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                                                                   EXHIBIT 10.10

                            LONG-TERM INCENTIVE PLAN

                                       OF

                             RELIANT RESOURCES, INC.


         1. PLAN. This Long-Term Incentive Plan of Reliant Resources, Inc. (the
"Plan") was adopted by Reliant Resources, Inc. (the "Company") to reward certain
corporate officers and employees of Reliant Resources, Inc., certain independent
contractors and nonemployee directors of Reliant Resources, Inc.

         2. OBJECTIVES. The purpose of this Plan is to further the interests of
the Company, its Subsidiaries and its shareholders by providing incentives in
the form of awards to employees, independent contractors and directors. Such
awards will recognize and reward outstanding performances and individual
contributions and give Participants in the Plan an interest in the Company
parallel to that of the shareholders, thus enhancing the proprietary and
personal interest of such Participants in the Company's continued success and
progress. This Plan will also enable the Company and its Subsidiaries to attract
and retain such employees, independent contractors and directors.

         3. DEFINITIONS. As used herein, the terms set forth below shall have
the following respective meanings:

                  "ANNUAL DIRECTOR AWARD DATE" means, for each year beginning on
         or after the IPO Closing Date, the first business day of the month next
         succeeding the date upon which the annual meeting of stockholders of
         the Company is held in such year.

                  "AUTHORIZED OFFICER" means the Chairman of the Board or the
         Chief Executive Officer of the Company (or any other senior officer of
         the Company to whom either of them shall delegate the authority to
         execute any Award Agreement, where applicable).

                  "AWARD" means an Employee Award, a Director Award or an
         Independent Contractor Award.

                  "AWARD AGREEMENT" means any Employee Award Agreement, Director
         Award Agreement or Independent Contractor Award Agreement.

                  "BOARD" means the Board of Directors of the Company.

                  "CASH AWARD" means an award denominated in cash.

                  A "CHANGE OF CONTROL" shall be deemed to have occurred upon
         the occurrence of any of the following events:

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                           (a) 30% OWNERSHIP CHANGE: Any Person makes an
                  acquisition of Outstanding Voting Stock and is, immediately
                  thereafter, the beneficial owner of 30% or more of the then
                  Outstanding Voting Stock, unless such acquisition is made
                  directly from the Company in a transaction approved by a
                  majority of the Incumbent Directors; or any group is formed
                  that is the beneficial owner of 30% or more of the Outstanding
                  Voting Stock; or

                           (b) BOARD MAJORITY CHANGE: Individuals who are
                  Incumbent Directors cease for any reason to constitute a
                  majority of the members of the Board; or

                           (c) MAJOR MERGERS AND ACQUISITIONS: Consummation of a
                  Business Combination unless, immediately following such
                  Business Combination, (i) all or substantially all of the
                  individuals and entities that were the beneficial owners of
                  the Outstanding Voting Stock immediately prior to such
                  Business Combination beneficially own, directly or indirectly,
                  more than 70% of the then outstanding shares of voting stock
                  of the parent corporation resulting from such Business
                  Combination in substantially the same relative proportions as
                  their ownership, immediately prior to such Business
                  Combination, of the Outstanding Voting Stock, (ii) if the
                  Business Combination involves the issuance or payment by the
                  Company of consideration to another entity or its
                  shareholders, the total fair market value of such
                  consideration plus the principal amount of the consolidated
                  long-term debt of the entity or business being acquired (in
                  each case, determined as of the date of consummation of such
                  Business Combination by a majority of the Incumbent Directors)
                  does not exceed 50% of the sum of the fair market value of the
                  Outstanding Voting Stock plus the principal amount of the
                  Company's consolidated long-term debt (in each case,
                  determined immediately prior to such consummation by a
                  majority of the Incumbent Directors), (iii) no Person (other
                  than any corporation resulting from such Business Combination)
                  beneficially owns, directly or indirectly, 30% or more of the
                  then outstanding shares of voting stock of the parent
                  corporation resulting from such Business Combination and (iv)
                  a majority of the members of the board of directors of the
                  parent corporation resulting from such Business Combination
                  were Incumbent Directors of the Company immediately prior to
                  consummation of such Business Combination; or

                           (d) MAJOR ASSET DISPOSITIONS: Consummation of a Major
                  Asset Disposition unless, immediately following such Major
                  Asset Disposition, (i) individuals and entities that were
                  beneficial owners of the Outstanding Voting Stock immediately
                  prior to such

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                  Major Asset Disposition beneficially own, directly or
                  indirectly, more than 70% of the then outstanding shares of
                  voting stock of the Company (if it continues to exist) and
                  of the entity that acquires the largest portion of such
                  assets (or the entity, if any, that owns a majority of the
                  outstanding voting stock of such acquiring entity) and (ii)
                  a majority of the members of the board of directors of the
                  Company (if it continues to exist) and of the entity that
                  acquires the largest portion of such assets (or the entity,
                  if any, that owns a majority of the outstanding voting stock
                  of such acquiring entity) were Incumbent Directors of the
                  Company immediately prior to consummation of such Major
                  Asset Disposition.

For purposes of the foregoing,

                           (1) the term "Person" means an individual, entity or
                  group;

                           (2) the term "group" is used as it is defined for
                  purposes of Section 13(d)(3) of the Securities Exchange Act of
                  1934 (the "Exchange Act");

                           (3) the term "beneficial owner" is used as it is
                  defined for purposes of Rule 13d-3 under the Exchange Act;

                           (4) the term "Outstanding Voting Stock" means
                  outstanding voting securities of the Company entitled to vote
                  generally in the election of directors; and any specified
                  percentage or portion of the Outstanding Voting Stock (or of
                  other voting stock) shall be determined based on the combined
                  voting power of such securities;

                           (5) the term "Incumbent Director" means a director of
                  the Company (x) who was a director of the Company on the IPO
                  Closing Date or (y) who becomes a director subsequent to such
                  date and whose election, or nomination for election by the
                  Company's shareholders, was approved by a vote of a majority
                  of the Incumbent Directors at the time of such election or
                  nomination, except that any such director shall not be deemed
                  an Incumbent Director if his or her initial assumption of
                  office occurs as a result of an actual or threatened election
                  contest or other actual or threatened solicitation of proxies
                  by or on behalf of a Person other than the Board;

                           (6) the term "election contest" is used as it is
                  defined for purposes of Rule 14a-11 under the Exchange Act;

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                           (7) the term "Business Combination" means (x) a
                  merger or consolidation involving the Company or its stock or
                  (y) an acquisition by the Company, directly or through one or
                  more subsidiaries, of another entity or its stock or assets;

                           (8) the term "parent corporation resulting from a
                  Business Combination" means the Company if its stock is not
                  acquired or converted in the Business Combination and
                  otherwise means the entity which as a result of such Business
                  Combination owns the Company or all or substantially all the
                  Company's assets either directly or through one or more
                  subsidiaries; and

                           (9) the term "Major Asset Disposition" means the sale
                  or other disposition in one transaction or a series of related
                  transactions of 70% or more of the assets of the Company and
                  its subsidiaries on a consolidated basis; and any specified
                  percentage or portion of the assets of the Company shall be
                  based on fair market value, as determined by a majority of the
                  Incumbent Directors.

                  Notwithstanding anything herein to the contrary, (i) solely
         for purposes of this Change of Control definition and the terms defined
         herein, prior to the proposed spin-off of the Company from Reliant, the
         term "Company" shall mean either the Company or Reliant; and (ii)
         neither the IPO nor the proposed spin-off of the Company from Reliant
         will constitute a Change of Control as contemplated herein.

                  "CODE" means the Internal Revenue Code of 1986, as amended
from time to time.

                  "COMMITTEE" means the Compensation Committee of the Board or
         such other committee of the Board as is designated by the Board to
         administer the Plan; provided, however, that prior to the IPO Closing
         Date, "Committee" shall mean the Compensation Committee of the Board of
         Directors of Reliant.

                  "COMMON STOCK" means the Common Stock, par value $0.001 per
         share, of the Company.

                  "COMPANY" means Reliant Resources, Inc., a Delaware
         corporation, or any successor thereto.

                  "DIRECTOR AWARD" means a Director Option or Stock Award.

                  "DIRECTOR AWARD AGREEMENT" means an agreement setting forth
         the terms, conditions and limitations applicable to a Director Award,
         in such form as the Company may prescribe.

                  "DIRECTOR OPTION" means a Nonqualified Stock Option granted to
         a Nonemployee Director pursuant to paragraph 9 hereof.

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                  "DIVIDEND EQUIVALENTS" means, with respect to shares of
         Restricted Stock that are to be issued at the end of the Restriction
         Period, an amount equal to all dividends and other distributions (or
         the economic equivalent thereof) that are payable to stockholders of
         record during the Restriction Period on a like number of shares of
         Common Stock.

                  "EMPLOYEE" means an employee of the Company or any of its
         Subsidiaries and an individual who has agreed to become an employee of
         the Company or any of its Subsidiaries and is expected to become such
         an employee within the following six months.

                  "EMPLOYEE AWARD" means any Option, SAR, Stock Award, Cash
         Award or Performance Award granted, whether singly, in combination or
         in tandem, to a Participant who is an Employee pursuant to such
         applicable terms, conditions and limitations (including treatment as a
         Performance Award) as the Committee may establish in order to fulfill
         the objectives of the Plan.

                  "EMPLOYEE AWARD AGREEMENT" means a written agreement setting
         forth the terms, conditions and limitations applicable to an Employee
         Award.

                  "FAIR MARKET VALUE" of a share of Common Stock means, as of a
         particular date, (i) if shares of Common Stock are listed on a national
         securities exchange, the average of the highest and lowest sales price
         per share of Common Stock on the consolidated transaction reporting
         system for the principal national securities exchange on which shares
         of Common Stock are listed on that date, or, if there shall have been
         no such sale so reported on that date, on the next preceding date on
         which such a sale was so reported, or, at the discretion of the
         Committee, the price prevailing on the exchange at the time of
         exercise, (ii) if shares of Common Stock are not so listed but are
         quoted on the Nasdaq National Market, the average of the highest and
         lowest sales price per share of Common Stock reported by the Nasdaq
         National Market on that date, or, if there shall have been no such sale
         so reported on that date, on the next preceding date on which such a
         sale was so reported, or, at the discretion of the Committee, the price
         prevailing on the Nasdaq National Market at the time of exercise, (iii)
         if the Common Stock is not so listed or quoted, the average of the
         closing bid and asked price on that date, or, if there are no
         quotations available for such date, on the next preceding date on which
         such quotations shall be available, as reported by the Nasdaq Stock
         Market, or, if not reported by the Nasdaq Stock Market, by the National
         Quotation Bureau Incorporated or (iv) if shares of Common Stock are not
         publicly traded, the most recent value determined by an independent
         appraiser appointed by the Company for such purpose; provided that,
         notwithstanding the foregoing, "Fair Market Value" in the case of any
         Award granted in connection with the IPO means the price per share of
         Common Stock set on the IPO Pricing Date, as set forth in the final
         prospectus relating to the IPO.

                  "GRANT DATE" means the date an Award is granted to a
         Participant pursuant to the Plan.

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                  "GRANT PRICE" means the price at which a Participant may
         exercise his or her right to receive cash or Common Stock, as
         applicable, under the terms of an Award.

                  "INCENTIVE STOCK OPTION" means an Option that is intended to
         comply with the requirements set forth in Section 422 of the Code.

                  "INDEPENDENT CONTRACTOR" means a person providing services to
         the Company or any of its Subsidiaries, or who will provide such
         services, except an Employee or Nonemployee Director.

                  "INDEPENDENT CONTRACTOR AWARD" means any Nonqualified Stock
         Option, SAR, Stock Award, Cash Award or Performance Award granted,
         whether singly, in combination or in tandem, to a Participant who is an
         Independent Contractor pursuant to such applicable terms, conditions
         and limitations as the Committee may establish in order to fulfill the
         objectives of the Plan.

                  "INDEPENDENT CONTRACTOR AWARD AGREEMENT" means a written
         agreement setting forth the terms, conditions and limitations
         applicable to an Independent Contractor Award.

                  "IPO" means the first time a registration statement filed
         under the Securities Act of 1933 and respecting an underwritten primary
         offering by the Company of shares of Common Stock is declared effective
         under that Act and the shares registered by that registration statement
         are issued and sold by the Company (otherwise than pursuant to the
         exercise of any overallotment option).

                  "IPO CLOSING DATE" means the date on which the Company first
         receives payment for the shares of Common Stock it sells in the IPO.

                  "IPO PRICING DATE" means the date of the execution and
         delivery of an underwriting or other purchase agreement among the
         Company and the underwriters relating to the IPO setting forth the
         price at which shares of Common Stock will be issued and sold by the
         Company to the underwriters and the terms and conditions thereof.

                  "NONEMPLOYEE DIRECTOR" means an individual serving as a member
         of the Board who is not an employee of Reliant or any of its
         Subsidiaries or the Company or any of its Subsidiaries.

                  "NONQUALIFIED STOCK OPTION" means an Option that is not an
         Incentive Stock Option.

                  "OPTION" means a right to purchase a specified number of
         shares of Common Stock at a specified Grant Price, which may be an
         Incentive Stock Option or a Nonqualified Stock Option.

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                  "PARTICIPANT" means an Employee, Nonemployee Director or
         Independent Contractor to whom an Award has been granted under this
         Plan.

                  "PERFORMANCE AWARD" means an award made pursuant to this Plan
         to a Participant who is an Employee or Independent Contractor that is
         subject to the attainment of one or more Performance Goals.

                  "PERFORMANCE GOAL" means a standard established by the
         Committee, to determine in whole or in part whether a Performance Award
         shall be earned.

                  "RELIANT" means Reliant Energy, Incorporated, a Texas
         corporation.

                  "RESTRICTED STOCK" means Common Stock that is restricted or
         subject to forfeiture provisions.

                  "RESTRICTION PERIOD" means a period of time beginning as of
         the Grant Date of an Award of Restricted Stock and ending as of the
         date upon which the Common Stock subject to such Award is no longer
         restricted or subject to forfeiture provisions.

                  "STOCK APPRECIATION RIGHT" OR "SAR" means a right to receive a
         payment, in cash or Common Stock, equal to the excess of the Fair
         Market Value or other specified valuation of a specified number of
         shares of Common Stock on the date the right is exercised over a
         specified Grant Price, in each case, as determined by the Committee.

                  "STOCK AWARD" means an Award in the form of shares of Common
         Stock or units denominated in shares of Common Stock, including an
         award of Restricted Stock.

                  "SUBSIDIARY" means (i) in the case of a corporation, any
         corporation of which the Company directly or indirectly owns shares
         representing 50% or more of the combined voting power of the shares of
         all classes or series of capital stock of such corporation which have
         the right to vote generally on matters submitted to a vote of the
         stockholders of such corporation and (ii) in the case of a partnership
         or other business entity not organized as a corporation, any such
         business entity of which the Company directly or indirectly owns 50% or
         more of the voting, capital or profits interests (whether in the form
         of partnership interests, membership interests or otherwise).

         4. ELIGIBILITY.

                  (a) EMPLOYEES. All Employees are eligible for the grant of
         Employee Awards under this Plan.

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                  (b) DIRECTORS. Members of the Board eligible for the grant of
         Director Awards under this Plan are those who are Nonemployee
         Directors.

                  (c) INDEPENDENT CONTRACTORS. All Independent Contractors are
         eligible for the grant of Independent Contractor Awards under this
         Plan.

         5. COMMON STOCK AVAILABLE FOR AWARDS. Subject to the provisions of
paragraph 15 hereof, no Award shall be granted if it shall result in the
aggregate number of shares of Common Stock issued under the Plan plus the number
of shares of Common Stock covered by or subject to Awards then outstanding
(after giving effect to the grant of the Award in question) to exceed 16,000,000
shares. No more than 2,000,000 shares of Common Stock shall be available for
Incentive Stock Options. The number of shares of Common Stock that are subject
to Awards under this Plan that are forfeited or terminated, expire unexercised,
are settled in cash in lieu of Common Stock or in a manner such that all or some
of the shares covered by an Award are not issued to a Participant or are
exchanged for Awards that do not involve Common Stock, shall again immediately
become available for Awards hereunder. The Committee may from time to time adopt
and observe such procedures concerning the counting of shares against the Plan
maximum as it may deem appropriate. The Board and the appropriate officers of
the Company shall from time to time take whatever actions are necessary to file
any required documents with governmental authorities, stock exchanges and
transaction reporting systems to ensure that shares of Common Stock are
available for issuance pursuant to Awards.

         6. ADMINISTRATION.

                  (a) This Plan shall be administered by the Committee except
         as otherwise provided herein.

                  (b) Subject to the provisions hereof, insofar as this Plan
         relates to Employee Awards or Independent Contractor Awards, the
         Committee shall have full and exclusive power and authority to
         administer this Plan and to take all actions that are specifically
         contemplated hereby or are necessary or appropriate in connection with
         the administration hereof. The Board (or its delegee) shall administer
         the Plan with respect to Director Awards. Insofar as this Plan relates
         to Employee Awards or Independent Contractor Awards, the Committee
         shall also have full and exclusive power to interpret this Plan and to
         adopt such rules, regulations and guidelines for carrying out this Plan
         as it may deem necessary or proper, all of which powers shall be
         exercised in the best interests of the Company and in keeping with the
         objectives of this Plan. The Committee may, in its discretion, provide
         for the extension of the exercisability of an Employee Award or
         Independent Contractor Award, accelerate the vesting or exercisability
         of an Employee Award or Independent Contractor Award, eliminate or make
         less restrictive any restrictions applicable to an Employee Award or
         Independent Contractor Award, waive any restriction or other provision
         of this Plan (insofar as such provision relates to Employee Awards or
         to Independent Contractor Awards) or an Employee Award or Independent
         Contractor Award or otherwise amend or modify an Employee Award or
         Independent Contractor Award in any manner that is either (i) not
         adverse to the Participant to whom such Employee Award or

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         Independent Contractor Award was granted or (ii) consented to by such
         Participant. The Committee may grant an Award to an Employee who it
         expects to become an employee of the Company or any of its Subsidiaries
         within the following six months, with such Award being subject to the
         individual's actually becoming an employee within such time period, and
         subject to such other terms and conditions as may be established by the
         Committee. The Committee may correct any defect or supply any omission
         or reconcile any inconsistency in this Plan or in any Employee Award or
         Independent Contractor Award in the manner and to the extent the
         Committee deems necessary or desirable to further the Plan purposes.
         Any decision of the Committee in the interpretation and administration
         of this Plan shall lie within its sole and absolute discretion and
         shall be final, conclusive and binding on all parties concerned.

                  (c) No member of the Committee or officer of the Company to
         whom the Committee has delegated authority in accordance with the
         provisions of paragraph 7 of this Plan shall be liable for anything
         done or omitted to be done by him or her, by any member of the
         Committee or by any officer of the Company in connection with the
         performance of any duties under this Plan, except for his or her own
         willful misconduct or as expressly provided by statute.

         7. DELEGATION OF AUTHORITY. The Committee may delegate to the Chief
Executive Officer and to other senior officers of the Company its duties under
this Plan pursuant to such conditions or limitations as the Committee may
establish. The Committee may engage or authorize the engagement of a third party
administrator to carry out administrative functions under the Plan.

         8. EMPLOYEE AND INDEPENDENT CONTRACTOR AWARDS.

                  (a) The Committee shall determine the type or types of
         Employee Awards to be made under this Plan and shall designate from
         time to time the Employees who are to be the recipients of such Awards.
         Each Employee Award shall be embodied in an Employee Award Agreement,
         which shall contain such terms, conditions and limitations as shall be
         determined by the Committee in its sole discretion and, if required by
         the Committee, shall be signed by the Participant to whom the Employee
         Award is granted and by an Authorized Officer for and on behalf of the
         Company. Employee Awards may consist of those listed in this paragraph
         8(a) and may be granted singly, in combination or in tandem. Employee
         Awards may also be granted in combination or in tandem with, in
         replacement of, or as alternatives to, grants or rights under this Plan
         or any other employee plan of the Company or any of its Subsidiaries,
         including the plan of any acquired entity. An Employee Award may
         provide for the grant or issuance of additional, replacement or
         alternative Employee Awards upon the occurrence of specified events,
         including the exercise of the original Employee Award granted to a
         Participant. All or part of an Employee Award may be subject to
         conditions established by the Committee, which may include, but are not
         limited to, continuous service with the Company and its Subsidiaries,
         achievement of specific business objectives, increases in specified
         indices,

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         attainment of specified growth rates and other comparable measurements
         of performance. Upon the death, disability or termination of
         employment by a Participant who is an Employee, any unexercised,
         deferred, unvested or unpaid Employee Awards shall be treated as set
         forth in the applicable Employee Award Agreement.

                           (i) OPTION. An Employee Award may be in the form of
                  an Option, which may be an Incentive Stock Option or a
                  Nonqualified Stock Option. The Grant Price of an Option shall
                  be not less than the Fair Market Value of the Common Stock on
                  the Grant Date; provided, however, that the Committee may, in
                  its sole discretion, make grants of Nonqualified Stock Options
                  as Employee Awards with an exercise price per share that is
                  less than the Fair Market Value of the Common Stock on the
                  Grant Date with respect to no more than 1,000,000 shares of
                  Common Stock. Subject to the foregoing provisions, the terms,
                  conditions and limitations applicable to any Options awarded
                  to Employees pursuant to this Plan, including the Grant Price,
                  the term of the Options and the date or dates upon which they
                  become exercisable, shall be determined by the Committee.

                           (ii) STOCK APPRECIATION RIGHTS. An Employee Award may
                  be in the form of an SAR. The terms, conditions and
                  limitations applicable to any SARs awarded to Employees
                  pursuant to this Plan, including the Grant Price, the term of
                  any SARs and the date or dates upon which they become
                  exercisable, shall be determined by the Committee.

                           (iii) STOCK AWARD. An Employee Award may be in the
                  form of a Stock Award. The terms, conditions and limitations
                  applicable to any Stock Awards granted pursuant to this Plan
                  shall be determined by the Committee.

                           (iv) CASH AWARD. An Employee Award may be in the
                  form of a Cash Award. The terms, conditions and limitations
                  applicable to any Cash Awards granted pursuant to this Plan
                  shall be determined by the Committee.

                           (v) PERFORMANCE AWARD. Without limiting the type or
                  number of Employee Awards that may be made under the other
                  provisions of this Plan, an Employee Award may be in the form
                  of a Performance Award. A Performance Award shall be paid,
                  vested or otherwise deliverable solely on account of the
                  attainment of one or more pre-established, objective
                  Performance Goals established by the Committee prior to the
                  earlier to occur of (x) 90 days after the commencement of the
                  period of service to which the Performance Goal relates or (y)
                  the lapse of 25% of the period of

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                  service (as scheduled in good faith at the time the goal is
                  established), and in any event while the outcome is
                  substantially uncertain. A Performance Goal is objective if
                  a third party having knowledge of the relevant facts could
                  determine whether the goal is met. Such a Performance Goal
                  may be based on one or more business criteria that apply to
                  the Employee, one or more business units of the Company, or
                  the Company as a whole, and may include one or more of the
                  following: earnings per share, earnings per share growth,
                  total shareholder return, economic value added, cash return
                  on capitalization, increased revenue, revenue ratios (per
                  employee or per customer), net income, stock price, market
                  share, return on equity, return on assets, return on
                  capital, return on capital compared to cost of capital,
                  return on capital employed, return on invested capital,
                  shareholder value, net cash flow, operating income, earnings
                  before interest and taxes, cash flow, cash from operations,
                  cost reductions, cost ratios (per employee or per customer),
                  proceeds from dispositions, project completion time and
                  budget goals, net cash flow before financing activities,
                  customer growth and total market value. Goals may also be
                  based on performance relative to a peer group of companies.
                  Unless otherwise stated, such a Performance Goal need not be
                  based upon an increase or positive result under a particular
                  business criterion and could include, for example,
                  maintaining the status quo or limiting economic losses
                  (measured, in each case, by reference to specific business
                  criteria). In interpreting Plan provisions applicable to
                  Performance Goals and Performance Awards, it is the intent
                  of the Plan to conform with the standards of Section 162(m)
                  of the Code and Treasury Regulation ss. 1.162-27(e)(2)(i),
                  and the Committee in establishing such goals and
                  interpreting the Plan shall be guided by such provisions.
                  Prior to the payment of any compensation based on the
                  achievement of Performance Goals, the Committee must certify
                  in writing that applicable Performance Goals and any of the
                  material terms thereof were, in fact, satisfied. Subject to
                  the foregoing provisions, the terms, conditions and
                  limitations applicable to any Performance Awards made
                  pursuant to this Plan shall be determined by the Committee.

                  (b) Notwithstanding anything to the contrary contained in this
         Plan, the following limitations shall apply to any Employee Awards made
         hereunder:

                           (i) no Participant may be granted, during any
                  calendar year, Employee Awards consisting of Options or SARs
                  that are exercisable for more than 1,500,000 shares of Common
                  Stock;

                           (ii) no Participant may be granted, during any
                  calendar year, Stock Awards covering or relating to more than
                  500,000 shares of Common Stock (the limitation set forth in
                  this clause (ii),

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                  together with the limitation set forth in clause (i) above,
                  being hereinafter collectively referred to as the "Stock
                  Based Awards Limitations"); and

                           (iii) no Participant may be granted Employee Awards
                  consisting of cash or in any other form permitted under this
                  Plan (other than Employee Awards consisting of Options or SARs
                  or Stock Awards) in respect of any calendar year having a
                  value determined on the Grant Date in excess of $3,500,000.

                  (c) The Committee shall have the sole responsibility and
         authority to determine the type or types of Independent Contractor
         Awards to be made under this Plan and the terms, conditions and
         limitations applicable to such Awards, except that Independent
         Contractor Awards may not be in the form of Incentive Stock Options.

         9. DIRECTOR AWARDS. Each Nonemployee Director of the Company shall be
granted Director Awards in accordance with this paragraph 9 and subject to the
applicable terms, conditions and limitations set forth in this Plan and the
applicable Director Award Agreements. Notwithstanding anything to the contrary
contained herein, Director Awards shall not be granted in any year in which a
sufficient number of shares of Common Stock are not available to make all such
scheduled Awards under this Plan.

                  (a) ANNUAL DIRECTOR AWARDS. On each Annual Director Award
         Date, each Nonemployee Director other than the Chairman shall
         automatically be granted a Director Award covering 1,000 shares of
         Common Stock. Such Award shall be nonforfeitable.

                  (b) DIRECTOR OPTIONS. A Director Award shall be in the form of
         a Nonqualified Stock Option. The Grant Price of a Director Option shall
         be equal to the Fair Market Value of the Common Stock on the Grant
         Date. Subject to the foregoing provisions, the terms, conditions and
         limitations applicable to Director Options, including the term of the
         Options and the date or dates upon which they become exercisable, shall
         be determined by the Board. The Board will not permit the repricing of
         Options by any method, including by cancellation and reissuance, and
         will not grant Options to Directors at a price less than Fair Market
         Value on the Grant Date.

                  (c) DIRECTOR AWARD AGREEMENTS. Any Award of Director Awards
         shall be embodied in a Director Award Agreement, which shall contain
         the terms, conditions and limitations set forth above and shall be
         signed by an Authorized Officer for and on behalf of the Company.

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         10. PAYMENT OF AWARDS.

                  (a) GENERAL. Payment made to a Participant pursuant to an
         Award may be made in the form of cash or Common Stock, or a combination
         thereof, and may include such restrictions as the Committee shall
         determine, including, in the case of Common Stock, restrictions on
         transfer and forfeiture provisions. If such payment is made in the form
         of Restricted Stock, the applicable Award Agreement relating to such
         shares shall specify whether they are to be issued at the beginning or
         end of the Restriction Period. In the event that shares of Restricted
         Stock are to be issued at the beginning of the Restriction Period, the
         certificates evidencing such shares (to the extent that such shares are
         so evidenced) shall contain appropriate legends and restrictions that
         describe the terms and conditions of the restrictions applicable
         thereto. In the event that shares of Restricted Stock are to be issued
         at the end of the Restricted Period, the right to receive such shares
         shall be evidenced by book entry registration or in such other manner
         as the Committee may determine.

                  (b) DEFERRAL. With the approval of the Committee, amounts
         payable in respect of Awards may be deferred and paid either in the
         form of installments or as a lump-sum payment. The Committee may permit
         selected Participants to elect to defer payments of some or all types
         of Awards or any other compensation otherwise payable by the Company in
         accordance with procedures established by the Committee. Any deferred
         payment pursuant to an Award, whether elected by the Participant or
         specified by the Award Agreement or by the Committee, may be forfeited
         if and to the extent that the Award Agreement so provides.

                  (c) DIVIDENDS, EARNINGS AND INTEREST. Rights to dividends or
         Dividend Equivalents may be extended to and made part of any Stock
         Award, subject to such terms, conditions and restrictions as the
         Committee may establish. The Committee may also establish rules and
         procedures for the crediting of interest or other earnings on deferred
         cash payments and Dividend Equivalents for Stock Awards.

                  (d) SUBSTITUTION OF AWARDS. Subject to the limitations set
         forth in Section 8(a)(i) and 8(b), at the discretion of the Committee,
         a Participant who is an Employee or Independent Contractor may be
         offered an election to substitute an Employee Award or Independent
         Contractor Award for another Employee Award or Independent Contractor
         Award or Employee Awards or Independent Contractor Awards of the same
         or different type.

                  (e) CASH-OUT OF AWARDS. At the discretion of the Committee, an
         Award that is an Option or SAR may be settled by a cash payment equal
         to the difference between the Fair Market Value per share of Common
         Stock on the date of exercise and the Grant Price of the Award,
         multiplied by the number of shares with respect to which the Award is
         exercised.

                                      -13-

<PAGE>   14

         11. OPTION EXERCISE. The Grant Price shall be paid in full at the time
of exercise in cash or, if permitted by the Committee and elected by the
optionee, the optionee may purchase such shares by means of tendering Common
Stock or surrendering another Award, including Restricted Stock, valued at Fair
Market Value on the date of exercise, or any combination thereof. The Committee
shall determine acceptable methods for Participants to tender Common Stock or
other Awards. The Committee may provide for procedures to permit the exercise or
purchase of such Awards by use of the proceeds to be received from the sale of
Common Stock issuable pursuant to an Award. Unless otherwise provided in the
applicable Award Agreement, in the event shares of Restricted Stock are tendered
as consideration for the exercise of an Option, a number of the shares issued
upon the exercise of the Option, equal to the number of shares of Restricted
Stock used as consideration therefor, shall be subject to the same restrictions
as the Restricted Stock so submitted as well as any additional restrictions that
may be imposed by the Committee. The Committee may adopt additional rules and
procedures regarding the exercise of Options from time to time, provided that
such rules and procedures are not inconsistent with the provisions of this
paragraph.

         12. TAXES. The Company or its designated third party administrator
shall have the right to deduct applicable taxes from any Employee Award payment
and withhold, at the time of delivery or vesting of cash or shares of Common
Stock under this Plan, an appropriate amount of cash or number of shares of
Common Stock or a combination thereof for payment of taxes or other amounts
required by law or to take such other action as may be necessary in the opinion
of the Company to satisfy all obligations for withholding of such taxes,
provided that withholding obligations with respect to Options may only be
satisfied in cash. The Committee may also permit withholding to be satisfied by
the transfer to the Company of shares of Common Stock theretofore owned by the
holder of the Employee Award with respect to which withholding is required,
except with respect to Options. If shares of Common Stock are used to satisfy
tax withholding, such shares shall be valued based on the Fair Market Value when
the tax withholding is required to be made.

         13. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION OF THE PLAN. The
Board may amend, modify, suspend or terminate this Plan for the purpose of
meeting or addressing any changes in legal requirements or for any other purpose
permitted by law, except that (i) no amendment or alteration that would
adversely affect the rights of any Participant under any Award previously
granted to such Participant shall be made without the consent of such
Participant and (ii) no amendment or alteration shall be effective prior to its
approval by the stockholders of the Company to the extent such approval is
required by applicable legal requirements.

         14. ASSIGNABILITY. Unless otherwise determined by the Committee and
provided in the Award Agreement, no Award or any other benefit under this Plan
shall be assignable or otherwise transferable except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act,
or the rules thereunder. The Committee may prescribe and include in applicable
Award Agreements other restrictions on transfer. Any attempted assignment of an
Award or any other benefit under this Plan in violation of this paragraph 14
shall be null and void.

                                      -14-

<PAGE>   15
                  Subject to approval by the Committee in its sole discretion,
all or a portion of the Awards granted to a Participant under the Plan may be
transferable by the Participant, to the extent and only to the extent specified
in such approval, to (i) the spouse, parent, brother, sister, children or
grandchildren (including adopted and stepchildren and grandchildren) of the
Participant ("Immediate Family Members"), (ii) a trust or trusts for the
exclusive benefit of such Immediate Family Members ("Immediate Family Member
Trusts"), or (iii) a partnership or partnerships in which such Immediate Family
Members have at least 99% of the equity, profit and loss interests ("Immediate
Family Member Partnerships"); provided that the Award Agreement pursuant to
which such Awards are granted (or an amendment thereto) must expressly provide
for transferability in a manner consistent with this paragraph. Subsequent
transfers of transferred Awards shall be prohibited except by will or the laws
of descent and distribution, unless such transfers are made to the original
Participant or a person to whom the original Participant could have made a
transfer in the manner described herein. No transfer shall be effective unless
and until written notice of such transfer is provided to and approved by the
Committee, in the form and manner prescribed by the Committee. Following
transfer, any such Awards shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, and, except as
otherwise provided herein, the term "Participant" shall be deemed to refer to
the transferee. The consequences of termination of employment or service shall
continue to be applied with respect to the original Participant, following which
the Awards shall be exercisable by the transferee only to the extent and for the
periods specified in this Plan and the Award Agreement.

         15. ADJUSTMENTS.

                  (a) The existence of outstanding Awards shall not affect in
         any manner the right or power of the Company or its stockholders to
         make or authorize any or all adjustments, recapitalizations,
         reorganizations or other changes in the capital stock of the Company or
         its business or any merger or consolidation of the Company, or any
         issue of bonds, debentures, preferred or prior preference stock
         (whether or not such issue is prior to, on a parity with or junior to
         the Common Stock) or the dissolution or liquidation of the Company, or
         any sale or transfer of all or any part of its assets or business, or
         any other corporate act or proceeding of any kind, whether or not of a
         character similar to that of the acts or proceedings enumerated above.

                  (b) In the event of any subdivision or consolidation of
         outstanding shares of Common Stock, declaration of a dividend payable
         in shares of Common Stock or other stock split, then (i) the number of
         shares of Common Stock reserved under this Plan, (ii) the number of
         shares of Common Stock covered by outstanding Awards, (iii) the Grant
         Price or other price in respect of such Awards, (iv) the appropriate
         Fair Market Value and other price determinations for such Awards, and
         (v) the Stock Based Awards Limitations shall each be proportionately
         adjusted by the Board as appropriate to reflect such transaction. In
         the event of any other recapitalization or capital reorganization of
         the Company, any consolidation or merger of the Company with another
         corporation or entity, the adoption by the Company of any plan of
         exchange affecting the Common Stock or any distribution to holders of
         Common Stock of securities or

                                      -15-

<PAGE>   16

         property (other than normal cash dividends or dividends payable in
         Common Stock), the Board shall make appropriate adjustments to (i) the
         number of shares of Common Stock covered by Awards, (ii) the Grant
         Price or other price in respect of such Awards, (iii) the appropriate
         Fair Market Value and other price determinations for such Awards, and
         (iv) the Stock Based Awards Limitations to reflect such transaction;
         provided that such adjustments shall only be such as are necessary to
         maintain the proportionate interest of the holders of the Awards and
         preserve, without increasing, the value of such Awards. In the event
         of a corporate merger, consolidation, acquisition of property or
         stock, separation, reorganization or liquidation, the Board shall be
         authorized (x) to issue or assume Awards by means of substitution of
         new Awards, as appropriate, for previously issued Awards or to assume
         previously issued Awards as part of such adjustment or (y) to cancel
         Awards that are Options or SARs and give the Participants who are the
         holders of such Awards notice and opportunity to exercise for 30 days
         prior to such cancellation.

         16. RESTRICTIONS. No Common Stock or other form of payment shall be
issued with respect to any Award unless the Company shall be satisfied based on
the advice of its counsel that such issuance will be in compliance with
applicable federal and state securities laws. Certificates evidencing shares of
Common Stock delivered under this Plan (to the extent that such shares are so
evidenced) may be subject to such stop transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any securities exchange
or transaction reporting system upon which the Common Stock is then listed or to
which it is admitted for quotation and any applicable federal or state
securities law. The Committee may cause a legend or legends to be placed upon
such certificates (if any) to make appropriate reference to such restrictions.

         17. UNFUNDED PLAN. This Plan shall be unfunded. Although bookkeeping
accounts may be established with respect to Participants under this Plan, any
such accounts shall be used merely as a bookkeeping convenience. The Company
shall not be required to segregate any assets for purposes of this Plan or
Awards hereunder, nor shall the Company, the Board or the Committee be deemed to
be a trustee of any benefit to be granted under this Plan. Any liability or
obligation of the Company to any Participant with respect to an Award under this
Plan shall be based solely upon any contractual obligations that may be created
by this Plan and any Award Agreement, and no such liability or obligation of the
Company shall be deemed to be secured by any pledge or other encumbrance on any
property of the Company. Neither the Company nor the Board nor the Committee
shall be required to give any security or bond for the performance of any
obligation that may be created by this Plan.

         18. AWARDS TO FOREIGN NATIONALS AND EMPLOYEES OUTSIDE THE UNITED
STATES. To the extent the Committee deems it necessary, appropriate or desirable
to comply with foreign law or practice and to further the purpose of the Plan,
the Committee may, without amending the Plan, (i) establish special rules
applicable to Awards granted to Participants who are foreign nationals, are
employed outside the United States, or both, including rules that differ from
those set forth in this Plan, and (ii) grant Awards to such Participants in
accordance with those rules.

                                      -16-

<PAGE>   17

         19. GOVERNING LAW. This Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, shall be
governed by and construed in accordance with the laws of the State of Texas.

         20. EFFECTIVENESS. The Plan, as approved by the Board, shall be
effective as set forth herein as of January 1, 2001, but all Awards granted
hereunder prior to or effective as of the IPO Closing Date shall be null and
void and canceled without consideration if the IPO Closing Date does not occur
on or before 10 business days after the IPO Pricing Date.. This Plan was
approved by the stockholder of the Company on _________________.

         IN WITNESS WHEREOF, this document has been executed effective as of the
Effective Date.

                                              RELIANT RESOURCES, INC.



                                              By
                                                --------------------------------
                                                Name:
                                                     ---------------------------
                                                Title:
                                                      --------------------------


                                      -17-