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EX-10.25 Change of Control Severance Pay Plan EXHIBIT 10.25 COOPER-STANDARD AUTOMOTIVE INC. CHANGE OF CONTROL SEVERANCE PAY PLAN COOPER-STANDARD AUTOMOTIVE INC. CHANGE OF CONTROL SEVERANCE PAY PLAN Table of Contents PAGE ---- 1. General Statement of Purpose............................................1 2. Effective and Termination Dates.........................................1 3. Definitions.............................................................1 4. Eligibility; Termination Following a Change of Control..................5 5. Severance Compensation..................................................6 6. Funding Upon Potential Change of Control................................6 7. Certain Additional Payments by the Company..............................7 8. No Mitigation Obligation...............................................10 9. Certain Payments not Considered for Other Benefits, etc................10 10. Confidentiality; Confidential Information; Non-competition.............11 11. Release................................................................11 12. Legal Fees and Expenses................................................11 13. Employment Rights......................................................11 14. Withholding of Taxes...................................................11 15. Successors and Binding Effect..........................................12 16. Governing Law..........................................................12 17. Validity...............................................................12 18. Headings...............................................................12 19. Construction...........................................................13 20. Administration of the Plan.............................................13 21. Amendment and Termination..............................................14 22. Other Plans, etc.......................................................14 Exhibit A -- Chief Executive Officer and Members of the Operations Committee Exhibit B -- Members of the Management Group Exhibit C -- Severance Compensation Exhibit D -- Form of Confidentiality and Non-Compete Agreement Exhibit E -- Form of Release i COOPER-STANDARD AUTOMOTIVE INC. CHANGE OF CONTROL SEVERANCE PAY PLAN 1. General Statement of Purpose The Board of Directors (the "BOARD") of Cooper-Standard Automotive Inc. (the "COMPANY") has considered the effect a change of control of the Company may have on certain executives of the Company and its Related Employers (as defined below). The executives have made and are expected to continue to make major contributions to the short-term and long-term profitability, growth and financial strength of the Company. The Company recognizes that the possibility of a change of control exists, desires to assure itself of both the present and future continuity of management, desires to establish certain minimum severance benefits for certain of its executives applicable in a change of control, and wishes to ensure that its executives are not practically disabled from discharging their duties in respect of a proposed or actual transaction involving a change of control. As a result, the Board believes that the Cooper-Standard Automotive Inc. Change of Control Severance Pay Plan (the "PLAN") will assist the Company in attracting and retaining qualified executives. 2. Effective and Termination Dates The Plan shall be effective immediately after the occurrence of the "Closing Date" as defined in the Stock Purchase Agreement among Cooper Tire & Rubber Company, Cooper Tyre & Rubber Company UK Limited and CSA Acquisition Corp. ("CSA") dated as of September 16, 2004 (the "EFFECTIVE DATE"). The Plan will automatically terminate on the later of (i) December 31, 2006 or (ii) the second anniversary of a Change of Control (the "TERMINATION DATE"); provided, however, that on each December 31, commencing with the year 2004, the Termination Date set forth in Subsection (i) of this Section will automatically be extended for an additional year unless, not later than 120 calendar days prior to such date, the Company shall have given written notice to the Executives that the Termination Date is not to be so extended. 3. Definitions Where the following words and phrases appear in the Plan, they shall have the respective meanings set forth below, unless their context clearly indicates otherwise: (a) "AFFILIATE" shall mean, with respect to an entity, any entity directly or indirectly controlling, controlled by, or under common control with such first entity. (b) "BASE PAY" means, with respect to each Executive, the rate of annual base salary, as in effect from time to time. (c) "BOARD" means the Board of Directors of the Company. (d) "CAUSE" means that, prior to any termination of employment pursuant to Section 4(b), the Executive shall have committed: (i) any act or omission constituting a material breach by the Executive of any of his significant obligations to or agreements with the Company, its Affiliate or a Related Employer or the continued failure or refusal of the Executive to adequately perform the duties reasonably required by the Company or a Related Employer which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company, its Affiliate or any Related Employer thereof, after notification by the Board of such breach, failure or refusal and failure of the Executive to correct such breach, failure or refusal within thirty (30) days of such notification (other than by reason of the incapacity of the Executive due to physical or mental illness); or (ii) the commission by and conviction of the Executive of a felony, or the perpetration by and criminal conviction of or civil verdict finding the Executive committed a dishonest act or common law fraud against the Company, its Affiliate or any Related Employer thereof (for the avoidance of doubt, conviction and civil verdict, in each case, shall mean when no further appeals may be taken by the Executive from such conviction or civil verdict and such conviction or civil verdict becomes final and binding upon the Executive with no further right of appeal); or (iii) any other willful act or omission which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company, its Affiliate or any Related Employer thereof, and failure of the Executive to correct such act or omission after notification by the Board of any such act or omission; or (iv) any notification to be given by the Board in accordance with Section 3(d)(i) or 3(d)(iii) shall specifically identify the breach, failure, refusal, act or omission to which the notification relates and, in the case of Section 3(d)(i) or 3(d)(iii) shall describe the injury to the Company, its Affiliate or a Related Employer, and such notification must be given within twelve (12) months of the Board's becoming aware, or within twelve (12) months of when the Board should have reasonably become aware of the breach, failure, refusal, act, or omission identified in the notification. Notwithstanding Section 20, failure to notify the Executive within any such twelve (12) month period shall be deemed to be a waiver by the Board of any such breach, failure, refusal, act or omission by the Executive and any such breach, failure, refusal, act or omission by the Executive shall not then be determined to be a breach. For the avoidance of doubt and for the purpose of determining Cause, the exercise of business judgment by the Executive shall not be determined to be Cause, even if such business judgment materially injures the financial condition or business reputation of, or is otherwise materially injurious to the Company or any Related Employer thereof, unless such business judgment by the Executive was not made in good faith, or constitutes willful or wanton misconduct, or was an intentional violation of state or federal law. (e) "CHANGE OF CONTROL" means the occurrence of any of the following events after the Effective Date (i) the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of CSA to any "person" or "group" (as such terms are defined in Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act 2 of 1934 (the "EXCHANGE ACT")) other than Permitted Holders or (ii) any person or group, other than Permitted Holders, is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of greater than or equal to 50% of the total voting power of the voting stock of CSA, including by way of merger, consolidation or otherwise, except where one or more of the Sponsors and/or their respective Affiliates, immediately following such merger, consolidation or other transaction, continue to have the ability to designate or elect a majority of the Board of Directors of CSA (or the board of directors of the resulting entity or its parent company). Notwithstanding that a transaction or series of transactions does not constitute a Change of Control, with respect to any Executive it shall be deemed a Change of Control for purposes of the Executive's entitlement's hereunder if clause (i), above, is satisfied in respect of the business or division in which such Executive is principally engaged. For the avoidance of doubt, a Change of Control pursuant to the immediately preceding sentence shall not apply to any Executive whose employment is not primarily with and for the business or division that is sold. (f) "CHIEF EXECUTIVE OFFICER" means the Executive who is identified on Exhibit A as being the Chief Executive Officer. (g) "CODE" means the Internal Revenue Code of 1986, as amended, or any successor thereto. (h) "COMMITTEE" means the Compensation Committee of the Board. (i) "COMMITTEE ACTION" means a writing by, or minutes of the actions of, the Committee, the substance of which, as to an Executive, has been communicated to such Executive. (j) "COMMON STOCK" means CSA's common stock. (k) "COMPANY" means the Company as hereinbefore defined. (l) "EMPLOYEE BENEFITS" means the perquisites, benefits and service credit for benefits as provided under any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which an Executive is entitled to participate, including without limitation any savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, stock option, performance share, performance unit, stock purchase, stock appreciation, deferred compensation, incentive compensation, group or other life, health, medical/hospital or other insurance (whether funded by actual insurance or self-insured by the Company or any Related Employer), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist or any policies, plans, programs or arrangements that may be adopted hereafter by the Company, its Affiliate or a Related Employer. (m) "EMPLOYER" means the Company and any Related Employer to which the Plan has been extended by the Board and which has adopted the Plan. 3 (n) "EXECUTIVE" means those employees of the Company or a Related Employer listed on Exhibits A or B, as the same may be amended from time to time by a Committee Action. (o) "MANAGEMENT GROUP" means the Executives who are identified on Exhibit B as being members of such Management Group. (p) "NONQUALIFIED SUPPLEMENTARY BENEFIT PLAN" means any plan which provides for the payment of pension benefits which would be payable under the terms of a Retirement Plan but for government-imposed limitations on the amount that is permitted to be paid from such Retirement Plan. (q) "OPERATIONS COMMITTEE" means the Executives who are identified on Exhibit A as being members of such Operations Committee. (r) "PERMITTED HOLDERS" means, as of the date of determination, any and all of (i) an employee benefit plan (or trust forming a part thereof) maintained by (A) the Company, its Affiliate or a Related Employer or (B) any corporation or other person of which a majority of its voting power of its voting securities or equity interest is owned, directly or indirectly, by the Company, its Affiliate or a Related Employer and (ii) Cypress Merchant Banking Partners II L.P., Cypress Merchant Banking II C.V., 55th Street Partners II L.P., Cypress Side-By-Side LLC, GS Capital Partners 2000, L.P., GS Capital Partners 2000 Offshore, L.P., GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, GS Capital Partners 2000 Employee Fund, L.P. and Goldman Sachs Direct Investment Fund 2000, L.P. (collectively, the "SPONSORS") and any of their respective Affiliates. (s) "PLAN" means this Cooper-Standard Automotive Inc. Change of Control Severance Pay Plan. (t) "RELATED EMPLOYER" means any corporation, partnership, limited liability company, joint venture, unincorporated association or other entity in which the Company has a direct or indirect ownership or other equity interest. (u) "RETIREMENT PLAN" means any tax-qualified defined benefit plan or scheme sponsored by the Company or a Related Employer which provides pension benefits to individuals who meet the age, service and other criteria for such benefits described in such plan. (v) "SEVERANCE COMPENSATION" means Severance Pay and other benefits provided by Section 5(a). (w) "SEVERANCE PAY" means the amounts payable as set forth in Section 5(a). (x) "SEVERANCE PERIOD" means the period of time commencing on the date of the first occurrence of a Change of Control and continuing until the earlier of (i) the second anniversary of the occurrence of the Change of Control or (ii) the Executive's death. 4 (y) "TERMINATION DATE" means the date of termination of the Plan as specified in Section 2. 4. Eligibility; Termination Following a Change of Control. (a) Subject to the limitations described below, the Plan applies to Executives who are employed on the date that a Change of Control occurs; provided, however, that in the event of a Change of Control described in the second to last sentence of Section 3(e), the Plan shall only apply to: (i) Executives who are employed on the date that the Change of Control occurs with the group whose assets are being sold as a result of the Change of Control; and (ii) Executives who are employed by the corporate headquarters of the Company on the date that such Change of Control occurs and (A) whose positions are transferred to the successor of the group whose assets are being sold, or (B) whose employment is terminated as a result of the Change of Control. (b) If an Executive's employment is terminated by an Employer during the Severance Period and such termination is without Cause, the Executive will be entitled to the Severance Compensation described in Section 5. (c) An Executive may, during the Severance Period, terminate his employment with an Employer with the right to Severance Compensation described in Section 5 upon the occurrence of one or more of the following events (regardless of whether any other reason, other than Cause, for such termination exists or has occurred, including without limitation other employment): (i) (A) if the Executive is the Chief Executive Officer or a member of the Operations Committee, a significant adverse change in the nature or scope of the authorities, powers, functions, responsibilities or duties attached to the position with the Employer which the Executive held immediately prior to the Change in Control, (B) a reduction in the Executive's Base Pay, or a reduction in the Executive's opportunities for incentive compensation pursuant to any long-term incentive compensation plan or program established by the Company, or (C) the termination or denial of the Executive's rights to Employee Benefits or a reduction in the scope or aggregate value thereof, any of which is not remedied by the Company within ten (10) calendar days after receipt by the Company of written notice from the Executive of such change, reduction or termination, as the case may be; (ii) if the Executive is the Chief Executive Officer or a member of the Operations Committee, the Company requires the Executive to have his principal location of work changed to any location that is in excess of 50 miles from the location thereof immediately prior to or after the Change in Control; (iii) any material breach of its obligations under the Plan by the Company or any successor thereto which is not remedied by the Company within ten (10) calendar days after receipt by the Company of written notice from the Executive of such breach; or (iv) if the Executive is the individual who is the Chief Executive Officer as of the Effective Date, voluntary termination for any reason or without reason during the thirty-day period immediately following the date that is six-months after a Change of 5 Control has occurred (for the avoidance of doubt, this subsection (iv) would not be applicable upon a Change of Control related to an initial public offering). (d) A termination by an Employer pursuant to Subsection (b) of this Section or by an Executive pursuant to Subsection (c) of this Section will not affect any rights that the Executive may have pursuant to any agreement, policy, plan, program or arrangement of the Company or a Related Employer providing Employee Benefits (other than as expressly provided in such agreement, policy, plan, program or arrangements), which rights shall be governed by the terms thereof, except that the Executive shall be considered to be an employee of the Employer for the period for which Severance Pay is calculated. (e) Notwithstanding the preceding provisions of this Section, an Executive will not be entitled to Severance Compensation if his employment with an Employer is terminated during the Severance Period because: (i) of the Executive's death; or (ii) the Executive becomes permanently disabled within the meaning of, and begins actually to receive disability benefits pursuant to, the long-term disability plan in effect for, or applicable to, the Executive immediately prior to the Change of Control. 5. Severance Compensation. (a) If an Executive's employment is terminated pursuant to Section 4(b) or if an Executive terminates his employment pursuant to Section 4(c), the Company will pay to the Executive as Severance Pay the amounts described on Exhibit C within the time periods specified therein, or, if later, upon the expiration of the revocation period provided for in Exhibit E, and will continue to provide to the Executive the other Severance Compensation described on Exhibit C for the periods described therein. (b) Without limiting the rights of an Executive at law or in equity, if the Company fails to make any payment or provide any benefit required to be made or provided hereunder on a timely basis, the Company will pay interest on the amount or value thereof at an annualized rate of interest equal to the so-called composite "prime rate" as quoted from time to time during the relevant period in the Midwest Edition of The Wall Street Journal plus the lesser of 5% or the maximum rate of interest allowed by law. Such interest will be payable as it accrues on demand. Any change of such prime rate or maximum rate will be effective on and as of the date of such change. (c) Notwithstanding any provision of the Plan to the contrary, the rights and obligations under this Section and under Sections 7 and 12 will survive any termination or expiration of the Plan or the termination of an Executive's employment following a Change of Control for any reason whatsoever. 6. Funding Upon Potential Change of Control. (a) Upon the earlier to occur of (i) a Change of Control or (ii) a declaration by the Board of Directors of CSA that a Change of Control is imminent, the Company shall promptly pay to 6 the extent it has not done so, and in any event within five (5) business days, a sum equal to the present value on the date of the Change of Control (or on such fifth business day if the Board of Directors of CSA has declared a Change of Control to be imminent) of the payments to be made to the Executives under the provisions of Sections 5 and 7 (to the extent calculable at such time) hereof, which shall be transferred to the Trustee and added to the principal of a grantor trust to be established between the Company and an independent, third party, Trustee (the "TRUST AGREEMENT"); provided that in the event of the Change of Control with respect to one or more Executives described in the second to last sentence of the definition of Change of Control (i.e., a sale of all or substantially all of the assets of the business or division in which such Executive was principally engaged), the Company's funding obligation shall be limited to the payments to be made to the affected Executives. (b) Any payments of compensation, pension, severance or other benefits by the Trustee pursuant to the Trust Agreement shall, to the extent thereof, discharge the Company's obligation to pay compensation, pension, severance and other benefits hereunder, it being the intent of the Company that assets in such Trust be held as security for the Company's obligation to pay compensation, pension, severance and other benefits under this Agreement. 7. Certain Additional Payments by the Company. (a) Anything in the Plan to the contrary notwithstanding, in the event that it shall be determined (as hereafter provided) that following, and as a result of, a Change of Control, any payment or distribution by the Company or any of its Related Employers to or for the benefit of an Executive, whether paid or payable or distributed or distributable pursuant to the terms of the Plan or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, performance share, performance unit, stock appreciation right or similar right, or the lapse or termination of any restriction on, or the vesting or exercisability of, any of the foregoing (a "PAYMENT"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being considered "contingent on a change of ownership or control" of the Company, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such tax (such tax or taxes, together with any such interest and penalties, being hereafter collectively referred to as the "EXCISE TAX"), then the Executive shall be entitled to receive an additional payment or payments (collectively, a "GROSS-UP PAYMENT"); provided, however, that no Gross-up Payment shall be made with respect to the Excise Tax, if any, attributable to (i) any incentive stock option ("ISO"), as defined by Section 422 of the Code (or any successor provision thereto) granted prior to the execution of the Plan where the addition of a Gross-Up Payment would cause the ISO to lose such status, or (ii) any stock appreciation or similar right, whether or not limited, granted in tandem with any ISO described in clause (i). The Gross-Up Payment shall be in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. (b) Subject to the provisions of Subsection (f) of this Section, all determinations required to be made under this Section, including whether an Excise Tax is payable by the Executive and 7 the amount of such Excise Tax and whether a Gross-Up Payment is required to be paid by the Company to the Executive and the amount of such Gross-Up Payment, if any, shall be made by the accounting firm serving as the Company's independent public accountants immediately prior to the Change of Control (the "ACCOUNTING FIRM"). The Company shall direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and the Executive within thirty (30) calendar days after the date of the Executive's termination, if applicable, and any such other time or times as may be requested by the Company or the Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company shall pay the required Gross-Up Payment to the Executive within five (5) business days after receipt of such determination and calculations with respect to any Payment to the Executive. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the same time as it makes such determination, furnish the Company and the Executive an opinion that the Executive has substantial authority not to report any Excise Tax on his federal, state or local income or other tax return. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (an "UNDERPAYMENT"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to Subsection (f) of this Section and the Executive thereafter is required to make a payment of any Excise Tax, the Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible. Any such Underpayment shall be promptly paid by the Company to, or for the benefit of, the Executive within five (5) business days after receipt of such determination and calculations. (c) The Company and the Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination
