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                                                                     EXHIBIT 4.5


                             RELIANT RESOURCES, INC.
                          2002 LONG-TERM INCENTIVE PLAN


         1.       PLAN. This Reliant Resources, Inc. 2002 Long-Term Incentive
Plan (the "Plan") is adopted by Reliant Resources, Inc. (the "Company") to
reward Key Employees and certain 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 Key Employees and certain 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 key employees and directors.

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

                  "AUTHORIZED EXECUTIVE" 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 award granted to a Key Employee or Director
         under the Plan.

                  "AWARD AGREEMENT" means any Key Employee Award Agreement or
         Director 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:

                           (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


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                  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 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


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                  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;

                           (7) the term "Business Combination" means (x) a
                  merger or consolidation involving the Company or its stock or


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                  (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) the
         proposed spin-off of the Company from Reliant will not 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.

                  "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" 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.

                  "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.


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

                  "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.

                  "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 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.

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

                  "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.

                  "KEY EMPLOYEE" means an employee (including an officer as such
         term is defined in Rule 16a-1 under the Exchange Act) of the Company or
         any of its Subsidiaries recognized by the Committee to be key to the
         success of the


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         Company or an individual the Company expects to become a key employee
         of the Company or any of its Subsidiaries within the following six
         months.

                  "KEY 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 a Key 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.

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

                  "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.

                  "PARTICIPANT" means a Key Employee or Director to whom an
         Award has been granted under this Plan.

                  "PERFORMANCE AWARD" means an award made pursuant to this Plan
         to a Participant 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.


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                  "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) KEY EMPLOYEES. All Key Employees are eligible for the
         grant of Key Employee Awards under this Plan.

                  (b) DIRECTORS. All Directors are eligible for the grant of
         Director Awards under this Plan.

         5.       COMMON STOCK AVAILABLE FOR AWARDS. Subject to the provisions
of paragraph 15 hereof, the stock to be subject to Awards under the Plan shall
be the shares of Common Stock of the Company, and the maximum number of shares
of Common Stock with respect to which Awards may be granted under the Plan shall
be 17,500,000 shares (which includes 3,500,000 shares of Common Stock with
respect to which awards under the Long Term Incentive Plan of Reliant Resources,
Inc., adopted effective January 1, 2001 (the "2001" Plan) were authorized but
not granted), of which (i) the number of shares of Common Stock with respect to
which Incentive Stock Options may be granted shall be no more than 2,000,000
shares and (ii) no more than twenty-five percent (25%) of such maximum number of
shares available under the Plan shall be shares of Common Stock with respect to
which Awards other than Options may be granted. Notwithstanding the foregoing
and subject to adjustment as provided in paragraph 15, the maximum number of
shares of Common Stock with respect to which Awards may be granted under this
Plan shall be increased by the number of shares of Common Stock with respect to
which Options or other Awards were granted under the 2001 Plan as of the
effective date of this Plan, but which terminate, expire unexercised, or are
settled for cash, forfeited or cancelled without the delivery of shares of
Common Stock under the terms of the 2001 Plan after the effective date of this
Plan. If, after the effective date of this Plan, any shares of Common Stock
covered by an Award granted under this Plan, or to which such an Award relates,
are forfeited, or if such an Award is settled for cash or otherwise terminates,
expires unexercised, or is canceled without the delivery of shares of Common
Stock, then the shares of Common Stock covered by such Award, or to which such
Award relates, or the number of shares of Common Stock otherwise counted against
the aggregate number of shares of Common Stock with respect to which Awards may
be granted, to the extent of any such settlement, forfeiture,


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termination, expiration, or cancellation, shall again become shares of Common
Stock with respect to which Awards may be granted. In the event that any Option
or other Award granted hereunder is exercised through the delivery of shares of
Common Stock or in the event that withholding tax liabilities arising from such
Award are satisfied by the withholding of shares of Common Stock by the Company,
the number of shares of Common Stock available for Awards under the Plan shall
be increased by the number of shares of Common Stock so surrendered or withheld.
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 Key Employee 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 delegate) shall administer the Plan with respect to Director
         Awards. Insofar as this Plan relates to Key Employee 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 a Key Employee
         Award, accelerate the vesting or exercisability of a Key Employee
         Award, eliminate or make less restrictive any restrictions applicable
         to a Key Employee Award, waive any restriction or other provision of
         this Plan (insofar as such provision relates to Key Employee Awards) or
         a Key Employee Award or otherwise amend or modify a Key Employee Award
         in any manner that is either (i) not adverse to the Participant to whom
         such Key Employee Award was granted or (ii) consented to by such
         Participant. The Committee may grant an Award to a Key Employee who it
         expects to become a Key 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 a Key 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 Key Employee 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.


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                  (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.       KEY EMPLOYEE AWARDS.

                  (a) The Committee shall determine the type or types of Key
         Employee Awards to be made under this Plan and shall designate from
         time to time the Key Employees who are to be the recipients of such
         Awards. Each Key Employee Award shall be embodied in a Key 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 Key Employee Award is granted and by an
         Authorized Executive for and on behalf of the Company. Key Employee
         Awards may consist of those listed in this paragraph 8(a) and may be
         granted singly, in combination or in tandem. Key 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 Key
         Employee plan of the Company or any of its Subsidiaries, including the
         plan of any acquired entity. A Key Employee Award may provide for the
         grant or issuance of additional, replacement or alternative Key
         Employee Awards upon the occurrence of specified events, including the
         exercise of the original Key Employee Award granted to a Participant.
         All or part of a Key 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, attainment of specified growth rates and other comparable
         measurements of performance. Upon the death, disability or termination
         of employment by a Participant who is a Key Employee, any unexercised,
         deferred, unvested or unpaid Key Employee Awards shall be treated as
         set forth in the applicable Key Employee Award Agreement.

                           (i) OPTION. A Key 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 no 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 Key Employee Awards with an exercise price per share that
                  is less than the Fair Market Value of the Common Stock on the
                  Grant


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                  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 Key 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. A Key Employee who has been granted an Option under
                  this Plan may be granted Incentive Stock Options under the
                  Plan if the Committee shall so determine, provided, however,
                  that to the extent the aggregate Fair Market Value (determined
                  at the time the Incentive Stock Option is granted) of the
                  Common Stock with respect to which all Incentive Stock Options
                  are exercisable for the first time by a Key Employee during
                  any calendar year (under all plans of Reliant or any of its
                  Subsidiaries or the Company or any of its Subsidiaries
                  described in Section 422(d) of the Code) exceeds $100,000,
                  such Options shall be treated as Nonqualifed Stock Options.

                           (ii) STOCK APPRECIATION RIGHTS. A Key Employee Award
                  may be in the form of an SAR. The terms, conditions and
                  limitations applicable to any SARs awarded to Key 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. A Key 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. A Key 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 Key Employee Awards that may be made under the other
                  provisions of this Plan, a Key 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 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


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                  or more business criteria that apply to the Key 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, adjusted earnings per share, 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 taxes, 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 or a
                  published index. 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 Section 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 Committee shall determine the terms,
                  conditions and limitations applicable to any Performance
                  Awards made pursuant to this Plan.

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

                           (i) no Participant may be granted, during any
                  calendar year, Key Employee Awards consisting of Options
                  and/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), together with the limitation set forth in
                  clause (i) above, being hereinafter collectively referred to
                  as the "Stock-Based Awards Limitations");

                           (iii) no Participant may be granted Key Employee
                  Awards consisting of cash or in any other form permitted under
                  this Plan (other


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                  than Key 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 $4,000,000; and

                           (iv) if at the time an Option or SAR is otherwise to
                  be granted pursuant to the Plan the optionee or rights holder
                  owns directly or indirectly (within the meaning of Section
                  424(d) of the Code) Common Stock possessing more than ten
                  percent (10%) of the total combined voting power of all
                  classes of stock of Reliant or any of its Subsidiaries or the
                  Company or any of its Subsidiaries (within the meaning of
                  Section 422(b) of the Code), then any Incentive Stock Option
                  to be granted to such optionee or rights holder pursuant to
                  the Plan shall have a Grant Price of no less than 110% of the
                  Fair Market Value of the Common Stock and such Incentive Stock
                  Option by its terms shall not be exercisable after the
                  expiration of five (5) years from the date such Incentive
                  Stock Option is granted in compliance with the requirement of
                  Section 422(c)(5) of the Code.

         9.       DIRECTOR AWARDS. Each Director of the Company may 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) STOCK AWARD. A Director 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
         Board.

                  (b) DIRECTOR OPTIONS. A Director Award may 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
         Director 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 Director Options by any method, including by
         cancellation and reissuance, and will not grant Director 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 Executive for and on behalf of the Company.

         10.      PAYMENT OF AWARDS.


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                  (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 a Key Employee may be offered an election to
         substitute a Key Employee Award for another Key Employee Award 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.

         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


                                       13
<PAGE>


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 taxes at the applicable supplemental rate from
any Key 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 as long as withholding of stock following
the exercise of an Option would result in a charge to earnings. 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 Key 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>


                  Subject to approval by the Committee in its sole discretion,
all or a portion of any Awards granted to a Participant under the Plan, other
than Incentive Stock Options, 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.


                                       15
<PAGE>


                  (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 Committee 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 property (other than normal cash
         dividends or dividends payable in Common Stock), the Committee 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 Committee 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


                                       16

<PAGE>


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 KEY 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.

         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 of the date it is approved by the stockholders of the Company at
the annual meeting of stockholders in 2002. No new Awards shall be granted under
the Plan after the tenth (10th) anniversary of the effective date. Unless
otherwise expressly provided in the Plan or in an applicable Award Agreement,
any Award granted hereunder may, and the authority of the Board or the Committee
to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to
waive any conditions or rights under such Award shall, continue after the
authority for grant of new Awards hereunder has been exhausted.



                                       17
<PAGE>



                                     RELIANT RESOURCES, INC.



                                     By
                                       --------------------------------------
                                        Philip J. Bazelides
                                        Senior Vice President-Human Resources

ATTEST:


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



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