<PAGE>

                                                                   EXHIBIT 10.75

                       SETTLEMENT AND RETENTION AGREEMENT

         THIS SETTLEMENT AND RETENTION AGREEMENT ("Agreement") is entered into
this 18th day of December, 2002, by and between THE WILLIAMS COMPANIES, INC., a
Delaware Corporation ("Company"), and JACK D. McCARTHY ("Executive");

         WHEREAS, Executive has expressed an interest in retiring immediately;

         WHEREAS, the Company has determined that it is critical to retain the
services of Executive as an employee until December 31, 2002, ("Separation
Date") to provide an orderly transition of his responsibilities;

         WHEREAS, the Company has also determined that the continued
availability of Executive to the Company after his retirement is also needed in
order to provide such orderly transition;

         WHEREAS, Executive is willing to delay his retirement to the Separation
Date and to provide consulting services after his retirement in accordance with
the provisions of this Agreement and the Consulting Agreement between the
Company and him, a copy of which is attached hereto as Exhibit "A"; and

         WHEREAS, Executive has requested, effective on his Separation Date, a
distribution of his entire interest in the Williams Companies Supplemental
Retirement Plan ("SERP") and Executive understands that he will not receive any
further consideration, benefits or payments under the SERP;

         NOW, THEREFORE, in consideration of their mutual promises made herein
and for other good and valuable consideration, and intending to be legally
bound, the Company and Executive hereby agree as follows:

<PAGE>

                  1.       Executive Services. Executive agrees to continue to
         provide his services as an employee of the Company until December 31,
         2002, or such earlier time as the Company may determine in its sole and
         absolute discretion. It is expressly recognized by the parties hereto
         that Executive will continue to be employed by the Company as an "at
         will" employee and that the Company may terminate his services at any
         time with or without any reason. During his employment, Executive shall
         receive his current salary and except as otherwise provided in this
         Agreement, he shall be entitled to continue to participate in those
         employee benefit programs currently made available to him, unless such
         employee benefit programs are amended or terminated in accordance with
         their respective terms. The termination of Executive's employment prior
         to December 31, 2002, shall not in any way relieve Executive of any of
         his obligations hereunder including, but not limited to, his duty to
         provide consulting services and to provide a written release to the
         Company in accordance with the terms hereof.

                  2.       Company Payments. The Company shall, in consideration
         of Executive's covenants and obligations hereunder:

                           (a)      Pay Executive, on December 31, 2002, the sum
                  of Seven Hundred and Forty-Seven Thousand Dollars ($747,000),
                  less all amounts withheld under applicable federal and state
                  tax laws, as a severance payment in lieu of any and all
                  severance payments that may be owed to Executive, provided the
                  Company shall be entitled to apply the net amount due (after
                  applicable tax withholdings) to any outstanding balance,

                                       2

<PAGE>

                  including accrued interest, of Executive under his stock
                  option loans from the Company;

                           (b)      Pay Executive on, or within ten (10) days of
                  the date on which the Release Agreement set forth in Exhibit
                  "B" becomes effective in accordance with its terms, the sum of
                  One Hundred Thousand Dollars ($100,000), less all amounts
                  withheld under applicable federal and state tax laws for
                  executing the release set forth on Exhibit "B."

         Unless Executive has repaid his stock option loans, the Company shall
         not be required to deliver any funds to Executive in order to satisfy
         its obligations under subparagraphs 2(a) and 2(b). The Company's
         obligation with respect to such payments shall be limited to: (i)
         withholding and remitting to the appropriate governmental agency the
         applicable withholding amounts under applicable federal and state laws
         and regulations and (ii) with respect to the obligations under
         subparagraph 2(a) and 2(b), applying the remaining amount of such
         payments as an offset to repay Executive's stock option loan until such
         loan is discharged in full with the balance of the payments, if any,
         being remitted to Executive.

                  3.       SERP. Executive hereby acknowledges and agrees that
         his SERP benefit is being paid to him at his request and that he will
         not be entitled to any further payments under the SERP. Executive
         hereby releases and forever discharges the SERP, the Company, its
         subsidiaries and affiliates (the "Williams Group") from any and all
         liabilities in connection with the SERP, including, but not limited to,
         any liability to provide any further payments to Executive.

                                       3

<PAGE>

                  4.       Severance. Due to the retention and severance payment
         being made subparagraph 2(a) and 2(b), Executive also hereby
         voluntarily waives any right which he may have to receive severance
         payments (other than the payments provided hereunder) of any nature
         whatsoever from the Company, including but not limited to, the
         severance payments that are provided under any severance plans,
         practices, programs or agreements maintained by or contributed to by
         the Williams Group, including, but not limited to, any
         change-in-control severance plan or agreement.

                  5.       Deferred Stock Awards. Executive's existing deferred
         stock awards that are scheduled to vest on January 1, 2003, July 31,
         2003, and August 1, 2004, will continue to vest on such dates, provided
         Executive continues to perform all of his obligations under the
         Consulting Agreement and this Agreement until the applicable vesting
         date. Unless Executive has repaid his stock option loan, upon the
         vesting of a deferred stock award the Company shall not be required to
         deliver any shares to Executive in order to satisfy its obligations
         under this paragraph 5. The Company's obligation with respect to such
         deferred stock shall be limited to: (i) withholding and remitting to
         the appropriate governmental agency the applicable withholding amounts
         under applicable federal and state laws and regulations and (ii)
         applying the remaining shares as collateral for Executive's stock
         option loan until such loan is discharged in full. With respect to
         subparagraph 5(ii), concurrent with the vesting of each deferred stock
         award, Executive agrees to execute and to provide to the

                                       4

<PAGE>

         Company an assignment separate from transfer with respect to the shares
         to be pledged as collateral.

                  6.       Consulting. Executive and Company agree that
         Executive, upon the termination of his employment, will provide
         consulting services to the Company in accordance with the terms of the
         Consulting Agreement attached hereto as Exhibit "A."

                  7.       Execution of Release. Executive agrees to execute no
         earlier than December 31, 2002, the Release Agreement attached hereto
         as Exhibit "B," provided that the Release shall in no way impair
         Executive's rights to indemnity from the Williams Group, including, but
         not limited to, his rights to indemnification under any certificate of
         incorporation, any bylaws, any corporate resolutions, any employee
         benefit plans, any insurance policies or any other instrument or
         agreement to which a member of the Williams Group is bound. Executive
         further understands that the execution of such Release is a material
         part of the consideration for the Company payments under Paragraph 2
         hereof.

                  8.       EICP Bonus. Executive shall not be entitled to
         receive a bonus under the Executive Incentive Compensation Program for
         the 2002 calendar year.

                  9.       Indemnification. To the extent permitted by law and
         as provided in its certificate of incorporation and bylaws, the Company
         shall indemnify and hold harmless Executive from all claims made
         against him to the extent they relate to, or arise out of, his
         employment at the Company as a director, officer, or employee.

                                       5

<PAGE>

                  10.      Benefits. Except as otherwise provided in Paragraphs
         2, 3, 4, 5, and 8 hereof, nothing contained herein shall be construed
         to abrogate Executive's rights under any employee benefit or incentive
         compensation plan. Executive's rights under any such employee benefit
         or incentive compensation plan shall be governed by the terms of such
         plan.

                  11.      Confidentiality. Executive covenants and agrees that,
         during and for six (6) years after termination of Executive's
         employment with Company, Executive shall not, unless required by
         applicable law, divulge, furnish, disclose or make accessible to any
         person, entity or governmental authority any knowledge or information,
         techniques, processes, trade secrets, customer information or lists,
         plans, devices or material with respect to any secret, confidential or
         sensitive research or development work, promotions, ideas,
         opportunities, business plans, designs, products or production methods
         of the Williams Group or with respect to any other secret, confidential
         or sensitive aspect of the business of the Williams Group, except as
         may be necessary in the furtherance and conduct of the business of the
         Williams Group. It is acknowledged that the Williams Group would be
         irreparably harmed if Executive should breach the provisions of this
         Paragraph 11. Accordingly, the Company is granted the right of specific
         performance to enforce the provisions of this Paragraph 11. Executive
         also acknowledges that this Paragraph 11 is a material term of this
         Agreement and that its breach could result in damage to the Williams
         Group that may be difficult to ascertain and that upon any such breach
         or in

                                       6

<PAGE>

         reasonable anticipation of any such breach, the Company will be
         entitled to an order of any court of competent jurisdiction to enjoin
         such breach.

                  12.      Exclusive Service. Through the Separation Date,
         Executive shall devote his full business time and attention and his
         best efforts to the performance of his duties hereunder.

                  13.      Derogatory Remarks. Executive will not make public
         derogatory comments regarding the Williams Group or any of its current
         or former directors, officers or employees at any time before or after
         his termination of employment.

                  14.      Files and Records. Promptly upon termination of his
         employment, Executive will return to the Company all property and all
         files and other documentation belonging to or relating or in any way
         pertaining to the Williams Group or the business or operations of the
         Williams Group, except as may be required by Executive in the bona fide
         enforcement of this Agreement.

                  15.      Cooperation in Litigation. To the extent reasonably
         necessary and upon reasonable notice, following his termination of
         employment, Executive will cooperate with the Williams Group in
         connection with the prosecution or defense of any claim asserted by or
         against any of them (excluding a claim in connection with the
         enforcement of this Agreement) with respect to which Executive may have
         any knowledge.

                  16.      General Provisions.

                           (a)      Binding Agreement: This Agreement will be
                  binding upon, and inure to the benefit of, Executive and the
                  Company and their respective permitted successors and
                  permitted assigns.

                                       7

<PAGE>

                           (b)      Amendment of Agreement: This Agreement may
                  not be modified or amended except by an instrument in writing
                  signed by both Executive and a duly authorized representative
                  of Company.

                           (c)      Waiver: No term or condition of this
                  Agreement will be deemed to have been waived, nor will there
                  by any estoppel against the enforcement of any provision of
                  this Agreement, except by written instrument of the party
                  charged with such waiver or estoppel. No such written waiver
                  will be deemed a continuing waiver unless specifically stated
                  therein, and each such waiver will operate only as to the
                  specific term or condition waived and shall not constitute a
                  waiver of such term or condition for the future or as to any
                  act other than that specifically waived.

                           (d)      Headings: The heading of paragraphs or
                  subparagraphs herein are included solely for convenience or
                  reference and will not control the meaning or interpretation
                  of any of the provisions of this Agreement.

                           (e)      Notices: Any and all notices required to be
                  sent pursuant to the terms of this Agreement will be sent by
                  registered or certified mail or be personally delivered to the
                  parties hereto at the following addresses or

                                       8

<PAGE>

                  such other addresses as they may designate:

                           Executive:

                           Jack D. McCarthy
                           [ ]
                           [ ]

                           Company:

                           The Williams Companies, Inc.
                           Attn: Senior Vice President, Human Resources
                           One Williams Center
                           P. O. Box 2400
                           Tulsa, Oklahoma 74102

                           (f)      Governing Law: All the terms and provisions
                  of this Agreement and their validity, interpretation,
                  performance and enforcement will be governed by the laws of
                  the State of Oklahoma.

                           (g)      Agreement Binding: Except as otherwise
                  expressly provided herein, the obligations of Executive under
                  this Agreement will continue after the termination of
                  Executive's employment with the Company for any reason, and
                  will be binding on Executive's heirs, executors, legal
                  representatives and permitted assigns and will inure to the
                  benefit of the Company and any successors and assigns of the
                  Company.

                                       9

<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day first written above.

                                         THE WILLIAMS COMPANIES, INC.

                                         By:    /s/ Michael P. Johnson
                                            ------------------------------------
                                         Title: Senior Vice President

Witness:
/s/ Shawna L. Gehres                     /s/ Jack D. McCarthy
                                         ---------------------------------------
                                         Jack D. McCarthy

                                       10

<PAGE>

                                   EXHIBIT "A"
                              CONSULTING AGREEMENT

         THIS CONSULTING AGREEMENT is entered into this ____ day of December,
2002, by and between THE WILLIAMS COMPANIES, INC. a Delaware Corporation,
("Williams") and Jack D. McCarthy ("Consultant").

         WHEREAS, Williams wishes to avail itself of Consultant's knowledge,
expertise and experience by utilizing the services of Consultant;

         WHEREAS, Consultant is willing to serve as a consultant to Williams
upon the terms and conditions set forth below;

         NOW, THEREFORE, in consideration of their mutual promises and for other
good and valuable consideration, Williams and Consultant hereby agree as
follows:

         1.       Consulting Services.

(a)      During the period beginning on the date on which Consultant ceases to
be employed by Williams and continuing until August 31, 2004, (the "Consulting
Period"), Consultant shall provide to Williams, its subsidiaries and affiliates
(the "Williams Group"), consulting services commensurate with his status and
experience with respect to the matters enumerated below and such other matters
as shall be reasonably requested from time to time by the Chief Executive
Officer of Williams (the "Williams Representative"), provided that Consultant
shall not be required to provide such services during any period when he is
unable to perform due to his health:

                           (i)      Consultant shall assist with the 2002
                           year-end financial closing for the Williams Group;

                           (ii)     Consultant shall assist in the selection of
                           a Chief Financial Officer for the Williams Group and
                           the transition of his replacement;

                           (iii)    Consultant shall assist with the debt
                           restructuring of the Williams Group; and

                           (iv)     Consultant shall assist with the placement
                           of the property and casualty insurance of the
                           Williams Group during the first quarter of 2003.

         Consultant shall provide consulting services to the Williams Group only
         as needed and when reasonably requested by the Williams Representative,

                                       11

<PAGE>

         provided that, without his prior consent, Consultant shall not be
         required to devote more than one hundred twenty (120) hours in any
         calendar month to the performance of any consulting services hereunder,
         and provided further that, until such time as Williams has paid
         Consultant for a minimum of one thousand (1000) hours of consulting
         services and subject to the terms of Paragraph 6 of this Agreement, so
         long as Consultant makes reasonable efforts to be available for
         consulting services during the term of this agreement, Williams shall
         pay Consultant for a minimum of fifty (50) hours of consulting services
         during each month of the Consulting Period. Upon such time as Williams
         has paid Consultant for a minimum of one thousand (1000) hours, there
         shall be no monthly minimums for consulting services. Consultant shall
         determine the time and location at which he shall perform such
         services, subject to the right of the Williams Representative to
         reasonably request by advance written notice that such services be
         performed at a specific time and at a specific location. Consultant
         shall honor any such request unless he is unable to perform due to his
         health, or he has a conflicting business commitment that would preclude
         him from performing such services at the time and/or place requested by
         the Williams Representative, and in such circumstances, shall make
         reasonable efforts to arrange a mutually satisfactory alternative.
         Williams shall use its reasonable best efforts not to require the
         performance of consulting services in any manner that unreasonably
         interferes with any other business activity of Consultant.

                  (b)      Consultant shall not, solely by virtue of the
         consulting services provided hereunder, be considered to be an officer
         or employee of any member of the Williams Group during the Consulting
         Period, and shall not have the power or authority to contract in the
         name of or bind any member of the Williams Group. Consultant shall at
         all times be treated as an independent contractor and shall be
         responsible for the payment of all taxes with respect to all amounts
         paid to him hereunder. Consultant shall not, by reason of the services
         performed hereunder, be entitled to participate in any employee
         benefits plan, program or arrangement made available to any employee of
         the Williams Group.

                   (c)     This Agreement is personal to Consultant and all of
         the services required of Consultant hereunder shall be performed
         personally by him.

         2.       Consulting Fees.

                   (a)     Williams shall pay Consultant, upon execution of this
         Agreement, the sum of One Hundred Fifty Thousand Dollars ($150,000) as
         consideration for executing this Agreement and for agreeing not to
         compete and not to solicit employees as provided for herein; and

                                       12

<PAGE>

                   (b)     In respect of the services to be performed hereunder,
         Williams shall pay Consultant Three Hundred Fifty Dollars ($350.00) for
         each hour of consulting service, within ten (10) business days
         following submission by Consultant of an itemized report indicating the
         hours of service performed during the reporting period and fully
         describing the services rendered. The first such itemized report shall
         indicate the hours of service performed up to the date of that first
         report. Each succeeding report shall indicate the hours of service
         performed since the most recent report. Until such time as Williams has
         paid Consultant for a minimum of one thousand (1000) hours of
         consulting services, each itemized report shall include the minimum
         billing for fifty (50) hours of consulting services each month
         described in Paragraph 1(a) above plus any additional hours of service
         rendered during the reporting period. Williams shall also reimburse
         Consultant for such reasonable travel, lodging and other appropriate
         expenses incurred by Consultant in the course or on account of
         rendering consulting services hereunder, subject to the submission by
         Consultant of evidence of such expenses in a form reasonably
         satisfactory to Williams. Consultant shall be eligible for a
         discretionary bonus in an amount determined by the Company at the end
         of the Consulting Period, provided the Company determines, in its sole
         discretion that he properly performed all of his obligations under this
         Agreement during the Consulting Period.

         3.       Confidential Information. Consultant shall not, at any time
during the Consulting Period, make use of or disclose, directly or indirectly,
any (i) trade secret or other confidential or secret information of the Williams
Group or (ii) other technical,

                                       13

<PAGE>

business, proprietary or financial information of the Williams Group not
available to the public generally or to the competitors of the Williams Group
("Confidential Information"), except to the extent that such Confidential
Information (a) becomes a matter of public record or is published in a
newspaper, magazine or other periodical available to the general public, other
than as a result of any act or omission of Consultant, (b) is required to be
disclosed by any law, regulation or order of any court or regulatory commission,
department or agency, provided that Consultant gives prompt notice of such
requirement to Williams to enable Williams to seek an appropriate protective
order, or (c) is necessary to perform properly Consultant's duties under this
Agreement. Promptly following the termination of the Consulting Period,
Consultant shall surrender to Williams all records, memoranda, notes, plans,
reports, computer tapes and software and other documents and data which
constitute Confidential Information which he may then possess or have under his
control (together with all copies thereof).

         4.       Noncompetition; Nonsolicitation.

                  (a)       Consultant acknowledges that during the Consulting
         Period he will become familiar with trade secrets and other
         confidential information concerning the Williams Group and that his
         services will be of special, unique and extraordinary value to the
         Williams Group.

                  (b)       Consultant agrees that during the Consulting Period
         he shall not in any manner, directly or indirectly, through any person,
         firm or corporation, alone or as a member of a partnership or as an
         officer, director, stockholder, investor or employee of or consultant
         to any other corporation or enterprise or otherwise, engage or be
         engaged, or assist any other person, firm corporation or enterprise

                                       14

<PAGE>

         in engaging or being engaged, in any business, in which Consultant was
         involved or of which he has knowledge is being conducted by the
         Williams Group during the Consulting Period, in any geographic area in
         which the Williams Group is then conducting such business.
         Notwithstanding the provisions of this subparagraph 4(b) to the
         contrary, Consultant may act as a director, stockholder, investor or
         employee of or consultant to any corporation or enterprise with regard
         to the business or businesses referred to above with the prior written
         consent of Williams, such consent not to be unreasonably withheld.

                  (c)      Consultant further agrees that during the Consulting
         Period he shall not in any manner, directly or indirectly, induce or
         attempt to induce any employee of Williams Group to terminate or
         abandon his or her employment for any purpose whatsoever.

                  (d)      Nothing in this Paragraph 4 shall prohibit Consultant
         from being (i) a stockholder in a mutual fund or a diversified
         investment company or (ii) a passive owner of not more than two percent
         (2%) of the outstanding stock of any class of a corporation, or any
         securities of which are publicly traded, so long as Consultant has no
         active participation in the business of such corporation.

                  (e)      If, at any time of enforcement of this Paragraph 4,a
         court or an arbitrator holds that the restrictions stated herein are
         unreasonable under circumstances then existing, the parties hereto
         agree that the maximum period, scope or geographical area reasonable
         under such circumstances shall be substituted for the stated period,
         scope or area and that the court or arbitrator shall be allowed to
         revise the restrictions contained herein to cover the maximum

                                       15

<PAGE>

         period, scope and area permitted by law. This Agreement shall not
         authorize a court or arbitrator to increase or broaden any of the
         restrictions in this Paragraph.

         5.       Hold Harmless. Consultant shall hold harmless Williams, its
subsidiaries and affiliates, and its and their respective shareholders,
officers, directors, employees and attorneys against any damage, injury, death,
claim, loss, charge or expense (including, without limitation, attorneys' fees
and court costs and the costs of investigation) of any party, including
Consultant, arising out of or relating to, or claimed to arise out of or relate
to, Consultant's gross negligence or willful misconduct in performing under this
Agreement.

         6.       Termination of the Consulting Services. Williams may terminate
this Agreement solely for cause, which shall be limited to either (i) the
conviction of Consultant of a felony which has a substantial effect on the
business or reputation of the Williams Group or (ii) the continual and repeated
failure of Consultant to perform the services required of him hereunder, after
written notice of the alleged failures and an opportunity to cure has been
given. Consultant may only terminate this Agreement due to a material breach
hereof by Williams.

         7.      Termination of Benefits. Nothing in this Agreement shall be
construed to limit, reduce, offset or otherwise impair Consultant's rights to
any benefits or compensation vested or accrued under the terms of the employee
benefit plans, programs or arrangements maintained by Williams, other than those
benefits which were released or waived by Consultant pursuant to the Settlement
and Retention Agreement dated December 18, 2002.

                                       16

<PAGE>

         8.       Enforcement. The parties hereto agree that the Williams Group
would be damaged irreparably in the event that any provision of Paragraph 3 or 4
of this Agreement were not performed in accordance with its terms or were
otherwise breached and that money damages would be an inadequate remedy for any
such nonperformance or breach. Accordingly, Williams and its successors and
permitted assigns shall be entitled, in addition to other rights and remedies
existing in their favor, to an injunction or injunctions to prevent any breach
or threatened breach of any of such provisions and to enforce such provisions
specifically (without posting a bond or other security). Consultant agrees that
he will submit himself to the personal jurisdiction of the courts of the State
of Oklahoma in any action by Williams to enforce an arbitration award against
him or to obtain interim injunctive or other relief pending an arbitration
decision.

         9.       Disputes. Any controversy or claim arising out of or relating
to this Agreement, or any breach thereof, shall be settled by arbitration in
accordance with the rules of the American Arbitration Association then in effect
in the State of Oklahoma, and judgment upon such award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
arbitration shall be held in Tulsa, Oklahoma, each party to bear its own costs.
The arbitrator shall have the authority to award any remedy or relief that a
court of competent jurisdiction could order or grant, including, without
limitation, the issuance of an injunction. However, either party may, without
inconsistency with this arbitration provision, apply to any court having
jurisdiction over such dispute or controversy and seek interim provisional,
injunctive or other equitable relief until the arbitration award is rendered or
the controversy is otherwise resolved.

                                       17

<PAGE>

Williams and Consultant acknowledge that this Agreement evidences a transaction
involving interstate commerce.

         10.      Computer Support and Access. During the Consulting Period,
Williams shall provide and maintain Consultant's computer and access to
Williams' network and telephone systems via his home office as shall be
reasonably necessary for Consultant to provide the consulting services requested
by the Williams Group under the terms of this Agreement.

         1)       Miscellaneous. This Agreement may only be amended by a written
instrument signed by Williams and Consultant. Except as otherwise expressly
provided hereunder, this Agreement shall constitute the entire agreement between
Williams and Consultant with respect to the subject matter hereof. This
Agreement may be executed in counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.

         12.      Notices. Any and all notices required to be sent pursuant to
the terms of this Agreement will be sent by registered or certified mail or be
personally delivered to the parties hereto at the following addresses or such
other addresses as they may designate:

                           Consultant:

                           Jack D. McCarthy
                           [ ]

                           Company:

                           The Williams Companies, Inc.
                           Attn: Senior Vice President, Human Resources
                           One William Center
                           P. O. Box 2400
                           Tulsa, Oklahoma 74102

                                       18

<PAGE>

         13.      Successor and Assigns. This Agreement shall be enforceable by
Consultant and his heirs, executors, administrators and legal representatives,
and by Williams and its successors and assigns.

         14.      Survival. Paragraphs 3, 4, and 9 of this Agreement shall
survive and continue in full force and effect in accordance with their
respective terms, notwithstanding any termination of the Consulting Period.

         15.      Governing Law. This Agreement shall be governed by the laws of
the State of Oklahoma, without reference to the principles of conflicts of law.

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day first written above.

                                       THE WILLIAMS COMPANIES, INC.

                                       By:___________________________________
                                       Title:________________________________

                                       Witness:
____________________________           ______________________________________
                                       Jack D. McCarthy

                                       19

<PAGE>

                                   EXHIBIT "B"

                                     RELEASE

         THIS RELEASE (this "Agreement") is entered into this ____ day of
January, 2003, by and between The Williams Companies, Inc. ("Williams") and Jack
D. McCarthy ("Mr. McCarthy") and is effective seven days after the execution
hereof by Mr. McCarthy (hereinafter the "Effective Date").

         WHEREAS, the parties entered into a Settlement and Retention Agreement
dated December 18, 2002 ("Settlement and Retention Agreement"); and

         WHEREAS, such Settlement and Retention Agreement provided for the
execution of this Agreement on or after December 31, 2002.

         NOW, THEREFORE, in consideration of the mutual promises made herein,
and for other good and valuable consideration, the parties hereby agree as
follows:

I.       COVENANTS AND OBLIGATIONS OF WILLIAMS

         Williams Payments and Obligations. Williams shall pay to Mr. McCarthy
the payments required under Paragraph 2 of the Settlement and Retention
Agreement and apply such payments in accordance with such agreement. The Company
will also perform its obligations under the Settlement and Retention Agreement.

II.      COVENANTS AND OBLIGATIONS OF MR. McCARTHY

         1.       Release. Except for the obligations specifically set forth
in this Agreement and the Settlement and Retention Agreement, including
Paragraphs 7 and 9 thereof, Mr. McCarthy for himself, his attorneys, and his
heirs, executors, administrators, successors and assigns, does hereby fully,
finally and forever release and discharge Williams and its subsidiaries,
affiliates, predecessors, successors and assigns and their respective officers,
directors, employees, representatives, agents and fiduciaries, de facto or de
jure ("Released Parties") of and from any and all charges, claims, actions (in
law or in equity), suits, demands, losses, expenses, damages, debts,
liabilities, obligations, disputes, proceedings, or any other manner of
liability (known or unknown) including without limitation those arising from, in
whole or in part, the employment relationship between Williams and Mr. McCarthy
or the termination thereof which exist, or have heretofore accrued, fixed or
contingent, known or unknown, including without limitation any claims arising
under 42 U.S.C. Section 1981, 42 U.S.C. Section 1983, 42 U.S.C. Section 1985, 42
U.S.C. Section 1986, the Equal Pay Act, 29 U.S.C. Section 206(d), the National
Labor Relations Act, as amended, 29 U.S.C. Section 160, et seq., the Americans
With Disabilities Act, 42 U.S.C. Section 12101, et seq., the Employee Retirement
Income Security Act of 1974, as amended, ("ERISA"), 29 U.S.C. Section 1001, et
seq., the Age Discrimination in Employment Act, 29 U.S.C. Section 621, et seq.,
Title VII of the Civil Rights Act of 1964 as amended by the Civil Rights Act of
1991, 42 U.S.C. Section 2000e, et seq., the Family and Medical Leave Act, 29
U.S.C. Section 2601 et seq., and claims of wrongful discharge, defamation,
infliction of emotional distress, termination in violation of public policy,
retaliatory discharge,

                                       20

<PAGE>

including those based on workers' compensation retaliation under state statutes,
discrimination on the basis of handicap, or claims related to employee benefits
or arising under any federal or state statute or common law.

         2.       Mr. McCarthy's Covenants. By signing this Agreement, Mr.
McCarthy covenants, agrees, represents and warrants that:

                  (a)      He has not filed and will not in the future file any
         lawsuits, complaints, petitions or accusatory pleadings against any of
         the Released Parties in any court based upon, arising out of or in any
         way related to any event or events occurring prior to the signing of
         this Agreement, including, without limitation, his employment with any
         of the Released Parties or the termination thereof;

                  (b)      This Agreement specifically includes, without
         limitation, all claims asserted by or on behalf of Mr. McCarthy against
         any of the Released Parties, together with all claims which might have
         been asserted by or on behalf of Mr. McCarthy in any suit, claim (known
         or unknown), charge or grievance against any of the Released Parties
         for or on account of any matter or things whatsoever up to and
         including the effective date of this Agreement; and

                  (c)      Mr. McCarthy waives all rights to recovery for any
         damages or compensation awarded as a result of any suit or proceeding
         by any third party or governmental agency on Mr. McCarthy's behalf
         related to claims released in Section 1 herein.

         3.       No Admission of Liability. Notwithstanding the provisions of
this Agreement and the payments to be made by Williams to Mr. McCarthy
hereunder, Williams does not admit any manner of liability to Mr. McCarthy but
has entered into this Agreement as a means of settling any and all disputes
between Williams and Mr. McCarthy.

         4.       Independent Advice. Mr. McCarthy has been encouraged to seek
independent legal and tax advice concerning the provisions of this Agreement in
general and, after such advice and consultation, Mr. McCarthy has freely and
knowingly entered into this Agreement. Mr. McCarthy acknowledges, understands
and affirms that:

                  (a)      This Agreement is a binding legal document;

                  (b)      Mr. McCarthy voluntarily signs and enters into
         this Agreement without reservation after having given the matter full
         and careful consideration;

                  (c)      Mr. McCarthy acknowledges that he has been provided
with the opportunity of at least twenty-one (21) days in which to consider this
Agreement and that he has been advised to consult with an attorney before
signing this Agreement. If Mr. McCarthy elects to take less than twenty-one (21)
days to consider this Agreement, he does so knowingly, willingly and on advice
of counsel, with full understanding that he is waiving a statutory right to take
the full twenty-one (21) days. Mr. McCarthy warrants

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that after careful review and study of this Agreement, he understands that the
terms set forth herein are those actually agreed upon. Further, Mr. McCarthy
acknowledges and understands that he has seven (7) days from his execution of
this Agreement to revoke or rescind it, in writing, and that after the
expiration of such seven (7) day period this Agreement is effective and
enforceable and may not be revoked.

         5.       No Release of Vested Benefit. Mr. McCarthy does not, by this
Agreement, release or discharge any right to any vested, deferred benefit in any
qualified employee benefit plan which provides for retirement, pension, savings,
thrift and/or employee stock ownership, as such terms are used under ERISA,
maintained by any of the Released Parties which employed Mr. McCarthy provided;
however, Mr. McCarthy agrees that he is not entitled to any other severance
payment except as set forth in the Settlement and Retention Agreement.

III.     GENERAL PROVISIONS

         1.       Binding Effect. This Agreement is binding upon and shall inure
to the benefit of the parties hereto and their respective successors, assigns,
personal representatives, officers, directors, agents, attorneys, parents,
subsidiaries and affiliates.

         2.       Waiver or Amendment. No waiver, alteration, or modification of
any of the provisions of this Agreement shall be binding unless in writing and
signed both by Mr. McCarthy and a duly authorized representative of Williams.

         3.       Entirety. This Agreement and the Settlement and Retention
Agreement constitute the entire agreement between the parties with respect to
the subject matter hereof. This Agreement and the Settlement and Retention
Agreement supersede any and all other negotiations, understandings or
agreements, whether oral or in writing between the parties with respect to the
subject matter hereof including, without limitation, any and all compensation or
benefits payable to Mr. McCarthy.

         4.       Miscellaneous. This Agreement and the rights and obligations
hereunder shall be construed in all respects in accordance with the internal
laws of the State of Oklahoma without reference to the conflict of laws
provisions thereof. If any provision of this Agreement be found or declared or
determined by a court of competent jurisdiction to be invalid, the validity of
the remaining parts, terms or provisions shall not be affected thereby and any
such invalid part, term or provision shall be deemed not to be a part of this
Agreement. Any litigation concerning this Agreement or the facts or matters
described herein shall be brought only in a court of competent jurisdiction in
Tulsa County, Tulsa, Oklahoma.

         5.       Authorization. Each person signing this Agreement as a party
or on behalf of a party represents that he is duly authorized to sign this
Agreement and such party's behalf and is executing this Agreement voluntarily,
knowingly and without any duress or coercion.

         MR. McCARTHY FURTHER STATES THAT HE HAS CAREFULLY READ THIS DOCUMENT
AND KNOWS AND UNDERSTANDS THE CONTENTS HEREOF AND THAT HE SIGNS THIS AGREEMENT
AS HIS OWN FREE ACT AND DEED. THE

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<PAGE>

PROVISIONS OF THIS AGREEMENT SHALL BE EFFECTIVE THE DATE ON WHICH MR. McCARTHY
SIGNS THIS AGREEMENT.

WITNESS:                                    THE WILLIAMS COMPANIES, INC.

________________________                 By:_____________________________

                                            Title:____________________________

                                            Date signed: _____________________

                                            ___________________________________
                                            JACK D. McCARTHY

                                            Date signed:______________________

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<PAGE>

                           A C K N O W L E D G M E N T

         I HEREBY ACKNOWLEDGE that _________________________, in accordance with
the Age Discrimination in Employment Act, as amended by the Older Workers
Benefit Protection Act of 1990, informed me in writing that:

                  (1)      I should consult with an attorney before signing the
         Release Agreement ("Release");

                  (2)      I may review the Release for a period of up to
         twenty-one (21) days following the Separation Date. If I choose to take
         less than twenty-one (21) days to review the Release, I do so
         knowingly, willingly and on advice of counsel;

                  (3)      For a period of seven days following the signing of
         the Release, I may revoke the Release, and that the Release will not
         become effective or enforceable until the seven day revocation period
         has elapsed which is the "Effective Date" set forth in the Release; and

                  (4)      The sums described in Paragraph 2 of the Settlement
         and Retention Agreement will not be paid to me until the seven-day
         revocation period has elapsed.

         I HEREBY FURTHER ACKNOWLEDGE receipt of this Release Agreement on the
_____ day of December, 2002.

WITNESS:

_____________________________

                                                _______________________________
                                                Jack D. McCarthy

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