Document:

<PAGE>   1
                                                                 EXHIBIT 10.9

                             RELIANT RESOURCES, INC.
                       ANNUAL INCENTIVE COMPENSATION PLAN

                   (As Established Effective January 1, 2001)

                                    RECITALS

         Reliant Resources, Inc., a Delaware corporation (the "Company"), with
its principal place of business in Houston, Harris County, Texas, hereby
establishes the Reliant Resources, Inc. Annual Incentive Compensation Plan (the
"Plan"), for the benefit of its eligible employees as follows:

     1. PURPOSE: The purpose of the Plan is to encourage a high level of
corporate performance through the establishment of predetermined corporate,
Subsidiary or business unit and/or individual goals, the attainment of which
will require a high degree of competence and diligence on the part of those
Employees (including officers) of the Company or of its participating
Subsidiaries selected to participate in the Plan, and which will be beneficial
to the owners and customers of the Company.

     2. DEFINITIONS: Unless the context otherwise clearly requires, the
following definitions are applicable to the Plan:

         AWARD: An incentive compensation award payable in cash granted to a
     Participant with respect to a particular Plan Year pursuant to any
     applicable terms, conditions and limitations as the Committee may establish
     in order to fulfill the objectives of the Plan.

         BOARD OF DIRECTORS or BOARD: The Board of Directors of the Company.

         CODE: The Internal Revenue Code of 1986, as amended from time to time.

         COMMITTEE: The Compensation Committee of the Board of Directors.

         COMPANY: Reliant Resources, Inc., or any successor thereto.

         COMPENSATION: The annual rate of base salary paid to the Participant as
     of the last day of the Plan Year or, under the circumstances described in
     Section 7(c)(1), as of the date of the Participant's termination of
     employment. Overtime is not included in Compensation for exempt Employees,
     but overtime pay for non-exempt Employees is adjusted based on Awards under
     this Plan in a manner consistent with the requirements of applicable labor
     law. Notwithstanding the foregoing, any Participant covered by the terms of
     a collective bargaining agreement shall have his Compensation calculated in
     the manner specified in the collective bargaining agreement.

                                      1
<PAGE>   2

         EMPLOYEE: An employee of the Company or any of its Subsidiaries who is
     a regular full or part-time employee and who regularly works at least 20
     hours per week.

         EMPLOYER: The Company and each Subsidiary which is designated by the
     Committee as an Employer under this Plan.

         PARTICIPANT: An Employee who is selected to participate in the Plan.

         PERFORMANCE AWARD: An Award made to a Participant pursuant to this Plan
     that is subject to the attainment of one or more Performance Goals.

         PERFORMANCE GOALS: The performance objectives of the Company, its
     Subsidiaries or its business units and/or individual Participants
     established for the purpose of determining the level of Awards, if any,
     earned during a Plan Year.

         PLAN: This Reliant Resources, Inc. Annual Incentive Compensation Plan,
     as amended from time to time.

         PLAN YEAR: The calendar year.

         SAVINGS PLAN: The Reliant Energy, Incorporated Savings Plan, as amended
     and restated effective April 1, 1999 and as thereafter amended, and any
     successor thereto contributed to by the Company.

         SUBSIDIARY: A subsidiary corporation with respect to the Company as
     defined in Section 424(f) of the Code.

         A pronoun or adjective in the masculine gender includes the feminine
gender, and the singular includes the plural, unless the context clearly
indicates otherwise.

     3. PARTICIPATION: The Committee (or its appropriately designated delegate)
shall select the Employees who will be Participants for each Plan Year. Only
Employees who are employed at least 90 days during the Plan Year and are
employed on the last day of the Plan Year are eligible for the payment of an
Award under the Plan, except as provided in Section 7(c). No Employee shall at
any time have the right (a) to be selected as a Participant in the Plan for any
Plan Year, (b) if so selected, to be entitled to an Award, or (c) if selected as
a Participant in one Plan Year, to be selected as a Participant in any
subsequent Plan Year.

         The terms and conditions under which a Participant may participate in
the Plan shall be determined by the Committee (or its appropriately designated
delegate) in its sole discretion.

     4. PLAN ADMINISTRATION: The Plan shall be administered by the Committee.
All decisions of the Committee shall be binding and conclusive on the
Participants. The Committee, on behalf of the Participants, shall enforce this
Plan in accordance with its terms and shall have

                                       2
<PAGE>   3

all powers necessary for the accomplishment of that purpose, including, but not
by way of limitation, the following powers:

         (a) To select the Participants;

         (b) To interpret, construe, approve and adjust all terms, provisions,
     conditions and limitations of this Plan;

         (c) To decide any questions arising as to the interpretation or
     application of any provision of the Plan;

         (d) To prescribe forms and procedures to be followed by Employees for
     participation in the Plan, or for other occurrences in the administration
     of the Plan;

         (e) To establish the terms and conditions of any Agreement under which
     an Award may be earned and paid; and

         (f) In addition to all other powers granted herein, the Committee shall
     make and enforce such rules and regulations for the administration of the
     Plan as are not inconsistent with the terms set forth herein.

         No member of the Committee or officer of the Company to whom the
Committee has delegated authority in accordance with the provisions of Section 5
of this Plan shall be liable for anything done or omitted to be done by him, 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 own willful
misconduct or as expressly provided by statute.

     5. 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 (including, but not limited to, its authority to select Participants)
pursuant to such conditions or limitations as the Committee may establish.

     6. AWARDS: The Committee shall determine the terms and conditions of Awards
to be made under this Plan and shall designate from time to time the individuals
who are to be the recipients of Awards. Awards may also be made in combination
or in tandem with, in replacement of, or as alternative 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 Award may provide
for the grant or issuance of additional, replacement or alternative Awards upon
the occurrence of specified events. All or part of an 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 individual and/or business objectives, increases in specified indices,
attainment of specified growth rates and other comparable measurements of
performance. Unless specified otherwise by the Committee, the amount payable
pursuant to an Award shall be based on a percentage of the Participant's
Compensation.

         An 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

                                       3

<PAGE>   4

pre-established, objective Performance Goals established by the Committee prior
to the earlier to occur of (x) 90 days after the commencement of such period of
service to which the Performance Goal relates and (y) the lapse of 25% of such
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 or more business criteria that apply to the individual, one or more
business units of the Company, or the Company as a whole. Performance Goals
shall be based upon targets established by the Committee with respect to one or
more of the following financial factors, as applied to the Company or a business
unit, as applicable: 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, 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, earnings before interest, taxes, depreciation and
amortization, cash flow, cash flow 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. Unless otherwise stated, 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), and may also be based on performance relative to a designated peer
group. 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. The Committee in its sole discretion may decrease the amount payable
pursuant to a Performance Award, but in no event shall the Committee have
discretion to increase the amount payable pursuant to a Performance Award in a
manner inconsistent with the requirements for qualified performance-based
compensation under Code Section 162(m). In interpreting Plan provisions
applicable to Performance Goals and Performance Awards, it is the intent of the
Plan to conform with the standards of Code Section 162(m) applicable to
qualified performance-based compensation, and the Committee in establishing such
Performance Goals and interpreting the Plan shall be guided by such provisions.
Subject to the foregoing provisions, the terms, conditions and limitations
applicable to any Performance Awards pursuant to this Plan shall be determined
by the Committee. No Participant may be granted Performance Awards which will
result in the payment of more than $3,500,000 per Plan Year.

     7. PAYMENT OF AWARDS: The Committee has sole and absolute authority and
discretion to determine the time and manner in which Awards, if any, shall be
paid under this Plan. Generally, however, the following provisions may apply:

         (a) FORM OF PAYMENT: Payment of Awards shall be made in cash and may be
     subject to such restrictions as the Committee shall determine.

         (b) DATE OF PAYMENT: Payment of Awards shall be made as soon as
     practicable (as determined by the Committee) following the close of the
     Plan Year (the "Payment Date"), unless otherwise provided in Section 7(c).

                                       4

<PAGE>   5

         (c) EMPLOYMENT REQUIRED: Except as provided below, Participants must be
     Employees on the Payment Date in order to receive payment of an Award.

              (1) Retirement, Death or Disability: If, prior to the Payment
         Date, a Participant retires on or after age 55 with 5 years of service,
         dies or terminates employment under circumstances establishing
         eligibility for disability benefits under the Company's long-term
         disability plan, then the Participant shall nonetheless receive payment
         of the Award the Participant would have received had the goals with
         respect to the Participant's Award been met at the target level based
         on his Compensation as of the Participant's date of retirement, death
         or disability, prorated for the number of days the Participant was
         employed during the Plan Year. Payments under this Section 7(c)(1)
         shall be made as soon as practicable following the date of the
         Participant's retirement, death or disability, but no later than 30
         days after the date of the Participant's retirement, death or
         disability. If a Participant who terminates due to retirement or
         disability resumes employment during the same Plan Year in a position
         qualifying the Participant to resume participation in the Plan, any
         additional payment for the Plan Year received on the Payment Date will
         be prorated based on days worked during the Plan Year subsequent to the
         Participant's return to work.

              (2) Termination After Last Day of the Plan Year: If a Participant
         is an Employee on the last day of the Plan Year and was employed at
         least 90 days during the Plan Year, but is not an Employee on the
         Payment Date, then the Participant may receive on the Payment Date, an
         Award (if any) upon management's recommendation and approval by the
         Committee.

     8. ASSIGNABILITY: Unless otherwise determined by the Committee and provided
in the 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. Any attempted assignment of an Award or any other benefit under
this Plan in violation of this Section 8 shall be null and void.

     9. TAX WITHHOLDING: The Company shall have the right to withhold applicable
taxes from any Award payment and to take such other action as may be necessary
in the opinion of the Company to satisfy all obligations for withholding of such
taxes.

     10. FINALITY OF DETERMINATIONS: Any determination by the Committee in
carrying out or administering this Plan shall be final and binding for all
purposes and upon all interested persons and their heirs, successors, and
personal representatives.

     11. EMPLOYEE RIGHTS UNDER THE PLAN: No Employee or other person shall have
any claim or right to be granted an Award under this Plan. Neither the Plan nor
any action taken thereunder shall be construed as giving an Employee any right
to be retained in the employ of the

                                       5

<PAGE>   6
Company or an Employer. No Participant shall have any lien on any assets of the
Company or an Employer by reason of any Award made under this Plan.

     12. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION: 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; however clause (ii) shall only apply if, and to the
extent, such approval is required by applicable legal requirements.

     13. OTHER PLANS: The Award payments under this Plan shall be considered
compensation under the Savings Plan.

     14. GOVERNING LAW: This Plan and all determinations made and actions taken
pursuant hereto, shall be governed by and construed in accordance with the laws
of the State of Texas.

     IN WITNESS WHEREOF, the Company has executed this Plan this _____day of
___________________, 2001, but effective as of January 1, 2001.

                                     RELIANT RESOURCES, INC.

                                     By
                                       ---------------------------------------
                                       R. S. Letbetter
                                       Chairman and Chief Executive Officer

ATTEST:

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

                                       6<PAGE>   1
                                                                 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. by providing
for certain cash benefits and by enabling them to acquire shares of common stock
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.

                                      -1-
<PAGE>   2

                  "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.

                  "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.

                  "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,

                                      -2-
<PAGE>   3

          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.

                  "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

                                      -3-
<PAGE>   4

          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.

                  "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

                                      -4-
<PAGE>   5

          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.

                  (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.

                                      -5-
<PAGE>   6

         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 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

                                      -6-
<PAGE>   7

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, 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.

                                      -7-
<PAGE>   8

                       (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 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

                                      -8-
<PAGE>   9

               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), 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

                                      -9-
<PAGE>   10

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.

     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

                                      -10-
<PAGE>   11

          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.

     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

                                      -11-
<PAGE>   12

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.

         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 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.

                                      -12-
<PAGE>   13

     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
     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

                                      -13-
<PAGE>   14

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.

     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:
                                            ---------------------------------

                                      -14-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00021-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00021-of-00352.parquet"}]]