<PAGE>

                                                                    Exhibit 10.3

                        SETTLEMENT AND RELEASE AGREEMENT

          This SETTLEMENT AND RELEASE AGREEMENT (the "SETTLEMENT AGREEMENT") is
made and entered into as of April 2, 2007, by and among: (i) Tecumseh Products
Company, a Michigan corporation (the "COMPANY"); (ii) Herrick Foundation, a
Michigan nonprofit corporation, Todd W. Herrick and Toni Herrick, each in their
capacity as trustee for the Ray W. Herrick and Hazel M. Herrick Trusts u/a/d
February 26, 1949 and February 24, 1956 f/b/o Todd W. Herrick and his
descendants and Ray W. Herrick and Hazel M. Herrick Trusts u/a/d February 26,
1949 and February 24, 1956 f/b/o Toni Herrick and her descendants (the "Herrick
Trusts"), Todd W. Herrick, Kent B. Herrick and Michael Indenbaum, each in their
capacity as members of the Board of Trustees of Herrick Foundation, Todd W.
Herrick, Kent B. Herrick, Michael Indenbaum, and Toni Herrick, each in their
individual capacities (collectively referred to herein as the "HERRICK
ENTITIES"); and (iii) Albert A. Koch, Peter Banks, and David M. Risley, each in
their capacity as directors of the Company and collectively referred to herein
as the "DEFENDANT DIRECTORS." The Company, the Herrick Entities and the
Defendant Directors, and any subsequent Person that becomes a party hereto in
accordance with the terms hereof, are each referred to herein as a "PARTY," and
collectively, the "PARTIES."

                                   WITNESSETH:

          WHEREAS AlixPartners, LLP, through its affiliate AP Services, LLC
("ALIXPARTNERS") is currently engaged to work on a turnaround plan for the
Company;

          WHEREAS James Bonsall has been appointed interim President and Chief
Operating Officer ("COO") of the Company pending selection of a Chief Executive
Officer (the "CEO"), the hiring of a CEO being a condition required by that
certain Amended And Restated Second Lien Credit Agreement, dated as of November
13, 2006 (as the same has heretofore been amended and as it may be further
amended, supplemented or otherwise modified from time to time, the "SECOND LIEN
CREDIT AGREEMENT") among the Company, Tricap Partners, LLC, as Lender (the
"SECOND LIEN LENDER"), Tricap Partners II L.P. as Administrative Agent (the
"SECOND LIEN ADMINISTRATIVE AGENT") and Citicorp USA, Inc., as Collateral Agent
for the Secured Parties;

          WHEREAS, on March 6, 2007, Herrick Foundation and Todd Herrick
commenced an action against the Company and the Defendant Directors in the
Circuit Court for the County of Lenawee, State of Michigan, Case No. 07-2525-CZ
(the "STATE COURT ACTION"), requesting that the court declare as void and of no
force or effect resolutions passed by the Board of Directors of the Company (the
"BOARD") on February 28, 2007 increasing the size of the Board to seven members,
amending the Company's bylaws, and removing Todd Herrick as Chairman of the
Board, but having him remain as a Board member;

          WHEREAS, on March 15, 2007, the Company commenced an action against
each of the Herrick Entities in the United States District Court for the Eastern
District of Michigan, Case No. 2:07-cv-11144 (the "FEDERAL ACTION," and together
with the State Court Action, the "GOVERNANCE LAWSUITS") requesting that the
court declare certain shareholder voting rights of Herrick Foundation, the
Herrick Trusts and Todd Herrick suspended, and enjoin the Herrick Entities from
exercising those rights;

          WHEREAS, the Company, the Herrick Entities and the Defendant Directors
have agreed to fully and finally settle all their disputes and claims with
respect to the

<PAGE>

Governance Lawsuits, as set forth in this Settlement Agreement, which global
settlement will be effected in the manner and subject to the conditions set
forth herein; and

          WHEREAS, this Settlement Agreement is being executed in connection
with (i) Amendment No. 5 (the "FIRST LIEN AMENDMENT") to that certain First Lien
Credit Agreement, dated as of February 6, 2006 (as the same has heretofore been
amended and as it may be further amended, supplemented or otherwise modified
from time to time, the "FIRST LIEN CREDIT AGREEMENT"), among the Company, the
financial institutions from time to time a party thereto as lenders (the "FIRST
LIEN LENDER"), the financial institutions from time to time a party thereto as
issuing banks (the "ISSUERS") and Citicorp USA, Inc., as administrative agent
and collateral agent for the First Lien Lenders and the Issuers (in such
capacities, the "FIRST LIEN ADMINISTRATIVE AGENT"), and (ii) Amendment No. 2 to
the Second Lien Credit Agreement (the "SECOND LIEN AMENDMENT" and together with
the First Lien Amendment, the "AMENDMENTS"), and it is a condition precedent to
the effectiveness of each of the First Lien Amendment and the Second Lien
Amendment that this Settlement Agreement be executed and delivered to the First
Lien Administrative Agent and the Second Lien Administrative Agent,
respectively;

          WHEREAS, the First Lien Lender, the First Lien Administrative Agent,
the Second Lien Lender, and the Second Lien Administrative Agent (collectively,
the "LENDER PARTIES"), have agreed to provide the Amendments for the benefit of
the Company and its shareholders;

          WHEREAS, each of the Parties recognizes and is aware that a breach of
this Settlement Agreement during the term of the First Lien Credit Agreement and
the Second Lien Credit Agreement will constitute an "Event of Default" under
each of the First Lien Credit Agreement and the Second Lien Credit Agreement;

          WHEREAS, each of the Parties has reviewed, or has had the opportunity
to review, this Settlement Agreement with the assistance of their respective
legal and financial advisors of their own choosing.

          NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows:

     Section 1. Composition of the Board.

          (a) Resignation of Todd Herrick. Upon execution of this Settlement
Agreement, Todd Herrick will immediately resign from his current position as a
member of the Board, and the Company and the Defendant Directors will cause the
Company's Board of Directors to appoint Todd Herrick as "Chairman Emeritus"
during the term of this Settlement Agreement, subject to his earlier death or
resignation, with Board observer rights, including the right (but not the
obligation) to attend and participate in all meetings of the Company's Board of
Directors (but not the right to vote at any such meeting) and the right to
receive all notices of Board and Board committee meetings and a copy of all
materials provided to any Board member (other than materials provided to members
of standing committees in existence as of the date of this Settlement Agreement
and as to which Todd Herrick does not have observer rights) concurrently with
the provision of the same to any Board member and in the same manner as provided
to such Board member.


                                       2

<PAGE>

          (b) Initial Five Member Board. The Board will initially be comprised
of five members, as follows:

               (i)  Messrs Risley, Banks and Kevin Sheehan will remain as
                    independent directors.

               (ii) Kent Herrick will replace Todd Herrick as a member of the
                    Board and shall be nominated and recommended by the Company
                    for election as a director of the Company during the term of
                    this Settlement Agreement (including, without limitation, at
                    the 2007 Annual Meeting of Shareholders), subject only to
                    his earlier death or resignation.

               (iii) Upon the execution of this Settlement Agreement, a search
                    committee will be charged with immediately locating a
                    director with restructuring experience reasonably acceptable
                    to the independent members of the Board and who is not
                    affiliated with AlixPartners. Upon the earliest of (1) 60
                    days following the appointment of the CEO, but in no event
                    later than 120 days after the date of this Settlement
                    Agreement, and (2) such time as a replacement director with
                    restructuring experience and who is not affiliated with
                    AlixPartners is appointed, Albert Koch will resign from his
                    current position as a member of the Board and of all Board
                    committees of which he is a member and from all other
                    positions he holds with the Company or any of its
                    Subsidiaries; provided, however, that Mr. Koch's director
                    position must eventually be filled by a director with
                    restructuring experience who is reasonably acceptable to the
                    independent directors of the Board and in accordance with
                    the Company's bylaws.

               (iv) Each Board member shall have the right to attend and
                    participate in all meetings of the Company's Board of
                    Directors and the right to receive all notices of Board and
                    Board committee meetings and a copy of all materials
                    provided to any Board member (other than materials provided
                    to members of standing committees in existence as of the
                    date of this Settlement Agreement as to which the receiving
                    Board member is not a member) concurrently with the
                    provision of the same to any Board member and in the same
                    manner as provided to such Board member.

          (c) Expansion to Seven Member Board. Upon the hiring of a CEO, the
Board will expand and be comprised of two additional members, for a total of
seven members, for the term of this Settlement Agreement, as follows:

               (i)  The CEO will be appointed to the Board and will become the
                    Chairman of the Board.

               (ii) So long as, at the time of his appointment, Steven Lebowski
                    qualifies as an "independent" director, Steven Lebowski will
                    be appointed to the Board and shall be nominated and
                    recommended by the Company for election as a director of the
                    Company during


                                       3

<PAGE>

                    the term of this Settlement Agreement, subject only to his
                    earlier death or resignation. The Company and the Defendant
                    Directors acknowledge that, based on materials provided to
                    date in support of Steven Lebowski's nomination to the
                    Board, they are not aware of any facts and circumstances
                    that would lead them to conclude that Mr. Lebowski is not
                    "independent." The Parties agree, however, that between the
                    date hereof and the time of his proposed appointment, Mr.
                    Lebowski will meet with the members of the Board and provide
                    any additional materials the Board reasonably requests. If,
                    after receiving the requested information, the Board is
                    unable to determine Mr. Lebowski's independence, the Parties
                    agree to defer the matter to mutually acceptable counsel
                    and, so long as an opinion of reputable counsel is delivered
                    to the Company stating that it would be reasonable for the
                    Board to conclude that Mr. Lebowski is independent, he shall
                    be appointed to the Board. If Steven Lebowski is not
                    determined to be "independent," Kent Herrick will propose
                    two nominees to fill the seventh Board seat. The independent
                    directors will select one of the proposed nominees, whose
                    independence shall be determined in accordance with the
                    protocol described in this paragraph. In the event such
                    nominee is determined not to be independent, the nomination
                    and independence determination process set forth in this
                    paragraph recommences until such time as a candidate is
                    appointed.

          (d) Conduct of Board Business. For the term of this Settlement
Agreement all of the Company's business and affairs conducted by members of the
Board of Directors as directors of the Company shall be conducted at meetings of
the Board of Directors (or actions by unanimous written consent in lieu of such
meetings), except for (i) business conducted through the standing committees of
the Board of Directors in existence as of the date of this Settlement Agreement
and consistent with their authority as of the date of this Settlement Agreement
or (ii) business conducted by committees hereafter created upon unanimous Board
approval (collectively, the "Permitted Committees"). For purposes of this
provision, any committee appointed pursuant to section 1(b)(iii) of this
Settlement Agreement (for the purpose of finding a replacement director with
restructuring experience) shall be created by a majority vote of the Board of
Directors and shall be included in the definition of Permitted Committees.

     Section 2. Management Roles.

          (a) CEO. The search for a CEO will continue and all information
relating to potential candidates will be shared with all members of the Board.
The selection of a CEO will be decided by a vote of the full five member Board
as set forth in Section 1(b) hereto; provided, however, that the provisions of
this Section 2(a) shall not be deemed to amend or otherwise alter the provisions
of Section 7.14 of the Second Lien Credit Agreement. James Bonsall shall not be
the CEO.


                                       4

<PAGE>

          (b) AlixPartners. Mr. Bonsall will remain interim President and COO of
the Company, and AlixPartners will continue to provide turnaround services to
the Company, at the discretion of the Company's Board of Directors until such
time as the CEO has been transitioned. Thereafter, the continued provision of
services by Mr. Bonsall and AlixPartners to the Company, if any, will be subject
to the discretion of the Company's Board of Directors and shall be conducted at
the discretion of the CEO subject to the terms of the Company's agreement with
AlixPartners.

          (c) Todd Herrick. The Parties agree that Todd Herrick will serve as a
consultant to the Company in such capacity as to be determined by the new CEO,
as applicable; provided, however, that Mr. Herrick will not be compensated for
such consulting services, but will be entitled to reimbursement of all
reasonable and documented expenses incurred in providing such services.

          (d) Kent Herrick. The Parties agree that the determination to rehire
Kent Herrick and the capacity of such hiring will be decided by the CEO. If Kent
Herrick is rehired, he will receive an agreement to provide him with a lump sum
severance upon termination equal to one year's salary less any salary paid to
him from the date he is rehired through the date of his termination, payable on
termination. If the CEO has not hired Kent Herrick within three months of his
appointment, Kent Herrick will be entitled to a lump sum severance payment equal
to one year's salary as was in effect immediately prior to his January 19, 2007
termination date.

     Section 3. Dismissal of Governance Lawsuits. Immediately upon execution of
this Settlement Agreement, the Company, the Director Defendants, Todd Herrick,
Herrick Foundation, and the other Herrick Entities will dismiss, with prejudice,
the Governance Lawsuits; provided, however, that nothing herein shall in any way
limit the rights of any third parties, including shareholders, that are not
parties to this Settlement Agreement. The Company and the Director Defendants
acknowledge and agree that the Herrick Entities have the right to vote all of
their voting shares in the Company with respect to all matters subject to a vote
of shareholders of the Company. The Company and the Director Defendants agree
not to claim or assert, or aid, assist or encourage any other person in claiming
or asserting, based upon actions or events occurring on or before the date of
this Settlement Agreement or based upon the existence, execution, delivery or
performance of this Settlement Agreement, that any of the Herrick Entities'
shares are not entitled to vote all or any part of their voting shares in the
Company with respect to any or all matters subject to a vote of shareholders of
the Company; provided, however, that such agreement shall in no way limit or in
any way constitute a determination of the rights of any third parties, including
shareholders, that are not parties to this Settlement Agreement. During the term
of this Settlement Agreement, the Company and the Director Defendants agree not
to take any action that is inconsistent with the terms of this Settlement
Agreement. During the term of this Settlement Agreement, the Herrick Entities
agree to vote for the slate of directors provided for herein in order to
effectuate the terms of this Settlement Agreement.

     Section 4. Herrick Entities' Attorneys' Fees. The Company hereby agrees to
pay the reasonable and documented attorneys' fees and other fees and expenses
incurred by any of the Herrick Entities in connection with executing, delivering
and performing this Settlement Agreement, pursuing any actions or proceedings
related hereto and any nominations or notices of nominations of directors for
election at the 2007 Annual Meeting of Shareholders, including the Governance
Lawsuits, or consummating the transactions contemplated hereby; provided,
however, that the total amount of attorneys' fees payable


                                       5

<PAGE>

under this Section 4 shall not exceed $300,000. Simultaneously with the
execution of this Settlement Agreement, the Company shall pay its reasonable and
documented outstanding invoices to Honigman Miller Schwartz and Cohn; provided,
however, that the total amount of attorneys' fees payable under this Section 4
shall not exceed $90,000.

     Section 5. Covenant to Vote. During the term of this Settlement Agreement,
the Herrick Entities and the Defendant Directors agree to exercise all of their
respective voting rights in a manner consistent with the terms and conditions
set forth in this Settlement Agreement.

     Section 6. Release of the Herrick Entities by the Company and the Director
Defendants. Upon and following the resignation of Todd Herrick provided for in
Section 1 hereto, and except with respect to the obligations expressly contained
in this Settlement Agreement, each of the Director Defendants and the Company
and, where appropriate, each of their respective directors, officers, managers,
members, trustees, agents, employees, partners, shareholders, subsidiaries,
successors, assigns, and other affiliates hereby release each of the Herrick
Entities from any and all claims, demands, rights, actions or causes of action,
liabilities, damages, losses, obligations, judgments, suits, matters,
indemnification claims, any claim arising out of issues of any kind or nature
whatsoever, known or unknown, contingent or absolute, suspected or unsuspected,
disclosed or undisclosed, hidden or concealed, matured or unmatured, with
respect to, and in connection with, the matters specifically referenced in this
Settlement Agreement, including, without limitation, the Amendments.

     Section 7. Release of the Defendant Directors by the Company and the
Herrick Entities. Immediately upon execution of this Settlement Agreement, and
except with respect to the obligations expressly contained in this Settlement
Agreement, each of the Herrick Entities and the Company, and, where appropriate,
each of their respective directors, officers, managers, members, trustees,
agents, employees, partners, shareholders, subsidiaries, successors, assigns,
and other affiliates hereby release the Defendant Directors from any and all
claims, demands, rights, actions or causes of action, liabilities, damages,
losses, obligations, judgments, suits, matters, indemnification claims, any
claim arising out of issues of any kind or nature whatsoever, known or unknown,
contingent or absolute, suspected or unsuspected, disclosed or undisclosed,
hidden or concealed, matured or unmatured, with respect to, and in connection
with, the matters specifically referenced in this Settlement Agreement,
including, without limitation, the Amendments.

     Section 8. Release of the Lender Parties by the Company and the Herrick
Entities. In consideration for their willingness and agreement to enter into the
Amendments for the benefit of the Company and its shareholders, each of the
Herrick Entities and the Company, and, where appropriate, each of their
respective directors, officers, managers, members, trustees, agents, employees,
partners, shareholders, subsidiaries, successors, assigns, and other affiliates
hereby release the Lender Parties from any and all claims, demands, rights,
actions or causes of action, liabilities, damages, losses, obligations,
judgments, suits, matters, indemnification claims, any claim arising out of
issues of any kind or nature whatsoever, known or unknown, contingent or
absolute, suspected or unsuspected, disclosed or undisclosed, hidden or
concealed, matured or unmatured, with respect to, and in connection with, the
matters specifically referenced in this Settlement Agreement.

     Section 9. Covenant Not to Sue. Each of the releasing parties in Section 6,
Section 7 and Section 8 agrees not to assert or bring any claim that is released
in any of those


                                       6

<PAGE>

sections, and, in addition to any other remedy available to the released
parties, agrees to pay all liabilities, losses and expenses (including, without
limitation, attorneys' fees and costs of investigation) incurred by any released
party as a result of any breach of this Section 9.

     Section 10. Non-Disparagement. Upon execution of this Settlement Agreement,
throughout the term of this Settlement Agreement, and for 12 months thereafter,
the Parties shall not make any disparaging statements in a public forum or to
the media concerning the Company, its officers, directors, employees, attorneys,
agents, or contracting parties, or its business or operations; provided,
however, that this non-disparagement agreement shall not in any way prevent the
Parties from disclosing any information to their attorneys or in response to a
lawful subpoena or court order requiring disclosure of information; provided,
further, however, that this non-disparagement agreement shall not in any way
restrict the Parties or their agents in their statements to other directors or
at meetings of the Company's Board of Directors, during their membership on the
board.

     Section 11. Term. This Settlement Agreement shall terminate at the earlier
of the conclusion of the 2008 Annual Shareholders Meeting and April 30, 2008;
provided, however, that any provisions of this Settlement Agreement intended to
survive such termination shall be binding on the Parties thereafter.

     Section 12. Condition Subsequent. It shall be a condition subsequent to the
effectiveness of this Settlement Agreement that the Amendments are executed and
delivered to the Company within ten business days of the date of this Agreement.

     Section 13. Governing Law; Jurisdiction. This Settlement Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Michigan, regardless of the laws that might otherwise govern under applicable
principles of conflict of laws of the State of Michigan. By execution and
delivery of this Settlement Agreement, each of the Parties hereto hereby
irrevocably and unconditionally agrees for itself that any legal action, suit or
proceeding against it with respect to any matter under or arising out of or in
connection with this Settlement Agreement or for recognition or enforcement of
any judgment rendered in any such action, suit or proceeding, shall be brought
in a federal court of competent jurisdiction in the United States District Court
for the Eastern District of Michigan, if such court has subject matter
jurisdiction. By execution and delivery of this Settlement Agreement, each of
the Parties hereto hereby irrevocably accepts and submits to the nonexclusive
jurisdiction of such courts, generally and unconditionally, with respect to any
such action, suit or proceeding.

     Section 14. Notices. All demands, notices, requests, consents and
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally or by courier service, messenger, facsimile
or, if duly deposited in the mails, by certified or registered mail, postage
prepaid-return receipt requested, and shall be deemed to have been duly given or
made: (a) upon delivery, if delivered personally or by courier service or
messenger, in each case with record of receipt; (b) upon transmission with
confirmed delivery, if sent by facsimile or telecopy; or (c) when received after
being sent by certified or registered mail, postage pre-paid, return receipt
requested, to the following addresses or such other addresses as may be
furnished hereafter by notice in writing, to the following Parties:


                                       7

<PAGE>

               IF TO THE COMPANY:

               Attn: President and Chief Operating Officer
               Tecumseh Products Company
               100 E. Patterson St.
               Tecumseh MI 49286
               Facsimile: (517) 423-8619

               with copies to:

               Attn: Paul M. Basta
               Kirkland & Ellis, LLP
               153 E. 53rd Street
               New York, NY 10022-4611
               Facsimile: 212-446-4900

               IF TO THE HERRICK ENTITIES:

               Todd W. Herrick
               261 Wildwood Circle
               Tecumseh, MI 49286-8706

               Herrick Foundation
               c/o Michael Indenbaum
               c/o Honigman Miller Schwartz & Cohn LLP
               2290 First National Building
               660 Woodward Avenue
               Detroit, Michigan 48226-3506
               Facsimile: 313.465.7633

               Herrick Trusts
               c/o Michael Indenbaum
               c/o Honigman Miller Schwartz & Cohn LLP
               2290 First National Building
               660 Woodward Avenue
               Detroit, Michigan 48226-3506
               Facsimile: 313.465.7633

               Toni Herrick
               7028 Foxmoor Court E.
               P.O. Box 19555
               Kalamazoo, MI 49009

               Kent Herrick
               9693 Woodbend
               Saline, MI 48176

               Michael Indenbaum
               c/o Honigman Miller Schwartz & Cohn LLP


                                       8

<PAGE>

               2290 First National Building
               660 Woodward Avenue
               Detroit, Michigan 48226-3506
               Facsimile: 313.465.7633

               in each case with copies to:

               Attn: Todd R. Mendel
               Barris, Sott, Denn & Driker, P.L.L.C.
               211 West Fort Street, 15th Floor
               Detroit, MI 48226-3281
               Facsimile: 313-965-2493

               IF TO THE DEFENDANT DIRECTORS:

               Attn: Albert A. Koch
               c/o Alix Partners, LLC
               2000 Town Center
               Southfield, MI 48075
               Facsimile: 248-262-8491

               Attn: Peter M. Banks
               5602 Newanga Avenue
               Santa Rosa, CA 95405

               Attn: David M. Risley
               2710 Derby Road
               Ottawa Hills, OH 43615

               in each case with copies to:

               Attn: Richard A. Chesley
               Paul Hastings Janofsky & Walker LLP
               191 North Wacker Drive, 30th Floor
               Chicago, IL 60606
               Facsimile: (312) 499-6150

     Section 15. Entire Agreement. This Settlement Agreement constitutes the
full and entire understanding and agreement among the Parties with regard to the
subject matter hereof and supersedes all prior agreements with respect to the
subject matter hereof.

     Section 16. Headings. The headings of the paragraphs and subparagraphs of
this Settlement Agreement are inserted for convenience only and shall not affect
the interpretation hereof.

     Section 17. Successors and Assigns. This Settlement Agreement is intended
to bind and inure to the benefit of the Parties and their respective permitted
successors and assigns.


                                       9

<PAGE>

     Section 18. Covenant Not to Assign. The Parties hereby agree that no Party
may assign, directly or indirectly, all or part of its rights or obligations
under this Settlement Agreement without the prior written consent of each Party,
which consent shall not be unreasonably withheld or delayed.

     Section 19. Specific Performance. Each Party hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Settlement Agreement will cause the other Parties to sustain damages for
which such other Parties would not have an adequate remedy at law for money
damages and, therefore, each Party hereto agrees that, in the event of any such
breach, such other parties shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which such parties may be entitled at
law or in equity.

     Section 20. Remedies Cumulative. All rights, powers and remedies provided
under this Settlement Agreement or otherwise available in respect hereof at law
or in equity shall be cumulative and not alternative, and the exercise of any
right, power or remedy thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by such party.
Nothing herein shall impact the rights heretofore existing, if any, of Todd
Herrick or Kent Herrick to receive pension and other benefits as a result of his
prior employment with the Company, its subsidiaries or both. Moreover, nothing
herein shall prohibit the Company, including any and all successors in interest,
from asserting any defenses, objections or any other rights it may have with
respect to any claim by Todd Herrick or Kent Herrick to receive such pension and
other benefits. The Company and the Director Defendants are not presently aware
of any defenses, objections or any other rights the Company may have with
respect to any claim by Todd Herrick or Kent Herrick to receive such pension and
other benefits.

     Section 21. No Waiver. The failure of any Party hereto to exercise any
right, power or remedy provided under this Settlement Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance by
any other Party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not constitute
a waiver by such Party of its right to exercise any such or other right, power
or remedy or to demand such compliance.

     Section 22. Counterparts. This Settlement Agreement may be executed in one
or more counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same Settlement Agreement. Delivery of an executed
signature page of this Settlement Agreement by facsimile or email shall be as
effective as delivery of a manually executed signature page of this Settlement
Agreement.

     Section 23. Severability. Any provision of this Settlement Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction and any such prohibited or unenforceable provision shall be deemed
reformed and construed so that it will be valid, legal and enforceable and not
prohibited to the maximum extent permitted by applicable law.


                                       10

<PAGE>

     Section 24. Third-Party Beneficiaries. Unless expressly stated herein, this
Settlement Agreement shall be solely for the benefit of the Parties and no other
person or entity shall be a third party beneficiary hereof.

     Section 25. Settlement Discussions. This Settlement Agreement is part of a
proposed settlement of a dispute among the Parties. Nothing herein shall be
deemed an admission of any kind. Pursuant to Federal Rule of Evidence 408 and
any applicable state rules of evidence, this Settlement Agreement and all
negotiations relating thereto shall not be admissible into evidence in any
proceeding other than a proceeding to enforce the terms of this Settlement
Agreement.

     Section 26. Consideration. It is hereby acknowledged by the Parties hereto
that, other than the agreements, covenants, representations and warranties set
forth herein, no consideration shall be due or paid to any Party for its entry
into this Settlement Agreement.

     Section 27. Receipt of Adequate Information; Representation by Counsel.
Each Party acknowledges that it has received adequate information to enter into
this Settlement Agreement and that it has been represented by counsel in
connection with this Settlement Agreement and the transactions contemplated by
this Settlement Agreement. Accordingly, any rule of law or any legal decision
that would provide any party with a defense to the enforcement of the terms of
this Settlement Agreement against such party shall have no application and is
expressly waived. The provisions of the Settlement Agreement shall be
interpreted in a reasonable manner to effect the intent of the Parties.

     Section 28. Time of the Essence. Time is of the essence with respect to all
provisions of this Settlement Agreement that specify a time for performance.

                            [SIGNATURE PAGES FOLLOW]


                                       11

<PAGE>

          IN WITNESS WHEREOF, the Parties hereto have duly executed and
delivered this Settlement Agreement as of the date first above written.

                                        TECUMSEH PRODUCTS COMPANY


                                        By: /s/ James Bonsall
                                            ------------------------------------
                                        Name: James Bonsall
                                        Title: President and Chief Operating
                                               Officer


                                       12

<PAGE>

          IN WITNESS WHEREOF, the Parties hereto have duly executed and
delivered this Settlement Agreement as of the date first above written.

                                        HERRICK FOUNDATION


                                        By: /s/ Todd W Herrick
                                            ------------------------------------
                                        Name: Todd W. Herrick
                                        Title: Chairman


                                        TODD W. HERRICK, INDIVIDUALLY, AS
                                        TRUSTEE FOR THE HERRICK TRUSTS AND AS A
                                        MEMBER OF THE BOARD OF TRUSTEES OF
                                        HERRICK FOUNDATION

                                        /s/ Todd W. Herrick
                                        ----------------------------------------


                                        TONI HERRICK, INDIVIDUALLY AND AS
                                        TRUSTEE FOR THE HERRICK TRUSTS

                                        /s/ Toni Herrick
                                        ----------------------------------------


                                        KENT B. HERRICK, INDIVIDUALLY AND AS A
                                        MEMBER OF THE BOARD OF TRUSTEES OF
                                        HERRICK FOUNDATION

                                        /s/ Kent B. Herrick
                                        ----------------------------------------


                                        MICHAEL INDENBAUM

                                        /s/ Michael Indenbaum
                                        ----------------------------------------

<PAGE>

          IN WITNESS WHEREOF, the Parties hereto have duly executed and
delivered this Settlement Agreement as of the date first above written.

                                        ALBERT A. KOCH


                                        By: /s/ Albert A. Koch
                                            ------------------------------------


                                        PETER BANKS


                                        By: /s/ Peter Banks
                                            ------------------------------------


                                        DAVID M. RISLEY


                                        By: /s/ David M. Risley
                                            ------------------------------------