<PAGE>

                                                                    EXHIBIT 10.1

                                  [Letterhead]

                                                               ______ [__], 2008

CONFIDENTIAL

[Executive]
[Address]

     RE:  Tecumseh Products Company 2008 Retention Bonus

Dear [Company Executive],

We are pleased to advise you that Tecumseh Products Company (the "Company") has
approved a new retention bonus opportunity for which you have been selected to
participate in.

In order to encourage you to remain focused on maintaining the Company's
business, the Company agrees to the following provisions:

1.   RETENTION BONUS & SEVERANCE BENEFIT

The Company shall pay you (or, in the case of your death, your estate) a
"Retention Bonus" in an amount equal to one year's base salary (computed based
on your per annum base salary in effect on the date hereof) if (i) at anytime
during the period beginning on the date hereof and ending twelve (12) months
after the date of the 2010 shareholders meeting (the "Term") the Chief Executive
Officer ("CEO") of the Company (as of the date hereof) is no longer employed by
the Company (other than as a result of the CEO's death, disability or the
Company terminating the CEO for cause under the terms of the CEO's
agreement)(the "CEO's Termination"), and (ii) you are employed by the Company on
the one-year anniversary of the CEO's Termination (the "Payment Date"). The
Retention Bonus shall be payable in cash in a lump sum no later than thirty (30)
days after the Payment Date.

In the event that during the Term and after the CEO's Termination, your
employment is terminated by the Company without Cause (as hereinafter defined)
or by you with "Good Reason" (as hereinafter defined), you shall be entitled to
a "Retention Severance Benefit" of: (i) six (6) months of your base salary
(computed based on your per annum base salary in effect on the date of your
termination) payable in cash in a lump sum no later than thirty (30) days after
your termination, in addition to any severance payments you are entitled to
under any other severance arrangement with the Company, and (ii) full vesting of
all outstanding awards under the Company's Long Term Incentive Plan ("LTIP") and
the lesser of one hundred and eighty

<PAGE>

(180) days from the date of your termination or the expiration of the term of
the award to exercise any outstanding awards under the LTIP.

The receipt of your Retention Bonus or Retention Severance Benefit will not
affect or impair your rights or obligations or those of the Company under any
employment or other arrangement, by and between the Company and you.

2.   DEFINITIONS

"Cause" shall mean any of the following: (A) your deliberate and willful
continuing substantial failure to perform your duties for the Company for thirty
(30) days (other than as a result of incapacity due to mental or physical
illness) after a written demand is delivered to you by the Company's CEO or
Board of Directors; (B) your willful engagement in illegal conduct or gross
misconduct that is materially and demonstrably injurious to the Company; (C)
your conviction of a felony or his plea of guilty or nolo contendere to a
felony; or (D) the willful and material breach of your confidentiality
obligations under local law or the Company's code of conduct.

"Good Reason" shall mean any of the following occurrences: (A) without your
prior written consent, the assignment to duties that are a material diminution
of your then assigned duties and responsibilities, or the taking of any action
that results in the material diminution of such assigned duties or
responsibilities; (B) the failure to maintain you in an equivalent position in
the entity surviving a merger or consolidation involving the Company; (C) any
material reduction in your base salary or target bonus opportunity or Incentive
Awards as or when required other than an across-the-board reduction applicable
to all executives of the Company; or (D) you are assigned to a location more
than one hundred (100) miles from the then current headquarters of the Company

3.   CONFIDENTIALITY

You agree that you shall not, without authorization of the Board, disclose the
terms of this letter agreement or that you are eligible to receive or have
received any payments under this letter agreement to anyone other than members
of your immediate family, your attorney(s), your financial or tax advisor(s),
authorized representatives of the Company and its affiliates, or a court or
arbitration panel of competent jurisdiction. Without limiting the generality of
the foregoing, you specifically agree that you shall not disclose any
information about this letter agreement to any current or former employees of
the Company except those expressly authorized by the Company to have knowledge
of this letter agreement.

4.   BENEFITS

Since the amounts provided by this letter agreement represent unique payments to
you, these amounts will not be considered in calculating salary related benefits
(including, without limitation, under the Company's 401(k) Plan), except as
required by law.

5.   NET PAYMENTS

All federal, state, city or other taxes that are required to be withheld
pursuant to any applicable law or regulation will be deducted from any payments
made hereunder.


                                       2

<PAGE>

6.   NO GUARANTEE OF EMPLOYMENT

Nothing in this letter agreement shall be held or construed to confer upon you
the right to a continuation of employment by the Company.

7.   GOVERNING LAW; VENUE AND JURISDICTION; ENFORCEMENT

(A) This letter agreement shall be governed by and construed in accordance with
the laws of the State of Michigan.

(B) The parties hereby consent to the jurisdiction of the state and federal
courts located in the County of Washtenaw, Michigan, which shall be the
exclusive venue for any legal action or proceeding filed by either party with
respect to this agreement. The parties hereby further agree and irrevocably
waive any objection, including any objection to the laying of venue or based on
the grounds of forum non conveniens that either of them may now or hereafter
have to the bringing of any such action or proceedings in such jurisdictions.

(C) In connection with any proceeding brought by you or your heirs or other
successors or assigns, to enforce any provision of this agreement, whether
brought by you as plaintiff or as a counter- or cross-claim by you, the Company
shall advance to you all cash amounts required to pay your costs, expenses and
fees (including actual attorneys' fees) incurred by you in connection with such
proceeding.

8.   ENTIRE AGREEMENT

Nothing herein shall supersede your employment agreement or Change in Control
and Severance Agreement with the Company. This letter agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes any prior agreement with respect to retention bonuses. No change
to this letter agreement shall be effective unless it is in writing and signed
by both you and a duly authorized officer of the Company.

9.   VALIDITY; EFFECTIVENESS

The invalidity or unenforceability of any provision or provisions of this letter
agreement shall not affect the validity or enforceability of any other provision
of this letter agreement, which shall remain in full force and effect.

10.  SUCCESSORS AND ASSIGNS

This letter agreement shall inure to the benefit of and be binding upon the
respective heirs, executors, administrators, representatives, successors and
assigns of the parties hereto; provided, however, that you may not assign your
rights or obligations hereunder without the prior written consent of the
Company. The Company or its successor may assign its rights and obligations
hereunder to any affiliate of the Company or its successor, as the case may be,
provided, that the Company or its successor, as the case may be, remains jointly
and severally liable for the performance by any such affiliate of its
obligations hereunder.


                                       3

<PAGE>

11.  SURVIVAL

This letter agreement shall survive the termination of your employment with the
Company or any successor thereto.

This letter agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.

Please indicate your acceptance of these terms by countersigning a copy of this
letter agreement and returning it to the undersigned at your earliest
convenience.

Very truly yours,

COMPANY


By:
    ---------------------------------
    Name:
    Title:

Accepted and agreed:


-------------------------------------   ----------------------------------------
Signature                               Printed Name

Date:         , 200
      --------     --


                                       4