<PAGE>
                                                                   Exhibit 10.12

                            DEFERRED STOCK AGREEMENT

     THIS DEFERRED STOCK AGREEMENT (the "Agreement") is by and between THE
WILLIAMS COMPANIES, INC., a Delaware corporation (the "Company") and the
individual identified on the last page hereof (the "Participant").

1.   Grant of Deferred Stock.  The Company hereby grants to the Participant
     effective February 5, 2004 (the "Effective Date"), subject to the terms and
     conditions of The Williams Companies, Inc.'s 2002 Incentive Plan (the
     "Plan") and this Agreement, the right to receive a total of XX,XXX shares
     of the Common Stock of the Company at the end of the initial deferral
     period (as defined herein). These shares are referred to in the Agreement
     as "Deferred Stock" during the initial deferral period and during the
     extended deferral period (as defined herein). Until the Deferred Stock
     vests and is paid, the Participant shall have no rights as a stockholder of
     the Company with respect to the Deferred Stock.

2.   Incorporation of Plan.  The Plan is hereby incorporated herein by reference
     and all capitalized terms used herein shall have the meaning set forth in
     the Plan. The Participant acknowledges receipt of a copy of the Plan and
     hereby accepts the Deferred Stock subject to all the terms and provisions
     of the Plan.

3.   Compensation Committee Decisions and Interpretations.  The Participant
     hereby agrees to accept as binding, conclusive and final all decisions and
     interpretations of the Compensation Committee of the Board of Directors,
     upon any questions arising under the Plan.

4.   Vesting and Payment of Deferred Stock.

     a.   The initial deferral period begins with the Effective Date and ends
          with the vesting of the Deferred Stock which will occur upon the first
          of the following events:

          (i)  XX,XXX shares vesting February 5, 2005;
               XX,XXX shares vesting February 5, 2006;
               XX,XXX shares vesting February 5, 2007;
               provided the Participant is employed by the Company or any of its
               parent, subsidiaries or affiliates at such time; or

          (ii) Death of the Participant while employed by the Company or any of
               its parent, subsidiaries or affiliates; or

          (iii) Disability of the Participant while employed by the Company or
               any of its parent, subsidiaries or affiliates; or

          (iv) Termination of the Participant's employment with the Company or
               any of its parent, subsidiaries or affiliates, voluntarily for
               Good Reason or involuntarily (other than due to Cause), within
               two years following a Change in Control as set

<PAGE>

               forth in the Plan; or

          (v)  Termination of the Participant's employment with the Company or
               any of its parent, subsidiaries or affiliates due to a reduction
               in force where Participant receives benefits under any severance
               pay plan or program maintained by the Company; or

          (vi) Termination of the Participant's employment with the Company or
               any of its parent, subsidiaries or affiliates resulting from a
               sale of a business or outsourcing of any portion of business
               provided the Company or any of its parent, subsidiaries or
               affiliates has not attempted to retain Participant through an
               offer of comparable employment as defined by the Company's
               Severance Pay Plan.

     b.   The award will be prorated and vesting accelerated upon Retirement of
          the Participant from the Company or any of its parent, subsidiaries or
          affiliates.

     c.   Deferred Stock which is vested will be paid based upon the following:

          (i)  Unless the Participant chooses to extend the date for payment,
               the Company will deliver to the Participant, or the Participant's
               legal representative, as soon as practicable, after the
               Participant is entitled to the payment of Deferred Stock, a
               certificate or certificates equal in number to the number of
               shares of Deferred Stock vested less the number of shares
               required to cover minimum statutory withholding requirements.

          (ii) Notwithstanding the normal withholding provisions of subparagraph
               4c(i), if the Participant becomes subject to taxation upon the
               vesting of Deferred Stock due to a change in applicable law (or
               regulation) and such change occurs after the date on which the
               Participant signs this Agreement, the number of shares of
               Deferred Stock necessary to cover minimum statutory withholding
               requirements will be used to satisfy such requirements upon such
               vesting and the remaining vested Deferred Stock will be delivered
               as provided in subparagraph 4c(i).

          (iii) The Participant may make a one-time, irrevocable election to
               extend the date for payment of the Deferred Stock for up to an
               additional five years (the "extended deferral period") provided
               this election is made at least 12 months prior to the vesting of
               such Deferred Stock above. The Participant acknowledges that the
               number of shares further deferred will be less any shares
               withheld to cover minimum statutory withholding requirements due
               when the Deferred Stock vests.

          (iv) If the payment of any Deferred Stock in any year in conjunction
               with other compensation earned by the Participant in such year
               causes the total compensation earned by the Participant in such
               year to exceed the pay cap in Internal Revenue Code Section
               162(m), the Company in its sole discretion may extend the
               deferral period for all or any portion of such Deferred Stock
               until the next year in which the Participant's total compensation
               including Deferred Stock


                                        2

<PAGE>

               does not exceed the pay cap.

5.   Payment of Dividend Equivalents.  Subject to Company discretion to reinvest
     in the form of additional awards or to take such action as it deems
     appropriate, if at anytime a dividend is paid on the Common Stock of the
     Company in cash or otherwise, an equivalent amount per share will be paid
     to the Participant based on the number of shares of Deferred Stock then
     standing in the Participant's name on the books and records of the Company
     with respect to the Award made hereunder. Upon conversion of Deferred Stock
     into Common Stock hereunder, the right to payment of Dividend Equivalents
     under this provision will cease.

6.   Other Provisions.

     a.   The Participant understands and agrees that payments under this
          Agreement shall not be used for, or in the determination of, any other
          payment or benefit under any continuing agreement, plan, policy,
          practice or arrangement providing for the making of any payment or the
          provision of any benefits to or for the Participant or the
          Participant's beneficiaries or representatives, including, without
          limitation, any employment agreement, any change in control severance
          protection plan or any employee benefit plan as defined in Section
          3(3) of ERISA, including, but not limited to qualified and
          non-qualified retirement plans.

     b.   The Participant agrees and understands stock certificates issued may
          be held as collateral for monies he/she owes to Company or any of its
          parent, affiliated or subsidiary companies or their vendor(s)
          contracted to provide business tools or services for use by
          Participant in his or her employment, including but not limited to
          personal loan(s), Company credit card debt, relocation repayment
          obligations or benefits from any plan that provides for pre-paid
          educational assistance.

     c.   In the event that the Participant's employment with the Company or any
          of its parent, subsidiaries or affiliates terminates prior to the
          vesting of the Deferred Stock granted under this agreement, such
          Deferred Stock shall be forfeited (except as provided in paragraph 4).

     d.   The Participant acknowledges that this Award and similar awards are
          made on a selective basis and are, therefore, to be kept confidential.

     e.   Neither the Deferred Stock, nor the Participant's interest in the
          Deferred Stock, may be sold, assigned, transferred, pledged or
          otherwise disposed of or encumbered at any time prior to both the
          vesting and payment of such Deferred Stock under this Agreement.

     f.   If the Participant at any time forfeits any or all of the Deferred
          Stock pursuant to this Agreement, the Participant agrees that all of
          the Participant's rights to and interest in the Deferred Stock shall
          terminate upon forfeiture without payment of consideration.

     g.   The Compensation Committee shall make determination as to whether an
          event has occurred resulting in the forfeiture of the Deferred Stock,
          in accordance with this


                                        3

<PAGE>

          Agreement, and all determinations of the Compensation Committee shall
          be final and conclusive.

     h.   With respect to the right to receive payment of the Deferred Stock
          under this Agreement, nothing contained herein shall give the
          Participant any rights that are greater than those of a general
          creditor of the Company.

7.   Notices.  All notices to the Company required hereunder shall be in writing
     and delivered by hand or by mail, addressed to The Williams Companies,
     Inc., One Williams Center, Tulsa, Oklahoma 74172, Attention: Stock
     Administration Department. Notices shall become effective upon their
     receipt by the Company if delivered in the forgoing manner.

                                        THE WILLIAMS COMPANIES, INC.


                                        By
                                           -------------------------------------
                                        Steven J. Malcolm
                                        Chairman, President and Chief
                                        Executive Officer

Participant:

I hereby accept the terms and conditions of this Deferred Stock Agreement:

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

Dated this       day of                 , 200  .
           -----        ----------------     --


                                        4