On August 27, 2008, American Eagle Outfitters, Inc. (the "Company") entered into a Separation Agreement and Release (the "Agreement") with Susan P. McGalla, the Company's President and Chief Merchandising Officer, related to her separation from employment with the Company. 

Pursuant to the Agreement, in exchange for a twenty-four month non-solicitation arrangement and a general release of any claims against the Company, Ms. McGalla will receive the following:

(1) her base salary earned through the termination of her employment with the Company effective on Saturday, January 31, 2009 (the "Separation Date");
(2)the amount of any annual cash bonus she would have earned if the Company achieves its 2008 performance goals;
(3) 70,489 shares of previously granted restricted stock if the Company achieves its 2008 performance goals;  
(4) the value of her account under the Company Long Term Incentive Compensation Plan (the "LTIP"), including the amount, if any, earned if the Company achieves its 2008 performance goals; Ms. McGalla's LTIP account will be paid out in three payments, the first third to be paid six months after Separation Date and the remaining two thirds in two payments when payouts under the LTIP are made in 2010 and 2011, subject in each case to her continuous compliance with her obligations under the Agreement; and
(5) thirty days from her Separation Date to exercise previously granted stock options for 330,000 shares and one year from the Separation Date to exercise the vested portion of her 2007 stock option award for 77,385 shares.

A copy of the Agreement is being filed herewith as exhibit 10.1 and is incorporated herein by reference.