Document:

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                                                                    EXHIBIT 10.2

                            TECUMSEH PRODUCTS COMPANY

                      EXECUTIVE DEFERRED COMPENSATION PLAN

                           (Effective January 1, 2005)

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                            TECUMSEH PRODUCTS COMPANY

                      EXECUTIVE DEFERRED COMPENSATION PLAN

                                      INDEX

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                                                                            PAGE
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ARTICLE I PLAN PURPOSES .................................................     1
ARTICLE II DEFINITIONS ..................................................     1
ARTICLE III ELIGIBILITY .................................................     4
ARTICLE IV PARTICIPATION ................................................     4
ARTICLE V GENERAL PROVISIONS ............................................     5
ARTICLE VI DEFERRED COMPENSATION ACCOUNTS ...............................     6
ARTICLE VII PARTICIPANTS' RIGHTS UNSECURED ..............................     8
ARTICLE VIII PAYMENT OF DEFERRED COMPENSATION ...........................     9
ARTICLE IX VALUATION DATE ...............................................    12
ARTICLE X ALIENATION ....................................................    12
ARTICLE XI DOMESTIC RELATIONS ORDERS ....................................    12
ARTICLE XII TAX WITHHOLDING .............................................    13
ARTICLE XIII PARTICIPANT CONSENT ........................................    14
ARTICLE XIV SEVERABILITY ................................................    14
ARTICLE XV AMENDMENT AND TERMINATION ....................................    14
ARTICLE XVI CHANGE OF CONTROL ...........................................    15
ARTICLE XVII PLAN ADMINISTRATION ........................................    16
ARTICLE XVIII LIMITATIONS OF ACTION .....................................    18
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                            TECUMSEH PRODUCTS COMPANY

                      EXECUTIVE DEFERRED COMPENSATION PLAN

     WHEREAS, Tecumseh Products Company ("Company") previously established and
maintained the Tecumseh Products Company Voluntary Deferred Compensation Plan.,
a nonqualified deferred compensation plan, last amended and restated effective
September 25, 2002 (and herein called the "Prior Plan"); and

     WHEREAS, the Prior Plan was "frozen" effective December 31, 2004, and

     WHEREAS, the Company desires to continue providing a tax-deferred capital
accumulation opportunity to a select group of management or highly compensated
Employees through the deferral of compensation in order to encourage the
Employees to maintain a long-term relationship with the Company and provide
flexibility to the Employee in his or her financial planning; and

     THEREFORE, the Company hereby establishes the Tecumseh Products Company
Executive Deferred Compensation Plan ("Plan") effective January 1, 2005.

                                    ARTICLE I
                                  PLAN PURPOSES

     1.1 The purpose of this Plan is to provide eligible officers and Key
Employees of the Employer with the opportunity to defer compensation. The Plan
is also intended to establish a method for attracting and retaining persons
whose abilities, experience and judgment can contribute to the long-term
strategic objectives of the Employer.

     1.2 The Company intends that the Plan be an unfunded, non-qualified
deferred compensation plan maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees of the Employer, and that payments under the Plan shall be, when paid
or otherwise made available to Participants, deductible by the Employer pursuant
to Sections 162 and 404(a)(5) of the Internal Revenue Code of 1986, as amended
(the "IRC"). The Plan will be interpreted and administered by the Committee to
maintain intended income tax deferral in accordance with IRC Section 409A and
regulations and other guidance issued thereunder.

                                   ARTICLE II
                                   DEFINITIONS

     As used in this Plan, the following terms shall have the meanings set forth
below. The masculine pronoun shall be deemed to include the feminine, and the
singular number shall be deemed to include the plural, unless a different
meaning is plainly required by the context.

     2.1 "Base Salary" means the annual salary paid to officers and Key
Employees of the Employer at regular intervals during the calendar year.

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     2.2 "Beneficiary" means any person(s) or legal entity(ies) designated by
the Participant or otherwise determined in accordance with Section 5.4.

     2.3 "Board" means the Board of Directors of the Company.

     2.4 "Committee" means the Governance, Compensation and Nominating Committee
of the Board, or such other committee as the Board may subsequently appoint to
administer the Plan.

     2.5 "Company" means Tecumseh Products Company, a Michigan corporation, and
its successors and assigns.

     2.6 "Compensation" means Base Salary and other qualifying remuneration paid
by the Employer, as the Committee shall determine.

     2.7 "Deferral Period" means the total period of time, expressed in Plan
Years, for which the Participant has elected to defer Compensation. Such
Deferral Period shall exclude the period of time beyond the Benefit Commencement
Date (as defined in Section 8.1(a)).

     2.8 "Deferred Compensation" means Compensation deferred pursuant to the
Plan.

     2.9 "Deferred Compensation Account" means the individual account maintained
under the Plan for a Participant as determined in Section 6.1.

     2.10 "Deferred Compensation Election Form" means an approved election form
that each Participant must execute in accordance with Section 4.1 in order to
participate in the Plan.

     2.11 "Disability" means any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months: (i) which renders an
employee unable to engage in any substantial gainful activity; or (ii), which
enables an employee to receive income replacement benefits for a period of not
less than 3 months under an accident and health plan covering employees of the
employee's Employer, provided that this definition shall be interpreted in
accordance with Code Section 409A(a)(2)(A)(v) and regulations and other guidance
thereunder. Notwithstanding (i) and (ii), an employee shall be deemed to have a
total and permanent disability when determined to be totally disabled by the
Social Security Administration.

     2.12 "Director" means a member of the Board.

     2.13 "Eligible Participant" means any officer or Key Employee of the
Employer designated by the Committee as eligible to participate in the Plan.
Where the context so requires, this term shall also include a former officer or
former Key Employee for whom the Committee maintains a Deferred Compensation
Account under the Plan.

     2.14 "Employer" means the Company, any of its present subsidiary
corporations, any corporation which becomes a controlled subsidiary of the
Company provided the Committee determines to extend coverage thereto, and/or any
successor(s) to such corporation(s). The

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Committee shall be deemed to have extended coverage to a subsidiary if an
employee of such subsidiary is designated by the Committee as eligible to
participate in the Plan.

     2.15 "Investment Option" means the book-keeping sub-account that is made
available to Participants by the Committee, under which a Participant may
designate a deferral. The initial Investment Options are the Phantom Share
Investment Option described in section 6.2 and the Corporate Bond Investment
Option described in Section 6.3, but the Committee has discretion to add,
eliminate, or modify any Investment Option(s) at any time pursuant to Section
6.9.

     2.16 "Key Employee" means any executive employee of the Employer, who is
not an officer, that the Committee in its sole discretion decides is
sufficiently important to the ongoing business objectives of the Employer.

     2.17 "Market Price" of a Tecumseh Share on any given day means that day's
closing price per share on the NASDAQ National Market or, if the Tecumseh Shares
are not traded on a particular day, the closing NASDAQ price per share on the
closest preceding date on which Tecumseh Shares were traded.

     2.18 "Participant" for any Plan Year means an Eligible Participant who has
elected to defer Compensation in accordance with the procedures set forth in
Section 4.1 and for whom the Committee has established and maintains a separate
Deferred Compensation Account.

     2.19 "Phantom Share" means a hypothetical or imaginary Tecumseh Share
without any of the rights attached to an actual Tecumseh Share, but whose
economic value for purposes of the Plan is the same as that of an actual
Tecumseh Share.

     2.20 "Plan" means the Tecumseh Products Company Executive Deferred
Compensation Plan as embodied herein and as amended from time to time by the
Board.

     2.21 "Plan Year" means the 12-month calendar year beginning January 1 and
ending December 31, or such shorter period, as applicable, in the year the Plan
is terminated.

     2.22 "Rabbi Trust" means an irrevocable trust, containing certain key
provisions, which the Internal Revenue Service would require in order to
conclude that contributions made thereto by an employer, to provide for the
payment of non-qualified deferred compensation benefits to employees, will not
be taxed to employees at the time contributions are made, but instead, at the
time the benefits are received or otherwise made available to the employee.

     2.23 "Separation from Service" means the date upon which a Participant has
a separation from service determined under the Separation From Service rules and
procedures described in attached Exhibit A.

     2.24 "Tecumseh Share" means a share of the Company's Class A Common Stock
($1.00 par value per share).

     2.25 "Unforeseeable Emergency" means a severe financial hardship to the
Participant resulting from an illness or accident of the Participant, the
Participant's spouse, or a dependent

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(as defined in IRC Section 152(a)) of the Participant, loss of the participant's
property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant. The foregoing requirements shall be met only if, as determined
under regulations of the U.S. Secretary of the Treasury, the amounts distributed
with respect to such an emergency do not exceed the amounts necessary to satisfy
such emergency plus amounts necessary to pay taxes reasonably anticipated as a
result of the distribution, after taking into account the extent to which such
emergency is or may be relieved through reimbursement or compensation by
insurance or otherwise or by liquidation of the Participant's assets (to the
extent the liquidation of such assets would not itself cause severe financial
hardship). This subsection (a) shall be interpreted and administered in
accordance with IRC Section 409A(a)(2)(B)(ii).

     2.26 "Valuation Date" means the last business day of either a calendar year
or calendar quarter, as the Committee will determine from time to time, the date
on which a Participant's Deferred Compensation Account is valued for purposes of
a hardship distribution pursuant to Section 8.6, and any other date specified by
the Committee for valuing a Participant's Deferred Compensation Account.

                                   ARTICLE III
                                   ELIGIBILITY

     3.1 Prior to the end of November in each Plan Year, the Committee shall
designate the officers and Key Employees who shall be eligible to defer
Compensation under the Plan during the following Plan Year. Also, the Committee
may from time to time designate newly-hired officers and Key Employees as
eligible to defer Compensation under the Plan. The Committee shall promptly
notify each eligible officer and Key Employee of his eligibility to participate
in the Plan if selected by the Committee. The Committee has total discretion to
determine who is eligible to participate on a Plan Year by Plan Year basis.

     3.2 Directors who are not also employees of the Employer are not eligible
to participate in the Plan.

                                   ARTICLE IV
                                  PARTICIPATION

     4.1 Election to Participate. Subject to Section 4.2, in order to
participate in the Plan, in respect of Compensation for a particular Plan Year,
an Eligible Participant must make a valid election to defer compensation by
executing and filing with the Committee, before the commencement of such Plan
Year, a Deferred Compensation Election Form. Such election shall be in addition
to the election provided under Section 6.10. An Eligible Participant must
specify on the applicable Deferred Compensation Election Form, the amount to be
deferred, subject to Section 4.6, and the timing and method of payment, pursuant
to Sections 8.1 and 8.2.

     4.2 New Participant. Notwithstanding Section 4.1, a newly- hired officer or
Key Employee who becomes an Eligible Participant after the first day of the
current Plan Year, may elect to participate in the Plan, with respect to future
Compensation for such Plan Year, by filing

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a Deferred Compensation Election Form within 15 days after his initial date of
designation or employment, whichever occurs later., provided that (i) deferrals
may only be made with respect to amounts earned subsequent to the initial
election, and (ii) such initial election shall not be available to an Eligible
Participant who is already participating (or previously participated) in another
non-qualified deferred compensation plan of the Company which is an account
balance plan.

     4.3 Election not Revocable. A Deferred Compensation Election Form, once
executed and filed with the Committee, cannot be revoked for such current Plan
Year's Compensation elected to be deferred pursuant to such form., except that a
Participant may modify such election to delay payment or to change the form of
payment as permitted in Section 6.10, or may cancel such election to the extent
permitted in Section 8.6, in the event of an Unforeseeable Emergency.

     4.4 Vesting. A Participant will be vested in his entire Deferred
Compensation Account balance at all times and will not be subject to forfeiture
for any reason.

     4.5 New Elections Required for Each Year. Compensation payable in future
Plan Years can only be deferred by filing a Deferred Compensation Election Form
for the appropriate Plan Year. A Participant is not required to defer
Compensation for any subsequent Plan Year by reason of having elected to defer
Compensation for a current or prior Plan Year.

     4.6 Deferrals in 5% Increments. The minimum amount which may be deferred by
an Eligible Participant for any Plan Year is 5% of Compensation. Deferrals in
excess of the minimum amount shall also be in 5% increments of Compensation.
Elections to convert MIP Phantom Shares or to defer MIP cash awards pursuant to
Section 6.10 are not subject to this Section 4.6.

                                    ARTICLE V
                               GENERAL PROVISIONS

     5.1 No Right to Payment Except as Provided in Plan. No Participant, or
other Eligible Participant or Beneficiary, shall have any right to any payment
or benefit hereunder except to the extent provided in the Plan.

     5.2 Employment Rights. The employment rights of any Participant or other
Eligible Participant shall not be enlarged, guaranteed or affected by reason of
the provisions of the Plan.

     5.3 Recipient Under a Disability. If the Committee determines that any
person to whom a payment is due hereunder is a minor, or is adjudicated
incompetent by reason of physical or mental Disability, the Committee shall have
the power to cause the payments becoming due to such person to be made to the
legal guardian for the benefit of the minor or incompetent, without
responsibility of the Employer or the Committee to see to the application of
such payment, unless prior to such payment claim is made therefor by a duly
appointed legal representative. Payments made pursuant to such power shall
operate as a complete discharge of the Employer, the Board and the Committee.

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     5.4 Designation of Beneficiary. Each Participant may designate any
person(s) or legal entity(ies), including his estate or a trust, as his
Beneficiary under the Plan by filing a written beneficiary designation, in
prescribed form, with the Committee. A Participant may at any time revoke or
change his designation of Beneficiary by filing a new beneficiary designation
with the Committee. If no person or legal entity shall be designated by a
Participant as his Beneficiary, or if no designated Beneficiary survives him,
his estate shall be his Beneficiary.

     5.5 Elections. Any election made or notice given by a Participant pursuant
to the Plan shall be in writing to the Committee, or to such representative as
may be designated by the Committee for such purpose. Notice shall be deemed to
have been made or given on the date received by the Committee or its designated
representative.

     5.6 Controlling Law. Except where pre-empted by federal law, the validity
of the Plan or any of its provisions shall be determined under, and it shall be
construed and administered according to, the laws of the State of Michigan,
without regard to principles of conflicts of law. At all times, the Plan will
also be interpreted and administered to maintain intended income tax deferral in
accordance with IRC Section 409A and regulations and other guidance issued
thereunder.

                                   ARTICLE VI
                         DEFERRED COMPENSATION ACCOUNTS

     6.1 Accounts. Upon receipt of a Participant's valid Deferred Compensation
Election Form, the Committee shall establish, as a bookkeeping entry only, a
Deferred Compensation Account for such Participant. The Committee shall
thereafter record in each Participant's Deferred Compensation Account for a
particular Plan Year, the amount(s) which he elected to defer which otherwise
would have been paid to the Participant during the subsequent Plan Year or Plan
Years, as the case may be. Such amount(s) shall be credited (as of the date such
amount(s) would otherwise have been paid to the Participant) to one or more of
the Investment Option sub-accounts which the Committee shall make available
under the Plan. The initial Investment Options are the Phantom Share Investment
Option and the Corporate Bond Investment Option.

     6.2 Phantom Share Investment Option. Participant elections for this Option
shall be reflected in a bookkeeping sub-account, the value of which shall be
based upon the performance of Tecumseh Shares. Amounts deferred will be credited
to such sub-account as units, each reflecting one Tecumseh Share. Fractional
units will also be credited to such sub-account, if applicable. The number of
credited units will be determined by dividing the dollar amount of Compensation
deferred by the Market Price of a Tecumseh Share on the date such amount would
otherwise have been paid to the Participant. Dividends paid on Tecumseh Shares
shall be reflected in such sub-account by the crediting of additional units in
such sub-account equal to the value of the dividend and based upon the Market
Price of a Tecumseh Share on the date such dividend is paid.

     6.3 Corporate Bond Investment Option. Participant elections for this Option
shall be reflected in a bookkeeping sub-account, the value of which shall be
based upon quarterly

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crediting of earnings based on the current yield of the Dow Jones Corporate Bond
Index (DJCI). Amounts deferred will be credited to such sub-account on the date
such amount would otherwise have been paid to the Participant. All amounts
reflected in this sub-account shall be credited with earnings, compounded
quarterly, from the date credited, based on a rate of return equal to the
current yield of the DJCI as of the last business day of the preceding quarter.

     6.4 Adjustments to Accounts. The value of a Participant's Deferred
Compensation Account shall be periodically adjusted for any payments made to
such Participant in the form of benefits, hardship distributions, or otherwise.
Where adjustment is made to the Phantom Stock sub-account, it shall be reflected
in reduction of units determined by the amount paid, divided by the Market Price
of a Tecumseh Share on the date of payment.

     6.5 Dilutive and Anti-dilutive Transactions Affecting Phantom Shares. The
Committee shall make appropriate adjustments to a Participant's Phantom Share
Investment Option sub-account where a "capital transaction" or "corporate
reorganization" has the effect of changing the economic equivalent number of
Phantom Shares units that a Participant has been credited under this Plan. The
Committee shall make an adjustment, either positive or negative as the case may
be, to each Participant's Phantom Share Investment Option sub-account to ensure
that neither unintended economic benefits nor detriments are conferred on a
Participant solely by reason of such "capital transaction" or "corporate
reorganization."

     6.6 No Transfers Among Investment Options. Each deferral of Compensation
under the Plan shall remain credited to the Investment Option(s) initially
selected by the Participant with respect to deferrals during that Plan Year.
However, deferrals during a subsequent Plan Year may be credited to different
Investment Options and/or in different proportions than deferrals during prior
Plan Years.

     6.7 Investment Option Allocation Election. Each Participant may elect to
allocate Deferred Compensation for a particular Plan Year among the Investment
Options described in Sections 6.2, 6.3 and/or 6.9. However, if more than one
Investment Option is selected for a particular Plan Year, such allocation cannot
be less than 10% of deferrals during that Plan Year.

     6.8 Effects On Other Plans. If, because of a Participant's deferral of
Compensation under this Plan, a Participant's retirement benefits in any pension
or retirement plan of the Employer (either qualified under IRC Section 401, or
not so qualified) are reduced, the Employer shall provide a corresponding
supplemental benefit under the Tecumseh Products Company Supplemental Retirement
Plan. However, this Section shall not apply to any qualified defined
contribution plan, such as a 401(k) plan.

     6.9 New Investment Options; Committee Discretion Limited. The Committee may
at any time in its sole discretion add an Investment Option or Options. Further,
the Committee may eliminate or modify the terms of an existing Investment Option
on a prospective basis, so long as the value of a Participant's Plan benefits
accrued prior to such modification is not adversely affected thereby. If the
Committee materially modifies the terms of an existing Investment Option, it
shall promptly notify Participants regarding the details of such modification.
Following receipt of such notice, each Participant shall have a period of not
less than ten (10)

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business days within which to elect to convert all or a portion (in 10%
increments) of the affected sub-account(s) to any other Investment Option(s)
then offered under the Plan, such election to take effect as of the effective
date of the material modification.

     6.10 Election to Convert MIP Awards.

     Phantom Shares - An Eligible Participant who has a Deferred Compensation
Account under the Plan may, upon written election, choose to convert all or part
of his Account under the Tecumseh Products Company Management Incentive Plan
(the "MIP"), attributable to phantom share allocations ("MIP Phantom Shares")
first becoming vested immediately after the end of a Plan Year, into the Phantom
Share Investment Option, the Corporate Bond Investment Option, any other
Investment Option that the Committee has made available, or a combination of the
foregoing, under this Plan. Such conversion privilege is irrevocable (subject to
the Participant's right to elect a different Investment Option under Section
6.9) and is subject to all provisions of this Plan. Also, any such written
election, as well as any elections under Sections 8.1 and 8.2 with respect to
the time and method of payment for the portion of the Participant's Deferred
Compensation Account attributable to such conversion, must:

     i)   be made at least twelve (12) months prior to the date the Participant
          becomes vested in the MIP Phantom Shares and may not take effect until
          at least twelve (12) months after the date on which the election is
          made; and

     ii)  provide for a minimum deferral of five (5) years after the date when
          the MIP award became vested and payable, pursuant to a Deferred
          Compensation Election Form (except in the case of death, Disability,
          or Unforeseeable Emergency).

     The conversion value of the MIP Phantom Shares used to calculate the number
of Phantom Share units to be allocated to the Participant's Phantom Share
Investment Option or the dollar amount to be allocated to the Participant's
Corporate Bond Investment Option or to any other Investment Option that the
Committee has made available shall generally be the value of the applicable MIP
Phantom Shares as of the date the Participant became vested in such MIP Phantom
Shares as determined under the MIP. However, the number of units allocated to a
Participant's Phantom Share sub-account under this Plan as the result of a
conversion pursuant to this Section 6.10 shall not be less than A x B, where "A"
represents the total number of MIP Phantom Shares being converted and "B"
represents the percentage of such converted MIP Phantom Shares being allocated
to the Participant's Phantom Share sub-account under this Plan.

     MIP Cash Awards - An Eligible Participant who is covered by the MIP may
also, upon written election, defer all or some portion of a MIP Cash Award for a
particular Class Year (in 25% increments of the award) in the same time and
manner as required for Phantom Shares, the relevant Cash Award portion of the
Deferred Compensation Election Form. Such deferred amounts shall be credited (as
of the date such amount(s) would otherwise have been paid to the Participant) to
one or more of the Investment Option sub-accounts which the Committee shall make
available under the Plan.

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                                   ARTICLE VII
                         PARTICIPANTS' RIGHTS UNSECURED

     7.1 Unsecured Creditors. Amounts credited to a Participant's Deferred
Compensation Account shall be dealt with in all respects as working capital of
the Employer. Therefore, the right of a Participant to receive any distribution
hereunder shall be an unsecured claim against the general assets of the
Employer.

     7.2 No Actual Investment Required. Subject to Section 16.1 and Section
17.1, no assets of the Employer shall in any way be held in trust for, or be
subject to, any claim by a Participant or his Beneficiary under the Plan.
Further, neither the Employer nor the Committee shall have any duty whatsoever
to invest any amounts credited to any Deferred Compensation Accounts established
under the Plan.

     7.3 Optional Rabbi Trust(s) or Other Arrangement to Facilitate Payment. The
Board, upon the recommendation of the Committee, may authorize the creation of
one or more Rabbi Trusts or other arrangements to facilitate payment of the
obligations under the Plan, provided that such trusts and arrangements are
consistent with the "unfunded" status of the Plan. A Participant shall have no
right, title, or interest whatsoever in or to any investments which the Company
may make to aid it in meeting its obligations hereunder. Nothing contained in
the Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Company and the Participant or any other person. To the extent that any person
acquires a right to receive payments from the Company under this Plan, such
right shall be no greater than the right of an unsecured general creditor of the
Company. All payments to be made hereunder are payable in cash from the general
funds of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payments of such amounts.
Notwithstanding the above provisions, no Rabbi Trust assets shall be located or
transferred outside of the United States and no property shall be transferred to
the Trust by in connection with an adverse change in the Company's financial
health.

                                  ARTICLE VIII
                        PAYMENT OF DEFERRED COMPENSATION

     8.1(a) Commencement of Benefits. Subject to Section 8.1(b), at the time a
Participant elects to defer Compensation for any particular Plan Year, he shall
concurrently elect, on the Deferred Compensation Election Form, a date when the
portion of his Deferred Compensation Account balance attributable to such
current Plan Year deferral shall be paid (or commence to be paid) as required in
Section 4.1. Such date shall be as soon as practicable, and not more than 30
days after the first business day of the Plan Year following either:

     (i) the date such Participant attains a selected age (maximum of age 70),;
     or

     (ii) the date of the Participant's Separation from Service upon retirement
     when first eligible for commencement of early, normal or late retirement
     benefits, or deferred benefits under a qualified defined benefit plan
     sponsored by the Employer

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whichever the Participant shall elect on his Deferred Compensation Election
Form. The date elected is hereinafter referred to as the "Benefit Commencement
Date." The Valuation Date to be used for such payment shall be the last business
day of the Plan Year that precedes the Benefit Commencement Date. If the option
described in Section 8.1(a)(ii) is selected, but upon the date of a
Participant's Separation from Service, he is not eligible for the commencement
of deferred benefits, then his Account balance under this Plan will be paid out
in a lump sum pursuant to Section 8.3.

     8.1(b) 365-Day Minimum Deferral Period. Notwithstanding the time for the
commencement of benefits pursuant to Section 8.1(a), commencement of benefits
will not occur prior to the expiration of a 365-day period beginning the day
after the date on which an election to defer Compensation became effective as
provided in the Plan.

     8.2(a) Payment Method Election. At the time the Deferred Compensation
Election Form is filed pursuant to Section 4.1, Participants must also elect the
method of receiving payment of their Deferred Compensation Account balance upon
the first business day of the Plan Year following the expiration of the Deferral
Period so elected in Section 8.1(a) above. If a Participant has elected
different pay-out methods on his Deferred Compensation Election Forms for
different years, then the Committee shall establish sub-accounts to keep track
of the portions of such Account that are subject to those different methods.
Each Participant shall elect to receive payment of his Deferred Compensation
Account either in:

     (i)  one lump-sum on the Benefit Commencement Date;

     (ii) annual installments, with accrued earnings or losses, determined in
          accordance with the Plan provisions governing the Investment Option(s)
          selected, over a specified period (not to exceed 15 years), beginning
          on the Benefit Commencement Date; or

     (iii) a lump-sum/annual installment combination where a lump sum equal to
          25%, 50% or 75% of the Participant's Deferred Compensation Account as
          specified by the Participant in the Deferred Compensation Election
          Form is paid to the Participant on his Benefit Commencement Date and
          where the remaining Deferred Compensation Account balance is paid in
          annual installments over a specified period (not to exceed 15 years),
          beginning on the first anniversary of the Benefit Commencement Date.

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     8.2(b) Installment Payout Formula. If a Participant selects payment option
(ii) of Section 8.2(a), the annual installment amount for a particular Plan Year
will be computed as follows:

                               $W = ($X / [Y - Z])

          Where W = Installment amount received by Participant in a particular
                    Plan Year.

          Where X = Participant's Deferred Compensation Account balance at the
                    end of the prior Plan Year.

          Where Y = Number of years originally elected by Participant for the
                    payment period.

          Where Z = Number of years in the elected payment period already
                    elapsed.

     8.2(c) Lump-Sum/Installment Combination Payout Formula. If a Participant
selects payment option (iii) of Section 8.2(a), the portion of the Deferred
Compensation Account balance remaining after the payment of the lump sum on the
Benefit Commencement Date to be paid out in any given Plan Year in annual
installments will be considered a separate account amount which is computed in
the same manner as described in Section 8.2(b).

     8.2(d) Delay of Payments to "Specified Employees." Notwithstanding the
foregoing provisions of this Section 8.2, a distribution (or commencement of
annual installments) to a "specified employee" shall be delayed until the later
of 30 days after the first business day of the Plan year following the Benefit
Commencement Date or six months following the date of Separation From Service
(or until death, if earlier) and in the case of installments, the second
installment will be paid on the anniversary of the first installment, and each
subsequent installment will be paid on each such anniversary thereafter.
(Specified employees are employees who (i) own more than 5 percent of the stock
of the Company; (ii) own more than 1 percent of the stock of the Company and
have compensation from the Company in excess of $150,000 a year (not indexed);
or (iii) are officers of the Company or the Employer with compensation in excess
of $130,000 a year (indexed)).

Notwithstanding the foregoing provisions of this Section 6.1(a), a distribution
(or commencement of annual installments) to a Specified Employee shall be
delayed until the first date of the seventh month following the date of
Separation From Service (or until death, if earlier). In the case of
installments, the second installment will be paid on the next Payment Date, and
each subsequent installment will be paid on each Payment Date thereafter.

     8.3 Automatic Lump Sum Payment. Notwithstanding the Participant's
Investment Option(s) or the Payment Method Elections previously made by him
pursuant to Sections 6.7 and 8.2, in the case of a Participant's Separation From
Service for any reason other than retirement when first eligible for
commencement of pension benefits or deferred benefits from a qualified

                                      -11-

<PAGE>

defined benefit plan sponsored by the Employer, but including death or
Disability, whether before or after his Benefit Commencement Date, his Account
balance under this Plan automatically will be transferred to the Corporate Bond
Investment Option. Such balance with interest shall be paid to him (or his
Beneficiary or estate) in a lump sum, as soon as administratively feasible
thereafter. Notwithstanding this Section 8.3, if a Participant elected a
distribution of his Deferred Compensation Account upon a fixed age, pursuant to
Section 8.1(a), and then Separates From Service, his Account shall be
distributed at the time and manner in which he originally selected.

     8.4 Payment Denomination. All payments to Participants or others will be
paid solely in cash.

     8.5 Change of Prior Elections. Subject to the consent of the Committee, an
Eligible Participant may file a request to change a prior election to postpone
commencement of benefits (Section 8.1(a)), or to change the payment method
(Section 8.2 (b)), provided that: (i) such modified election may not take effect
until at least twelve (12) months after the date on which the election is made;
(ii) the payment (or first installment) with respect to which such election is
made must be deferred for a period of at least five (5) years from the date such
payment (or first installment) would otherwise have been made, (except in the
case of death, Disability, or Unforeseeable Emergency); and (iii) such election
may not be made less than twelve (12) months prior to the date of such first
scheduled payment. This Section 8.5 shall be interpreted and administered in
accordance with IRC Section 409A(a)(4)(C).

     8.6 Hardship Withdrawal. General Rule. A Participant may request a
distribution from his Deferral Account, prior to commencement of benefits, in
the event of an Unforeseeable Emergency. The request to take a distribution
shall be made by completing a form provided by and filed with the Committee. The
Committee will first require that the Participant cancel all outstanding
elective deferrals, deferred pursuant to Section 4.1. If the Committee
determines that the requested distribution is for the purpose of meeting an
Unforeseeable Emergency in accordance with Section 2.25 of the Plan, and that
the requested distribution is necessary to relieve the Unforeseeable Emergency
even after the cancellation of outstanding deferral election(s), then the amount
determined by the Committee, sufficient to meet the Unforeseeable Emergency in
accordance with Section 2.25 of the Plan, shall be paid in a single cash lump
sum as soon as practicable. If a hardship withdrawal is made from a
Participant's Phantom Share sub-account, the Phantom Share units in such
sub-account shall be reduced by a number determined by dividing the amount
withdrawn by the Market Price of Tecumseh Shares on the trading date preceding
the date of withdrawal, rounded to the next-higher one-tenth (1/10) unit. Once a
Participant's deferral election(s) is cancelled pursuant to this Section 8.6,
notwithstanding that a distribution might be granted, a Participant may not
elect to again defer, pursuant to Section 4.1 of the Plan for at least 12 months
from the date that the distribution under this Section is requested.

                                      -12-

<PAGE>

                                   ARTICLE IX
                                 VALUATION DATE

     9.1 Valuation. As of each Valuation Date, the Deferred Compensation Account
of each Participant shall be valued by the Committee. The current value, and the
change in value from the prior valuation (whether positive or negative), shall
be communicated in writing to each Participant within 45 days after each
Valuation Date.

                                    ARTICLE X
                                   ALIENATION

     10.1 Anticipation, alienation, sale, transfer, assignment, pledge, levy,
garnishment or other encumbrance of any payments from or benefits held under the
Plan shall not be permitted or recognized, and to the extent permitted by law,
no such payments or benefits shall be subject to legal process or attachment for
the payment of any claim of any person entitled to receive the same.

                                   ARTICLE XI
                            DOMESTIC RELATIONS ORDERS

     11.1 Notwithstanding Article X,

     (i)  To the extent required under any final judgment, decree or order
          (including approval of a property settlement agreement), referred to
          as the "Order," that (i) relates to the provision of child support,
          alimony payments, or marital property rights; (ii) is made in
          compliance with Section 409A of the Internal Revenue Code of 1986, as
          amended and any regulations issued thereunder; and (iii) is made
          pursuant to a state domestic relations law, any portion of a
          Participant's Deferred Compensation Account may be paid to a spouse,
          former spouse or, child or other dependent of the Participant (the
          "Alternate Payee"). A separate account shall be established with
          respect to the Alternate Payee, in the same manner as the Participant,
          and any amount so set aside for an Alternate Payee shall be paid out
          in a lump sum payment within ninety (90) days of the date of the
          Order. Any payment made to an Alternate Payee pursuant to this
          paragraph shall be reduced by required income tax withholding.

     (i)  The Plan's liability to pay benefits to a Participant shall be reduced
          to the extent that amounts have been paid or set aside for payment to
          an Alternate Payee pursuant to an Order. No such transfer shall be
          effectuated unless the Committee has been provided with such an Order.

     (ii) The Company or the Committee shall not be obligated to defend against
          or set aside any Order, or any legal order relating to the garnishment
          of a Participant's benefits, unless the full expense of such legal
          action is borne by the Participant. In the event that the
          Participant's action (or inaction) nonetheless causes the Company or
          the Committee to incur such expense, the amount of the expense may

                                      -13-

<PAGE>

          be charged against the Participant's Deferred Compensation Account and
          thereby reduce the Company's obligation to pay benefits to the
          Participant. In the course of any proceeding relating to divorce,
          separation, or child support, the Company or the Committee shall be
          authorized to disclose information relating to the Participant's
          Account to the Alternate Payee (including the legal representatives of
          the Alternate Payee), or to a court.

                                   ARTICLE XII
                                 TAX WITHHOLDING

     12.1 Withholding. Subject to Sections 11.1, 12.2 and 12.3, the Employer
shall deduct from all payments under this Plan each Participant's share of any
taxes required to be withheld by any Federal, state or local government. The
Participants and their Beneficiaries, distributees and personal representatives
will bear any and all Federal, foreign, state, local income taxes or any other
taxes imposed on Participants or amounts paid under this Plan.

     12.2 FICA Taxes. Pursuant to IRC Section 3121(v) and regulations
thereunder, Compensation deferred pursuant to this Plan is subject to employment
taxes under the Federal Insurance Contributions Act ("FICA") at the time of
deferral rather than at the time of distribution to the Participant.
Accordingly, at the time of deferral, each Participant will be required to pay
to the Employer, either by payroll deduction or check, his share of FICA
(including hospital insurance) taxes due and payable; except to the extent the
Participant has already reached the maximum compensation levels subject to
Old-Age, Survivors, and Disability Insurance ("OASDI") tax at the time
Compensation is deferred under the Plan.

     12.3 Taxes Due at Deferral Date Other than FICA Taxes. If any of the taxes
referred to in Section 12.1 are due at the time of deferral, instead of at the
time of payout, each Participant will be required to pay to the Employer, by
payroll deduction or check, the Participant's share of any such taxes due and
payable.

                                  ARTICLE XIII
                               PARTICIPANT CONSENT

     13.1 By electing to defer Compensation pursuant to this Plan, Participants
shall be deemed conclusively to have accepted and consented to all terms of the
Plan and all actions or decisions made by the Company, the Board or the
Committee with regard to the Plan. Such terms and consent shall also apply to,
and be binding upon, the Beneficiaries, distributees and personal
representatives and other successors in interest of each Participant.

                                      -14-

<PAGE>

                                   ARTICLE XIV
                                  SEVERABILITY

     14.1 In the event any provision of this Plan would violate applicable law
or serve to invalidate the Plan, that provision shall be deemed to be null and
void, and the Plan shall be construed as if it did not contain the provision in
question.

                                   ARTICLE XV
                            AMENDMENT AND TERMINATION

     15.1 Board May Terminate. Subject to all other provisions of this Plan, the
Board, may at any time terminate the Plan.

     15.2 Board or Committee May Amend. Subject to all other provisions of this
Plan, the Committee or the Board may amend this Plan at any time, provided that
any amendment by the Committee shall be consistent with the Plan's original
design and purpose.

     15.3 Fiduciary Guidelines. Notwithstanding Sections 6.9, 15.1 and 15.2, the
Board shall not make amendments or terminate the Plan if such amendments or
termination would reduce a Participant's respective balance in his Deferred
Compensation Account. Further, the Board shall not make amendments which would
in any way eliminate the express requirement in Section 16.1 requiring the
establishment and funding of a Rabbi Trust in the event of a Change of Control
(as defined at Section 16.1) if one has not previously been established and
funded.

     15.4 Termination. In the event the Board terminates the Plan, the Committee
shall give written notice to each Participant that his Deferred Compensation
Account balance will be distributed in the manner initially elected by each
Participant pursuant to Article VIII. Further, pursuant to the responsibility
vested with the Committee as stated in Section 17.1, the Committee will evaluate
the advisability of establishing a Rabbi Trust - if one does not already exist -
in light of the circumstances that caused the Board to terminate the Plan.

     15.5 Corporate Successors. The Plan shall not be automatically terminated
by a transfer or sale of assets of the Company or by the merger or consolidation
of the Company into or with any other corporation or other entity. The Plan will
be continued after such sale, merger or consolidation if and to the extent that
the transferee, purchaser or successor entity (hereinafter called the
"Successor") agrees to continue the Plan. In the event the Plan is not assumed
and continued by the Successor, then the Plan shall terminate in accordance with
Section 15.4; provided that each Participant's Phantom Share sub-account shall
be valued based upon Phantom Share units being valued by reference to the
greater of (a) the Market Price of Tecumseh Shares on the effective date of such
sale, merger or consolidation, or (b) the value per share, as of such date, of
consideration received by the actual holders of Tecumseh Shares in connection
with the sale, merger or consolidation in question.

                                      -15-

<PAGE>

                                   ARTICLE XVI
                                CHANGE OF CONTROL

     16.1 Funding of Rabbi Trust. Notwithstanding Article VII, and subject to
the following paragraph, upon a "Change of Control" as defined in attached
Exhibit B (i.e., a change in the ownership or effective control of the Company
or in the ownership of a substantial portion of the assets of the Company,
within the meaning of IRC Section 409A(a)(2)(A)(v)), the Board shall cause the
immediate contribution of funds to a newly-created Rabbi Trust (or existing
Rabbi Trust if previously established), i.e., a "Rabbi Trust" established in
accordance with Rev. Proc. 92-64 (or any successor), for the benefit of each
Plan Participant, as beneficiary. If the Committee determines that a Rabbi Trust
is not the appropriate funding mechanism, any other funding mechanism approved
by the Internal Revenue Service as a means to avoid Plan Participants being in
constructive receipt of income can be used in the alternative. Such initial
contribution will be equal to the balance in each Participant's Deferred
Compensation Account as of the Change of Control date. Further, if the Plan is
not terminated upon such Change of Control, the Employer shall continue to
contribute to the Rabbi Trust, on a monthly basis, an amount of cash and/or
Tecumseh Shares equal to the Compensation being deferred by each Participant
after the Change of Control. Also, the Employer shall continue to contribute
additional cash and/or Tecumseh Shares as required to maintain the value of the
assets of such Rabbi Trust at least equal to the estimated value of future
benefits payable under the Plan.

     Notwithstanding the above provisions, no Rabbi Trust assets shall be
located or transferred outside of the United States and no property shall be
transferred to the Trust or any other funding mechanism in connection with an
adverse change in the Company's financial health.

     Any assets set aside in the Rabbi Trust shall not be deemed to be the
property of the Participant and shall be subject to claims of the creditors of
Company. No Participant or Beneficiary shall have any claim against, right to,
or security or other interest in, any fund, account or asset of Company from
which any payment under the Plan may be made.

                                  ARTICLE XVII
                               PLAN ADMINISTRATION

     17.1 Committee. The responsibilities for general administration of the Plan
as well as the decisions to establish and fund a Rabbi Trust or other funding
medium shall reside with the Committee.

     17.2 Determinations of Committee. Subject to the limitations of the Plan or
the express powers reserved solely for the Board, the Committee shall from time
to time establish rules for the administration and interpretation of the Plan
and the transaction of its business. The determination of the Committee shall be
conclusive concerning the content, import or meaning of any and all terms in the
Plan.

     17.3 Majority Vote. Any act which the Plan authorizes or requires the
Committee to do may be done by a majority (expressed from time to time by a vote
at a meeting or, in lieu thereof,

                                      -16-

<PAGE>

a written consent) and shall constitute the action of the Committee, and shall
have the same effect for all purposes as if assented to by all members of the
Committee.

     17.4 Agents and Employees. The Committee may employ or retain agents and
may designate one or more employees of the Company, by name or by position, to
perform such clerical, accounting, and other services as the Committee may
require in carrying out the provisions of the Plan.

     17.5 Authorization of Committee Members. The members of the Committee may
authorize one or more of their members to execute or deliver any instrument,
make any payment, or perform any other act which the Plan authorizes or requires
the Committee to do.

     17.6 Costs. Any and all costs in administering this Plan will be paid by
the Employer.

     17.7 Claims. Claims for benefits under the Plan shall be made in writing to
the Committee. The Participant (or Beneficiary) may furnish the Committee with
any written material he believes necessary to perfect his claim.

     17.8 Claims Review. A person whose claim for benefits under the Plan has
been denied, or his duly authorized representative, may request a review upon
written application to the Committee, may review pertinent documents, and may
submit issues and comments in writing. The claimant's written request for review
must be submitted to the Committee within 60 days after receipt by the claimant
of written notification of the denial of a claim. A decision by the Committee
shall be made promptly, and not later than 60 days after the Committee's receipt
of a request for review, unless special circumstances require an extension of
time for proceeding, in which case a decision shall be rendered as soon as
possible, but not later than 120 days after receipt of the request for review.
The decision on review shall be in writing, shall include reasons for the
decision, may include specific reference to the pertinent provision of the Plan
on which the decision is based, and shall be written in a manner calculated to
be understood by the claimant.

     17.9(a) Arbitration. Unless otherwise required by law, any controversy or
claim arising out of or relating to the Plan or the breach thereof, shall be
settled by binding arbitration in the City of Tecumseh in accordance with the
laws of the State of Michigan by three arbitrators, one of whom shall be
appointed by the Company, one by the Participant (or in the event of his prior
death, his beneficiary(ies) or other distributee(s)), and the third of whom
shall be appointed by the first two arbitrators. If the selected (third)
arbitrator declines or is unable to serve for any reason, the appointed
arbitrators shall select another arbitrator. Upon their failure to agree on
another arbitrator, the jurisdiction of the Circuit Court of Lenawee County,
Michigan shall be invoked to make such selection. The arbitration shall be
conducted in accordance with the commercial arbitration rules of the American
Arbitration Association except as provided in 17.9(b) below. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. Review by the arbitrators of any decision, action or
interpretation of the Board or Committee shall be limited to a determination of
whether it was arbitrary and capricious or constituted an abuse of discretion,
within the guidelines of Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101
(1989). In the event the Participant or his beneficiary shall retain

                                      -17-

<PAGE>

legal counsel and/or incur other costs and expenses in connection with
enforcement of any of the Participant's rights under the Plan, the Participant
or beneficiary shall not be entitled to recover from the Company any attorneys
fees, costs or expenses in connection with the enforcement of such rights
(including enforcement of any arbitration award in court) regardless of the
final outcome; except that the arbitrators in their discretion may award
reasonable attorneys fees and reasonable costs to the Participant in an
arbitration initiated by the Participant to enforce the Participant's rights
under the Plan, provided the Participant is the prevailing party in such
arbitration.

     17.9(b) Any arbitration shall be conducted as follows:

          (i) The arbitrators shall follow the Commercial arbitration Rules of
     the American Arbitration Association, except as otherwise provided herein.
     The arbitrators shall substantially comply with the rules of evidence;
     shall grant essential but limited discovery; shall provide for the exchange
     of witness lists and exhibit copies; and shall conduct a pretrial and
     consider dispositive motions. Each party shall have the right to request
     the arbitrators to make findings of specific factual issues.

          (ii) The arbitrators shall complete their proceedings and render their
     decision within 40 days after submission of the dispute to them, unless
     both parties agree to an extension. Each party shall cooperate with the
     arbitrators to comply with procedural time requirements and the failure of
     either to do so shall entitle the arbitrators to extend the arbitration
     proceedings accordingly and to impose sanctions on the party responsible
     for the delay, payable to the other party. In the event the arbitrators do
     not fulfill their responsibilities on a timely basis, either party shall
     have the right to require a replacement and the appointment of new
     arbitrators.

          (iii) The decision of the arbitrator shall be final and binding upon
     the parties and accordingly a judgment by any Circuit Court of the State of
     Michigan or any other court of competent jurisdiction may be entered in
     accordance therewith.

          (iv) Subject to the provisions of Section 17.9(a) relating to
     reasonable attorneys fees and costs in an arbitration, the costs of the
     arbitration shall be borne equally by the parties to such arbitration,
     except that each party shall bear its own legal and accounting expenses
     relating to its participation in the arbitration.

                                  ARTICLE XVIII
                              LIMITATIONS OF ACTION

     18.1 Every asserted claim to benefits or right of action by or on behalf of
any Participant, past, present, or future, or any spouse, child, beneficiary or
legal representative thereof, against the Company arising out of or in
connection with the Plan shall, irrespective of the place where such right of
action may arise or be asserted, cease and be barred by the expiration of the
earliest of: (i) one year from the date of the alleged act or omission in
respect of which such right of action first arises in whole or in part, (ii) one
year after the Participant's Separation From

                                      -18-

<PAGE>

Service, or (iii) six months after notice is given to or on behalf of the
Participant of the amount payable to or in respect of the Participant under the
Plan.

WITNESS execution of this plan document on behalf of the Company by its duly
authorized officer.

                                        TECUMSEH PRODUCTS COMPANY

                                        By: /s/ TODD W. HERRICK
                                            ------------------------------------
                                            Its President and
                                            Chief Executive Officer

                                        Dated: March 29, 2006

                                      -19-

<PAGE>

                                    EXHIBIT A
                             Separation From Service

A Separation From Service occurs on the date upon which a Participant separates
from service with his Employer, as determined in accordance with Code Section
409A and Treasury Regulations promulgated thereunder. A Separation From Service
shall be deemed to occur

1. if a Participant terminates employment with his Employer and does not
continue to render services to the Company or any controlled subsidiary of the
Company; or

2. if the Participant's Employer ceases to be a controlled Subsidiary of the
Company.

For purposes of this Plan, a Participant separates from service if the
Participant dies, retires or otherwise has a Separation From Service with the
Employer. However, the employment relationship is treated as continuing intact
while the Participant is on military leave, sick leave, or other bona fide leave
of absence (such as temporary employment by the government) if the period of
such leave does not exceed six months, or if longer, so long as the
Participant's right to reemployment with the Employer is provided either by
statute or by contract. If the period of leave exceeds six months and the
Participant's right to reemployment is not provided either by statute or by
contract, the employment relationship is deemed to terminate on the first date
immediately following such six-month period.

Whether a Separation From Service has occurred is determined based on the facts
and circumstances. Where a Participant either actually or purportedly continues
in the capacity as a Participant, such as through the execution of an employment
agreement under which the Participant agrees to be available to perform services
if requested, but the facts and circumstances indicate that neither the Employer
nor the Participant intended for the Participant to provide more than
insignificant services to the Employer, a Participant will be treated as having
a Separation From Service. For purposes of the preceding sentence, the Employer
and Participant will not be treated as having intended for the Participant to
provide insignificant services where the Participant continues to provide
services at an annual rate that is at least equal to 20 percent of the services
rendered, on average, during the immediately preceding three full calendar years
of employment (or, if employed less than three years, such lesser period) and
the annual remuneration for such services is at least equal to 20 percent of the
average annual remuneration earned during the final three full calendar years of
employment (or, if less, such lesser period). Where a Participant continues to
provide services to the Employer in a capacity other than as a Participant, a
separation from service will not be deemed to have occurred if such former
Participant is providing services at an annual rate that is 50 percent or more
of the services rendered, on average, during the immediately preceding three
full calendar years of employment (or if employed less than three years, such
lesser period) and the annual remuneration for such services is 50 percent or
more of the annual remuneration earned during the final three full calendar
years of employment (or if less, such lesser period). For purposes of this
paragraph, the annual rate of providing services is determined based upon the
measurement used to determine the Participant's base compensation (for example,
amounts of time required to earn salary, hourly wages or payments for specific
projects).

                                      -20-

<PAGE>

                                    EXHIBIT B

"Change of Control," solely for the purposes of this Plan, shall mean (and be
limited to) any change that qualifies as a change of control event pursuant to
Section 409A of the Internal Revenue Code of 1986, as amended, Proposed Treasury
Regulation Section 1.409A-3(g)(5), and all subsequent relevant authority, which
shall include one or more of the following events:

a) a change in the ownership of the Company in compliance with Proposed Treasury
Regulation Section 1.409A-3(g)(5)(v) pursuant to which any person or group
acquires ownership of stock of the corporation that, together with stock held by
such person or group, constitutes more than 50 percent of the total fair market
value or total voting power of the stock of such corporation.

b) a change in the effective control of the Company pursuant to Proposed
Treasury Regulation Section 1.409A-3(g)(5)(vi), pursuant to which either:

(1) Any one person, or more than one person acting as a group, acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership (including acquisition of
beneficial ownership within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934) of stock of the Company possessing 35 percent
or more of the total voting power of the stock of such corporation; or

(2) A majority of members of the Company's board of directors is replaced during
any 12-month period by directors whose appointment or election is not endorsed
by a majority of the members of the Company's board of directors prior to the
date of the appointment or election;

c) a change in the ownership of a substantial portion of the Company's assets
pursuant to Proposed Treasury Regulation Section 1.409A-3(g)(5)(vii) pursuant to
which any one person or group acquires (or has acquired during the 12-month
period ending on the date of the most recent acquisition by such person or
persons) assets from the Company that have a total gross fair market value (as
defined in 1.409A-3(g)(5)(vii)) equal to or more than 40 percent of the total
gross fair market value of all of the assets of the Company immediately prior to
such acquisition or acquisitions.

d) For purposes of this Exhibit B, the following terms shall have the following
meanings:

i) "person" shall mean a person as defined in Section 3(a)(9) of the 1934 Act.

ii) "beneficial ownership" shall be determined in accordance with Rule 13d-3
promulgated under the 1934 Act or any successor regulation.

iii) "group" shall mean a group as described in Rule 13d-5 promulgated under the
1934 Act or any successor regulation provided such group falls within the
purview of Prop. Treas. Reg. Sections 1.409A-3(g)(v)(B), 1.409A-3(g)(5)(vi)(D),
or 1.409A-3(g)(5)(vii)(C), as applicable. The formation of a group hereunder
shall have the effect described in paragraph (b) of said Rule 13d-5 or any
successor regulation.

                                      -21-<PAGE>

                                                                    EXHIBIT 10.3

                            TECUMSEH PRODUCTS COMPANY

                      DIRECTOR RETENTION PHANTOM STOCK PLAN

The following document sets forth the terms of the Plan as amended and restated
effective January 1, 2005.

     Tecumseh Products Company (the "Company") amends and restates its Director
Retention Phantom Stock Plan to provide an incentive for outside Directors to
remain in service on the Company's Board of Directors so that the Company may
continue to benefit from their counsel and dedication, while rewarding their
commitment to the Company with deferred income based on the Company's realized
return on equity and the stock market performance of the Class A Common Stock of
the Company.

1    DEFINITIONS

     As used in the Plan, the following terms have the following respective
meanings:

     "Account" has the meaning given in Section 4.1 hereof.

     "Award" means an allocation of Phantom Shares to the Account of an Eligible
Director and shall include the dollar amount authorized for Plan Awards prior to
the conversion of such amount into Phantom Share units.

     "Board" means the Board of Directors of the Company.

     "Committee" means the Governance, Compensation and Nominating Committee of
the Board, or such other committee as the Board may subsequently appoint to
administer the Plan.

     "Determination Date" means, for each Eligible Director, the date on which
he or she ceases to be a Director of the Company due to resignation, retirement,
death, Disability or other reason, provided that such event is also a
"separation from service" with the Company, as determined in accordance with
Code Section 409A. If such event is not a "separation from service," then the
Determination Date shall be the earliest date following such event when a
"separation from service" occurs.

     "Disability" (or to be "Disabled") means a medically determinable physical
or mental impairment which can be expected to result in death or to last for a
continuous period of not less than 12 months and causes an Eligible Director to
be unable to engage in any substantial gainful activity by reason of such
impairment. An Eligible Director shall also be deemed to have a Disability when
determined to be totally disabled by the Social Security Administration.

     "Eligible Director" means, for any relevant time, each individual who at
that time is a member of the Board but is not also an officer or employee of the
Company or of any subsidiary of the Company.

<PAGE>

     "Market Price" means, for any given date (i) if the Shares are then listed
for trading on one or more national securities exchanges (including for this
purpose the NASDAQ "National Market"), the average of the high and low sale
prices for a Share on the principal such exchange on the date in question (or,
if no Shares traded on such exchange on such date, the next preceding date on
which such trading occurred); (ii) if (i) is inapplicable but bid and asked
prices for Shares are quoted through NASDAQ, the average of the highest bid and
lowest asked prices so quoted for a Share on the date in question (or, if no
prices for Shares were quoted on that date, the next preceding date on which
they were quoted); (iii) if (i) and (ii) are inapplicable but bid and asked
prices for Shares are otherwise quoted by one or more broker-dealers known to
the Company to be making a market in the Shares, the average of the highest bid
and lowest asked prices so quoted on the date in question (or, if no prices were
quoted on that date, the next preceding date on which they were quoted); and
(iv) if all of the foregoing are inapplicable, the fair market value of a Share
on the date in question as determined in good faith by the Committee.

     "NASDAQ" means the National Association of Securities Dealers, Inc.
Automated Quotation System.

     "Phantom Share" means an allocation credited to the Account of an Eligible
Director and maintained in such Account together with any prior or subsequent
allocations made on behalf of such Director. An allocation of Phantom Shares
shall confer only such rights as are specified in the Plan. Directors who
receive allocations of Phantom Share units shall not (as a consequence of such
allocations) be treated as shareholders under the Articles of Incorporation or
By-Laws of the Company or under applicable law.

     "Plan" means this Director Retention Phantom Stock Plan.

     "Plan Year" means the calendar year.

     "Retainer" means the annual amount payable to an Eligible Director for
serving as a Director of the Company during a given year, excluding amounts
payable for attendance at meetings of the Board, any amounts payable for serving
on or as chair of any committee of the Board and any amounts payable for
reimbursement of expenses.

     "Share(s)" means Class A Common Stock, $1.00 par value per share, of the
Company.

2    ADMINISTRATION

     The Plan shall be administered by the Committee. To the extent consistent
with the terms of the Plan, the Committee shall have the power to interpret any
Plan provision, to prescribe, amend, and rescind rules and regulations relating
to the Plan, and to make all other determinations that it deems necessary or
advisable to administer the Plan. The Committee may appoint such agents to
assist in administration of the Plan, other than Eligible Directors, as the
Committee deems appropriate. The Committee's interpretation of the Plan and any
action it takes with respect to allocations of Phantom Share units pursuant
thereto shall be final and binding upon all affected parties.

                                       2

<PAGE>

3    AWARDS

     3.1 The target dollar amount of an Award shall equal the greater of (A) a
stated percentage (not to exceed 100%) of each Eligible Director's annual
Retainer that will constitute the Award if the Company attains or exceeds a
target Return on Equity ("ROE") as established by the Committee from time to
time, or (B) $5,000 (without regard to ROE). The actual amount to be used for
Awards (the "Award Pool") for a given Plan Year shall be a percentage of the
target amount (not to exceed 100%) of the Company's actual ROE for such Plan
Year. As used in this Plan, "ROE" means the Company's average annual rate of
return on equity for the Plan Year, determined by the same method as the Company
uses for other performance measurement purposes (rounded to the nearest
one-hundredth of a percent). The Award Pool shall be zero for any Plan Year in
which ROE is below a percentage established by the Committee when the Committee
establishes the target ROE. Promptly after establishing the target ROE and the
minimum ROE (if any) the Committee shall advise the Eligible Directors of such
determination(s). Subject to Section 6.3, each Award shall be fully vested when
made.

     3.2 If an Eligible Director shall die, become Disabled, retire or otherwise
terminate service as a Director prior to December 31 of a Plan Year, he or she
shall not be entitled to an Award for such Plan Year. If an Eligible Director
shall die or become Disabled on or after January 1 but before Awards, if any,
are determined pursuant to Section 4.2, the Committee may authorize an Award to
him or her or to his or her beneficiary or estate in such amount, if any, as the
Committee in its discretion deems appropriate; provided that Awards shall be
made under this Section 3.2 only if an Award Pool is established under Section
3.1.

     3.3 Beginning with the 2005 Plan Year, each Phantom Share Award made by the
Company shall be assigned a "Class Year" corresponding to the Plan Year for
which the Award has been made.

4    ACCOUNTS

     4.1 For each Eligible Director, the Company shall establish and maintain a
bookkeeping account ("Account") in which all Phantom Share units allocable to
the Eligible Director due to his or her participation in the Plan shall be
credited.

     4.2 At the organizational meeting of the Board of Directors which follows
the Annual Meeting of Shareholders, the Award (if any) for the preceding Plan
Year shall be determined and there shall be allocated to each Eligible
Director's Account a number (to four decimal places) of Phantom Share units that
is equal to the dollar amount of the Eligible Director's Award, divided by the
Market Price on the trading date immediately preceding the allocation date.

     EXAMPLE: If an Eligible Director is due to receive $10,000 as his/her
     annual Award pursuant to this Plan, and if the Market Price per Share is
     $51 on the valuation date, then he or she will receive an allocation of
     Phantom Share units determined by the formula $10,000 / $51, or 196.0784
     Phantom Share units.

                                       3

<PAGE>

     4.3 On the payment date for any cash dividend or other cash distribution
declared upon the Shares, there shall be allocated to each Eligible Director's
Account that number (to four decimal places) of Phantom Share units that is
equal to the total of units which on the related record date were in the
Eligible Director's Account, multiplied by the per Share cash dividend or other
distribution, and divided by the Market Price on such payment date.

5    POLICY REGARDING RETIREMENT OF OUTSIDE DIRECTORS

     5.1 An Eligible Director shall retire from the Board as provided in the
Company's Bylaws, and nothing contained in this Plan shall entitle an Eligible
Director to serve beyond the term for which he or she was elected to the Board.
Nothing in this Plan shall be construed to restrict the stockholders' right to
elect any person a Director of the Company in accordance with the Articles of
Incorporation and Bylaws.

6    PAYMENT OF AWARDS

     6.1 Subject to the provisions of Sections 6.3 and 6.4, within 30 days after
(a) an Eligible Director's Determination Date, or (b) a Company Change of
Control, the Company shall pay to the Director an amount in cash equal to:

          -    the number of Phantom Share units then credited to his or her
               Account based on Awards for Plan Years ending on or before
               December 31,2004

     multiplied by

          -    the Market Price per Share on the Determination Date or date such
               Company Change of Control shall have occurred, as the case may
               be.

     6.2 Subject to the provisions of Sections 6.3 and 6.4, one-half of each
Eligible Director's Award for a Class Year after 2004 shall be payable within 30
days after the third December 31 following the end of such Class Year and the
remaining one-half shall be payable within 30 days after the fifth December 31
following the end of such Class Year. In each instance the payment shall be a
cash amount equal to the Market Price per Share on the business day preceding
the payment date multiplied by the applicable number of Phantom Share units. The
"applicable number" in the case of a third year payment is 50% of the units
credited to his or her Account for the Class Year in question as of the third
December 31 following the end of that Class Year. The "applicable number" in the
case of a fifth year payment is the remainder of the units credited to his or
her Account for the Class Year in question as of the fifth December 31 following
the end of that Class Year. Notwithstanding the above benefit payment schedule,
if the Eligible Director's Determination Date or a Company Change in Control
should occur prior to a scheduled payment date, then the balance of all awards
for post-2004 Class Years shall be paid in a lump within 30 days after such
event, using the payment formula described of Section 6.1 as applied to all
Phantom Share units then credited to his or her Account.

                                       4

<PAGE>

     6.3 An Eligible Director's Account shall be forfeited if his or her service
on the Board is terminated, voluntarily or otherwise, for any Reason denominated
below (which shall be determined by the Committee). Such "Reason," for the sole
purpose of determining whether an Eligible Director's Awards are to be
forfeited, shall be deemed to exist where -

     (i) The Eligible Director breaches any material written rules, regulations
or policies of the Board, now existing or hereafter arising, which are uniformly
applied to all Eligible Directors or which rules, regulations and policies are
promulgated for general application to Directors of the Company; or

     (ii) The Eligible Director willfully and repeatedly fails to substantially
perform the duties of his or her tenure (other than any such failure resulting
from incapacity due to physical or mental illness) after a written demand for
substantial performance is delivered to him by the Board chairperson, which
demand specifically identifies the manner in which the chairperson believes that
the Eligible Director has not substantially performed such duties; or

     (iii) The Eligible Director is convicted of a felony under state or federal
law, or commits a crime involving moral turpitude; or

     (iv) The Eligible Director embezzles or misappropriates any property
belonging to the Company such that he may be subject to criminal prosecution
therefor or the Eligible Director intentionally and materially injures the
Company, its personnel or its property.

     6.4 If an Eligible Director's Determination Date occurs due to death, or if
he or she dies prior to payment pursuant to Section 6.1 or 6.2, then the amount
payable shall be paid to the beneficiary or beneficiaries designated in the
Eligible Director's written beneficiary designation filed with the Committee,
or, if no valid beneficiary designation has been filed, the legally appointed
personal representative of the Eligible Director's estate. If no such
representative is appointed by the time payment is due, then the Company shall
hold the payment without interest until appointment occurs or proper claim for
such items otherwise is made of the Company by the person or persons entitled
thereto. If the Company is notified that an Eligible Director has been
adjudicated mentally incompetent as of the time any amount is payable under the
Plan to the Eligible Director, or if it otherwise is demonstrated to the
satisfaction of the Committee that such mental incapacity then exists by a
person authorized by a durable power of attorney or similar document to attend
to the Eligible Director's financial affairs, the any cash so payable shall be
delivered to, the Eligible Director's legally appointed guardian or conservator
or, if none has been appointed, the holder of such power of attorney or similar
document.

     6.5 For any portion of an Account becoming vested after December 31, 2004,
"Company Change in Control" means a change in the ownership or effective control
of the Company or in the ownership of a substantial portion of the assets of the
Company, within the meaning of Code Section 409A(a)(2)(A)(v), as more fully
described in attached Exhibit A. For other portions of an Account, "Company
Change in Control" shall have the meaning set forth in attached Exhibit B.

                                       5

<PAGE>

7    ADJUSTMENTS

     In the event of any non-cash dividend or other distribution, or any stock
split, reverse stock split, recapitalization, reorganization, split-up,
spin-off, merger, consolidation, share exchange, or other like change in the
capital or corporate structure of the Company affecting the Shares, there shall
be made such adjustment or adjustments (if any) in the number of units credited
to the Accounts of Eligible Directors as the Committee determines to be
appropriate in light of such event in order to continue to make available the
benefits intended by the Plan, but no adjustment shall be required by reason of
any sales of Shares or other Company securities by the Company at any price,
whether below, or at or above Market Price, and whether by or pursuant to
warrant, option, right, conversion right or privilege, or otherwise.

8    MISCELLANEOUS MATTERS

     8.1 Accounts are not intended to be and shall not be trust accounts for the
benefit of any Eligible Director or other person, nor shall the establishment
and maintenance of an Account afford any Eligible Director or other person any
right or interest in any asset the Company may determine to earmark for future
payment of benefits under the Plan. Rather, benefits payable under the Plan are
intended to be unfunded for tax purposes, and the sole right of an Eligible
Director or beneficiary or other successor in interest thereof with respect to
his or her Account shall be the right as an unsecured general creditor of the
Company to claim any cash benefit to which the Eligible Director becomes
entitled after his or her Determination Date, pursuant to the terms and
conditions of the Plan.

     8.2 An Eligible Director's right and interest in his or her Account shall
not be subject in any manner to anticipation, alienation, sale, assignment,
pledge, encumbrance, attachment, garnishment for the benefit of creditors of the
Eligible Director, or other transfer whatsoever, other than by will or the laws
of descent and distribution.

     8.3 Nothing in the Plan shall obligate any Eligible Director to continue as
a Director of the Company or the Company, or to accept any nomination for a
future term as such a Director, or require the Company to nominate or cause the
nomination of any Eligible Director for a future term as a Director of the
Company or the Company.

     8.4 This Plan shall be governed by and construed, enforced, and
administered in accordance with the laws of the State of Michigan excluding any
such laws which direct an application of the laws of any other jurisdiction. At
all times, the Plan will also be interpreted and administered to maintain
intended income tax deferral in accordance with Code Section 409A and
regulations and other guidance issued thereunder. The Company and the Committee
shall be subject to suit regarding the Plan only in the courts of the State of
Michigan, and the Company shall fully indemnify and defend the Board and the
Committee with respect to any actions relating to this Plan made in good faith
by such bodies or their members.

                                        6

<PAGE>

9    DURATION OF THE PLAN

     9.1 The Plan was adopted by the Board on March 29, 2006 pursuant to the
Board's resolution of February 23, 2005 (authorizing the changes made in this
amended and restated document) and takes effect as of January 1, 2005.

     9.2 The Board may at any time and from time to time amend, modify, suspend,
or terminate the Plan, except that none of the foregoing actions by the Board
shall adversely affect the rights or benefits of an Eligible Director without
such Eligible Director's consent.

                                       7

<PAGE>

                                    Exhibit A

For any portion of an Account becoming vested after December 31, 2004, "Company
Change in Control," solely for the purposes of this Plan, shall mean (and be
limited to) any change that qualifies as a change of control event pursuant to
Section 409A of the Internal Revenue Code of 1986, as amended, Proposed Treasury
Regulation Section 1.409A-3(g)(5), and all subsequent relevant authority, which
shall include one or more of the following events:

a) a change in the ownership of the Company in compliance with Proposed Treasury
Regulation Section 1.409A-3(g)(5)(v) pursuant to which any person or group
acquires ownership of stock of the corporation that, together with stock held by
such person or group, constitutes more than 50 percent of the total fair market
value or total voting power of the stock of such corporation.

b) a change in the effective control of the Company pursuant to Proposed
Treasury Regulation Section 1.409A-3(g)(5)(vi), pursuant to which either:

(1) Any one person, or more than one person acting as a group, acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership (including acquisition of
beneficial ownership within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934) of stock of the Company possessing 35 percent
or more of the total voting power of the stock of such corporation; or

(2) A majority of members of the Company's board of directors is replaced during
any 12-month period by directors whose appointment or election is not endorsed
by a majority of the members of the Company's board of directors prior to the
date of the appointment or election;

c) a change in the ownership of a substantial portion of the Company's assets
pursuant to Proposed Treasury Regulation Section 1.409A-3(g)(5)(vii) pursuant to
which any one person or group acquires (or has acquired during the 12-month
period ending on the date of the most recent acquisition by such person or
persons) assets from the Company that have a total gross fair market value (as
defined in 1.409A-3(g)(5)(vii)) equal to or more than 40 percent of the total
gross fair market value of all of the assets of the Company immediately prior to
such acquisition or acquisitions.

d) For purposes of this Exhibit A, the following terms shall have the following
meanings:

     i) "person" shall mean a person as defined in Section 3(a)(9) of the 1934
     Act.

     ii) "beneficial ownership" shall be determined in accordance with Rule
     13d-3 promulgated under the 1934 Act or any successor regulation.

     iii) "group" shall mean a group as described in Rule 13d-5 promulgated
     under the 1934 Act or any successor regulation provided such group falls
     within the purview of Prop. Treas. Reg. Sections 1.409A-3(g)(v)(B),
     1.409A-3(g)(5)(vi)(D), or 1.409A-3(g)(5)(vii)(C), as applicable. The
     formation of a group hereunder shall have the effect described in paragraph
     (b) of said Rule 13d-5 or any successor regulation.

                                       8

<PAGE>

                                    EXHIBIT B

     For any portion of an Account becoming vested before January 1, 2005,
"Company Change in Control," solely for the purposes of this Plan, shall mean
one or more of the following events:

     (i) The acquisition, after December 31, 2004, of beneficial ownership of
25% or more of the Company's Class A Common Stock or Class B Common Stock then
outstanding by any person (including a group, within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934 (the "1934 Act")), other than:

     (A) the trustee of any Company-sponsored employee benefit plan,

     (B) the Company or any of its subsidiaries,

     (C) Kenneth G. Herrick, his descendants, or trusts for the benefit of such
individuals, or

     (D) trusts or foundations established by Kenneth G. Herrick or by any of
the descendants or trusts mentioned in (C), above.

     (ii) The first purchase, after December 31, 2004, under a tender offer or
exchange offer for 25% or more of the Company's Class A Common Stock or Class B
Common Stock then outstanding, other than an offer by:

     (A) the trustee of any Company-sponsored employee benefit plan,

     (B) the Company or any of its subsidiaries,

     (C) Kenneth G. Herrick, his descendants, or trusts for the benefit of such
individuals, or

     (D) trusts or foundations established by Kenneth G. Herrick or by any of
the descendants or trusts mentioned in (C), above.

     (iii) The first day on which less than a majority of the total membership
of the Board shall be Continuing Directors;

     (iv) The effective date of a transaction (or a group of related
transactions) in which more than 50% in fair market value of the assets of the
Company are disposed of pursuant to a partial or complete liquidation, a
spin-off, a sale of assets or otherwise; or

     (v) The date on which the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 51% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger of consolidation.

                                       9

<PAGE>

     (b) For purposes of this Exhibit B, the following terms shall have the
following meanings:

     (i) "Continuing Director" shall mean any Director of the Company who either
(1) is a member of the Board on the date this Plan is adopted by the Board and
has not terminated membership on the Board, or (2) is recommended or elected to
the Company's Board of Directors by at least three-quarters of the Continuing
Directors.

     (ii) "Person" shall mean a person as defined in Section 3(a)(9) of the 1934
Act, "beneficial ownership" shall be determined in accordance with Rule 13d-3
promulgated under the 1934 Act or any successor regulation, the term "group"
shall mean a group as described in Rule 13d-5 promulgated under the 1934 Act or
any successor regulation, and the formation of a group hereunder shall have the
effect described in paragraph (b) of said Rule 13d-5 or any successor
regulation. Anything hereinabove to the contrary notwithstanding, however: (a)
relationships by blood, adoption or marriage between or among two or more
persons shall not be deemed to constitute any of such persons a member of a
group with any other such persons; (b) action taken or agreed to be taken by any
person acting in his official capacity as an officer or Director of the Company
shall not be deemed to constitute such person a member of a group with any other
person, and (c) formation of a group shall not constitute an acquisition by the
group (or any member thereof) of beneficial ownership of any shares of the
Company's Class B ("voting") common stock beneficially owned by any member of
such group and acquired by such group member in an Excluded Acquisition.

     (iii) "Excluded Acquisition" means any acquisition of shares of voting
common stock from the Company (whether or not for consideration) or from any
person by operation of law (including but not limited to the laws of descent and
distribution), by will, by gift or by foreclosure of a security interest given
to secure a bona fide loan, or any acquisition consummated prior to January 1,
2005.

                                       10

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