EXHIBIT 10.2

 

EMPLOYMENT AGREEMENT

(Susan P. McGalla)

THIS AGREEMENT is by and between American Eagle Outfitters, Inc. and/or its
designated subsidiary ("Company") and Susan P. McGalla ("Executive"), and is
effective as of January 30, 2005.

Company agrees to promote Executive to President and Chief Merchandising Officer
- American Eagle Outfitters Brand ("President - AE Brand ") and Executive hereby
accepts this offer of continued employment and agrees to serve Company subject
to the general supervision, advice and direction of Company's Chief Executive
Officer (or his designee) and Board of Directors ("Board"), and upon the
following terms and conditions:

 1. Position and Duties. Executive shall be employed as Company's President - AE
    Brand, with such authority and duties as are customary for this position,
    and shall perform such other services and duties as the Board may from time
    to time designate. Executive's formal election as President -- AE Brand is
    subject to approval at the next meeting of the Board of Directors.

    1.1. Executive agrees to devote her full business time, best efforts, and
    undivided attention to the business and affairs of Company, except for any
    vacations, illness, or disability. Executive shall not engage in any other
    businesses that would interfere with her duties, provided that nothing
    contained herein is intended to limit Executive's right to make passive
    investments in the securities of publicly or privately owned companies or
    other businesses which will not interfere or conflict with her duties
    hereunder. Executive may serve on the Board of Directors of not more than
    one publicly traded company that does not compete with the Company with the
    consent of the CEO.

    1.2. Executive agrees that she shall at all times observe and be bound by
    all rules, policies, practices, and resolutions heretofore or hereafter
    adopted in writing by the Company which are generally applicable and
    provided to Company's officers and employees and which do not otherwise
    conflict with this Agreement.

    1.3. Company shall indemnify Executive in the performance of her duties and
    responsibilities and advance expenses in connection therewith to the same
    extent as other senior executives and officers. Disputes arising out of this
    paragraph 1.3 shall not be subject to arbitration under paragraph 6.

     

 2. Term. This Agreement and Executive's employment by the Company shall
    terminate on February 3, 2007, unless sooner terminated as provided herein,
    or unless extended by the mutual written agreement of both parties (the
    "Term").

     

 3. Compensation.

    3.1. Base Salary. Company shall pay Executive an annual salary at the rate
    of $800,000.00 as compensation for her services hereunder, payable in equal
    installments in accordance with Company's payroll practices for executive
    employees. The Compensation Committee of the Board (the "Committee") may
    increase Executive's base salary at their discretion, but said salary shall
    not be decreased.

    3.2. Cash Bonus.

    3.2.1 Annual Incentive Bonus. Executive is eligible to receive an annual
    incentive bonus targeted at 90% of her base salary and a maximum of 180% of
    her base salary for fiscal 2005 and for fiscal 2006 under the Company's
    Management Incentive Plan, or any equivalent replacement plan (the "Bonus
    Plan"). For each fiscal year after 2005 during the term of this Agreement,
    the CEO may in his discretion recommend to the Committee that Executive
    receive an annual incentive bonus targeted at more than 90% of her annual
    base salary and a maximum of more than 180% of her base salary under the
    Bonus Plan. Payment of this annual performance bonus is 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 payment. It is the Company's 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.
    The incentive bonus determined to be due, if any, will be paid within 70
    calendar days after the close of Company's fiscal year and completion of an
    outside audit by Company's then current outside audit firm.

    3.2.2. Long Term Incentive Bonus. Executive is eligible to receive a long
    term incentive bonus under the Bonus Plan, or any successor plan (the "LTI
    Plan"), where for each fiscal year during the term of this Agreement, the
    CEO shall recommend to the Committee that there be credited to Executive's
    LTI bonus account an amount targeted at 45% of her annual base salary and a
    maximum of 90% of her base salary, 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 her LTI bonus account. Subject to paragraph 7 hereof, Executive
    will receive payment of: (a) one-third of the amount in her LTI bonus
    account in each fiscal year beginning in fiscal 2008; (b) the entire amount
    in her LTI bonus account on death, disability or retirement; and (c) no
    amount of her LTI bonus account upon any voluntary termination of employment
    by Executive (other than for retirement or disability). It is the Company's
    intention that the LTI Plan be adopted and administered in a manner that
    enables Company to deduct for federal income tax purposes all amounts paid
    pursuant to the LTI Plan.

    3.2.3. Promotion Bonus. Executive shall receive a one time cash bonus in the
    amount of $50,000.00 in connection with her promotion, payable within 30
    days of the date that this Agreement is fully executed.

    3.3. Stock.

    3.3.1. Stock Grant. Executive shall receive a series of grants for a total
    of 74,848 shares of restricted stock over the term of this Agreement,
    consisting of 37,424 shares of restricted stock in each of fiscal 2005 and
    in fiscal 2006, pursuant to and subject to all terms and conditions set
    forth in Company's 1999 Stock Incentive Plan, or any equivalent replacement
    plan (the "Stock Plan"). For fiscal years after 2005, Executive is eligible
    for additional restricted stock grants at the recommendation of the CEO at
    his discretion and subject to approval of the Committee. Pursuant to the
    terms of the Stock Plan, the Committee will condition the vesting of
    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 have been met prior to vesting. It is the Company's
    intention that the Stock Plan be adopted and administered in a manner that
    enables Company to deduct for federal income tax purposes the value of all
    restricted stock grants. The delivery of restricted stock earned, if any,
    will be made within 70 calendar days after the close of Company's fiscal
    year and completion of an outside audit by Company's then current outside
    audit firm. Any awards of restricted stock outstanding at the time of a
    "change in control," as that term is defined in Section 9(c) of the
    Company's 2005 Stock Award and Incentive Plan, shall vest immediately upon
    the change in control.

    3.3.2. Stock Options. Executive shall receive a one time grant of
    non-qualified options covering the term of this Agreement to purchase a
    total of 200,000 shares of Company's common stock vesting one-third on each
    January 30 of 2006, 2007, and 2008, which award shall be made pursuant to
    and subject to all terms and conditions set forth in the Stock Plan and in a
    manner consistent with the Company's compensation policies. For fiscal years
    after 2005, Executive is eligible for additional stock option grants at the
    recommendation of the CEO at his discretion and subject to approval of the
    Committee.

    3.3.3 Adjustment. The parties agree that in the event of any stock split of
    Company shares or other Company securities, Company shall adjust the number
    of shares awarded or to be awarded under subparagraph 3.3.1 hereof and the
    options awarded in subparagraph 3.3.2 hereof to prevent the dilution or
    diminution of such awards.

    3.4. Vacation. During the term of this Agreement, Executive shall be
    entitled to vacation commensurate with other senior executives. Company's
    CEO and Executive shall mutually agree upon the dates of such vacation.

    3.5. Auto Allowance. During the term of this Agreement, Company will provide
    Executive with an automobile allowance of $850.00 per month. Any amount
    included in Executive's W-2 wages relative to this allowance shall be
    grossed up for tax purposes. (The term "grossed up" as used in this
    subparagraph 3.5 refers to an additional payment to Executive in an amount
    equal to any income or excise taxes due and owing by Executive with respect
    to the allowance and any additional payments thereon.)

    3.6 Business Expenses. Company shall pay, advance or reimburse Executive for
    all normal and reasonable business-related expenses, including travel
    expenses, incurred in the performance of her duties on the same basis as
    paid to other senior executives. Company shall furnish Executive with
    Company credit cards provided to other senior executives for use solely in
    the performance of her duties.

    3.7. Taxes. The compensation provided to Executive hereunder shall be
    subject to any withholdings and deductions required by any applicable tax
    laws.

    3.8. Benefit Plans. Executive is entitled to participate in any deferred
    compensation or other employee benefit plans, including any profit sharing
    or 401(k) plans; group life, health, hospitalization and disability
    insurance plans; deferred compensation plans; discount privileges; equity
    plans; incentive bonus plans; and other employee welfare benefits made
    available generally to, and under the same terms as, Company's executives.

     

 4. Executive's Obligations.

    4.1. Confidential Information. Executive agrees that during and after her
    employment, any "confidential information" as defined below shall be held in
    confidence and treated as proprietary to Company. Executive agrees not to
    use or disclose any confidential information except to promote and advance
    the business interests of Company. Executive agrees that upon her separation
    from employment, for any reason whatsoever, she shall not take or copy, and
    shall immediately return to Company, any documents that constitute or
    contain confidential information. "Confidential information" includes, but
    is not limited to, any confidential data, figures, projections, estimates,
    pricing data, customer lists, buying manuals or procedures, distribution
    manuals or procedures, other policy and procedure manuals or handbooks,
    supplier information, tax records, personnel histories and records, company
    phone directories, lists of associates, organizational charts, information
    regarding sales, information regarding properties and any other confidential
    information regarding the business, operations, properties or personnel of
    Company which are disclosed to or learned by Executive as a result of her
    employment, but shall not include her personal non-business records or
    personnel records or any information that (i) Executive possessed prior to
    her first performing services for Company; (ii) becomes a matter of public
    knowledge thereafter through sources independent of Executive; (iii) is
    disclosed by Company without restriction on its use; or (iv) is required to
    be disclosed by law or governmental order or regulation, or court order.

    4.2. Solicitation.

    4.2.1. Employees. Executive agrees that during her employment and for two
    years after the end of her employment, for any reason, she shall not,
    directly or indirectly, solicit Company's employees to leave their
    employment; she shall not employ or seek to employ them; and, she shall not
    cause or induce any of Company's competitors to solicit or employ Company's
    employees; provided, however, such prohibition on employment shall not
    extend to employees that approach Executive without solicitation by
    Executive.

    4.2.2 Third Parties. Executive agrees that during her employment and for two
    years following the end of her employment, for any reason, she shall not,
    either directly or indirectly, recruit, solicit or otherwise induce or
    influence any customer, supplier, sales representative, lender, lessor or
    any other person having a business relationship with Company to discontinue
    or reduce the extent of such relationship except in the course of her duties
    pursuant to this Agreement and with the good faith objective of advancing
    Company's business interests.

    4.3. Non-competition. Subject to the Company's performance of the acts and
    obligations set forth in the next sentence hereof, Executive agrees that for
    a period of one year following the end of her employment (the "non-compete
    period"), for any reason, she shall not, either directly or indirectly,
    accept employment with, act as a consultant to, or otherwise perform the
    same services (which shall be determined regardless of job title) for any
    business that directly competes with Company's business, which is understood
    to be the design, manufacture and retail sale (including Internet sales) of
    specialty clothing, accessories, shoes, and related merchandise.
    Notwithstanding the foregoing, if Executive's employment is terminated
    pursuant to any provisions or subparagraphs of paragraph 5 hereof or if the
    Company and Executive do not enter into a new agreement before, at, as of,
    or after the end of the Term, then the non-competition provisions of this
    subparagraph 4.3 shall apply only if: (i) Company at its option invokes the
    first sentence of this paragraph 4.3 by written notice to the Executive, and
    (ii) Company continues to pay Executive her base salary and provides medical
    coverage or pays COBRA as severance during and for the entire non-compete
    period (collectively, "severance benefits"); and provided further that if
    the Company fails to continue to pay or provide Executive her severance
    benefits during any point in the non-compete period, Executive will
    immediately no longer be subject to the non-competition provisions of this
    subparagraph 4.3.

    4.4. Cooperation.

    4.4.1. With Company. Executive agrees to cooperate with Company during the
    course of all third-party proceedings arising out of Company's business
    about which Executive has knowledge or information. Such proceedings may
    include, but are not limited to, internal investigations, administrative
    investigations or proceedings, and lawsuits (including pre-trial discovery).
    For purposes of this paragraph, cooperation includes, but is not limited to,
    Executive's making herself available for interviews, meetings, depositions,
    hearings, and/or trials without the need for subpoenas or assurances by
    Company, providing any and all documents in her possession that relate to
    the proceeding, and providing assistance in locating any and all relevant
    notes and/or documents, provided that Company gives to Executive reasonable
    notice of the need for cooperation and pays Executive, if she is required to
    appear at the request of the Company, such pay to be at a per day rate based
    on her final annual base salary.

    4.4.2. With Third Parties. Executive agrees to communicate with, or give
    statements to, third parties relating to any matter about which Executive
    has knowledge or information as a result of her employment only to the
    extent that it is Executive's good faith belief that such communication or
    statement is in Company's business interests.

    4.4.3. With Media. Executive agrees to communicate with, or give statements
    to, any member of the media (print, television or radio) relating to any
    matter about which Executive has knowledge or information as a result of her
    employment only to the extent that it is Executive's good faith belief that
    such communication or statement is in Company's business interests.

    4.5. Remedies. Executive agrees that any disputes under this paragraph shall
    not be subject to arbitration. If Executive breaches this paragraph 4, the
    damage will be substantial, although difficult to quantify, and money
    damages may not afford Company an adequate remedy; therefore, if Executive
    breaches or threatens to breach this paragraph, Company shall be entitled,
    in addition to other rights and remedies, to specific performance,
    injunctive relief and other equitable relief to prevent or restrain such
    conduct, provided that this paragraph 4.5 shall not be interpreted to excuse
    Company from meeting its burden of proof in any action to secure such
    relief.

     

 5. Termination and Related Benefits.

    5.1. Death. This Agreement shall terminate automatically upon Executive's
    death, and Company shall pay her surviving spouse, or if she leaves no
    spouse, her estate, any base salary earned by Executive, and any rights or
    benefits that have vested. In addition, Company shall pay Executive's
    surviving spouse, or if she leaves no spouse, her estate, any declared but
    unpaid bonus that, but for Executive's death would otherwise have been
    payable to Executive. All unvested portions of awards granted under the
    Stock Plan and under any other plans that are outstanding, and not
    previously forfeited, shall vest at Executive's death.

    5.2. Permanent Disability. Upon Executive's permanent disability, Company
    shall have the right to terminate this Agreement immediately with written
    notice. For these purposes, permanent disability means a permanent and total
    disability within the meaning of Code section 22(e)(3). If this Agreement is
    terminated due to Executive's permanent disability, Company shall pay
    Executive any base salary earned and any rights or benefits that have
    vested. In addition, Company shall pay Executive any declared but unpaid
    bonus that, but for Executive's disability, would otherwise have been
    payable to Executive. All unvested portions of awards under the Stock Plan
    and under any other plans that are outstanding, and not previously
    forfeited, shall vest at the time Executive's employment is terminated for
    permanent disability under this paragraph 5.2.

    5.3. Termination by Company.

    5.3.1 At End of Term. Company may terminate this Agreement at the end of its
    Term or any extension thereof by giving 60 calendar days' written notice to
    Executive. Company may, in its sole discretion, require Executive to cease
    active employment and pay out the 60-day notice period. Upon a termination
    of this Agreement at the end of the Term or any extension thereof by
    Company's written notice to Executive, Company shall have the same
    obligations to Executive as those set forth in subparagraph 5.3.2 below.

    5.3.2. During the Term. In addition to a termination for cause as provided
    below in subparagraph 5.3.3, Company may terminate this Agreement during its
    Term, for any reason, upon 30 days' written notice to Executive. Company
    may, in its sole discretion, require Executive to cease active employment
    immediately. In the event of such a termination, Company shall have only the
    following obligations:

    > (i) Pay Executive severance in the form of base salary continuation for
    > one year; provided, however, that such salary shall cease to be paid if
    > Executive accepts or performs comparable employment.
    > 
    > (ii) If Executive has been employed the full fiscal year prior to the date
    > of termination, pay Executive any annual incentive bonus declared, but
    > unpaid under the annual bonus plan; and no amount under the long term
    > incentive plan.
    > 
    > (iii) Continue Executive's medical coverage or pay COBRA premiums on
    > behalf of Executive for one year under the same terms as provided to other
    > Company executives; provided, however, that such coverage shall cease upon
    > Executive's becoming eligible for similar coverage under another benefit
    > plan.
    > 
    > (iv) If Executive has been actively employed at least six full months
    > during the fiscal year in which her employment is terminated, then any
    > restricted stock awards outstanding at the time of the termination and not
    > previously forfeited shall vest to the extent that the performance goals
    > established at the time of grant are met for the fiscal year during which
    > termination occurred, even though Executive was not employed for the
    > entire fiscal year.

    5.3.3. For Cause. Company may terminate this Agreement during its Term if it
    has "cause" to do so. For purposes of this paragraph, the term "cause" means
    the following:

    > (i) willful violation of laws and regulations governing Company;
    > 
    > (ii) willful failure to substantially comply with any material terms of
    > this Agreement, provided Company shall make a written demand for
    > substantial compliance setting forth the specific reason(s) for same and
    > Executive shall have 60 days to cure, if possible;
    > 
    > (iii) willful breach of fiduciary duties;
    > 
    > (iv) willful damage, willful misrepresentation, willful dishonestly, or
    > other willful conduct which Company determines has had or is likely to
    > have a material adverse effect upon Company' s operations, assets,
    > reputation or financial conditions; or
    > 
    > (v) willful breach of any stated material employment policy of Company.

    Failure to meet performance targets and measures shall not constitute
    "cause" as that term is used herein. Executive may have an opportunity to be
    heard by the Board prior to a termination for cause. For purposes of this
    paragraph, Executive's acts or omissions shall be considered "willful" if
    done without a good faith, reasonable belief that such act or omission was
    in Company's best interest. In the event of termination for cause, Company's
    obligations hereunder cease on Executive's last day of active employment,
    unless otherwise provided herein.

    5.3.4. Method of Payment. Executive agrees that Company shall have the
    option of paying the present value of any amount(s) due under this paragraph
    in a lump sum or in the form of salary continuation, but in no event shall
    such payout period exceed one year. Present value shall be calculated based
    upon National City Bank's prime interest rate.

    5.4. Termination by Executive.

    5.4.1. At End of Term. Executive may terminate this Agreement at the end of
    its Term or any extension of this Agreement by giving 60 calendar days'
    written notice to Company's CEO. Company may, in its sole discretion, accept
    Executive's termination effective immediately and shall continue to pay
    Executive for 60 calendar days. Company shall thereafter have no obligations
    to Executive under this Agreement, except as otherwise provided herein.

    5.4.2. Voluntary Resignation. Executive may terminate this Agreement or any
    extension of this Agreement by her voluntary resignation. Executive shall
    give at least 60 calendar days' written notice of her intention to resign to
    Company's CEO, which Company may accept immediately. In the event of
    Executive's resignation, Company will have no further obligations or
    liability hereunder except as otherwise provided herein.

    5.4.3. For Good Reason. Executive may terminate this Agreement or any
    extension of this Agreement for good reason, which shall mean a material
    reduction or change in Executive's position, title(s), authority, functions,
    duties or responsibilities relating to her supervision and management of
    merchandising, design and marketing for the AE Brand and AE Direct; provided
    Executive has not agreed in writing, to the change in advance and provided
    further that Executive may only exercise this right by written notice to the
    Company within 30 days of the change. In the event Executive exercises this
    right, Company shall have the same obligations to Executive as those set
    forth in subparagraph 5.3.2 above.

    5.5. Salary Due at Termination. In the event of any termination of
    Executive's employment, in addition to the payment provided for in paragraph
    4.3, Executive (or her estate) shall be paid any unpaid portion of her
    salary that has accrued by virtue of her employment during the period prior
    to termination, and bonuses for any fiscal year completed prior to such
    termination for which the bonus has been earned and not yet been paid,
    together with any unpaid business expenses properly incurred prior to
    termination. Such amounts shall be paid within 15 days of the date of
    termination, unless otherwise provided herein.

     

 6. Arbitration
    . Unless stated otherwise herein, the parties agree that arbitration shall
    be the sole and exclusive remedy to redress any dispute, claim or
    controversy involving the interpretation of this Agreement or the terms,
    conditions or termination of this Agreement or the terms, conditions or
    termination of Executive's employment with Company. The parties intend that
    any arbitration award shall be final and binding and that a judgment on the
    award may be entered in any court of competent jurisdiction and enforcement
    may be had according to its terms. This paragraph shall survive the
    termination or expiration of this Agreement.

    

    6.1. Arbitration shall be held in Pittsburgh, PA, and shall be conducted by
    a retired federal judge or other qualified arbitrator mutually agreed upon
    by the parties in accordance with the Voluntary Arbitration Rules of the
    American Arbitration Association then in effect. The parties shall have the
    right to conduct discovery pursuant the Federal Rules of Civil Procedure;
    provided, however, that the Arbitrator shall have the authority to establish
    an expedited discovery schedule and cutoff and to resolve any discovery
    disputes. The Arbitrator shall not have jurisdiction or authority to change
    any provision of this Agreement by alterations of, additions to or
    subtractions from the terms hereof. The Arbitrator's sole authority in this
    regard shall be to interpret or apply any provision(s) of this Agreement.
    The Arbitrator shall be limited to awarding compensatory damages, including
    unpaid wages or benefits, but shall have no authority to award punitive,
    exemplary or similar-type damages, except where expressly provided by
    statute.

    6.2. Any claim or controversy not sought to be submitted to arbitration, in
    writing within 120 days of when it arose shall be deemed waived and the
    moving party shall have no further right to seek arbitration or recovery
    with respect to such claim or controversy.

    6.3. The arbitrator shall be entitled to award expenses, including the costs
    of the proceeding, and reasonable counsel fees.

    6.4. The parties hereby acknowledge that since arbitration is the exclusive
    remedy, neither party has the right to resort to any federal, state or local
    court or administrative agency concerning breaches of this Agreement, except
    as otherwise provided herein in paragraph 6, and that the decision of the
    Arbitrator shall be a complete defense to any suit, action or proceeding
    instituted in any federal, state or local court before any administrative
    agency with respect to any arbitrable claim or controversy.

     

 7. Internal Revenue Code Section 409A
    .
    Company shall, to the extent necessary, modify the timing of delivery of
    compensation and/or benefits to Executive if it is determined that the
    timing would result in the additional tax and/or interest and/or penalties
    assessed to Executive under Section 409A of the Internal Revenue Code of
    1986, as amended (collectively referred to as the "Penalties"). Company
    agrees that in the event that it shall be determined that any compensation
    or benefits, whether paid or payable or distributed or distributable to
    Executive, is subject to the Penalties, Company shall indemnify and pay to
    Executive (or her successors and assigns) an additional amount (the
    "Additional Payment") such that, after payment by Executive of any federal,
    state or local income tax, employment tax, excise tax, and other tax
    (including any Penalties) imposed upon the Additional Payment and any
    interest or penalties imposed with respect to such taxes, Executive retains
    from the Additional Payment an amount equal to the Penalties imposed on such
    compensation and/or benefits. The Company hereby agrees to make the
    Additional Payment to Executive within 30 days of both receipt of notice
    from Executive and reasonable verification by the Company from information
    furnished by Executive that such Penalties are required to be paid by
    Executive.

     

 8. General Provisions
    .

    8.1. The parties agree that the covenants and promises set forth in
    paragraph 4, 5 and 6 shall survive the termination of this Agreement and
    continue in full force and effect.

    8.2. Except as otherwise provided in paragraph 6.2 above, failure to insist
    upon strict compliance with any term hereof shall not be considered a waiver
    of any such term.

    8.3. This Agreement, along with any other document or policy or practice
    referenced herein (which are collectively referred to herein as
    "Agreement"), contain the entire agreement of the parties regarding
    Executive's employment and supersede any prior written or oral agreements or
    understandings relating to the same. No modification or amendment of this
    Agreement shall be valid unless in writing and signed by or on behalf of
    both parties.

    8.4. Once signed by both parties, this Agreement shall be binding upon and
    shall inure to the benefits of the heirs, successors, and assigns of the
    parties, including any successor to the Company's business.

    8.5. This Agreement is intended to be performed in accordance with, and only
    to the extent permitted by, all applicable laws, ordinances, rules and
    regulations. If any provisions of this Agreement, or the application thereof
    to any person or circumstance, shall, for any reason and to any extent, be
    held invalid or unenforceable, such invalidity and unenforceability shall
    not affect the remaining provisions hereof and the application of such
    provisions to other persons or circumstances, all of which shall be enforced
    to the greatest extent permitted by law.

    8.6. The validity, construction, and interpretation of this Agreement and
    the rights and duties of the parties hereto shall be governed by the laws of
    the Commonwealth of Pennsylvania, without reference to state choice of law
    rules.

    8.7. Any written notice required or permitted hereunder shall be mailed,
    certified mail (return receipt requested) or hand-delivered, addressed to
    Company's CEO at its corporate headquarters in Warrendale, PA, or to
    Executive at the most recent home address. Notices are effective upon
    receipt.

    8.8. The rights of Executive under this Agreement shall be solely those of
    an unsecured general creditor of Company.

    8.9. The headings in this Agreement are inserted for convenience of
    reference only and shall not be a part of or control or affect the meaning
    of any provision hereof.

> > IN WITNESS WHEREOF, the parties have duly executed and delivered this
> > Agreement.
> > 
> > EXECUTIVE
> > 
> > /s/ Susan P. McGalla
> > 
> > 
> > Susan P. McGalla
> > 
> > 
> > 
> > Signed: May 16, 2005
> > 
> >  
> > 
> > AMERICAN EAGLE OUTFITTERS, INC.
> > 
> > By: /s/ James V. O'Donnell
> > James V. O'Donnell
> > Chief Executive Officer
> > 
> > Signed: May 16, 2005