Stock Units  Available.  The number of Phantom Stock
Units  which may be granted  in the  aggregate  under this Plan is four  hundred
thousand (400,000). Phantom Stock Units which lapse, expire or terminate for any
reason  without  payment  shall once again become  available for grant under the
Plan.

     5.2 Value of Phantom  Stock Units.  Each  Phantom  Stock Unit shall have an
Initial Value that is equal to the average of the high and the low selling price
of one share of common stock of the Company on the principal securities exchange
on which such Company  shares are publicly  traded as of the date such Units are
deemed to be granted,  or if there is no such sale on the relevant date, then on
the last previous day on which a sale was reported.

     Subsequent  to such date of grant,  the value of each  Phantom  Stock  Unit
shall  change in direct  relationship  to changes in the value of a share of the
Company's  common stock as determined by the Committee  pursuant to a Valuation.
The  Committee,  subject  to the terms of the Plan,  shall  establish  rules and
procedures which shall govern the determination of the Initial Value and Accrued
Value of Phantom Stock Units granted hereunder.

     5.3  Adjustments.  In the event of any change in corporate  capitalization,
such  as  a  stock  split  or  a  corporate  transaction  such  as  any  merger,
consolidation,  separation,  including a spin-off or other distribution of stock
or  property  of  the  Company,   any   reorganization   (whether  or  not  such
reorganization  comes within the definition of such term in Code Section 368) or
any partial or complete  liquidation of the Company,  such  adjustment  shall be
made in the number of Phantom Stock Units subject to outstanding  Awards granted
under the Plan,  as may be  determined  to be  appropriate  and equitable by the
Committee, in its sole discretion, to prevent dilution or enlargement of rights;
provided,  however, that the Committee, in its sole discretion, may refrain from
making any such  adjustment (or may make any  adjustment it deems  advisable) in
the event such  change in  corporate  capitalization  is a direct  result of the
contribution  by the Company of common  stock of the  Company in the U.S.  Brass
Chapter 11 bankruptcy case to settle, defend,  release, or otherwise resolve any
liability  of or claim  against  the  Company  arising  in  connection  with the
manufacture, marketing or sale of polybutylene plumbing systems by U.S. Brass.

Article 6. Grant of Phantom Stock Units
     6.1 Grant of Phantom Stock Units. Subject to the terms of the Plan, Phantom
Stock Units may be granted to eligible  key  Employees at any time and from time
to time,  as shall be  determined by the  Committee.  The  Committee  shall have
complete  discretion  in  determining  the number and frequency of Phantom Stock
Units granted to each Participant.



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     6.2 Vesting of Phantom Stock Units.  Subject to the terms of Articles 7 and
8 herein, a Participant's  Phantom Stock Units shall become vested at the end of
the applicable  Performance  Period or on such other date or dates as determined
by the Committee in its sole discretion.

     6.3 Award  Agreement.  Each grant under the Plan shall be  evidenced  by an
Award  Agreement.  Each  Award  Agreement  shall be signed by an  officer of the
Company and by the Participant,  and shall contain the terms and conditions that
apply to the grant, which shall include, but shall not be limited to, the number
of Phantom Stock Units granted, the Initial Value assigned to each Phantom Stock
Unit, the vesting period of the Phantom Stock Units, and the timing, calculation
of,  and  conditions  to payout of  Phantom  Stock  Units.  Except as  otherwise
provided by the Plan, the included terms and conditions need not be the same for
each Participant, nor for each grant.

     6.4  Phantom  Stock  Unit  Account.  A Phantom  Stock  Unit  Account  ("the
Account")   shall  be  established  and  maintained  by  the  Company  for  each
Participant  that receives an Award under the Plan. As the value of each Phantom
Stock Unit changes,  the Account established on behalf of each Participant shall
be adjusted  accordingly.  Each Account shall be the record of the Phantom Stock
Units granted to the Participant  under the Plan on each applicable  grant date,
is  maintained  solely  for  accounting  purposes,   and  shall  not  require  a
segregation of any Company assets.

Article 7. Termination of Employment
     7.1  Termination  of  Employment  Due  to  Death,  Disability,   or  Normal
Retirement. In the event the employment of a Participant is terminated by reason
of death,  Disability,  or Normal Retirement prior to the end of the Performance
Period, the Participant's  Phantom Stock Units shall vest, and shall be paid, in
cash, as soon as practicable following the effective date of such termination of
employment.  In such  event,  the amount of payout of such  Phantom  Stock Units
shall be determined by the Committee on the terms set forth in the Participant's
Award Agreement and in the Plan. Such terms may include, but are not limited to,
the  proration of the amount of payout based on the number of months  during the
applicable  Performance  Period in which the  Participant  was  employed  by the
Company.

     7.2  Termination  of  Employment  for  Other  Reasons.  In  the  event  the
employment  of a  Participant  is  terminated  prior to the end of a Performance
Period for any reason other than those  reasons set forth in Section 7.1 herein,
all Phantom  Stock Units shall be forfeited by the  Participant  to the Company,
without payment to the Participant, unless provided otherwise by the Committee.



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Article 8. Change in Control
     In the event of a Change  in  Control  of the  Company,  the  Participant's
Phantom Stock Units shall become  immediately vested as of the effective date of
such Change in  Control.  The Accrued  Value of all of a  Participant's  Phantom
Stock Units shall be paid, in cash, as soon as practicable thereafter, but in no
event later than thirty (30) days  following the effective date of the Change in
Control.

Article 9. Payout of Phantom Stock Units
     9.1 Amount of Payout.  Except as provided otherwise in this Plan, the total
amount  payable to a  Participant  shall be the  aggregate  Accrued Value of the
Participant's  vested Phantom Stock Units, if any, at the end of the Performance
Period,  or at such other  Valuation  Date  established  by the  Committee.  The
Accrued Value shall not include the Initial Value of such Phantom Stock Units.

     9.2 Timing of Payout.  Except as  otherwise  provided  herein,  the Accrued
Value of Phantom Stock Units determined  pursuant to the terms of the Plan shall
be paid to  Participants,  in cash, as soon as practicable  following the end of
the  Performance  Period,  but in no event later than thirty (30) days following
the end of the Performance Period, as provided herein.

     9.3 Deferral of Payout. The Committee may permit a Participant to defer his
or her receipt of cash that would otherwise be due with respect to Phantom Stock
Units  granted  under the Plan.  If such  deferral  election is  permitted,  the
Committee shall, in its sole discretion, establish rules and procedures for such
payment deferrals.

Article 10. Rights of Participants
     10.1 Employment. Nothing in this Plan shall interfere with, or limit in any
way, the right of the Company to terminate any  Participant's  employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Company.

     10.2 Participation. No Participant or other employee shall, at any time,
have a right to be selected for participation in the Plan.

     10.3 Nontransferability.  No Phantom Stock Unit, right, or interest granted
to a Participant under this Plan may be sold, transferred, pledged, assigned, or
otherwise  alienated  or  hypothecated,  other  than by  will or by the  laws of
descent and distribution.

     10.4 Beneficiary  Designation.  Each Participant  under this Plan may, from
time  to  time,  name  any  beneficiary  or  beneficiaries  (who  may  be  named
contingently or successively) to whom any amount under the Plan is to be paid in
case of the  Participant's  death before  receipt of any or all of such amounts.
Each designation  shall revoke all prior  designations by the same  Participant,
shall be in a form prescribed by the Committee,  and will be effective only when
filed by the  Participant  in  writing  with  the  Committee  during  his or her
lifetime. In the absence of any such



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designation, amounts remaining unpaid at the Participant's death shall be paid
to the Participant's estate.

     10.5 Employee  Benefit Plans.  Phantom Stock Units and any amounts  payable
hereunder shall not be considered part of covered  compensation  for purposes of
any of the Company's qualified or non-qualified employee benefit plans.

Article 11. Miscellaneous Provisions
     11.1 Gender and Number.  Except where  otherwise  indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.

     11.2  Severability.  In the event that any  provision  of the Plan shall be
held illegal or invalid for any reason,  the illegality or invalidity  shall not
affect the  remaining  parts of the Plan,  and the Plan shall be  construed  and
enforced as if the illegal or invalid provision had not been included.

     11.3 Costs of the Plan.  All costs of the Plan  including,  but not limited
to, payout of Phantom Stock Units and administrative expenses, shall be incurred
by the Company out of the Company's general assets. Although not prohibited from
doing so, the  Company is not  required  in any way to  segregate  assets in any
manner or to specifically fund the benefits provided under this Plan.

     11.4 Tax  Withholding.  The Company shall have the right to deduct from any
payments under this Plan any federal,  state,  or local taxes required by law to
be withheld with respect to such payments.

     11.5  Successors.  All  obligations  of the  Company  under  this Plan with
respect to Phantom Stock Units, and the corresponding  rights granted hereunder,
shall be binding on any successor to the Company,  whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation,
or otherwise of all or substantially all of the voting  interests,  the business
and/or the assets of the Company.

     11.6 Indemnification. Each person who is or shall have been a member of the
Committee,  or the Board,  shall be indemnified and held harmless by the Company
against and from any loss, cost, liability,  or expense that may be imposed upon
or reasonably  incurred by him or her in connection  with or resulting  from any
claim, action, suit, or proceeding to which he or she may be a party or in which
he or she 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 or her in
settlement thereof, with the Company's approval, or


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paid by him or her in satisfaction of any judgment in any such action,  suit, or
proceeding  against  him or her,  provided  he or she shall give the  Company an
opportunity,  at its own expense, to handle and defend the same before he or she
undertakes to handle and defend it on his or her own behalf.

     The foregoing right of indemnification  shall not be exclusive of any other
rights of  indemnification  to which such  persons may be  entitled  through any
authority that the Company may have to indemnify them or hold them harmless,  or
by operation of law.

Article 12. Requirements of Law
     12.1  Requirements  of Law.  The  granting,  administration,  and payout of
Phantom  Stock  Units under this Plan shall be subject to all  applicable  laws,
rules,  and  regulations and to such approvals by any  governmental  agencies or
national securities exchanges as may be required.

     12.2       Governing Law. To the extent not preempted by federal law, this
Plan and all agreements hereunder shall be construed in accordance with and
governed by the laws of the state of Texas.



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