Exhibit 10.1







         KERR-McGEE CORPORATION 2002 ANNUAL INCENTIVE COMPENSATION PLAN
         --------------------------------------------------------------




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         KERR-McGEE CORPORATION 2002 ANNUAL INCENTIVE COMPENSATION PLAN
         --------------------------------------------------------------


                                TABLE OF CONTENTS
                                -----------------


Article                                                        Page
-------                                                        ----

    I           Establishment And Purpose.................      1

   II           Definitions...............................      1

  III           Administration............................      3

   IV           Eligibility And Participation.............      4

    V           Award Determination.......................      4

   VI           Payment Of Final Awards...................      6

  VII           Termination Of Employment.................      7

 VIII           Rights Of Participants....................      7

   IX           Change In Control.........................      7

    X           Miscellaneous.............................      9

                                       i

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         KERR-McGEE CORPORATION 2002 ANNUAL INCENTIVE COMPENSATION PLAN


                                    Article I

                            Establishment And Purpose


         1.1  Establishment  of the Plan.  Kerr-McGee  Corporation,  a  Delaware
corporation (the "Company"), hereby establishes an annual incentive compensation
plan  to  be  known  as  "The  Kerr-McGee   Corporation  2002  Annual  Incentive
Compensation Plan (the "Plan"), as set forth in this document.  The Plan permits
annual  cash  awards to Officers of the  Company,  based on the  achievement  of
pre-established performance goals.

         The Plan is effective  May 14, 2002 (the  "Effective  Date").  The Plan
shall  first  apply to Awards  for 2002 Plan Year  performance.  The Plan  shall
remain in effect until terminated as provided in Article V, Section 5.8 herein.

         1.2      Purpose.  The purposes of the Plan are to:

         (a) Provide  incentives  to achieve  annual goals that are within group
         and/or  individual  control  and are  considered  key to the  Company's
         success;

         (b) Encourage teamwork in various segments of the Company;

         (c) Reward  performance  with pay that varies in relation to the extent
         to which the pre-established goals are achieved; and

         (d) Ensure all amounts  paid under the Plan be  "qualified  performance
         based  compensation"  within the meaning of Section  162(m) of the Code
         and its accompanying regulations.


                                   Article II

                                   Definitions

         Whenever used in the Plan, the following  terms shall have the meanings
set  forth  below  and,  when  the  defined  meaning  is  intended,  the term is
capitalized:

         (a) "Award  Opportunity"  means the various  levels of incentive  award
         payouts  which an  Officer  may earn under the Plan,  including  Target
         Incentive Awards,  as established by the Committee  pursuant to Article
         V, Sections 5.1 and 5.2 herein.

         (b) "Board" or "Board of Directors" means the Board of Directors of the
         Company.

         (c) "Code" means the Internal Revenue Code of 1986, as amended.

         (d)  "Committee"  means a committee  of two (2) or more  members of the
         Board of Directors, all of whom shall be "outside directors" within the
         meaning of the Regulations under Code Section 162(m),  appointed by the
         Board to administer the Plan, pursuant to Article III herein.

         (e) "Company"  means  Kerr-McGee  Corporation,  a Delaware  corporation
         (including any and all  Subsidiaries and Limited  Liability  Companies)
         and any successor thereto.

         (f) "Effective Date" means the date the Plan becomes effective,  as set
         forth in Article I, Section 1.1 herein.

         (g) "Employee" means a full time, salaried employee of the Company. The
         term  "Employee"  shall not  include a person  hired as an  independent
         contractor,   leased   employee,   consultant  or  a  person  otherwise
         designated  by the  Company  at the  time of hire  as not  eligible  to
         participate  in the Plan,  even if such person is  determined  to be an
         "employee" by any governmental or judicial authority.

         (h)  "Exchange  Act"  means the  Securities  Exchange  Act of 1934,  as
         amended from time to time, or any successor act thereto.

         (i) "Final  Award" means the actual award earned  during a Plan Year by
         an Officer, as determined by the Committee.

         (j) "Limited  Liability Company" means any Limited Liability Company in
         which the Company or a Subsidiary  owns fifty  percent (50%) or more of
         the Limited Liability Company.

         (k)  "Officer"  means  an  Employee  who,  as of  the  last  day of the
         applicable  Plan Year, is an elected officer of the Company at or above
         the level of Corporate Vice President,  which may also be referenced in
         the Plan as a Participant.

         (l) "Plan Year" means the Company's fiscal year.

         (m) "Retirement" means retirement of an Officer after attaining age and
         service requirements of the Company's pension plan in which the Officer
         participates.  For this purpose,  "service" shall be measured under the
         rules for determining vesting service under the Kerr-McGee  Corporation
         Retirement  Plan for U.S.  Employees,  determined as if the  individual
         were a participant in such plan.

         (n)  "Subsidiary"  means any  corporation  (other than the  Company) in
         which the Company,  a Subsidiary or a Limited  Liability Company of the
         Company owns fifty percent (50%) or more of the total  combined  voting
         power of all classes of stock.

         (o) "Target  Incentive  Award" means the award,  as  established by the
         Committee at a competitive  level, which may be paid to an Officer when
         "targeted" performance results are attained.

         (p) "Maximum  Incentive  Award" means the award,  as established by the
         Committee  which is intended  to reward  outstanding  performance,  and
         which may be paid to an Officer when  outstanding  performance  results
         are attained;  however,  in no case can the Maximum Incentive Award for
         an individual Officer exceed $3,000,000.

         (q) "Total Disability" shall normally have such meaning as that defined
         under the Company's group insurance plan covering total  disability and
         determinations  of  Total  Disability  normally  shall  be  made by the
         insurance  company  providing  such  coverage  on the date on which the
         employee,  whether or not eligible for  benefits  under such  insurance
         plan, becomes Totally Disabled.  In the absence of such insurance plan,
         the Committee shall make such determination.


                                   Article III

                                 Administration
                                 --------------

         3.1 The Committee.  The Plan shall be administered by a Committee which
initially shall be a subcommittee of the Executive Compensation Committee of the
Board.  Subject to the terms of this  Plan,  the Board may  appoint a  successor
Committee  to  administer  the  Plan.  The  members  of the  Committee  shall be
appointed  by,  must be members  of, and shall  serve at the  discretion  of the
Board.

         3.2 Authority of the Committee.  Subject to the provisions  herein, the
Committee  shall  have the full power to  determine  the size and types of Award
Opportunities  and Final Awards,  to determine the terms and conditions of Award
Opportunities  in a manner  consistent  with the Plan, to construe and interpret
the Plan and any  agreement  or  instrument  entered  into  under the  Plan,  to
establish,  amend or waive rules and regulations for the Plan's  administration,
and  (subject  to the  provisions  of  Article IV herein) to amend the terms and
conditions of any  outstanding  Award  Opportunity  to the extent such terms and
conditions  are within the sole  discretion  of the Committee as provided in the
Plan. Further,  the Committee shall make all other  determinations  which may be
necessary or advisable for the  administration of the Plan. As permitted by law,
the Committee may delegate its authority hereunder.

         3.3  Decisions  Binding.   All  determinations  and  decisions  of  the
Committee  as to  any  disputed  question  arising  under  the  Plan,  including
questions  of  construction  and  interpretation,  shall be final,  binding  and
conclusive upon all parties.


                                   Article IV

                          Eligibility And Participation
                          -----------------------------

         4.1 Eligibility. Each Officer who is an Officer as of the last day of a
Plan Year shall be eligible to participate in the Plan for that Plan Year.

         4.2 No Right to Participate. No Employee shall at any time have a right
to  be  selected  for  participation  in  the  Plan  despite  having  previously
participated in the Plan.


                                    Article V

                               Award Determination
                               -------------------

         5.1 Performance Measures and Performance Goals. For each Plan Year, the
Committee  shall establish  ranges of attainment of the performance  goals which
will correspond to various levels of Award Opportunities.  Each performance goal
range shall include a level of performance  at which one hundred  percent (100%)
of the Target  Incentive  Award may be earned.  In  addition,  each range  shall
include  levels of  performance  above and below the one hundred  percent (100%)
performance  level at which a greater or lesser percent of the Target  Incentive
Award may be earned.

         After the performance  goals are established,  the committee will align
the  achievement  of the  performance  goals  with the Award  Opportunities  (as
described in Article V, Section 5.2 herein),  such that the level of achievement
of the  pre-established  performance  goals  at the end of the  Plan  Year  will
determine the Final Awards.

         The  Committee  may  establish  one or  more  Company-wide  performance
measures which must be achieved for any Officer to receive a Final Award payment
for that Plan Year.

         Following the  completion of each Plan Year, if the  performance  goals
were met,  the  Committee  shall  certify in  writing  prior to payment of Final
Awards that the performance goals for such Plan Year were satisfied.

         5.2 Award  Opportunities.  No later  than  ninety  (90) days  after the
beginning of each Plan Year, the Committee shall  establish,  in writing,  Award
Opportunities   which  correspond  to  various  levels  of  achievement  of  the
pre-established  performance goals. The established Award Opportunities may vary
in relation to the job  classification  of each Officer or among Officers in the
same job  classification.  Except as provided in Article V,  Section 5.7 herein,
Award  Opportunities  for Officers  shall be  established  as a function of each
Officer's Base Salary (as defined  below).  No later than ninety (90) days after
the beginning of each Plan Year,  the  Committee  shall  establish,  in writing,
various  levels of Final  Awards  which may be paid with  respect  to  specified
levels of attainment of the pre-established performance goals.

         For purposes of this  Article V, "Base  Salary"  shall mean,  as to any
specific Plan Year, an Officer's actual base salary paid while an Officer.  Base
salary shall not be reduced by any  voluntary  salary  reductions  or any salary
reduction  contributions made to any salary reduction plan, defined contribution
plan or other deferred  compensation plans of the Company, but shall not include
any payments under this Plan, the 1998, 2000 and 2002 Long Term Incentive Plans,
or any other bonuses,  incentive pay or special awards. In the event an Employee
becomes an Officer  during the Plan Year,  then only the salary  earned while an
Officer will be taken into account for awards under this Plan. The Officer shall
be eligible to receive any other applicable  cash-based  compensation from other
Company bonus plans for that part of the year in which he was not an Officer.

         5.3 Computation of Final Awards. Awards will be computed and paid based
on  the  attainment  of  the  pre-established   performance  goals.  Awards  for
proxy-named  Officers  will be funded with up to 1.5% of cash flow in  aggregate
with no more  than  0.5% of cash  flow  being  allocated  to any  individual  as
calculated by the  Committee.  Subject to Section 5.7 herein,  the Committee may
establish  performance  goals based on the Company's Pretax Income,  Net Income,
Earnings  Per Share,  Revenue,  Expenses,  Return on  Assets,  Return on Equity,
Return on Investment, Net Profit Margin, Operating Profit Margin, Operating Cash
Flow,  Total  Stockholder  Return,  Capitalization,  Liquidity,  Reserve Adds or
Replacement,  Finding and Development  Costs,  Results of Customer  Satisfaction
Surveys and other measures of Quality, Safety, Productivity,  Cost Management or
Process Improvement or other measures the Committee  approves.  Such performance
goals may be determined solely by reference to the performance of the Company, a
Subsidiary,  a Limited  Liability  Company or a  division  or unit of any of the
foregoing, or based upon comparisons of any of the performance measures relative
to other  companies.  The  Committee may also exclude the impact of any event or
occurrence which the Committee  determines should appropriately be excluded such
as, for example, a restructuring or other  nonrecurring  charge, an event either
not  directly  related  to the  operations  of the  Company  or not  within  the
reasonable  control  of the  Company's  management,  or a change  in  accounting
standards required by U. S. generally accepted accounting principles.

         5.4  Threshold  Levels of  Performance.  The  Committee  may  establish
minimum levels of performance goal achievement,  below which no payouts of Final
Awards shall be made to any Officer.

         5.5 No Mid-Year  Change in Award  Opportunities.  Except as provided in
Article V,  Section  5.7  herein,  each  Officer's  Final  Award  shall be based
exclusively  on the  Award  Opportunity  levels  established  by  the  Committee
pursuant to Article V, Section 5.2 above.

         5.6 Award  Adjustments.  The  Committee  shall have the  discretion  to
reduce or  eliminate  the  amount of the Final  Award  otherwise  payable  to an
Officer.

         5.7 Possible Modifications.  In the event that changes are made to Code
Section 162(m) or the Regulations thereunder (or their interpretation) to permit
greater  flexibility with respect to any Award Opportunities under the Plan, the
Committee may exercise such greater flexibility consistent with the terms of the
AICP and, to the extent of such changes,  without regard to otherwise applicable
restrictive provisions of the AICP.

         5.8 Amend and Terminate.  The Board,  without notice,  at any time, may
modify or amend,  in whole or in part, any or all of the provisions of the Plan,
or suspend or terminate it entirely.


                                   Article VI

                             Payment Of Final Awards
                             -----------------------

         6.1 Form and Timing of Payment.  Unless a deferral  election is made by
an Officer  pursuant to Article VI, Section 6.2 herein,  or deferral of all or a
portion of an Officer's Final Award is required by Article VI, Section 6.3, each
Officer's  Final  Award shall be paid  within  seventy-five  (75) days after the
Award is approved in writing by the Committee.

         6.2  Voluntary  Deferral of Final Award  Payouts.  An Officer may defer
receipt of some or all  payments  otherwise  due under the Plan  pursuant to the
terms of a deferred  compensation plan sponsored by the Company under which such
deferral is permitted.

         6.3 Deferral of Final Award Payouts. In the event that all or a portion
of an  Officer's  Final  Award is not  deductible  by the  Company due to limits
contained in Code Section  162(m) or any successor  Code Section,  the Committee
may, in its  discretion,  require that payment of the  nondeductible  portion of
such Final Award be deferred under a deferred compensation plan sponsored by the
Company.

                                   Article VII

                            Termination Of Employment
                            -------------------------

         If before an Award is  actually  paid to an Officer  with  respect to a
Performance Period the Officer ceases to be a regular, full time employee of the
Corporation,  any of its Subsidiaries or any of its Limited Liability  Companies
for a reason other than death,  Total  Disability or  Retirement,  the Officer's
eligibility  under the Plan shall  terminate  and no Award will be paid.  In the
event a participating  Officer (who was an officer as of the first day of a Plan
Year) terminates  employment due to death, Total Disability or Retirement,  such
Officer shall be entitled to a pro rata portion of the Final Award calculated on
actual Base Salary earned by such Officer.


                                  Article VIII

                             Rights Of Participants
                             ----------------------

         8.1  Employment.  Nothing in the Plan shall  interfere with or limit in
any way the right of the Company to terminate  any  Officer's  employment at any
time,  nor confer  upon any  Officer  any right to continue in the employ of the
Company.

         8.2 Nontransferability. No right or interest of any Officer in the Plan
shall be  assignable  or  transferable,  or  subject to any lien,  directly,  by
operation of law or otherwise,  including, but not limited to, execution,  levy,
garnishment, attachment, pledge and bankruptcy.


                                   Article IX

                                Change In Control
                                -----------------

         In the event of a Change in Control,  each  Participant  shall,  in the
sole   discretion  of  the  Committee   (except  as  otherwise   provided  in  a
Participant's continuity agreement with the Company),  receive a full payment of
the  Participant's  Target  Incentive  Award for the Plan Year during which such
Change in Control occurs, as determined by the Committee.  In such circumstances
the Committee shall determine the Final Award based upon such performance during
the Plan year until the date of the Change in  Control.  Such  amounts  shall be
paid in cash to  each  participant  within  seventy-five  (75)  days  after  the
effective date of the Change in Control.

For purposes of the Plan, a "Change in Control" shall be deemed to have occurred
if:

         (a) Any person ("Person") as defined in Section 3(a)(9) of the Exchange
Act and as used in  Section  13(d) and 14(d)  thereof,  including  a "group"  as
defined in Section  13(d) of the Exchange Act, but excluding the Company and any
subsidiary and any employee  benefit plan sponsored or maintained by the Company
or any  subsidiary  (including  any  trustee  of such plan  acting as  trustee),
directly or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), of securities of the Company  representing  25% or more
of the combined voting power of the Company's then outstanding securities (other
than indirectly as a result of the Company's redemption of its securities); or

         (b) The consummation of any merger or other business combination of the
Company, sale of 50% or more of the Company's assets, liquidation or dissolution
of the Company or combination of the foregoing transactions (the "Transactions")
other than a Transaction  immediately  following  which the  shareholder  of the
Company  and any  trustee or  fiduciary  of any Company  employee  benefit  plan
immediately  prior to the  Transaction  own at least  60% of the  voting  power,
directly or indirectly,  of (A) the surviving  corporation in any such merger or
other  business  combination;  (B) the  purchaser or successor to the  Company's
assets; (C) both the surviving corporation and the purchaser in the event of any
combination  of  Transactions;  or (D) the parent  company  owning  100% of such
surviving  corporation,  purchaser  or both the  surviving  corporation  and the
purchaser, as the case may be; or

         (c) Within any twenty-four month period, the persons who were directors
immediately  before the  beginning  of such period (the  "Incumbent  Directors")
shall cease (for any reason other than death) to  constitute at least a majority
of the Board or the board of directors  of a successor to the Company.  For this
purpose,  any  director  who was not a director at the  beginning of such period
shall be deemed to be an Incumbent  Director if such director was elected to the
Board  by,  or on the  recommendation  of or with  the  approval  of,  at  least
two-thirds of the directors who then  qualified as Incumbent  Directors (so long
as such  director was not  nominated by a person who  commenced or threatened to
commence an election  contest or proxy  solicitation by or on behalf of a Person
(other than the Board) or who has entered  into an  agreement to effect a Change
in Control or expressed an intention to cause such a Change in Control); or

         (d) A  majority  of the  members  of the Board of  Directors  in office
immediately prior to a proposed  transaction  determine by a written  resolution
that such proposed transaction, if taken, will be deemed a Change in Control and
such proposed Transaction is consummated.



                                    Article X

                                 Miscellaneous
                                 -------------

         10.1 Governing Law. The Plan,  and all agreements  hereunder,  shall be
governed by and construed in accordance with the laws of the State of Oklahoma.

         10.2 Withholding Taxes. The Company shall have the right to deduct from
all payments under the Plan any foreign, federal, state or local income or other
taxes  required  by law to be withheld  with  respect to such  payments.  Before
payment of any Final  Award may be  deferred  under  Article VI, the Company may
require that the Officer pay or agree to withholding  for any foreign,  federal,
state  or local  income  or other  taxes  which  may be  imposed  on any  amount
deferred.

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

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

         10.5 Costs of the Plan. All costs of implementing and administering the
Plan shall be borne by the Company.

         10.6 Successors. All obligations of the Company under the Plan shall be
binding upon and inure to the benefit of any  successor to the Company,  whether
the existence of such successor is the result of a direct or indirect  purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

         10.7 Other  Plans.  Nothing  contained  in this Plan shall  prevent the
Board from adopting other or additional  compensation  arrangements,  subject to
stockholder approval if such approval is required;  and such arrangements may be
either generally applicable or applicable only in specific cases.

         10.8  Construction.  The Committee shall have such duties and powers as
may be necessary to discharge its responsibilities  under this Plan,  including,
but not limited to, the ability to construe and  interpret  the Plan and resolve
any  ambiguities  with  respect  to any of the  terms and  provisions  hereof as
written and as applied to the operation of the Plan.



                                           KERR-McGEE CORPORATION


                                           By: /s/Matthew R. Simmons
                                              ---------------------------------
                                               Matthew R. Simmons
                                               Director and Chair of the
                                               Executive Compensation Committee