<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
AMERICAN EAGLE OUTFITTERS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
AMERICAN EAGLE OUTFITTERS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
MAY 7, 1997
AND
PROXY STATEMENT
IMPORTANT
Please mark, sign and date your proxy and
promptly return it in the enclosed envelope.
No postage is necessary if mailed in the United States.
<PAGE> 3
AMERICAN EAGLE OUTFITTERS, INC.
150 Thorn Hill Drive
Warrendale, Pennsylvania 15086-7528
412-776-4857
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 7, 1997
--------------------
April 11, 1997
To the Shareholders of
American Eagle Outfitters, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
American Eagle Outfitters, Inc., an Ohio corporation (the "Company"), will be
held at the Hyatt Hotel on Capital Square, 75 East State Street, Columbus, Ohio,
on May 7, 1997, at 10:00 a.m., local time, for the following purposes:
1. To elect seven directors, each for a term of one year and
until their successors are duly elected and qualified.
2. To consider approval of the amendments to the Company's 1994
Stock Option Plan previously adopted by the Board of
Directors.
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Whether or not you plan to attend the meeting, please date, sign and
mail the enclosed proxy in the envelope provided. If you attend the meeting, you
may vote in person and your proxy will not be used.
By Order of the Board of Directors
William P. Tait
Secretary
<PAGE> 4
AMERICAN EAGLE OUTFITTERS, INC.
April 11, 1997
-------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 7, 1997
-------------------------
This Proxy Statement is furnished to the shareholders of American Eagle
Outfitters, Inc., an Ohio corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company of proxies to be used at
the Annual Meeting of Shareholders to be held on May 7, 1997 , at 10:00 a.m.,
local time, at the Hyatt Hotel on Capital Square, 75 East State Street,
Columbus, Ohio and at any adjournment thereof. It is being mailed to the
shareholders on or about April 11, 1997.
All shares represented by properly executed proxies received by the
Company prior to the meeting will be voted in accordance with the shareholder's
directions. A proxy may be revoked, without affecting any vote previously taken,
by written notice mailed to the Company (Attention: William P. Tait, Secretary)
or delivered in person at the meeting, by filing a duly executed, later dated
proxy or by attending the meeting and voting in person.
Shareholders of record at the close of business on April 2, 1997, are
entitled to notice of and to vote at the Annual Meeting and any adjournment or
adjournments thereof. At April 2, 1997, the Company had outstanding 9,917,950
shares of Common Stock, without par value, entitled to vote at the Annual
Meeting. Each Common Share entitles the holder thereof to one vote upon each
matter to be voted upon by shareholders at the Annual Meeting.
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock of the Company is necessary to constitute a quorum for
the transaction of business at the Annual Meeting. Abstentions and broker non-
votes are counted for purposes of determining the presence or absence of a
quorum. Broker non-votes occur when brokers, who hold their customers' shares in
street name, sign and submit proxies for such shares and vote such shares on
some matters, but not others. This would occur when brokers have not received
any instructions from their customers, in which case the brokers, as the holders
of record, are permitted to vote on "routine" matters, which include the
election of directors, but not on non-routine matters.
The election of each director nominee requires the favorable vote of a
plurality of all votes cast by the holders of Common Stock at a meeting at which
a quorum is present. Proxies that are marked "Withhold Authority" and broker
non-votes will not be counted toward such nominee's achievement of a plurality
and thus will have no effect. Each other matter to be submitted to the
shareholders for approval at the Annual Meeting requires the affirmative vote of
the holders of a majority of the Common Stock voting on the matter. For purposes
of determining the number of shares of Common Stock voting on the matter,
abstentions will be counted and will have the effect of a negative vote; broker
non-votes will not be counted and thus will have no effect.
Page 3
<PAGE> 5
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
OWNERSHIP OF COMMON STOCK
The following table sets forth, as of March 1, 1997, certain
information with regard to the beneficial ownership of the Company's Common
Stock by: (i) each person known by the Company to own beneficially more than 5%
of the outstanding shares of Common Stock; (ii) each of the Company's directors;
(iii) each executive officer named in the summary compensation table below; and
(iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
Shareholder Shares Beneficially Owned(1)
- ----------- ----------------------------
Number Percent
------ -------
<S> <C> <C>
Retail Ventures, Inc. (2) 2,844,611 28.7%
Natco Industries, Inc. (2) 3,107,189 31.3%
S.H.D. Investments LLC (3) 1,000,000 10.1%
Jay L. Schottenstein (4)(5) 2,889,626 29.1%
Geraldine Schottenstein (5) 3,107,189 31.3%
Saul Schottenstein (6) 10,000 *
George Kolber (7) 48,500 *
Martin P. Doolan(8) 2,500 *
John L. Marakas (9) 12,000 *
Thomas R. Ketteler(10) 13,500 *
David W. Thompson(11) 22,500 *
Laura A. Weil (12) 4,500 *
Roger S. Markfield(13) 167,423 1.7%
Joseph E. Kerin(14) 12,885 *
All directors and executive officers as a group 3,184,434 31.2%
<FN>
* Represents less than 1% of the Company's shares of Common Stock.
(1) Unless otherwise indicated, each of the shareholders has sole voting and
investment power with respect to the shares of Common Stock beneficially owned.
The percent is based upon the 9,917,950 shares outstanding at March 1, 1997 and
the number of shares, if any, as to which the named person has the right to
acquire beneficial ownership upon the exercise of stock options exercisable
within 60 days of March 1, 1997.
(2) The address for Retail Ventures, Inc. ("RVI") and Natco Industries, Inc.
("Natco") is 1800 Moler Road, Columbus, Ohio 43207-1698.
(3) The address for S.H.D. Investments LLC is 5804 E. Slauson, City of Commerce,
California, 90040-3018.
(4) Includes 2,844,611 shares of Common Stock owned by RVI, 15 shares of Common Stock
held as custodian for a family member, and 45,000 shares subject to exercisable
options. Jay L. Schottenstein serves as Chairman and Chief Executive Officer of
RVI and Natco. Jay L. Schottenstein is the beneficial owner of 69.9% of the
outstanding voting securities of RVI. Accordingly, he may be deemed to be the
beneficial owner of the shares of Common Stock of the Company held by RVI.
(5) Geraldine Schottenstein is the mother of Jay L. Schottenstein. Geraldine
Schottenstein is the beneficial owner of 78.8% of the outstanding voting
securities of Natco. Accordingly, she may be deemed to be the beneficial owner of
the shares of Common Stock of the Company held by Natco.
(6) Includes 5,000 shares subject to exercisable options held by Saul Schottenstein.
Saul Schottenstein is the uncle of Jay L. Schottenstein and is a director of RVI
and Natco. For a description of Saul Schottenstein's beneficial ownership of the
outstanding voting securities of RVI and Natco, see "Ownership of RVI and Natco."
(7) Includes 23,000 shares subject to exercisable options held by Mr. Kolber
(8) Includes 2,500 shares subject to exercisable options held by Mr. Doolan.
(9) Includes 9,000 shares subject to exercisable options held by Mr. Marakas.
</TABLE>
Page 4
<PAGE> 6
(10) Includes 3,000 shares subject to exercisable options held by Mr.
Ketteler.
(11) Includes 3,000 shares subject to exercisable options held by Mr.
Thompson.
(12) Includes 2,000 shares subject to exercisable options held by Ms. Weil.
(13) Includes 9,000 shares subject to exercisable options held by Mr.
Markfield.
(14) Includes 3,000 shares subject to exercisable options held by Mr. Kerin.
OWNERSHIP OF RVI AND NATCO
The following table shows the shares of RVI and Natco common stock
owned beneficially by each person owning more than 5% of the shares, each
director or executive officer owning any shares, and by all directors and
executive officers of the Company as a group, as of March 1, 1997.
<TABLE>
<CAPTION>
Shares of Shares of
RVI Natco
Common Percent of Common Percent of
Shareholder Stock Class Stock Class
----------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
Jay L. Schottenstein (1) 349.5 69.9% 7,372.3 40.4%
Saul Schottenstein (2) 51.0 10.2% 361.4 2.0%
Geraldine Schottenstein (3) 153.0 30.6% 14,383.2 78.8%
Ann Schottenstein Deshe (4) 97.0 19.4% 7,010.9 38.4%
Susan Schottenstein Diamond (5) 48.5 9.7% 3,505.5 19.2%
All directors and executive officers as a
group 354.5 70.9% 7,733.7 42.4%
<FN>
(1) Represents sole and/or shared voting and investment power over shares held in trust for family members as
to which Jay L. Schottenstein is either Trustee or a Trust Advisor.
(2) Represents sole and or shared voting and investment power over 46 RVI shares held in trust for family
members as to which Saul Schottenstein is Trustee and 5 RVI shares owned directly.
(3) Represents sole and/or shared voting and investment power over shares held in trust family members as to
which Geraldine Schottenstein is Trustee.
(4) Ann Schottenstein Deshe is the sister of Jay L. Schottenstein. Represents sole and/or shared voting and
investment power over shares held in trust for family members as to which Ann Schottenstein Deshe is
either Trustee or a Trust Advisor.
(5) Susan Schottenstein Diamond is the sister of Jay L. Schottenstein. Represents sole and/or shared voting an
investment power over shares held in trust for family members as to which Susan Schottenstein Diamond is
either Trustee or a Trust Advisor.
</TABLE>
ELECTION OF DIRECTORS
The members of the Board of Directors of the Company are elected at the
Annual Meeting. The number of members of the Board has been fixed at seven by
action of the Board pursuant to the Code of Regulations (By-laws) of the
Company. Board members serve until the annual meeting following their election
or until their successors are duly elected and qualified.
NOMINEES FOR ELECTION AS DIRECTORS
The enclosed proxy, if returned duly executed and not revoked, will be
voted as specified thereon, or if no instructions are given, will be voted FOR
the nominees listed below. In the event that any nominee should become
unavailable, the Board of Directors may decrease the number of directors
pursuant to the Code of Regulations, or may designate a substitute nominee, in
which event the proxy will be voted for such substitute nominee. The Board has
no reason to believe that any nominee will be unavailable or, if re-elected,
unable to serve. Each of the nominees became
Page 5
<PAGE> 7
a director of the Company at the time it was organized in January 1994, except
for John L. Marakas, who was elected in April 1994, Martin P. Doolan, who was
elected in August 1995 and George Kolber, who was elected in December 1995. The
following table sets forth certain information with respect to each nominee. A
description of each nominee's principal occupation for the past five years
follows the table.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
<S> <C> <C>
Jay L. Schottenstein 42 Chairman of the Board and Chief Executive Officer
Saul Schottenstein 75 Vice Chairman
George Kolber 46 Vice Chairman and Chief Operating Officer
Martin P. Doolan 57 Director
Thomas R. Ketteler 54 Director
John L. Marakas 70 Director
David W. Thompson 44 Director
</TABLE>
Jay L. Schottenstein has served as Chairman and Chief Executive Officer
of the Company and its predecessors since March 1992 and prior to that time he
served as a Vice President and Director of the Company's predecessors since
1980. He has also served since March 1992 as Chairman and Chief Executive
Officer of Schottenstein Stores Corporation ("SSC"), a privately-held company
with interests in retailing, real estate and manufacturing. He has also served
as Chairman since March 1992 and as Chief Executive Officer since April 1991 of
Value City Department Stores, Inc. ("VCD"), a publicly-held company which is
subject to the reporting requirements of Section 13 of the Securities Exchange
Act of 1934, as amended, which operates a chain of off-price department stores
and is 68% owned by SSC, with the remaining shares publicly-held and traded on
the New York Stock Exchange. Mr. Schottenstein served as Vice Chairman of SSC
since 1986 and as a director of SSC since 1982. He has also served as an officer
and director of various other corporations owned or controlled by members of his
family (the "Schottenstein Family") since 1976, including the Valley Fair
Corporation, a publicly-held company which is subject to the reporting
requirements of Section 13 of the Securities and Exchange Act of 1934, as
amended. Jay L. Schottenstein is the nephew of Saul Schottenstein.
Saul Schottenstein has been a director of the Company and its
predecessors since 1980. He has served as President of SSC since 1984, and as a
director of SSC since 1982. He served as Executive Vice President of SSC from
1982 to 1984. Prior to that time he served in various executive capacities with
SSC since 1946. He is also an officer and director of various other corporations
owned or controlled by the Schottenstein Family, including Value City Department
Stores, Inc. and the Valley Fair Corporation, each a publicly-held company which
is subject to the reporting requirements of Section 13 of the Securities
Exchange Act of 1934, as amended.
George Kolber has served as Vice Chairman of the Company's Board of
Directors and Chief Operating Officer since December 1995. Prior to joining the
Company, he served as Vice President of Schottenstein Stores Corporation since
1979 and as Vice President, Administration of Value City Department Stores, Inc.
from 1990 until 1993. Prior to that time, Mr. Kolber served as Vice President
and Chief Financial Officer of Strauss Stores and R&S Strauss, Associates. He
has also served as Chairman of the Board of Directors of Penn Jersey Auto Stores
and on the Board of Directors of Wieboldts Department Stores.
Martin P. Doolan serves as Chairman, President and Chief Executive
Officer of U.S. Netting, Inc., a manufacturer of plastic extruded filtration
netting headquartered in Austin, Texas. He served as Chairman of Bestop, Inc.,
an automotive convertible top manufacturer from 1988 to June 1995. He has also
served as Chief Executive Officer of a number of other companies including
Walt's Radiator and Muffler, Inc., an automotive retail service and distribution
chain where he continues to serve as a director; Sun Engine, a remanufacturer of
domestic automobile engines; Pilliod Cabinet Corp., a furniture manufacturer;
and Sunwest International, a brass door and hardware manufacturer.
Thomas R. Ketteler has served SSC as Chief Operating Officer since
April 1995, as a director since 1985 and
Page 6
<PAGE> 8
Vice President of Finance since 1981. Prior to that time, he was a partner in
the firm of Alexander Grant and Company, Certified Public Accountants. Mr.
Ketteler is an officer and director of various other corporations owned or
controlled by the Schottenstein Family. Since 1991, Mr. Ketteler has also served
as Secretary and a director of the Valley Fair Corporation, a publicly-held
company which is subject to the reporting requirements of Section 13 of the
Securities Exchange Act of 1934, as amended.
John L. Marakas has been retired since April 1991. Prior to his
retirement, Mr. Marakas served as President and a director of Nationwide
Corporation, an insurance and financial services holding company from March 1972
to April 1990 and as President and a director of Nationwide Life Insurance
Company from September 1981 to April 1991.
David W. Thompson has served as President since June 1993 of Value City
Furniture, a division of SSC. From June 1981 to June 1993, Mr. Thompson served
as Vice President of Value City Furniture.
INFORMATION CONCERNING BOARD OF DIRECTORS
During the year ended February 1, 1997 ("Fiscal 1996"), the Board of
Directors met three times and acted by unanimous written consent twice. Saul
Schottenstein did not attend any of the meetings. The Board has standing Audit
and Compensation and Stock Option Committees.
The members of the Audit Committee are John L. Marakas and Martin P.
Doolan. The function of the Audit Committee is to recommend to the Board a firm
of accountants to serve as the Company's auditors and to review with the
independent auditors and the appropriate corporate officers matters relating to
corporate financial reporting and accounting procedures and policies, adequacy
of financial, accounting and operating controls and the scope of the audit.
The Audit Committee met once in Fiscal 1996.
The members of the Compensation and Stock Option Committee are John L.
Marakas and Martin P. Doolan. The function of the Committee is to consult with
and advise the Chairman with respect to the Company's compensation policies,
including compensation of senior management. The Committee also determines the
number and terms of any stock options to be granted under the Company's stock
option plan. The Compensation and Stock Option Committee acted by unanimous
written consent once and met once in Fiscal 1996.
Directors who are not employees are paid $2,000 for each Board and
Committee meeting attended, with a minimum annual compensation of $8,000.
Directors who are also employees of the Company do not receive additional
compensation for serving as directors.
The Company's 1994 Stock Option Plan, as amended, provides the
automatic grant of options to purchase 1,000 shares of Common Stock to each
non-employee director on the first trading day of each fiscal quarter. The
exercise price for each option is the fair market value of the Common Stock on
the date of grant. The exercise price must be paid either in cash, with
previously acquired Common Stock of the Company, the option holder's promissory
note or any combination of the foregoing, provided, however, use of
consideration other than cash requires consent of the Board. All of the options
become exercisable one year after the date of grant and remain exercisable for a
period of ten years from the date of grant, subject to earlier termination after
termination of the option holder's service as a director of the Company. The
options are transferable by the optionholders either (i) if transferred without
consideration to immediate family members, or the entities they control, or (ii)
if such transfer is approved by the Stock Option Committee.
EXECUTIVE OFFICERS
The following persons are executive officers of the Company. Except as
otherwise indicated, each was elected to the position indicated with the Company
upon its organization in January, 1994. For information regarding officers who
are also directors, see "Election of Directors." The officers of the Company are
elected annually by the Board and
Page 7
<PAGE> 9
serve at the pleasure of the Board.
Roger S. Markfield, age 55, has served as President and Chief
Merchandising Officer of the Company since February 1995 and prior thereto as
Executive Vice President Merchandising for the Company and its predecessors
since May 1993. Prior to joining the Company, he served as Executive Vice
President--General Merchandising Manager for the Limited Division of The
Limited, Incorporated, a large national speciality retailer from May 1992 to
April 1993. From 1969 to 1976 and from 1979 to 1992, he was employed by R.H. May
& Co. ("May's"), a national retailer operating department and speciality stores,
as a Buyer in Boys' Wear rising to the office of President of Corporate
Buying--Mens. From 1976 to 1979, Mr. Markfield left May's to serve as Senior
Vice President of Merchandising and Marketing for the Gap Stores, Inc.
Laura A. Weil, age 40, has served as Chief Financial Officer of the
Company since December 1995 and as Executive Vice President since June 1996.
Prior to joining the Company, she was a consultant to companies including
Schottenstein Stores Corporation, from March 1995 to December 1995. From 1992 to
1995, she was Senior Vice President and the head of the retailing investment
banking practice at Oppenheimer & Co., Inc. Prior to joining Oppenheimer, Mrs.
Weil held various executive positions at R.H. Macy & Co., Inc. from 1989 to
1992, including Vice President-Finance and Chief Financial Officer-Credit
Operations. From 1988 to 1989 she was an executive with L'Herbier de Provence, a
Paris-based cosmetics and toiletries retailer. From 1979-1981 and 1983-1988, Ms.
Weil held various investment banking positions with Lehman Brothers and its
predecessor Lehman Brothers Kuhn Loeb. Inc., including Vice President of the
firm's Merchandising group.
Joseph E. Kerin, age 51, has served as Executive Vice President Stores
and Operations of the Company and its predecessors since January 1991. From May
1989 to November 1989, he served as a Regional Store Manager for Value City
Department Stores, Inc. Prior to that time, he held various positions with the
Company's predecessors, including Senior Vice President--Store Operations from
October 1987 to October 1988, Vice President--General Manager Store Operations
from February 1979 to October 1987, General Manager Store Operations from
November 1975 to February 1979 and Regional/District Manager of the Silverman's
Division from October 1972 to November 1975.
Dale E. Clifton, age 43, has served the Company and its predecessors as
Controller since June 1986, as Chief Accounting Officer since October 1988, and
as Vice President since October 1994. He served the Company and its predecessors
as Treasurer from July 1995 to June 1996, Secretary from October 1988 to June
1996 and Assistant Controller from 1984 to June 1986. Prior to joining the
Company, he worked as a Certified Public Accountant from 1975 to 1984 at Alpern,
Rosenthal & Company.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and persons who are beneficial owners of more than
ten percent of the Company's Common Stock ("reporting persons") to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission. Reporting persons are required by Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) forms filed
by them. Based on its review of the copies of Section 16(a) forms received by
it, the Company believes that, during Fiscal 1996, all filing requirements
applicable to reporting persons were complied with, except for one late filing
each for Dale Clifton, Thomas Ketteler, George Kolber, Laura Weil, and Jay
Schottenstein.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth certain information regarding
compensation paid during the Company's Fiscal 1996 and each of the last three
fiscal periods to the Company's Chief Executive Officer and to each of the
Company's four most highly compensated executive officers whose compensation
exceeded $100,000 during Fiscal 1996.
Page 8
<PAGE> 10
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
---------------------------------------------- -------------------------
Restricted
Name and Fiscal Other Annual ------------ Options/
Principal Position Year(1) Salary Bonus Compensation(2) Stock Awards SARs(#)
- ------------------ ---- ------ ----- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Jay L. Schottenstein (4) 1996 $250,050 None None None 75,000
Chairman and Chief 1996T $125,025 None None None None
Executive Officer 1995 $250,050 None None None None
1994 $149,068 None None None 75,000
Roger S. Markfield (5) 1996 $412,464 $67,770 None None None
President and Chief 1996T $206,232 None $43,865 None None
Merchandising Officer 1995 $413,587 $100,000 $899 None None
1994 $282,464 $42,000 $150,154 $2,464,000(3) 15,000
George Kolber 1996 $400,000 $75,000 $58,154 None 100,000
Vice Chairman and 1996T $43,942 $37,500 None None 50,000
Chief Operating
Officer
Laura A. Weil 1996 $250,016 $50,000 $95,124 None 15,000
Chief Financial Officer 1996T $29,344 None $4,627 None 10,000
Joseph E. Kerin 1996 $166,270 None $2,050 None 10,000
Executive 1996T $81,250 None $2,309 None None
Vice President - Stores 1995 $162,404 None $108 None None
1994 $156,923 $25,000 $3,615 $150,000 5,000
<FN>
(1) 1996 refers to the twelve months ended February 1, 1997, 1996T refers to the 27 week transition period ended
February 3, 1996 and 1995 and 1994 refer to the fiscal years ended July 29, 1995 and July 30, 1994, respectively.
(2) Includes amounts allocated for the reimbursement of moving expenses to Mr. Markfield of $41,984 for Transition 1996
and $149,979 for Fiscal 1994, as well as commuting expense reimbursements to Mr. Kolber of $58,154 and Ms. Weil of
$95,124 for 1996.
(3) On April 11, 1994, the Board of the Company approved the issuance of Common Stock to certain key employees of the
Company pursuant to a one time grant of restricted shares issued under a form of restricted stock agreement between
the Company and the employee. The agreement conditions the vesting of the shares upon continued employment with the
Company. The restriction expires as to 20% of the shares on April 13 of each of the five years after the grant.
(4) Jay L. Schottenstein is also Chairman of SSC and Value City Department Stores, Inc. He does not devote himself
full-time to the business of the Company.
(5) The Company entered into an employment agreement with Roger S. Markfield, which provided an annual base salary of
$270,000 and an annual bonus at a minimum equal to 15% of his base salary. The agreement also provided for the grant
of the restricted shares listed in the table. Mr. Markfield's base salary was increased to $412,464 in Fiscal 1995.
The initial term of the agreement expires on May 10, 1997 and thereafter, Mr. Markfield's employment is on an
at-will basis and, per mutual written agreement, in certain circumstances he would receive severance pay in an
amount equal to his first year base salary.
</TABLE>
Page 9
<PAGE> 11
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding individual
grants of stock options in Fiscal 1996 to each of the Company's most highly
compensated executive officers disclosed in the Summary Compensation Table.
<TABLE>
<CAPTION>
GRANT
INDIVIDUAL GRANTS DATE VALUE
---------------------------------------------------------------------------------- ----------
% of Total
Options/
SARs
Options/ Granted to
SARs Employees Exercise or Market Grant Date
Granted in Fiscal Base Price Price Expiration Present
Name (#) Year ($/Sh) ($/Sh) Date Value $ (2)
- ---- --- ---- ------ ------ ---- -----------
<S> <C> <C> <C> <C> <C> <C>
Jay L. Schottenstein (1) 75,000 12.7% $6.75 N/A April 14, 2004 $262,093
Jay L. Schottenstein 75,000 12.7% $6.75 $17.25 June 3, 2006 $901,767
George Kolber (1) 5,000 0.8% $6.75 N/A April 14, 2004 $17,473
George Kolber 25,000 4.2% $6.75 $17.25 June 3, 2006 $300,589
George Kolber 75,000 12.7% $17.25 N/A June 3, 2006 $704,768
Roger Markfield (1) 15,000 2.5% $6.75 N/A April 14, 2004 $52,419
Laura A. Weil 15,000 2.5% $6.75 $17.25 June 3, 2006 $180,354
Joseph E. Kerin 10,000 1.7% $17.25 N/A June 3, 2006 $93,969
Joseph E. Kerin (1) 5,000 0.8% $6.75 N/A April 14, 2004 $17,473
<FN>
(1) These options were repriced on February 5, 1996 to the then current market price of $6.75.
(2) The grant date present value was determined using the Black Scholes option pricing model with the following
assumptions: risk-free interest rates of 5%; no dividend yield; volatility factor of the expected market price of
the Company's common stock of .7384; weighted-average expected life of the option of 5 years; and an expected
forfeiture rate of approximately 15%.
</TABLE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE
None of the executive officers named in the Summary Compensation Table
exercised options during Fiscal 1996. The following table provided certain
information on the number and value of stock options held by the executive
officers named in the Summary Compensation Table at February 1, 1997.
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<PAGE> 12
<TABLE>
<CAPTION>
Number of Value of Unexercised
Shares Value Unexercised Options at In-The-Money Options at
Acquired on Realized February 1, 1997(#)(1) February 1, 1997($)(2)
Name Exercise(#) $ Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jay L. Schottenstein -- -- 30,000 120,000 $75,000 $300,000
George Kolber -- -- 22,000 133,000 $65,000 $160,000
Roger S. Markfield -- -- 6,000 9,000 $15,000 $22,500
Laura A. Weil -- -- 2,000 23,000 $6,000 $61,500
Joseph E. Kerin -- -- 2,000 13,000 $5,000 $7,500
<FN>
(1) Effective on February 5, 1996 the Company's Board of Directors approved
the repricing of substantially all outstanding stock options to the
then current market price of $6.75.
(2) Represents the total gain which would be realized if all in-the-money
options held at year end were exercised, determined by multiplying the
number of shares underlying the options by the difference between the
per share option exercise price and the per share fair market value at
year end of $9.25. An option is in-the-money if the fair market value
of the underlying shares exceeds price of the option.
</TABLE>
TEN-YEAR OPTION/SAR REPRICINGS
The following table provides certain information on the Fiscal 1996
repricings of stock options held by the executive officers.
<TABLE>
<CAPTION>
Length of
Number of Market Price Exercise Original Option
Options/ of Stock at Price At Term
SARs Time of Time of Remaining at
Repriced or Repricing or Repricing or New Date of
Amended Amendment Amendment Exercise Repricing or
Name Date (#) ($) ($) Price ($) Amendment
- ---- ---- --- --- --- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Jay L. Schottenstein Feb. 5, 1996 75,000 $6.75 $16.00 $6.75 8.21 years
George Kolber Feb. 5, 1996 5,000 $6.75 $16.00 $6.75 8.21 years
Roger S. Markfield Feb. 5, 1996 15,000 $6.75 $16.00 $6.75 8.21 years
Joseph E. Kerin Feb. 5, 1996 5,000 $6.75 $16.00 $6.75 8.21 years
Dale E. Clifton Feb. 5, 1996 5,000 $6.75 $16.00 $6.75 8.21 years
</TABLE>
The Stock Option Committee of the Board of Directors determined to
"reprice" substantially all stock options outstanding on February 5, 1996. The
options were repriced at the closing sale price of the common stock on the prior
trading day, February 2, 1996. The repricing was accomplished by the grant of
new options, replacing outstanding options, but retaining the vesting and
termination dates of the previously outstanding options. The Committee believed
that it was in the best interest of the Company to reprice the options for a
number of reasons, including the recent drop in the price of the Company's
stock, in part, from factors beyond the control of optionholders, such as the
then poor
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<PAGE> 13
operating environment for apparel retailers and the recent senior management
changes at the Company. The Committee believed that the repricing would improve
employee morale, assist the Company in retaining employees and provide holders
of options an incentive to improve the Company's performance and stock price.
Compensation and Stock Option Committee Members: John L. Marakas and Martin P.
Doolan
The following Compensation Report of the Board of Directors and
Performance Graph shall not be deemed incorporated by reference by general
statement incorporating by reference this Proxy Statement into any of the
Company's filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934 , as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
COMPENSATION REPORT OF THE BOARD OF DIRECTORS
General. The key components of the Company's executive officer
compensation include both short term compensation consisting of annual base
salary and annual bonuses and long term, equity-based compensation consisting of
grants of restricted stock and stock options awards. The Board of Directors has
delegated to the Chairman of the Board the authority to establish the annual
compensation of the officers of the Company, other than the Chairman's
compensation, as permitted under Ohio law. The full Board of Directors has made
the only grants of restricted stock by the Company to executive officers and the
first grant of stock options under the Company's 1994 Stock Option Plan, in each
case prior to the Company's initial public offering. The Stock Option Committee
of the Board of Directors, which was established after the Company's initial
public offering, now grants options under the 1994 Stock Option Plan. During
Fiscal 1996, the Board of Directors expanded the scope of the authority of the
Stock Option Committee to include advising the Chairman with respect to the
Company's overall compensation policy and, specifically, compensation of senior
management. In connection with this additional authority, the Committee was
renamed the "Compensation and Stock Option Committee." The Committee's
recommendations will affect compensation for executive officers beginning in
Fiscal 1997.
Chief Executive Officer's Compensation. Beginning effective January 1,
1994, Jay L. Schottenstein, the Company's Chairman and Chief Executive Officer,
began receiving a salary in the amount of $250,000 per year. That is the only
compensation he received from the Company during Fiscal 1996 and the Board of
Directors did not take any actions to change his annual salary. The Committee
did determine to reprice Mr. Schottenstein's options at the time substantially
all other options were repriced in Fiscal 1996 and granted Mr. Schottenstein
additional options to purchase 75,000 shares during Fiscal 1996.
Executive Officer's Compensation. Roger S. Markfield, the President,
entered into an employment agreement with the Company in Fiscal 1993 which fixed
the amount of his base salary and the amount of his restricted stock award and a
minimum bonus amount. In Fiscal 1995, Mr. Markfield's base salary was increased
to $412,464 per annum, and it was not changed in Fiscal 1996.
The remaining executive officers' base salaries for Fiscal 1996 were
determined by the Chairman after consultation with the senior management and
discussion with each individual officer. The determination base of salaries was
based primarily on subjective factors, such as the Chairman's perception of
individual performance, the individual's contribution to the overall performance
of the Company and the anticipated value of the individual's contribution to the
Company's future performance. The determination was not based on specific
objective criteria. No specific weight was given to any of the factors
considered.
Stock Awards. The Company's 1994 Stock Option Plan was adopted at the
time the Company went public in April 1994 for the purpose of providing
long-term incentives to key employees and motivating key employees to improve
performance of the Company's stock. The Company's Stock Option Committee, which
administers the 1994
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<PAGE> 14
Stock Option Plan, determined to reprice substantially all options, including
those held by executive officers for the reason set forth above under "10-Year
Option/SAR Repricings," and granted additional options to executive officers as
set forth above under "Options/SAR Grants in Last Fiscal Year."
The following members of the Board of Directors respectfully submit
this report:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Jay L. Schottenstein Saul Schottenstein John L. Marakas* Martin P. Doolan*
George Kolber Thomas R. Ketteler David W. Thompson
</TABLE>
*Members of the Compensation and Stock Option Committee.
PERFORMANCE GRAPH
The following graph shows the percentage change in the cumulative total
return performance to holders of the Company's Common Stock with that of The
NASDAQ Stock Market - U.S. Index and the Standard & Poor's Specialty Apparel
Index, both of which are published indexes. This comparison includes the period
beginning April 13, 1994 (the effective date the Company's Common Stock was
registered under the Securities and Exchange Act of 1934) through January 31,
1997. The Company's shares of Common Stock are traded on The NASDAQ National
Market under the symbol "AEOS". The comparison of the cumulative total returns
for each investment assumes that $100 was invested in the Company's Common Stock
on April 14, 1994 and in the respective index on March 31, 1994.
<TABLE>
COMPARISON OF 33 MONTH CUMULATIVE TOTAL RETURN*
AMONG AMERICAN EAGLE OUTFITTERS, INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE S & P RETAIL (SPECIALTY APPAREL) INDEX
<CAPTION>
4/14/94 7/94 7/95 1/96 1/97
<S> <C> <C> <C> <C> <C>
American Eagle Outfitters, Inc. 100 108 103 41 58
Nasdaq Stock Market-US 100 97 137 145 190
S & P Retail (Specialty Apparel) 100 89 84 88 111
<FN>
* $100 INVESTED ON 4/14/94 IN STOCK OR ON 3/31/94
IN INDEX - INCLUDING REINVESTMENT OF DIVIDENDS.
</TABLE>
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Jay Schottenstein and Saul Schottenstein, each of whom is an executive
of the Company, are also members of the Company's Board of Directors. As stated,
the Company's Chairman and Chief Executive Officer, Jay L. Schottenstein, with
the input of its senior management, determined the annual salary and bonus
compensation of the officers of the Company, other than the Chairman's and such
determination was not formally considered and ratified by the Board of
Directors. For information regarding the relationship between the Company and
SSC, see "Certain Relationship and Related Transactions" below.
The Stock Option Committee administers and grants options under the
Company's 1994 Stock Option Plan. The Stock Option Committee consists of John L.
Marakas and Martin Doolan. None of the members are present or former officers of
the Company or have affiliates that are parties to agreements with the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Schottenstein Family owns 100% of RVI and Natco. On April 2, 1997,
the Schottenstein Family, through its ownership of RVI and Natco, as well as
personal holdings, beneficially owns 60.3% of the outstanding shares of Common
Stock of the Company. As long as the Schottenstein Family owns more than 50% of
the Company's voting shares, it will continue to have the power acting alone to
approve any action requiring a vote of the majority of the voting shares of the
Company and to elect all of the Company's directors.
The Company has certain relationships and transactions with other
entities controlled by the Schottenstein Family. The Company's Code of
Regulations provides that any such related party transaction will be subject to
approval by a majority of the disinterested directors of the Company and will be
on terms which, in the judgment of such directors, will be no less favorable to
the Company than could be obtained from unaffiliated parties.
OFFICE/DISTRIBUTION CENTER LEASE
The Company leases its distribution center and headquarters offices
from an affiliate, Linmar Realty Company, a partnership owned indirectly by the
Schottenstein Family. A new lease was entered into, effective January 1, 1996,
in connection with the completion of an addition to the facility during 1995.
This lease expires on December 31, 2010. The new lease requires minimum monthly
rent payments of $4.09 per square foot for the first five years to $5.96 per
square foot for the last five years of the lease. Additionally, the Company is
required to pay all real estate taxes, insurance, maintenance and certain other
expenses. For Fiscal 1996, the Company recorded $1,407,000 of rent expense under
the lease.
IMPORT SERVICES AGREEMENT
Under the terms of an Import Services Agreement with the import
division of SSC ("SSC Imports"), SSC Imports processes the paperwork for the
Company's import transactions, for which it receives a fee of one percent of the
value of the imports plus reimbursement of direct expenses. For Fiscal 1996, the
Company paid SSC Imports for such services approximately $960,000. The import
service for merchandise processed through SSC Imports accounted for
approximately 78% of the Company's total purchases for Fiscal 1996.
MERCHANDISE SERVICES AGREEMENT
From time to time, the Company sells its overstock merchandise to VCD,
with limited restrictions regarding presentation of the merchandise. For Fiscal
1996, VCD paid the Company approximately $2,812,000 for such merchandise.
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<PAGE> 16
OFFICER LOANS
Under the Company's restricted stock agreements, the holder of
restricted stock incurs income tax liability as the stock vests. The Company has
made loans to certain executive officers to enable them to pay their income tax
liability without any of the restricted stock. The loans are for one year, which
are renewed annually and bear interest at the rate of 6.8% per annum and are
collateralized by the stock. At February 1, 1997, the principal amount of the
loan for Roger S. Markfield was $286,026.
OTHER RELATIONSHIPS
The Company purchases merchandise from Azteca Production International,
a company that is owned by Paul Guez and members of his family (the "Guez
Family"). Mr. Guez has provided services to the Company and owns 12,500 shares
of the Company's stock subject to a restricted stock agreement with the Company.
On February 8, 1995, a company controlled by the Guez Family, S.H.D.
Investments, LLC, purchased 1,000,000 shares of the Company's common stock from
Sam Forman, a former officer and director of the Company. SSC guaranteed a bank
loan obtained by S.H.D. Investments, LLC in connection with the acquisition.
During Fiscal 1996, the Company purchased $10,332,000 of merchandise from Azteca
Productions International.
The Company purchases merchandise from Wisetex Trading Limited, an
import company operated by the son of Edward S. Finkelstein, a former director
of the Company, and in which Mr. Finkelstein has an ownership interest. For
Fiscal 1996, the Company purchased merchandise from Wisetex Trading Limited in
the amount of $452,000.
The Company purchases merchandise from and utilizes the import services
of Prophecy Limited Partnership ("Prophecy"), an import company owned in part by
members of the Schottenstein Family. For Fiscal 1996, the Company purchased
merchandise and services from Prophecy Limited Partnership in the amount of
$4,785,000. In March 1997, the independent members of the Board of Directors
approved the Company's acquisition of Prophecy. The goals of the acquisition are
to leverage the talent and expense of the Company's New York design office and
to use Prophecy's production expertise and manufacturing relationships to
shorten the product delivery cycle and enable the Company to continually improve
product quality and value. The preliminary terms of the acquisition include a
cash payment of $0.9 million at closing plus a contingent payment of up to $0.7
million.
APPROVAL OF AMENDMENTS OF THE COMPANY'S 1994 STOCK OPTION PLAN
The Board of Directors has approved amendments to the Company's 1994
Stock Option Plan (the "Plan"), subject to approval of the amendments by the
shareholders at the Annual Meeting: (a) to increase the number of common shares
available for issuance under the Plan from 600,000 to 1,200,000, and to increase
the number of shares for which options may be granted to any one individual
during the term of the Plan from 200,000 to 400,000; (b) to provide that the
members of the Stock Option Committee (the "Committee") be "non-employee
directors"; (c) to provide that non-employee directors, including those on the
Committee, are eligible to receive options under the Plan; (d) to provide that
an option to purchase 1,000 shares of the Company's Common Stock is
automatically granted to each non-employee director on the first trading day of
each fiscal quarter of the Company; and (e) to provide that Non-Statutory Stock
Options(as hereinafter defined) are transferable by optionholders either (i) if
transferred without consideration to immediate family members, or the entities
they control, or (ii) if such transfer is approved by the Committee.
Prior to its amendment, the Plan provided for the issuance of options
to purchase up to 600,000 shares of Common Stock of the Company, subject to
adjustment for stock splits and other changes in the Company's capitalization.
The shares are available from authorized but unissued shares of Common Stock of
the Company. On April 4, 1997 the closing price per share of the Common Stock on
the Nasdaq National Market was $10.875. As amended, the Plan provides for the
issuance of options to purchase up to 1,200,000 shares of Common Stock of the
Company, subject to adjustment for stock splits and other changes in the
Company's capitalization.
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<PAGE> 17
The options granted under the Plan may be either incentive stock
options ("Incentive Stock Options") which meet the requirements of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or nonqualified
options ("Non-Statutory Stock Options") which do not meet such requirements.
Incentive Stock Options and Non-Statutory Stock Options may be granted to such
key employees, officers, and directors of the Company (or its subsidiaries or
parent, if any), consultants and advisers who render services to the Company as
the Committee shall select from time to time. Individuals who are not employees,
but who render services to the Company, including directors, may only be granted
Non-Statutory Stock Options. The approximate number of persons eligible to
participate in the Plan is 100.
The Plan is administered by the Committee which, under the Plan, must
consist of not less than two members of the Board of Directors appointed by the
Board who are "disinterested persons." As amended, the Committee would consist
of not less than two members of the Board of Directors appointed by the Board
who are "Non-Employee Directors" as defined by the amended Rule 16b-3(b)(3)(i)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Prior to its amendment, each member of the Committee automatically
received under the Plan a Non-Statutory Option to purchase 2,500 shares of the
Company's Common Stock at an exercise price equal to 100% of the fair market
value of the shares on the date of such grant which was the first trading day of
each fiscal year of the Company. The amendment to the Plan provides that each
member of the Board who is not an officer or employee of the Company shall
automatically receive a Non-Statutory Option to purchase 1,000 shares of the
Company's Common Stock at an exercise price equal to 100% of the fair market
value of the shares on the date of such grant which is the first trading day of
each fiscal quarter of the Company.
The Committee has the discretion under the Plan to make cash grants to
optionholders, other than themselves, that are intended to offset a portion of
the taxes payable upon exercise of Non-Statutory Stock Options or on certain
dispositions of shares acquired under Incentive Stock Options.
No Incentive Stock Option may be granted to any person who owns stock
possessing more than 10% of the combined voting power of the stock of the
Company unless the option price per share is at least 110% of the fair market
value of the shares and the option is not exercisable more than five years after
the date of grant. The aggregate fair market value of shares with respect to
which Incentive Stock Options are exercisable for the first time by any optionee
during any calendar year (determined as of the date of grant) may not exceed
$100,000. The foregoing restrictions do not apply to Non-Statutory Stock
Options.
Unless otherwise determined by the Committee. All options must be
granted on or before January 2, 2004, cannot be exercisable after the expiration
of ten years from the date of grant, are not to be transferable by an optionee
otherwise than by will or the laws of descent and distribution, and may be
exercised during the lifetime of the optionee only by him or his guardian or
legal representative. Unless otherwise determined by the Committee, options
generally will not be granted for less than the fair market value per share on
the date of grant, will not be exercisable during the first year following the
date of grant, will be exercisable thereafter in amounts equal to 20% per year,
beginning on the first anniversary of the date of grant, on a cumulative basis,
and will remain exercisable for a period of 10 years. The proposed amendments to
the Plan provide that Non-Statutory Stock Options are transferable by
optionholders either (a) if transferred without consideration to immediate
family members, or the entities they control, or (b) if such transfer is
approved by the Committee.
Upon termination of an optionee's employment with the Company (or its
subsidiaries, parent, or any successor corporation, if any), other than (a) if
termination is by reason of death or disability, or (b) termination of
employment for cause, the optionee will have 30 days after the date of
termination to exercise all the options held by the optionee to the extent the
same were exercisable on the date of termination; provided, however, if such
termination is a result of the optionee's retirement with the consent of the
Company (as determined by the Committee), such option will then be exercisable
to the extent of 100% of the shares subject thereto. The Committee may cancel an
option during the 30-day period after termination of employment if the optionee
engages in employment or activities contrary, in the opinion of
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<PAGE> 18
the Committee, to the best interests of the Company. Upon termination of
employment by reason of death or disability, the optionee or the optionee's
personal representative or the person to whom the optionee's rights pass by will
or the laws of descent and distribution will have one year after the date of
such termination (but not later than the expiration date of the option
agreement) to exercise all the options held by the optionee to the extent the
same were exercisable on the date of termination; provided, however, the
Committee may permit the exercise of all or any portion of any option granted to
such optionee not otherwise exercisable. Upon termination of employment for
cause, all options held by such optionee will terminate on the date of
termination.
Payment for shares is to be made within five business days following
the date of exercise of an option in cash or, with the consent of the Committee,
(i) by tendering previously acquired shares valued at their fair market value as
of the date of tender, (ii) with a full recourse, interest bearing promissory
note, (iii) any combination of the foregoing, or (iv) if the shares subject to
the options have been registered under the Securities Act of 1933, as amended,
by delivering to the Company instructions for the delivery to a broker of the
notice of exercise and a certificate for the shares purchased and instructions
to the broker to deliver to the Company a sum equal to the purchase price of the
shares. If tax offset payments sufficient to allow for withholding of taxes are
not being made at the time of exercise of options, the person exercising the
options will pay to the Company an amount equal to the withholding amount
required to be made less any amount withheld by the Company pursuant to the
terms of the Plan.
The Board may terminate, amend or modify the Plan at any time without
further action on the part of the shareholders of the Company; provided,
however, that (a) no amendment to the Plan may cause the Incentive Stock Options
granted under the plan to fail to qualify as incentive stock options under the
Code, and (b) any amendment to the Plan which requires the approval of the
shareholders of the Company under the Code, the regulations promulgated
thereunder, or the rules promulgated under Section 16 of the Exchange Act will
be subject to approval by the shareholders of the Company in accordance with the
Code, such regulations, or such rules. No amendment, modification or termination
of the Plan may adversely affect any option previously granted without the
consent of the optionee. Any stock option outstanding at the termination date of
the Plan will remain outstanding until it has either been exercised or expires
by its terms.
FEDERAL INCOME TAX CONSEQUENCES
With respect to all Non-Statutory Stock Options, in general, for
federal income tax purposes under present law:
(i) The grant of the option, by itself, will not result in income
to the optionholder.
(ii) Except as provided in (v) below, the exercise of the option
(in whole or in part, according to its terms) will result in
income to the optionholder at that time in an amount equal to
the excess (if any) of the fair market value of the stock on
the date of exercise over the option price.
(iii) The tax basis of the stock acquired upon exercise of the
option, which will be used to determine the amount of any gain
or loss on a future taxable disposition of such stock, will be
the fair market value of the shares on the date of exercise.
(iv) No deduction will be allowable to the Company upon the grant
of such an option, but upon exercise of such an option a
deduction will be allowable to the Company at that time in an
amount equal to the amount of income realized by the
optionholder exercising the option provided that the Company
deducts and withholds appropriate federal withholding tax.
(v) With respect to the exercise of an option and the payment of
the option price by the delivery of Common Stock, to the
extent that the number of shares received does not exceed the
number of shares surrendered, no taxable income will be
realized by the optionholder at that time, the tax basis of
the shares received will be the same as the tax basis of the
shares surrendered, and the holding period of the optionholder
in the shares received will include his holding period in the
shares surrendered. To
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the extent that the number of shares received exceeds the
number of shares surrendered, income will be realized by the
optionholder at that time in the amount of the fair market
value of such excess shares, the tax basis of such excess
shares will be such fair market value, and the holding period
of the optionholder in such shares will begin as of the date
such shares are transferred to the optionholder.
With respect to all Incentive Stock Options, in general, for federal
income tax purposes under present law:
(i) Neither the grant nor the exercise of an option, by itself,
will result in income to the optionholder except that, under
Section 56 of the Code, the excess of the fair market value of
the stock at the time of exercise over the option price is an
adjustment in computing alternative minimum taxable income
which may, under certain circumstances, result in an
alternative minimum tax liability to the optionholder under
Section 55 of the Code.
(ii) If the shares acquired upon exercise of an option are disposed
of in a taxable transaction after the expiration of two years
from the date the option was granted for such shares and after
the expiration of one year from the date on which such shares
are transferred to the optionholder, long-term capital gain or
loss will be realized by the optionholder in an amount equal
to the difference between the option price and the amount
realized by the optionholder.
(iii) If the shares acquired upon exercise of an option are disposed
of within the two year period from the date of grant or within
the one year period after transfer of the shares to the
optionholder:
(a) Ordinary income will be realized by the optionholder
at the time of such disposition in the amount of the
excess, if any, of the fair market value of the
shares at the time of such exercise over the option
price, but not in an amount exceeding the excess, if
any, of the amount realized by the optionholder over
the option price.
(b) Short term or long term capital gain will be realized
by the optionholder at the time of any such taxable
disposition in an amount equal to the excess, if any,
of the amount realized over the fair market value of
the shares at the time of such exercise.
(c) Short term or long term capital loss will be realized
by the optionholder at the time of any such taxable
disposition in an amount equal to the excess, if any,
of the option price over the amount realized.
(iv) No deduction will be allowed to the Company with respect to
options granted or shares transferred upon exercise thereof,
except that if a disposition is made by the optionholder
within the two year period or the one year period referred to
above, the Company will be entitled to a deduction in the
taxable year in which the disposition occurred in an amount
equal to the amount of ordinary income realized by the
optionholder making the disposition.
(v) With respect to the exercise of an option and the payment of
the option price solely by the delivery of Common Stock, to
the extent that the number of shares received does not exceed
the number of shares surrendered, no taxable income will be
realized by the optionholder at that time, the tax basis of
the shares received will be the same as the tax basis of the
shares surrendered and the holding period (except for the one
year period referred to above) of the optionholder in the
shares received will include his holding period in the shares
surrendered. To the extent that the number of shares received
exceeds the number of shares surrendered, no taxable income
will be realized by the optionholder at that time, such excess
shares will be considered incentive stock option stock with a
zero basis and the holding period of the optionholder in such
shares will begin on the date such shares are transferred to
the optionholder. If the shares surrendered were acquired as
the result of the exercise of an incentive stock option and
the surrender takes place within two years from the date the
option relating to the surrendered shares was granted or
within one year from such exercise, the surrender will result
in the realization of ordinary income by the optionholder at
that time in the
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amount of the excess, if any, of the fair market value of the
shares surrendered over the option price of such shares. If
any of the shares received are disposed of within one year
after the shares are transferred to the optionholder, the
optionholder will be treated as first disposing of the shares
with a zero basis.
OTHER INFORMATION WITH RESPECT TO OPTIONS
Information with respect to options granted to and held by executive
officers during the Company's last fiscal year is set forth under the caption
"Option/SAR Grants in Last Fiscal Year," above. As of April 4, 1997, the
number of shares subject to outstanding options granted under the Plan to all
executive officers as a group is 488,000; the number of shares subject to
outstanding options granted to all employees as a group, other than executive
officers, is 143,000; the number of shares subject to outstanding options
granted to all current directors who are not executive officers of the Company
as a group is 39,500; the number of shares subject to outstanding options
granted to each nominee for election as a director is 225,000 for Mr. J.
Schottenstein, 5,000 for Mr. S. Schottenstein , 205,000 for Mr. Kolber, 8,000
for Mr. Ketteler, 5,500 for Mr. Doolan, 13,000 for Mr. Marakas, and 8,000 for
Mr. Thompson; and the number of shares subject to outstanding options granted
to all consultants and advisers who render services to the Company as a group
is 89,900. All options granted under the Plan to date have been granted at an
exercise price equal to the fair market value of the Common Stock on the date
of grant, except for 117,000 shares granted at a price below fair market
value. Except for options received by directors under the automatic grant
provisions, which are fully exercisable after one year, substantially all
options granted under the Plan to date are exercisable 20% per year, beginning
on the first anniversary of the date of grant, on a cumulative basis and
remain exercisable for a period of 10 years.
The purposes of the Plan are to promote the growth and profitability of
the Company by increasing the opportunity for key employees, officers, and
directors of, and consultants and advisers who render services to, the Company
to participate as equity owners in the financial success of the Company and to
assist the Company in attracting, retaining, and motivating highly qualified
employees. The Board of Directors believes that, in order to accomplish these
purposes, the Plan should be amended to increase the number of shares
available for issuance. In addition, the SEC recently amended Rule 16b-3 to
remove restrictions on the granting and transferability of options, and the
Board has determined to amend the Plan accordingly. The affirmative vote of
the holders of a majority of the Common Stock of the Company present and
entitled to vote at the Annual Meeting is required to approve the amendments
to the Plan. THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
APPROVAL OF THE AMENDMENTS TO THE 1994 STOCK OPTION PLAN.
REPORT TO BE PRESENTED AT THE MEETING
At the meeting, the Company's Fiscal 1996 Report will be presented to
Shareholders for the year ended February 1, 1997. This report contains
financial statements and the report of Ernst & Young LLP, independent
auditors, with respect to such financial statements. It is anticipated that
representatives of Ernst & Young LLP will be present at the Annual Meeting to
respond to appropriate questions and to make a statement if such
representatives so desire. The Fiscal 1996 Report is not to be regarded as
proxy soliciting material and management does not intend to ask, suggest or
solicit any action from the shareholders with respect to such report.
COST OF SOLICITATION OF PROXIES
The Company will bear the cost of the solicitation of proxies,
including the charges and expenses of brokerage firms and others for
forwarding solicitation material to beneficial owners of stock.
Representatives of the Company may solicit proxies by mail, telegram,
telephone, or personal interview.
Page 19
<PAGE> 21
SHAREHOLDER PROPOSALS
Each year the Board of Directors submits its nominations for election
of directors at the Annual Meeting of Shareholders. Other proposals may be
submitted by the Board of Directors of the shareholders for inclusion in the
Proxy Statement for action at the Annual Meeting. Any proposal submitted by a
shareholder for inclusion in the Proxy Statement for the Annual Meeting of
Shareholders to be held in 1998 must be received by the Company (addressed to
the attention of the Secretary) on or before January 5, 1998. To be submitted
at the meeting, any such proposal must be a proper subject for shareholder
action under the laws of the State of Ohio, and must otherwise conform to
applicable requirements of the Proxy Rules of the Securities and Exchange
Commission.
OTHER MATTERS
The only business which the management intents to present at the
meeting consists of the matters set forth in this statement. The Management
knows of no other matters to be brought before the meeting by any other person
or group. If any other matter should properly come before the meeting, the
proxy enclosed confers upon the persons designated herein authority to vote
thereon in their discretion.
THE COMPANY'S FISCAL 1996 REPORT, INCLUDING FINANCIAL STATEMENTS, WAS
FURNISHED TO SHAREHOLDERS PRIOR TO OR CONCURRENTLY WITH THE MAILING OF THIS
PROXY STATEMENT. EXTRA COPIES OF THE ANNUAL REPORT AND COPIES OF THE COMPANY'S
REPORT ON FORM 10-K TO THE SECURITIES AND EXCHANGE COMMISSION ARE AVAILABLE
UPON REQUEST, DIRECTED TO LAURA A. WEIL, CHIEF FINANCIAL OFFICER OF THE
COMPANY, AT 150 THORN HILL DRIVE, WARRENDALE, PENNSYLVANIA 15086-7528.
Page 20
<PAGE> 22
PROXY -- AMERICAN EAGLE OUTFITTERS, INC.
The undersigned shareholder of American Eagle Outfitters, Inc. hereby
appoints Laura A. Weil and Dale E. Clifton, or any one of them, as
attorneys and proxies with full power of substitution to vote all of
the shares of Common Stock of American Eagle Outfitters, Inc. which
the undersigned is entitled to vote at the Annual Meeting of
Shareholders of American Eagle Outfitters, Inc. to be held at the
Hyatt Hotel on Capital Square, 75 East State Street, Columbus, Ohio on
Wednesday, May 7, 1997, and at any adjournment or adjournments thereof
as follows:
1. ELECTION OF DIRECTORS.
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below). to vote for all nominees listed below.
</TABLE>
(INSTRUCTIONS: Do not check "WITHHOLD AUTHORITY" to vote for only
certain individual nominees. To withhold authority to
vote for any individual nominee, strike a line through
the nominee's name below and check "FOR").
Martin P. Doolan Thomas R. Ketteler George Kolber John L. Marakas
Jay L. Schottenstein Saul Schottenstein David W. Thompson
2. The approval and a adoption of the amendments to the Company's 1994
Stock Option Plan described in the accompanying Proxy Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion to vote upon such other matters as may properly
come before the meeting.
(Continued on Other Side)
(Continued from Other Side)
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS.
Please sign and date this Proxy below and return in the enclosed
envelope.
Date: _____________________ , 1997
----------------------------------
(Signature)
----------------------------------
(Signature)
Signature(s) shall agree with the
name(s) printed on this proxy.
If signing as attorney, executor,
administrator, trustee or
guardian, please give your full
title as such.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Proxy Card
