EXHIBIT 10.1

 

 

July 18, 2005

 

Joan Hilson

 

Dear Joan,

I am pleased to offer you the position of Senior Vice President-Finance for
American Eagle Outfitters, Inc. or its designated subsidiary (the "Company").
The following summarizes the terms and conditions of your employment.

Position and Duties

: You will be employed as Senior Vice President-Finance, with such authority and
duties as are customary for the position, and shall perform such other services
and duties as the CEO or Board may from time to time designate. It is our intent
that, depending on your assimilation in our business, development and
contributions, you should be promoted to the position of Chief Financial Officer
of the Company within 12 to 18 months of the start of your employment.

Start Date

: Your first day of active employment for the Company will be on or before
September 1, 2005.

Annual Base Salary

: For our 2005 fiscal year, your base salary will be at an annual rate of
$430,000.00 payable in accordance with Company's payroll practices for executive
employees.

Sign-On Bonus and Replacement Bonus

: A one time sign-on cash bonus of $50,000.00 (before tax) will be paid to you
within 30 days after your start date. A sign-on bonus payback agreement is
enclosed for your review and signature. The Company will also pay you a one time
bonus equal to the amount of your spring 2005 incentive bonus at your current
employer, which you have indicated is up to 40% of your annual target bonus,
upon your establishing to the Company's satisfaction the amount that you would
have actually been paid for that bonus by your current employer if you had not
accepted this offer.

Annual Incentive Bonus

: For fiscal years after 2005, you will be eligible to receive an annual
incentive bonus targeted at 50% of your annual base salary in each fiscal year
or other performance period established under Company's Management Incentive
Plan" ("the Bonus Plan"), with a maximum annual incentive bonus equal to 100% of
your annual base salary. The Bonus Plan conditions the payment of this annual
performance bonus based on achievement of pre-determined performance goals set
forth in writing and based on objective measurements all established by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee must verify that the performance goals and other material terms are
met prior to payment. It is the parties' intention that the Bonus Plan be
adopted and administered in a manner that enables Company to deduct for federal
income tax purposes the amount of any annual incentive bonus. Notwithstanding
the forgoing, if your start date is on or before September 1, 2005, then your
annual incentive bonus for fiscal 2005 will be targeted at 50% of your full
annual base salary, or $215,000.00, based on Company EPS performance goals
established by the Committee and conditioned on your continuous employment with
the Company through the date in 2006 when executive fiscal 2005 annual incentive
bonuses are paid, and you are not eligible for an annual incentive bonus above
the targeted 50% amount for fiscal 2005 even if performance goals are achieved
or exceeded. If your start date is after September 1, 2005, then the amount of
your annual incentive bonus for fiscal 2005 will be based on the prorated amount
of your base salary actually paid to you in fiscal 2005 and not your full annual
base salary of $430,000.00.

Long Term Incentive Cash Plan

. You will be eligible to receive a long term incentive bonus under the Bonus
Plan (the "LTI Plan"), where an amount targeted at 25% of annual base salary and
a maximum of 50% of base salary will be contributed to your LTI bonus account,
conditioned on achievement of pre-determined performance goals set forth in
writing and based on objective measurements all established by the Committee.
The Committee must verify that the performance goals and other material terms
have been met prior to crediting the LTI bonus account. You will receive payment
of: (a) one-third of the amount in your LTI bonus account in each fiscal year
beginning in fiscal 2008; (b) the entire amount in your LTI bonus account on
death, disability or retirement; and (c) no amount of your LTI bonus account,
which will be forfeited, on any voluntary termination of employment, unless
specifically excepted by mutual agreement under the terms of the voluntary
termination, and excluding amounts earned and otherwise payable but deferred
under the Company's deferred compensation plan. It is the parties' intention
that the LTI Plan be adopted and administered in a manner that enables the
Company to deduct for federal income tax purposes all amounts paid pursuant to
the LTI Plan. If your start date is on or prior to September 1, 2005, then your
LTI bonus calculation for fiscal 2005 will be targeted at 25% of your full year
base salary or $107,500.00 and not a prorated portion of your base salary and
you are not eligible for an annual incentive bonus above the targeted 25% amount
for fiscal 2005 even if performance goals are achieved or exceeded. If your
start date is after September 1, 2005, then your LTI bonus calculation for
fiscal 2005 will be based on a prorated portion of your full year base salary
based on the actual amount of base salary paid to you in fiscal 2005. No amount
of your LTI bonus is guaranteed and the entire amount will depend on whether
applicable performance goals are achieved.

Restricted Stock:

You will receive 7,000 shares of restricted stock in a grant made by the
Committee pursuant to and subject to all terms and conditions set forth in
Company's 2005 Stock Award and Incentive Plan ("the 2005 Plan"). Pursuant to the
terms of the 2005 Plan, the Committee will condition the vesting of this
restricted stock based on achievement of pre-determined performance goals set
forth in writing and based on objective measurements all established by the
Committee. The Committee must verify that the performance goals and other
material terms are met prior to vesting. If the performance goals are not met
then the restricted stock will be forfeited. It is the parties' intention that
the 2005 Plan be adopted and administered in a manner that enables the Company
to deduct for federal income tax purposes the full value of all restricted stock
grants. For fiscal 2005, your performance goals to earn the restricted stock
will be individual performance goals, not Company goals, which 2005 Individual
Performance Goals are attached to this letter and incorporated herein by
reference. The 7,000 shares will vest upon completion of the Individual
Performance Goals, even if those goals are achieved after fiscal 2005 as a
result of a later start date. This grant of 7,000 shares is in addition to the
equity award that you will be eligible to receive under the 2005 Plan for fiscal
2006.

Relocation

: You will be eligible for a full relocation package as outlined in the American
Eagle Outfitter's, Inc. Relocation guide. (Relocation guide and payback
agreement enclosed). In addition, the Company will use the services of the
Lexicon Company to provide you the opportunity to sell your existing home at an
appraised value. Please contact Lee Ann Rohan once you accept this offer.

Benefit Plans

: You will be entitled to participate in employee benefit plans, including any
profit sharing or 401(k) plans; group life, health, hospitalization and
disability insurance plans; deferred compensation plans; discount privileges;
and other employee welfare benefits made available generally to, and under the
same terms as, the Company's other executives. The Company will pay any COBRA
premiums for continued coverage under your existing health plan until you are
eligible for coverage under the Company's group health insurance.

At Will Employment

: The Company is an "at will" employer. This means that you can terminate your
employment at anytime and for any reason and the Company can also terminate your
employment at any time and for any reason. Notwithstanding the foregoing, if you
accept this offer and are unable to begin active employment with the Company as
a result of your non-competition agreement with your current employer, then the
Company will pay you your base salary, replacement bonus and Cobra benefit for
up to the six month period during which you are prevented from working for the
Company; provided that you will cooperate with the Company at its expense and
use your best efforts to resolve any such issue and further provided further
that you shall provide such permissible services to the Company or any of its
affiliates as the Company may direct during this interim period. The payment by
the Company of your base salary during this period shall be reduced by any
payment that you receive from your current employer pursuant to your
non-competition agreement.

Confidentiality, Non-competition and Intellectual Property Agreement

: Your employment is conditioned upon your execution of the form of
Confidentiality, Non-Competition and Intellectual Property Agreement in the form
attached to this letter.

References/Drug Screen:

Your hiring and employment with American Eagle are contingent upon successful
completion of your references and your submission to and passing of a pre-hire
drug screen. If you begin work with American Eagle before your references are
checked and/or before your drug screen occurs or American Eagle has received its
results, and if either your reference check results are unacceptable or you
refuse to submit to or fail to pass your pre-hire drug screen requirement, your
contingent employment will be terminated.

We very much look forward to you becoming a member of the American Eagle
Outfitters team. Please sign and date one copy of this letter and the attached
agreements and return them to me to indicate you understand and accept the
terms; the additional copy is for your records. Please let me know if you have
any questions.

Sincerely,

/s/ Laura Weil                                            Laura Weil   Executive
Vice President and Chief Financial Officer          

Agreed and accepted as outlined above:

  /s/ Joan Hilson                                       
7/20/05                                            Joan Hilson

Date