<PAGE>

                                                                EXHIBIT 10(a)(3)

                    TENNECO INC. DEFERRED COMPENSATION PLAN

                                 DECEMBER 1967
                          AS AMENDED JANUARY 1, 1970,
                     AMENDED AND RESTATED JANUARY 1, 1980,
                     AMENDED AND RESTATED JANUARY 1, 1982,
                      AMENDED AND RESTATED AUGUST 1, 1984,
                     AMENDED AND RESTATED NOVEMBER 1, 1984,
                     AMENDED AND RESTATED JANUARY 1, 1986,
                     AMENDED AND RESTATED JANUARY 1, 1987,
                     AMENDED AND RESTATED NOVEMBER 1, 1988,
                  AND AMENDED AND RESTATED SEPTEMBER 12, 1995.

1. NAME AND PURPOSE. The name of this plan is the "Tenneco Inc. Deferred
Compensation Plan" (the Plan). The purpose of this Plan is to provide reward and
incentive to employees who contribute to the success of the Company's business
by their ability, industry, loyalty, inventiveness, or exceptional service,
through making such employees participants in that success.

2. DEFINITIONS. For purposes of this Plan, the following definitions shall be
applicable:

  a. The term "Employee" shall mean any person who is regularly employed on a
salaried basis by the Company or by a Qualified Subsidiary, including, but not
limited to, any employee who is also an officer or director of the Company or of
a Qualified Subsidiary.

  b. The term "Participant" shall mean an Employee who has been credited with
any portion of an award pursuant to Section 4 hereof for any year during which
this Plan is in effect and who (or whose beneficiary) has not received the total
vested portion of the balance of the Participant's account.

  c. The term "Company" shall mean Tenneco Inc.

  d. The term "Qualified Subsidiary" shall mean a company 50 percent or more of
whose voting stock is owned (directly or through another Qualified Subsidiary)
by the Company.

  e. The term "Board of Directors" shall mean the Board of Directors of the
Company.

  f. The term "Compensation and Benefits Committee" shall mean the Compensation
and Benefits Committee established by the Board of Directors.

  g. The term "Normal Retirement Date" when applied to a Participant shall
mean the Participant's Normal Retirement Date under the Tenneco Inc. Retirement
Plan.

  h. The term "Early Retirement Benefit" shall mean an Early Retirement
Benefit under the Tenneco Inc. Retirement Plan.

  i. The term "Disability" shall have the same meaning as that provided in the
Tenneco Inc. Retirement Plan.
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  j. The term "Accumulation Limit" shall mean $1.5 million or such other amount
as the Compensation and Benefits Committee may, from time to time, designate as
in effect.

3. ADMINISTRATION. The Board of Directors has designated the Compensation and
Benefits Committee to administer, construe and interpret this Plan. The
construction and interpretation by the Compensation and Benefits Committee of
any provision of this Plan shall be final, conclusive and binding upon all
parties, including the Company, its stockholders and its Employees. No member of
the Compensation and Benefits Committee shall be liable for any act done or
determination made in good faith.

4. ACCOUNTING. The Company shall create a Deferred Compensation Ledger under
which an account shall be maintained in the name of each Employee who is
selected by the Board of Directors to be a Participant. Each Participant's
account shall be maintained in accordance with the following rules:

a. CREDITING OF AWARD. The Participant's award for a particular calendar year,
if any, shall be declared by the Board of Directors as of the commencement of
the calendar year. As of the first day of each month of the calendar year, the
Participant's account will be credited for 1/12 of the award, provided, that on
such day the Participant is an Employee.

b. INTEREST. As of the last day of each month on which the participant is an
employee, interest for the month shall be credited on the closing balance of the
Participant's account as of the last day of the immediately preceding month at a
rate (or rates) that is equal to the Prime Interest Rate (or Rates) announced by
the Chase Manhattan Bank for such later month (or applicable portions thereof).

c. CPI ADJUSTMENT. If the Participant is an Employee on the last day of a
calendar year (the "current year"), then as soon as is administratively feasible
following the completion of the current year, the percentage change in the
Consumer Price Index For All Urban Households as prepared by the Bureau of Labor
Statistics (the "CPI") as of the last day of the current year from the CPI as of
the last day of the preceding calendar year shall be calculated. The award
credited to the Participant's account for the current year and the sum of each
award credited to the Participant's account for each preceding calendar year
plus the total allowable CPI adjustments that have previously been determined
with respect thereto shall be separately multiplied by the percentage to
determine the current year CPI adjustment to the award credited for the current
year and to the award credited for each preceding calendar year. The total of
the allowable current year CPI adjustments to the award credited for the current
year and to the award credited for each of the preceding calendar years shall be
credited to (or, if negative, debited from) the Participant's account as of the
last day of the current year.

In the event that a Participant ceases to be an Employee prior to the last day
of the current year, the percentage change in the CPI as of the last day of the
month coinciding with or immediately preceding the date upon which the
Participant ceased to be an Employee from the CPI as of the last day of the
preceding calendar year shall be calculated. Such percentage shall be utilized
to determine the total of the allowable current year CPI adjustments to the
award credited for the partial current year and to the award credited for each
of the preceding calendar years in the manner hereinbefore described and such
total shall be credited to (or, if negative, debited from) the Participant's
account as of the last day of the month coinciding
<PAGE>
 
with or immediately preceding the date upon which the Participant ceased to be
an Employee.

For purposes of the foregoing, no current year CPI adjustment to an award
credited for any calendar year shall be allowable to the extent that such
adjustment, when added to all previous CPI adjustments to such award, would
exceed the original amount of the award credited for the calendar year.

d. VESTING. A Participant will vest in any award credited to his or her account
for a particular calendar year beginning on or after January 1, 1980, and in any
CPI adjustments made to such award, based upon the consecutive calendar years,
commencing with the particular calendar year, throughout which the Participant
has been an Employee, in accordance with the following schedule:

<TABLE> 
<CAPTION> 
                CALENDAR                           VESTING
          YEARS OF EMPLOYMENT                     PERCENTAGE
          <S>                                     <C> 
                  1                                  33 1/3%
                  2                                  66%
                  3                                  100%
</TABLE> 

Notwithstanding the foregoing, a Participant will be fully vested in all awards
credited to his or her account and in all CPI adjustments made to such awards
(i) if the Participant continues to be an Employee until the earliest of
attainment of his or her Normal Retirement Date, attainment of eligibility to
elect to receive an Early Retirement Benefit or termination of employment on
account of disability or death; or (ii) if the Compensation and Benefits
Committee determines that it would be in the best interests of the Company to
fully vest the Participant upon termination of employment. A Participant will
always be fully vested in any interest that has been credited to his or her
account.

  5. PAYMENT OF BENEFITS. Distributions under this Plan shall be made only in
accordance with the following rules:

  a.  RETIREMENT OR DISABILITY. In the case of a participant who ceases to be an
Employee after having attained his or her Normal Retirement Date or having
attained eligibility to elect to receive an Early Retirement Benefit or on
account of disability, the Participant shall be entitled to receive an amount
equal to the balance of the Participant's account in a lump sum as soon as
administratively feasible following the reporting of the CPI as of the last day
of the month during which he or she ceased to be an Employee or in a number of
post termination annual installments, not to exceed five, as the Participant
shall elect. Interest and CPI adjustment will continue to be credited to a
Participant's account when a post termination distribution is elected.


  b.  OTHER TERMINATION OF EMPLOYMENT. In the case of a Participant who ceases
to be an Employee, otherwise than on account of disability, after attainment of
his or her Normal Retirement Date or after attainment of eligibility to elect to
receive an Early Retirement Benefit, the Participant shall be entitled to
receive an amount equal to the vested portion of the balance of the
Participant's account in 60 equal monthly installments commencing as of the
first day of the month immediately following the reporting of the CPI as of the
last day of the month during which he or she ceased to be an Employee. However,
in the event a
<PAGE>
 
Participant ceases to be an Employee on or after November 1, 1988, the
Compensation and Benefits Committee, in its sole and absolute discretion, may
direct that, in lieu of said installments, the Participant shall be paid an
amount equal to the vested portion of the balance of the Participant's account
in a lump sum as soon as administratively feasible following the reporting of
the CPI as of the last day of the month during which he or she ceases to be an
Employee. No interest or CPI adjustments will be credited following termination
of employment for reasons other than disability, retirement, or death.

c. DEATH DURING EMPLOYMENT. In the case of a Participant who dies while an
the participant's beneficiary shall be entitled to receive an amount
equal to the balance of the participant's account in a lump sum as soon as
administratively feasible following the reporting of the CPI as of the last day
of the month during which the participant's death occurred or in a number of
post termination annual installments, not to exceed five, as elected by the
administrator of the Participant's estate. Interest and CPI adjustments will
continue to be credited to the account when a post termination distribution
election is made.

d. ACCUMULATION LIMIT. In the event the balance of a Participant's account as of
the last day of a calendar year equals or exceeds the Accumulation Limit then in
effect, an amount equal to the Distribution Amount shall be distributed to the
Participant in a lump sum as soon as administratively feasible following the
expiration of the calendar year and the crediting of CPI adjustments for the
calendar year to the Participant's account, provided, that if the Participant
ceases to be an Employee prior to such distribution, distribution shall be
suspended and, thereafter, shall be made in accordance with paragraphs a, b, or
c, whichever applicable.

For purposes of the foregoing, the Distribution Amount shall be equal to the sum
of:

(i) each award, credited to the Participant's account for a particular calendar
    year, in which the Participant is 100% vested and with respect to which
    net CPI adjustments have been credited to the Participant's account in an
    amount equal to the original amount of the award credited, determined as of
    the close of the calendar year; plus

(ii) the net CPI adjustments credited to the Participant's account with respect
     to each award included in clause (i); plus

(iii) the portion of interest credited to the Participant's account that is
      allocated to each award included in clause (i) and to the net CPI
      adjustments included in clause (ii), determined in accordance with such
      allocation method as may be approved for such purpose by the Compensation
      Committee.

e. DEATH FOLLOWING TERMINATION OF EMPLOYMENT. In the case of a Participant who
dies after ceasing to be an Employee and before having received an amount equal
to the entire vested portion of the balance of his or her account, the
Participant's beneficiary shall be entitled to receive an amount equal to the
remainder of the vested portion of the balance of the Participant's account in a
continuation of such form of distribution as the Participant was receiving prior
to death, or if distribution to the Participant had not commenced, in such form
as to which the Participant was entitled under paragraphs a, b, or c.

In the event that, upon written application of the recipient Participant or
beneficiary, the
<PAGE>
 
Compensation and Benefits Committee determines that distribution in the form or
commencing at the time specified above would impose a significant hardship on
the recipient, the Compensation and Benefits Committee may authorize
distribution in a different form or commencing at a different time.

Notwithstanding anything to the contrary contained in the foregoing provisions
of this Section 5:

(i) if distribution of a Participant's account is to commence on or after
    September 1, 1984 and at the time of such commencement the vested portion of
    the balance of the account does not exceed fifteen thousand dollars
    ($15,000.00), said portion shall be distributed in a lump sum, and shall not
    be distributed in installments.

(ii) if, after distribution of a Participant's account in installments has
    commenced, the vested portion of the balance of the account at any time on
    or after September 1, 1984 does not exceed fifteen thousand dollars
    ($15,000.00), said portion shall promptly be distributed in a lump sum, and
    shall not continue to be distributed in installments.

(iii) if a Participant ceased to be an Employee under circumstances described in
    paragraphs (a) or (c) and distribution of the Participant's account in
    installment form commenced prior to January 1, 1986, the remaining balance
    of the account shall continue to be distributed in such installment form.

The amount of any distribution to a Participant or his or her beneficiary during
a month shall be debited, as of the last day of the immediately preceding month,
against the vested portion of the balance of the Participant's account.

  6.  DESIGNATION OF BENEFICIARY. Each Participant may at any time designate the
beneficiary or beneficiaries to whom payments hereunder shall be made on
account of the Participant's death. Any such designation shall be in writing and
filed with the Compensation and Benefits Committee. If no such designation is on
file with the Compensation and Benefits Committee or if no person so designated
is living, or otherwise in existence, at the time of the Participant's death,
then the deceased Participant's estate shall be deemed to be his or her
designated beneficiary.

  7.  NATURE AND SOURCE OF BENEFIT PAYMENTS. Portions of awards credited
pursuant to Section 4 hereof are compensation for services, and the benefits
provided herein with respect to such amounts shall constitute a liability of the
Company to the Participants and/or the beneficiaries in accordance with the
terms hereof. The payment of such benefits shall be made from the general funds
of the Company. No special or separate fund shall be established or other
segregation of assets made to assure the payment of such benefits and no
Participant shall have any interest in any particular asset of the Company by
virtue of the existence of a credit balance in such Participant's account.

  8.  EXPENSES OF ADMINISTERING PLAN. All expenses of administering this plan
shall be borne by the Company and no part thereof shall be charged against any
Participant's account.

  9.  AMENDMENT OR TERMINATION OF PLAN. The Board of Directors may:

  a. terminate this Plan at any time; and

  b.  amend or modify this Plan, from time to time, in any respect;
<PAGE>
 
provided, that any amendment or termination of this Plan shall in no way affect
the rights of any Participant or beneficiary to the receipt of benefits to the
extent of the balance of the Participant's account at the time of such amendment
or termination.

10. NON-ALIENATION OF BENEFITS. No benefit under this Plan shall be subject in
    any manner to anticipation, alienation, sale, transfer, assignment, pledge,
    encumbrance, or charge, and any attempt at such shall be void, and any such
    benefit shall not in any way be subject to the debts. contracts,
    liabilities, engagements, or torts of the person who shall be entitled to
    such benefit, nor shall it be subject to attachment or legal process for or
    against such person.

11. CLAIMS PROCEDURE. The Compensation and Benefits Committee shall establish a
    claims procedure which satisfies the requirements of the Employee Retirement
    Income Security Act of 1974.

APPROVED ON BEHALF OF THE BOARD OF DIRECTORS



By [SIGNATURE APPEARS HERE]


   
Pursuant to Section 11 of the Tenneco Inc. Deferred Compensation Plan (the
"Plan"), the Compensation and Benefits Committee of the Board of Directors of
Tenneco Inc. (the "Compensation and Benefits Committee") adopts the following
procedure for use in the administration of the Plan:

            TENNECO INC. DEFERRED COMPENSATION PLAN CLAIMS PROCEDURE

A. CLAIMS FOR BENEFITS

1.  As a prerequisite to payment of any benefit under the Plan, the Participant
    or the beneficiary of the deceased Participant shall make a claim in such
    manner as the Compensation and Benefits Committee may reasonably require;

2.  Promptly upon the receipt of such claim, the Compensation and Benefits
    Committee shall determine whether the claimant is entitled to the benefit
    and, if so, the amount thereof.

B. DENIAL OF BENEFITS

In the event that any claim for a benefit under this Plan is denied, in whole or
in part, the Compensation and Benefits Committee shall furnish the claimant with
a written notice setting forth in a manner calculated to be understood by the
claimant:

1. The specific reasons for the denial;

2. Specific reference to any pertinent provisions of this Plan upon which the
   denial is based;

<PAGE>
 
3.  A description of any additional material or information necessary for the
    claimant to perfect the claim and an explanation of why such material or
    information is necessary; and
4.  Appropriate information as to the steps to be taken if the claimant wishes
    to submit the claim for review.

A claim shall be deemed denied if the Compensation and Benefits Committee does
not approve the claim and fails to furnish the aforesaid notice of denial before
the expiration of a period commencing with its receipt of the claim and
consisting of 90 days, plus such extension of time for processing the claim, not
to exceed 90 additional days, as special circumstances require, provided, that,
prior to the expiration of the initial 90 days of the period, the claimant has
been furnished with a written notice, which indicates the special circumstances
requiring the extension and the date by which a decision regarding the claim is
expected to be rendered.

C.  PROCEDURE FOR REVIEW OF DENIED CLAIMS

A claimant whose claim for a benefit under the Plan is denied, either in whole
or in part, shall have the right, to be exercised by written application filed
with the Compensation and Benefits Committee not later than the 60th day after
receipt of notice of such denial, to request a review of the claim. Such request
for review may contain such issues and comments as the claimant may wish
considered in the review and the Compensation and Benefits Committee shall
permit the claimant to review pertinent documents in its possession, including
copies of the Plan. The Compensation and Benefits Committee shall make a final
determination with respect to the claim as soon as practicable. Notice of the
final determination shall be furnished to the claimant in writing, in a manner
reasonably calculated to be understood by the claimant, and shall set forth the
specific reasons for the determination and specific references to any pertinent
provisions of the Plan upon which the determination is based. A claim shall be
deemed denied on review if the Compensation and Benefits Committee fails to
furnish the aforesaid notice of final determination before the expiration of a
period commencing with its receipt of the request for review of the claim and
consisting of 60 days, plus such extension of time for completing the review,
not to exceed 60 additional days, as special circumstances require, provided,
that prior to the expiration of the initial 60 days of the period, the claimant
has been furnished with a written notice which indicates the special
circumstances requiring the extension and the date by which a decision regarding
the review of the claim is expected to be rendered.


APPROVED ON BEHALF OF THE COMPENSATION AND BENEFITS COMMITTEE


By: [SIGNATURE APPEARS HERE]
<PAGE>
 
                                 TENNECO INC.

                        DEFERRED COMPENSATION AGREEMENT

  AGREEMENT dated           , 19  , between Tenneco Inc., a Delaware 
Corporation, herein called "Tenneco", and 
                         of                                   , herein called
"Participant".

                                  WITNESSETH:

  In consideration of the mutual agreements herein contained, Tenneco and 
Participant agree as follows:

                                      1.

  Participant covenants and agrees to remain in the service of Tenneco, or its 
divisions or subsidiaries, until termination of employment due to retirement or 
other reason, and in consideration therefore and subject to the terms and 
conditions contained in the Tenneco Inc. Deferred Compensation Plan (the 
"Plan"), Tenneco agrees to maintain in its Deferred Compensation Ledger an 
account in the name of the Participant. Said account shall be credited with so 
much of the award of $       that has been declared for the calendar year    
and with such other amounts, as shall be determined in accordance with the 
provisions of the Plan, a copy of which is attached hereto and made a part 
hereof.

                                      2.

  It is agreed that this Agreement is entered into solely for the purpose of 
evidencing the additional compensation granted to Participant pursuant to the 
provisions of the Plan and is not intended and shall not operate to change in 
any way any of the other terms and conditions of Participant's employment by 
Tenneco.

                                      3.

  The Agreement shall inure to and bind the successors and assigns to Tenneco.

  IN WITNESS WHEREOF, Tenneco has caused this Agreement to be executed by its 
Chairman or one of its Vice Presidents and attested by its Secretary or an 
Assistant Secretary, and Participant has signed same, in duplicate originals, on
the date and year first above written.

ATTEST:                                         TENNECO INC.



/s/ Karl A. Stewart                             By:  /s/ Dana G. Mead
----------------------------                       ---------------------------
                  Secretary                                       Chairman/CEO


                                                   ---------------------------
                                                                   Participant