10-K405

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549-0001

FORM 10-K

x     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended January 29, 2000

OR

¨     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-23760

American Eagle Outfitters, Inc.
(Exact name of registrant as specified in its charter)

Delaware	No. 13-2721761
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

150 Thorn Hill Drive, Warrendale, PA	15086-7528
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (724) 776-4857

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Shares, without par value

           (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to the filing requirements for at least the past 90 days. YES  x NO            

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Aggregate market value of voting stock held by non-affiliates of the registrant, 21,391,503 Common Shares, based on the $37.94 closing sale price on April 1, 2000 was $811,540,145.

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 47,010,494 Common Shares were outstanding at April 1, 2000.

DOCUMENTS INCORPORATED BY REFERENCE 

Part III—Proxy Statement for 2000 Annual Meeting of Stockholders, in part, as indicated.

PART I
ITEM 1.     BUSINESS.

Overview

We are a specialty retailer of all-American casual apparel, accessories, and footwear for men and women between the ages of 16 and 34. We source, design, and market a versatile line of timeless and relaxed clothing classics like jeans, khakis, and T-shirts under our American Eagle Outfitters® and AE® brand names for exclusive sale in our American Eagle Outfitters stores. As of January 29, 2000, we operated 466 stores in 45 states and the District of Columbia.

We opened our first American Eagle Outfitters store in 1977. We are currently one of the largest retailers targeting the highly favorable teenage demographic. We appeal to our growing consumer base by selling attractively priced fashionable items that reflect our lifestyle-based retail branding strategy. Our lifestyle brand concept is incorporated in every aspect of our retail operations. Our designers interpret fashion trends and develop merchandise that has fresh, collegiate appeal for our target customer. Our store layout and design are uniform and convey a natural and youthful brand image. We utilize strong visual representations of active youth in our in-store print advertising. Other marketing, advertising and promotional programs further reinforce our classic American Eagle brand image. We believe the combination of these efforts has created a strong brand identity for American Eagle Outfitters ®.

Organization and History

Until January 2, 1994, our business was operated by Retail Ventures, Inc. and Natco Industries, Inc., two corporations owned principally by members of the Jerome Schottenstein family. Effective on that date, we obtained all of the operating assets and liabilities of the American Eagle Outfitters® operations in exchange for the issuance of shares of our common stock. We lease our office and distribution center from a partnership owned by the Schottenstein Family and Schottenstein Stores Corporation. Shottenstein Stores Corporation also continues to provide us with certain corporate services. See Note 3 of Notes to Consolidated Financial Statements. On November 2, 1998, we changed our state of incorporation from Ohio to Delaware. Effective on April 7, 1999, we completed a plan of reorganization to achieve certain corporate objectives and to implement a holding company structure. As part of this reorganization, we changed our name from Natco Industries, Inc. to American Eagle Outfitters, Inc. and our predecessor, formerly known as American Eagle Outfitters, Inc. changed its' name to AE Stores Company and became our wholly owned operating subsidiary. The transaction did not have a significant impact on our financial statements.

In Fiscal 1999, we formed Eagle Trading Company, a Mexican distribution subsidiary with operations near Mexico City, Mexico.

Effective January 31, 2000, we acquired importing operations from Schottenstein Stores Corporation. The purpose of the acquisition is to integrate the expertise of the importing operation into our supply chain process.

Our financial year is a 52/53 week year that ends on the Saturday nearest to January 31. For tax purposes, we report on a July year-end. As used herein, "Fiscal 1999", "Fiscal 1998", "Fiscal 1997" and "Fiscal 1996" refer to the respective 52-week periods ended January 29, 2000, January 30, 1999, January 31, 1998 and February 1, 1997. "Transition 1996" refers to the twenty-seven week period from July 30, 1995 to February 3, 1996. "Fiscal 2000" refers to the 53-week period ending January 27, 2001.

Our principal offices are located at 150 Thorn Hill Drive, Warrendale, Pennsylvania 15086-7528 and our telephone number is (724) 776-4857.

Brand and Merchandising Strategies

Over the past several years, we have focused on several core brand and merchandising strategies to differentiate ourselves from our competition, improve our profitability and increase sales. These strategies include:

Build the American Eagle Outfitters Brand.

Several years ago, we sharpened the definition of our target customer. Since then we have been focused on our AE brand strategy to provide overall value through the entire shopping experience—marketing, service, merchandise quality, price, fashion, and shopping environment. We created a focused brand image based on a youthful active lifestyle, classic American styles and affordability. Our brand image is communicated through all aspects of our operations, from merchandising to marketing to our store environment.

In Fiscal 1998, we began selling merchandise on our internet site, ae.com, and launched our catalog, AE Magazine. In Fiscal 1999, we experienced increased customer traffic on our internet site, and increased the number and circulation of our catalogs. Increased marketing initiatives further strengthen our brand image. In 1999, we announced several internet partnerships, which link our website to websites of other companies, such as barnesandnoble.com, ESPN, reel.com, and CDNow. We believe these partnerships will add customer traffic and provide complimentary services for our internet customers. Magazine advertising is also an important part of our brand building strategy. We advertise in magazines such as Mademoiselle, Seventeen, Spin, Teen People, In Style and ESPN, whose readers match a segment of the demographic profile of our target customer range.

In order to continue to build brand recognition, we have allocated more resources to marketing. In Fiscal 1999, we spent $27.2 million, or 3.3% of sales, on advertising and marketing which was an increase of almost 66% from $16.4 million, or 2.8% of sales in the prior year.

Merchandising Strategies

An integral part of our strategy is to offer merchandise that reinforces our brand image and serves our target customer through items which are fashion-right and value-priced to drive added sales. We strive to intelligently source merchandise production in order to maximize merchandise margins.

We provide great quality apparel, footwear, and accessories at affordable prices. We believe our prices are competitive with or lower than those of comparable mall-based retailers. We have established relationships with key manufacturers through our own sourcing company to ensure the quality of our goods. Our sourcing and merchandise strategies allow us to execute our affordable pricing strategy while maintaining high quality standards.

Growth Strategies

Our growth strategies are focused on developing and expanding the visibility and availability of a strong brand throughout the United States. The principal elements of our growth strategies include:

Geographical Growth

Our primary store expansion strategy is to continue our geographic expansion throughout the United States and to fill-in existing markets. We currently operate in 45 states, with the highest concentration of locations in Ohio, Pennsylvania, New York, Michigan, Illinois, and Virginia. We opened 80 stores in Fiscal 1999, increasing our store base by nearly 22% and our selling square footage by over 27%. Of our 80 new stores we opened in Fiscal 1999, 27 stores, or approximately 34%, are in new markets in the Northwest and Southwest.

The table below shows certain information relating to our historic store growth:

	Fiscal 1999	Fiscal 1998		Fiscal 1997		Fiscal 1996		Transition 1996
Stores at beginning of period	386	332		303		272		266
Stores opened during the period	80	56		36		38		11
Stores closed during the period	—	(2	)	(7	)	(7	)	(5	)
Total Stores at End of Period	466	386		332		303		272

Continue to Invest in Our Distribution Facility

To support our store expansion strategy, we increased our distribution capacity. Over the past two years, we have invested approximately $9.5 million to upgrade and expand our distribution center and headquarters facility by 120,000 square feet. This investment has lowered our unit payroll costs by 8% in Fiscal 1998 and by an additional 12% in Fiscal 1999.

Mall Types

The American Eagle brand offers customers fashionable merchandise at value-oriented prices, appealing to a broad income demographic. Therefore, we can operate profitably in a variety of mall types. While substantially all stores to be opened in Fiscal 2000 will be in regional shopping malls, we believe that selected street locations in high traffic urban settings and university towns, as well as airports and strip centers, provide attractive expansion opportunities.

Flagship Stores

In 1999, we opened two "flagship" stores, which are larger stores where we offer our customers a broader merchandise selection and more exciting store environment. In July 1999, our first flagship store in San Francisco opened. The store is 8,400 gross square feet, representing our largest store. In December 1999, we opened our second flagship store in the Georgetown area of Washington, D.C. This store is approximately 8,000 gross square feet.

Direct to Consumer Opportunities

In Fiscal 1998, we began selling merchandise through our internet site, ae.com, and launched our catalog, AE Magazine, to further promote sales through alternative distribution channels. Our internet site is an extension of the AE lifestyle that we convey in our stores and our catalog. We offer approximately 80% of our apparel through ae.com and we also provide movie clips, horoscopes, and book selections, all carefully selected and edited for our target customer. Since inception, we have experienced an increase in traffic on our internet site. We also increased our circulation for our catalogs to a total of 4.0 million in Fiscal 1999 from 0.9 million in Fiscal 1998. Fiscal 1999 also included an additional holiday catalog.

Remodel Opportunities

We believe significant opportunities exist to improve our sales productivity because we are in the early stages of the development of our brand. Our brand provides opportunities for expansion of existing product categories into additional markets, as well as expansion into complimentary product lines. For example, women's apparel has increased as a percentage of total sales from 24% in Fiscal 1995 to 53% in Fiscal 1999. Additionally, in Fiscal 1999, we introduced personal care products in 75 of our stores, including a unisex fragrance, Alive.

In order to maintain a balanced presentation in each merchandise category and to accommodate additional product categories, we are seeking larger new store locations and increasing selling square footage in store remodels. Our new stores planned for Fiscal 2000 will average over 5,500 square feet compared to 4,800 for Fiscal 1999 openings. We remodeled 25 stores in Fiscal 1999, and we tested a new store design in five locations. We believe this new format will improve the overall shopping experience for our customers by providing innovative design features and incorporating the latest store technologies.

Merchandise Categories

We design and sell virtually all of our merchandise under our own brands. Our merchandising strategy focuses on providing a carefully selected, in-season, merchandise assortment within our principal merchandise groups: mens and womens apparel, footwear and accessories. Merchandise is regularly updated with new styles, colors and fabrics. We offer quality fashionable interpretations of fundamental wardrobe items such as jeans, sweaters, khakis, T-shirts, woven shirts, and fleece.

The following table shows the approximate percentage of net sales attributable to each merchandise group:

	Fiscal 1999		Fiscal 1998		Fiscal 1997		Fiscal 1996		Transition 1996
Men's apparel	39	%	40	%	41	%	36	%	52	%
Women's apparel	53	%	52	%	50	%	47	%	20	%
Footwear and accessories —men's and women's	8	%	8	%	9	%	17	%	18	%
	100	%	100	%	100	%	100	%	100	%

Store Operations

Our store operations are managed by an Executive Vice President and Director of Store Operations, seven regional managers and fifty-two district managers, each of whom supervises an average of nine stores. A typical store has a store manager, two assistant store managers, four full-time and six to twelve part-time sales associates, depending on the season. The hiring and training of new employees is the responsibility of the store manager and district manager, and we have established training and operations procedures to assist them.

Our continued success is dependent in part on our ability to attract, retain, and motivate qualified employees. Our attractive incentive compensation program and creative training program are vital to this success. Sales associates are trained to provide superior customer service in order to maximize sales, and to ensure that store merchandising plans are executed properly and to minimize inventory shrinkage. We utilize AE Digital University, a state-of-the-art in-store training curriculum to provide on-site training and skills development to sales associates and managers.

During Fiscal 1998, we implemented staff scheduling software to improve productivity and customer service by better aligning store staffing with expected customer traffic. In Fiscal 1999, this software, along with other technical and planning process improvements, has contributed to improving the productivity of store payroll expense.

To ensure that we maximize our investment when we expand into new markets, we have a dedicated "new store opening" team. This team combines the expertise of experienced store managers and marketing and visual professionals so that we open new stores to achieve maximum productivity.

Regional, district, and store managers receive performance bonuses based on sales, payroll, and shrinkage goals for their stores. Sales associates and assistant managers are eligible for a number of incentives, including cash awards and prizes for achieving certain sales goals. In Fiscal 1997, we introduced AE Rewards, an incentive program that enables hourly sales associates to earn points for achieving sales goals. These points can be redeemed for a variety of prizes that they can select from an awards catalog.

Store Environment

We consider our stores and in-store marketing as principal elements that signify and convey the image of our brand. Our store design, furniture, fixtures and music are carefully coordinated to create a store environment that is consistent with the casual, fashionable image of the brand. To promote consistency and name recognition, our stores are designed to be substantially identical, with a warm and casual ambiance created by the use of worn hardwood floors, light colored wooden fixtures and off white walls. Large in-store photographs depict young people enjoying an active, casual lifestyle with friends and family and reflect our casual, "live your life" attitude. We believe that our store ambiance is welcoming and comfortable and promotes a pleasant shopping experience. We believe that our current store design in the majority of our stores is effective, meeting the needs of our target customer. However, we understand that we must evolve and react quickly to the rapidly changing retail environment. Accordingly, in Fiscal 1999, we developed a new AE store design, which was reflected in five stores opened in 1999. The new format enhances the casual atmosphere of our store by providing comfortable seating areas, stools in the checkout area, enhanced music systems and video screens to invite the customer to relax and enjoy their shopping experience. We feel that this enhanced format will improve the overall shopping experience of our customers. Beginning in Fiscal 2000, all new stores will reflect this re-design format.

We regularly refurbish and renovate our stores to provide better customer service and upgrade to our newest store design, particularly in connection with lease renewals. In Fiscal 1999, we renovated 25 older stores at a total cost of $9.4 million. Also, we spent $1.4 million in fixture and leasehold retrofits to existing stores.

Store Locations

Our stores average approximately 4,400 gross square feet and approximately 3,500 on a selling square foot basis. At January 29, 2000, we operated 466 stores in 45 states and the District of Columbia shown below:

Alabama	Indiana	Missouri	Oregon
11 stores	14 stores	12 stores	3 stores
Arkansas	Iowa	Nebraska	Pennsylvania
3 stores	12 stores	4 stores	36 stores
California	Kansas	Nevada	Rhode Island
3 stores	5 stores	3 stores	1 store
Colorado	Kentucky	New Hampshire	South Carolina
5 stores	6 stores	4 stores	8 stores
Connecticut	Louisiana	New Jersey	South Dakota
9 stores	8 stores	16 stores	2 stores
Delaware	Maine	New Mexico	Tennessee
1 store	1 store	2 stores	14 stores
District of Columbia	Maryland	New York	Texas
1 store	12 stores	28 stores	21 stores
Florida	Massachusetts	North Carolina	Utah
20 stores	16 stores	18 stores	5 stores
Georgia	Michigan	North Dakota	Vermont
16 stores	22 stores	3 stores	2 stores
Idaho	Minnesota	Ohio	Virginia
1 store	10 stores	28 stores	21 stores
Illinois	Mississippi	Oklahoma	Washington
22 stores	5 stores	5 stores	10 stores
			West Virginia
			7 stores
			Wisconsin
			10 stores

Purchasing

We purchase merchandise from approximately 110 North American and foreign suppliers who either manufacture their own merchandise or supply merchandise manufactured by others, or both. During Fiscal 1999, approximately 21% of our merchandise was purchased from North American suppliers and the remaining 79% from foreign suppliers. Since we rely on a small number of overseas sources for a significant portion of our purchases, any event causing the disruption of imports including the insolvency of a significant supplier, the imposition of additional import restrictions, or political or economic disruptions in a country where our vendor factories are located, could have a material adverse affect on our operations. We do not maintain any long-term or exclusive commitments or arrangements to purchase from any single supplier.

All of our suppliers receive a vendor compliance manual that describes our quality standards and shipping instructions. We maintain a quality control department at our distribution center to inspect incoming merchandise shipments for uniformity of sizes and colors, and for overall quality of manufacturing. Periodic quality inspections are also made by our employees at manufacturing facilities in the United States and internationally to identify potential problems prior to shipment of merchandise. Additionally, our merchant group works directly with many factories to address quality control issues before merchandise is shipped.

Merchandise Design

A key element of our business strategy is to design products geared to a well-defined customer group and which embody the image of a casual, youthful lifestyle. Our internal design group is divided primarily into separate mens and womens design teams. The product development process begins with senior management in the merchandising and design areas, who develop seasonal merchandise themes and concepts. These design themes and concepts are developed through domestic and foreign travel, retail shopping and an awareness of fashions and activities currently favored by the young, active segment of the population. These themes and concepts are then used to create items for the merchandise line that are then developed by the designers. The designers collaborate with our buyers to create a coordinated merchandise presentation for each season, which is augmented by periodic, in-season merchandise updates.

Merchandise Inventory, Replenishment and Distribution

Purchase orders, executed by our buyers, are entered into the computerized merchandise data system at the time of order. Merchandise is normally shipped directly from vendors to our central distribution center near Pittsburgh, PA. Upon receipt, merchandise is entered into the merchandise data system, then processed and prepared for shipment to the stores or forwarded to a warehouse holding area to be used as store replenishment goods. The allocation of merchandise among stores varies based upon a number of factors relating to the specific characteristics of each store such as geographic location, customer demographics or store size. Merchandise is shipped to the stores two to three times per week depending upon the season and store requirements.

The specialty retail apparel business fluctuates according to changes in the economy and customer preferences, dictated by fashion and season. These fluctuations especially affect the inventory owned by apparel retailers, since merchandise usually must be ordered well in advance of its selling season. While we endeavor to test many merchandise items before ordering large quantities, we are still vulnerable to changing fashion trends and fluctuations in customer demands. In addition, the cyclical nature of the retail business requires that we carry a significant amount of inventory, especially prior to peak selling seasons, when we build up our inventory levels. We enter into agreements for the manufacture and purchase of our private label apparel well in advance of the applicable selling season. As a result, we are vulnerable to changes in consumer demand, pricing shifts, and the timing and selection of merchandise purchases.

We continually review our inventory levels in order to identify slow-moving merchandise and generally use markdowns to clear this merchandise. Markdowns may occur when inventory exceeds customer demand for reasons of style, seasonal adaptation, changes in customer preference, lack of consumer acceptance of fashion items, competition, or we determine that the inventory in stock will not sell at its currently ticketed price. Such markdowns may have an adverse impact on our earnings, depending on the extent and amount of inventory affected.

Customer Credit

We offer our customers an American Eagle Outfitters private label credit card. We have no liability to the card issuer for bad debt expense, provided that purchases are made in accordance with the issuing banks' procedures. We believe that providing in-store credit through use of our proprietary credit card promotes incremental sales and encourages customer loyalty. Our credit card holders receive special promotional offers and advance notice of all in-store sales events. The names and addresses of these preferred customers are added to our customer database which is used primarily for direct mail purposes. Customers may also pay for their purchases with American Express®, Discover®, MasterCard®, Visa ®, cash or check. During Fiscal 1999, approximately 48% of all purchases were paid for with credit cards.

In November 1998, we replaced our gift certificate program with stored value gift cards. Gift cards with values from $10 to $200 can be purchased. When the recipient uses the gift card, the value of the purchase is electronically deducted and any remaining value can be used for future purchases. During Fiscal 1999, we sold 98% more in gift cards and certificates than the prior year. In connection with stored value cards and gift certificates, a deferred revenue amount is established upon the purchase of the card by the customer and revenue is recognized upon redemption and purchase of the merchandise.

Marketing and Advertising

Our marketing and advertising strategies are designed to increase consumer recognition of our merchandise and establish American Eagle Outfitters as a differentiated lifestyle brand. We currently focus our advertising efforts on direct mail, in-store signage, promotional events, and print media. Seasonally, we review and consider other means of advertising.

In-store advertising is primarily communicated through large graphics that portray men and women engaged in activities associated with an active lifestyle. Promotions, contests and gifts with purchase are also offered to customers, often in conjunction with corporate partners whose target customer demographics are similar to ours. Examples of co-marketing efforts include music compact discs produced in conjunction with a national music magazine and contests for prizes including mountain bikes, four-wheel drive vehicles and vacation trips.

We utilize direct mail to announce upcoming sales, the arrival of new merchandise and to promote our image. Promotional materials are also included in the monthly statement for our private label credit card. We use our own list of customers and database mining techniques to target direct mail materials to existing and potential customers.

We also utilize print advertising to build recognition of our brand. Our print ads appear in nationwide publications with reader demographic profiles that match a segment of our target customer range.

Information Systems

Our computer information systems consist of a full range of retail financial and merchandising systems which include merchandise planning, distribution center processing, inventory allocation, shipment processing, in-store systems, sales reporting, and financial processing and reporting.

In Fiscal 1999, our computer disaster recovery planning was expanded to cover all aspects of our business and we now have a detailed execution plan in the event of a major business disruption. During 1999, we made significant technological improvements in our stores including testing of in-store computers, implementing thermal printers, installing hand-held devices in our stores to increase efficiency in price changes and re-ticketing merchandise. A new merchandise allocation software application was implemented to support increased sales volumes. We initiated the planning, design, and testing of a new warehouse management system to be fully implemented in Spring 2000. We standardized hardware and software for both our home office and field personnel.

In June 1999, we completed the testing and implementation of software and systems to ensure that they successfully responded to the Year 2000 change. As a result of these efforts, we experienced no significant disruptions in mission critical information technology and non-information technology systems. We will continue to monitor our mission critical computer applications and those of our suppliers and business partners throughout the year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly.

During 2000, we plan to install in-store computers in all our stores to link them with the home office. We will modify our programs related to our hand-held devices to encompass inventory receiving and transfer processing. We will begin implementation of supply chain software and begin creating a data warehouse for our organization.

Competition

The retail apparel industry is very competitive. We compete primarily on the basis of quality, fashion, service, selection and price. We compete with various divisions of The Limited and The Gap, as well as with retail chains such as Abercrombie & Fitch, The Buckle, Pacific Sunwear, and other national, regional and local retailers catering to a youthful customer. We also compete with the casual apparel and footwear departments of department stores, often in the same mall as our stores. Many of our competitors are considerably larger and have substantially greater financing, marketing, and other resources.

Trademarks and Service Marks

We have registered American Eagle Outfitters® in the U.S. Patent and Trademark Office ("PTO") as a trademark for clothing products and for a variety of non-clothing products, and as a service mark for retail clothing store service. We have also registered AE ® as a trademark for clothing products, and AEO® as a trademark for clothing products and a variety of non-clothing products. AE® is pending for a variety of non-clothing and personal care items. American Eagle has applied to the PTO for the registration of AE™ as a trademark for footwear that will be registered in the near future, and AE Khaki™, and AE Supply™ as trademarks for clothing products. Additionally, the on-line retail clothing trademark, @e, is registered as a trademark.

Employees

As of March 1, 2000, we had 8,149 employees, of whom 1,754 were full-time salaried employees, 609 were full-time hourly employees and 5,786 were part-time and seasonal hourly employees. We consider our relationship with our employees to be satisfactory.

ITEM 2.     PROPERTIES.

We rent our headquarters and distribution facilities near Pittsburgh, PA from Linmar Realty Company ("Linmar"), a related party. Our headquarters and distribution center occupy approximately 430,000 square feet, 49,000 square feet of which is used for executive, administrative and buying offices. This includes an expansion of 120,000 square feet in September 1999. As a result of this expansion, a new lease was entered into which expires on December 31, 2020. We also lease additional office space comprising approximately 20,000 square feet near Pittsburgh, PA and approximately 15,000 square feet for our design and production offices in New York, NY. These leases expire in August 2004 and October 2008, respectively. In addition, we lease a distribution facility near Mexico City, Mexico for approximately 42,000 square feet.

All of our stores are leased. The store leases generally have terms of approximately 10 years. Most of these leases provide for base rent and require the payment of a percentage of sales as additional rent when sales reach specified levels. Under our store leases, we are typically responsible for maintenance and common area charges, real estate taxes and certain other expenses. We have generally been successful in negotiating renewals as leases near expiration.

ITEM 3.    LEGAL PROCEEDINGS.

We are subject to various claims and legal actions that arise in the ordinary course of our business. We believe that such claims and legal actions, individually and in the aggregate, will not have a material adverse effect on our business or our financial condition.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Our stock is traded on the Nasdaq National Market under the symbol "AEOS". The following table sets forth the range of high and low sales prices of the common stock as reported on The Nasdaq National Market during the periods indicated. As of March 20, 2000, there were 197 stockholders of record. However, when including associates who own shares through the Company's 401(k) retirement plan and employee stock purchase plan and others holding shares in broker accounts under street name, the Company estimates the shareholder base at approximately 20,000. The following information reflects the January 1998, May 1998, and May 1999 stock splits.

For the Quarters Ended	Market Price
	High		Low
April 1998	$	20.79	$	7.75
July 1998	$	26.75	$	16.57
October 1998	$	27.31	$	14.13
January 1999	$	34.19	$	21.88
April 1999	$	43.88	$	31.31
July 1999	$	51.69	$	37.88
October 1999	$	57.63	$	32.69
January 2000	$	49.63	$	34.56

We have never paid cash dividends and presently anticipate that all of our future earnings will be retained for the development of our business and the share repurchase program (See Note 12 of the Consolidated Financial Statements). We do not anticipate paying cash dividends in the foreseeable future. The payment of any future dividends will be at the discretion of our Board of Directors and will be based on future earnings, financial condition, capital requirements and other relevant factors.

ITEM 6.     SELECTED CONSOLIDATED FINANCIAL DATA.

Selected Consolidated Financial Data (dollars and shares in thousands, except per share amounts and square foot data)

	For the Years Ended
	January 29,		January 30,		January 31,		February 1,		February 3,
	2000		1999		1998		1997		1996(2)
									(Unaudited)
Net sales (1)	$   832,104		$   587,600		$   405,713		$    326,404		$    340,323
Gross profit	$   356,508		$   234,511		$   136,967		$       98,756		$       90,908
Gross profit as a percentage of sales	42.8	%	39.9	%	33.8	%	30.3	%	26.7	%
Operating income (loss) (1)	$   149,514		$     87,053		$     31,120		$         8,859		($ 1,073	)
Net income (loss)	$     90,660		$     54,118		$     19,537		$         5,925		($ 1,334	)
Net income (loss) as a percentage of sales	10.9	%	9.2	%	4.8	%	1.8	%	(0.4	%)
Basic earnings (loss) per share	$          1.96		$          1.20		$          0.44		$           0.13		($ 0.03	)
Diluted earnings (loss) per share	$          1.86		$          1.13		$          0.43		$           0.13		($ 0.03	)
Weighted average basic shares outstanding	46,370		45,281		44,181		43,899		43,890
Weighted average diluted shares outstanding	48,742		47,952		45,633		45,388		43,890
Total assets	$   354,628		$   210,948		$   144,795		$    110,438		$       95,363
Total cash and short-term investments	$   168,492		$     85,300		$     48,359		$       34,326		$       19,986
Working capital	$   174,137		$     94,753		$     48,486		$       34,378		$       24,775
Stockholders' equity	$   264,501		$   151,197		$     90,808		$       71,056		$       63,796
Average return on stockholders' equity	43.6	%	44.7	%	24.1	%	8.8	%	(2.3	%)
Current ratio	2.97		2.59		1.90		1.87		1.78
Total non-current liabilities	$        1,702		--		--		--		--
Long term debt	--		--		--		--		--
Total stores at year-end	466		386		332		303		273
Comparable store sales increase (decrease)	20.9	%	32.1	%	15.1	%	(1.8	%)	6.6	%
Net sales per average selling square foot (3)	$           569		$           497		$           391		$            340		$            381
Total selling square feet at end of period	1,625,731		1,276,889		1,080,657		990,980		916,796
Net sales per average gross square foot (3)	$           451		$           388		$           303		$            261		$            288
Total gross square feet at end of period	2,039,380		1,624,933		1,393,361		1,285,598		1,200,816

(1) The prior year amounts have been reclassified to conform to the January 29, 2000 classifications.

(2) The 53-week period ended February 3, 1996 includes 9 months of sales, or $21.5 million, from outlet stores sold in October 1995. It also includes 6 months of operations from the year ended July 29, 1995, representing $113.7 million of net sales, $13.7 million of operating loss, and $8.4 million of net loss.

(3) Average net sales per square foot is calculated using retail sales for the period divided by the straight average of the beginning and ending square footage for the period.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

Overview

We achieved record sales and earnings for the year ended January 29, 2000 ("Fiscal 1999"). Our record sales and profitability resulted from our focus on several brand and merchandise strategies developed to enhance our brand image and differentiate us from our competition. During Fiscal 1999, we emphasized these brand and merchandising strategies:

— invested in our brand through increased marketing efforts,

— committed to key merchandise items that are current, value-priced, intelligently-sourced and carefully promoted to maximize sales and profitability,

— premiered a new store design, and

— increased our focus on AE Direct, our internet and catalog business.

During Fiscal 1999, we continued to expand the non-store distribution of our merchandise by providing commerce opportunities on our Internet web site, ae.com, and through catalog promotions. We circulated five catalogs to four million customers, an increase in distribution of 34% over the prior year. In 1999, more customers shopped at our internet store, ae.com than ever before.

We opened 80 new stores, including 2 flagship stores, and upgraded 25 store locations during 1999. We premiered a new store design in five locations. Our goal with this design is to provide a store environment that is inviting and comfortable.

Additionally, we continue to invest in our distribution infrastructure. Over the past two years, we have invested approximately $9.5 million to upgrade our distribution center. This investment has lowered our unit processing costs by 8% in 1998 and by an additional 12% in 1999. Additionally, we increased our distribution and headquarters facility by 120,000 square feet. We believe these investments will continue to improve the efficiency for replenishment and processing of new orders and increase the capacity of our Warrendale facility to 700 stores.

As a result of these initiatives, our sales for Fiscal 1999 increased to $832.1 million compared to $587.6 million for the year ended January 30, 1999 ("the prior year" or "Fiscal 1998"), an increase of 41.6%. Comparable store sales increased 20.9% compared to the prior year. This was achieved on top of a 32.1% comparable store sales increase in Fiscal 1998. Our strong sales performance was driven primarily by a 42.0% increase over last year in the number of merchandise units sold. Additionally, gross profit increased to $356.5 million, or 42.8% of sales, for Fiscal 1999, compared to $234.5 million, or 39.9% of sales for the prior year. The increased gross profit reflected implementation of our brand and merchandising strategies, resulting in improved merchandise mark-ons, decreased markdowns as a percent of sales, and improved leveraging of buying, occupancy and warehousing costs.

Fiscal 1999's record gross profit translated into significantly improved operating profit and net income. Operating profit for Fiscal 1999 increased 71.8% to $149.5 million compared to $87.1 million in the prior year. Net income for Fiscal 1999 was $90.7 million, or $1.86 per diluted share, compared to $54.1 million, or $1.13 per diluted share, in the prior year. Our strong operating performance for the year allowed us to fund working capital requirements and capital expenditure needs entirely through cash flow. No borrowings were required under our $100.0 million credit facility.

Our balance sheet strengthened as a result of the record operating performance achieved in Fiscal 1999. As of January 29, 2000, cash and cash equivalents, including short-term investments, increased by approximately 98% to $168.5 million from $85.3 million as of January 30, 1999. Inventory was $60.4 million compared with $49.7 million at the end of the prior year, and increased approximately 1.0% on a per store basis. Stockholders' equity increased approximately 75% to $264.5 million, or $5.66 per share, at the end of Fiscal 1999 compared to $151.2 million, or $3.28 per share, at the end of the prior period. Average return on stockholders' equity was 43.6% for Fiscal 1999, compared with 44.7% for Fiscal 1998.

Results of Operations

This table shows, for the periods indicated, the percentage relationship to net sales of the listed items included in the Company's Consolidated Statements of Operations.

	For the Fiscal Years Ended
	January 29, 2000		January 30, 1999		January 31, 1998
Net sales	100.0	%	100.0	%	100.0	%
Cost of sales, including certain buying, occupancy and warehousing expenses	57.2		60.1		66.2
Gross profit	42.8		39.9		33.8
Selling, general and administrative expenses	23.4		23.6		24.3
Depreciation and amortization expense	1.4		1.5		1.8
Operating income	18.0		14.8		7.7
Investment income (expense), net	—		0.4		0.3
Income before income taxes	18.0		15.2		8.0
Provision for income taxes	7.1		6.0		3.2
Net income	10.9	%	9.2	%	4.8	%

Comparison of Fiscal 1999 to Fiscal 1998

Net sales increased 41.6% to $832.1 million from $587.6 million. The increase includes:

— $118.8 million from comparable store sales, representing a 20.9% increase over the prior year, and

— $125.7 million from new and noncomparable store sales, and nonstore sales.

The increase resulted primarily from an increase of 42.0% in units sold. We operated 466 stores at the end of Fiscal 1999, compared to 386 stores at the end of Fiscal 1998.

Gross profit increased 52.0% to $356.5 million from $234.5 million. Gross profit as a percent of net sales increased to 42.8% from 39.9%. The increase in gross profit as a percent of net sales, was attributable to a 2.1% increase in merchandise margins as well as a 0.8% improvement in buying, occupancy, and warehousing costs. The increase in merchandise margins resulted from improved mark-ons and a decrease in markdowns as a percent of sales. The improvement in buying, occupancy, and warehousing costs reflects improved leveraging achieved through comparable store sales growth.

Selling, general and administrative expenses increased to $194.8 million from $138.8 million. As a percent of net sales, these expenses decreased to 23.4% from 23.6%. The $56.0 million increase includes:

— $15.4 million in store operating expenses to support new store growth,

— $15.0 million in compensation and benefit costs related to additional personnel to support the increased sales volume and incentive programs that reward employees for the achievement of key performance indicators,

— $8.2 million for direct mail, signage, promotional advertising, and catalog and non-store advertising,

— $7.2 million in additional outside service costs to support the growing business, including the non-store business,

— $2.6 million related to equipment costs, primarily leasing store registers and other hardware, and

— $7.6 million for other selling, general, and administrative expenses.

Depreciation and amortization expense increased to $12.2 million from $8.6 million. As a percent of net sales, these expenses decreased to 1.4% from 1.5%.

For Fiscal 1999, we had interest income of $4.4 million, which was offset by investment expense of $4.6 million. Investment expense resulted from a valuation adjustment related to a marketable equity security during the fourth quarter of Fiscal 1999. Interest income increased from $2.4 million as a result of higher cash reserves available for investment. No borrowings were required under the terms of our line of credit during the current or prior period.

Income before income taxes increased to $149.4 million from $89.5 million. As a percent of net sales, income before income taxes increased to 18.0% from 15.2%. The increase in income before income taxes as a percent of sales was attributable to the factors noted above.

Comparison of Fiscal 1998 to Fiscal 1997

Net sales increased 44.8% to $587.6 million from $405.7 million. The increase includes:

— $127.3 million from comparable store sales, representing a 32.1% increase over the prior year, and

— $54.6 million from new and noncomparable store sales, and nonstore sales.

The increase resulted from an increase of 31.6% in units sold, as well as an 8.8% increase in prices. We operated 386 stores at the end of Fiscal 1998, compared to 332 stores at the end of Fiscal 1997.

Gross profit increased to $234.5 million from $137.0 million. Gross profit as a percent of net sales increased to 39.9% from 33.8%. The increase in gross profit as a percent of net sales, was attributable to a 3.6% increase in merchandise margins as well as a 2.5% improvement in buying, occupancy, and warehousing costs. The increase in merchandise margins resulted from a decrease in markdowns as a percent of sales, and improved mark-ons. This improvement in buying, occupancy, and warehousing costs reflects improved leveraging achieved through comparable store sales growth.

Selling, general and administrative expenses increased to $138.8 million from $98.5 million. As a percent of net sales,these expenses decreased to 23.6% from 24.3%. The $40.3 million increase includes:

— $16.9 million in compensation costs to support increased sales and new incentive programs,

— $9.0 million for general services purchased, supplies, and other expenses,

— $7.8 million in store operating expenses to support new store growth,

— $5.4 million for increased promotional advertising, direct mail, catalog and Internet development costs, and

— $1.2 million related to costs in connection with the Natco merger.

Depreciation and amortization expense increased to $8.6 million from $7.3 million. As a percent of net sales, these expenses decreased to 1.5% from 1.8%.

Interest income increased to $2.4 million from $1.2 million as a result of higher cash reserves available for investment. No borrowings were required under the terms of our line of credit during the current or prior period.

Income before income taxes increased to $89.5 million from $32.3 million. As a percent of net sales, income before income taxes increased to 15.2% from 8.0%. The increase in income before income taxes as a percent of sales was attributable to the factors noted above.

Liquidity and Capital Resources

Our primary source of cash in Fiscal 1999 was from operations. Additionally, maturity of our short-term investments resulted in proceeds of $38.8 million. Our primary uses of cash included $124.2 million to purchase short-term investments, $45.6 million in capital expenditures, and $10.7 million to support inventory increases for anticipated sales and new store growth. Working capital at year-end was $174.1 million for Fiscal 1999, $94.8 million for Fiscal 1998, and $48.5 million for Fiscal 1997. The increase in total cash during Fiscal 1999 resulted primarily from the increase in cash provided by operating activities.

For Fiscal 1999, the source of the $132.9 million of cash provided by operating activities was net income adjusted for non-cash charges for depreciation and amortization. This cash was used primarily for capital expenditures and to purchase short-term investments that can be sold at any time. The remainder of the cash flow provided by operating activities is being retained for new store growth, store remodels, system enhancements, and other capital expenditures. We fund merchandise purchases through operating cash flow.

At January 29, 2000, we had an unsecured demand lending arrangement with a bank to provide a $100.0 million line of credit at either the lender's prime lending rate (8.50% at January 29, 2000) or a negotiated rate such as LIBOR. The facility has a limit of $40.0 million to be used for direct borrowing. No borrowings were required against the line during Fiscal 1999. At January 29, 2000, letters of credit in the amount of $56.9 million were outstanding leaving a remaining available balance on the line of $43.1 million.

Capital expenditures, net of construction allowances, totaled $45.6 million for Fiscal 1999. These expenditures included:

— $18.8 million related to the addition of 80 new stores,

— $9.4 million for 25 remodeled locations,

— $4.0 million in improvements to our distribution center,

— $2.8 million in warehousing systems costs,

— $2.2 million in improvements to our corporate offices,

— $1.7 million in systems improvements,

— $1.4 million in fixture and leasehold retrofits to existing stores,

— $1.1 million related to future store openings, and

— $4.2 million in other capital expenditures.

We expect capital expenditures for Fiscal 2000 to total approximately $118 million. We plan to open approximately 90 stores during Fiscal 2000 at an estimated cost of $39 million. Additionally, we will select approximately 40 locations to upgrade to our newest store design in Fiscal 2000 for an estimated cost of $17 million. In Fiscal 2000, we plan to start construction on a second distribution facility estimated to cost approximately $45 million. This will allow us to continue to improve replenishment and processing of new orders and increase the capacity of our distribution facilities to approximately 1,400 stores. Additionally, we plan to spend approximately $9 million to install new systems including both hardware and software for our stores, corporate office, and existing distribution facility. We plan to fund these capital expenditures primarily through available cash, investments, and cash flow from operations. These forward-looking statements will be influenced by our financial position, consumer spending, availability of financing, and the number of acceptable mall store leases that may become available.

Our growth strategy includes the possibility of growth through acquisitions. We periodically consider and evaluate acquisitions and opportunities to support future growth and may undertake acquisitions in 2000. At this time we have not committed to any material future acquisition. In the event we did pursue material future acquisitions, such actions could require additional equity or debt financing, which we would seek to obtain as required. There can be no assurance that we will be successful in closing any potential acquisition transaction, or that any acquisition we undertake will increase our profitability.

Income Taxes

We had deferred tax assets of $17.2 million at January 29, 2000 which resulted from financial and tax accounting differences. We have had taxable income during each of the past three tax years and anticipate that future taxable income will be able to recover the full amount of the deferred tax asset. Assuming a 40% effective tax rate, we will need to recognize pre-tax net income of $43.0 million in future periods to recover existing deferred tax amounts. See Note 8 of the Consolidated Financial Statements.

Impact of Inflation

We do not believe that the relatively modest levels of inflation experienced in the United States in recent years have had a significant effect on our net sales or our profitability. Substantial increases in cost, however, could have a significant impact on our business and the industry in the future.

Impact of Year 2000

In prior years, we discussed the nature and progress of our plans to become Year 2000 ready. In June 1999, we completed our correction phase which included repair and resolution and testing and implementation of software and systems. As a result of these efforts, we experienced no significant disruptions in mission critical information technology and non-information technology systems and we believe those systems successfully responded to the Year 2000 date change. The total cost of the Year 2000 project was $2.0 million and was funded through cash flows from operations. Of the total cost, $0.5 million relates to hardware and software which was capitalized. The remaining costs were expensed as incurred and include salaries, incentive compensation and third party consulting services. We will continue to monitor our mission critical computer applications and those of our suppliers and business partners throughout the year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly.

Safe Harbor Statement, Business Risks, and Seasonality

This report contains various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent our expectations or beliefs concerning future events, including the following:

— the planned opening of approximately 90 stores in Fiscal 2000,

— the selection of approximately 40 stores for remodeling,

— the opening of an additional distribution facility, and

— the possibility of growth through acquisitions.

We caution that these statements are further qualified by factors that could cause our actual results to differ materially from those in the forward-looking statements, including without limitation, the following:

— our ability to anticipate and respond to changing consumer preferences and fashion trends in a timely manner,

— decline in demand for our merchandise,

— the ability to obtain suitable sites for new stores at acceptable costs,

— the integration of new stores into existing operations,

— customer acceptance of our new store design,

— our ability to successfully acquire and integrate other businesses,

— the integration of our additional distribution facility into existing operations,

— the expansion of buying and inventory capabilities,

— the hiring and training of qualified personnel,

— the availability of capital,

— the effect of overall economic conditions and consumer spending patterns,

— the effect of changes in weather patterns,

— the change in currency and exchange rates, duties, tariffs, or quotas, and

— the effect of competitive pressures from other retailers.

The impact of the above factors, some of which are beyond our control, may cause our actual results actually to differ materially from expected results in these statements and other forward-looking statements we may make from time-to-time.

Historically, our operations have been seasonal, with a significant amount of net sales and net income occurring in the fourth fiscal quarter, reflecting increased demand during the year-end holiday selling season and, to a lesser extent, the third quarter, reflecting increased demand during the back-to-school selling season. During Fiscal 1999, these periods accounted for approximately 56% of our sales. As a result of this seasonality, any factors negatively affecting us during the third and fourth fiscal quarters of any year, including adverse weather or unfavorable economic conditions, could have a material adverse effect on our financial condition and results of operations for the entire year. Our quarterly results of operations also may fluctuate based upon such factors as the timing of certain holiday seasons, the number and timing of new store openings, the amount of net sales contributed by new and existing stores, the timing and level of markdowns, store closings, refurbishments and relocations, competitive factors, weather and general economic conditions.

ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

	January 29, 2000		January 30, 1999		January 31, 1998
Assets
Current assets:
Cash and cash equivalents		$   76,581		$   71,940		$   48,359
Short-term investments		91,911		13,360		—
Merchandise inventory		60,375		49,688		36,278
Accounts and note receivable, including related party		13,471		8,560		7,647
Prepaid expenses and other		6,640		2,757		5,388
Deferred income taxes		13,584		8,199		4,801
Total current assets		262,562		154,504		102,473
Fixed assets:
Fixtures and equipment		52,158		36,307		25,842
Leasehold improvements		70,403		46,996		35,978
		122,561		83,303		61,820
Less: Accumulated depreciation		37,635		29,933		23,273
		84,926		53,370		38,547
Other assets, less accumulated amortization		7,140		3,074		3,775
Total assets		$ 354,628		$ 210,948		$ 144,795
Liabilities and stockholders' equity
Current liabilities:
Accounts payable		$   30,700		$   18,551		$   24,606
Accrued compensation and payroll taxes		21,307		17,739		9,227
Accrued rent		17,755		13,042		7,909
Accrued income and other taxes		7,927		4,773		9,715
Unredeemed stored value cards and gift certificates		7,703		3,372		1,703
Other liabilities and accrued expenses		3,033		2,274		827
Total current liabilities		88,425		59,751		53,987
Commitments and contingencies		—		—		—
Total noncurrent liabilities		1,702		—		—
Stockholders' equity		264,501		151,197		90,808
Total liabilities and stockholders' equity		$ 354,628		$ 210,948		$ 144,795

See Notes to Consolidated Financial Statements

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

	For the Years Ended
	January 29, 2000		January 30, 1999		January 31, 1998
Net sales		$ 832,104		$ 587,600		$ 405,713
Cost of sales, including certain buying, occupancy and warehousing expenses		475,596		353,089		268,746
Gross profit		356,508		234,511		136,967
Selling, general and administrative expenses		194,795		138,847		98,529
Depreciation and amortization expense		12,199		8,611		7,318
Operating income		149,514		87,053		31,120
Investment income (expense), net		(160	)	2,436		1,158
Income before income taxes		149,354		89,489		32,278
Provision for income taxes		58,694		35,371		12,741
Net income		$  90,660		$  54,118		$  19,537
Basic earnings per common share		$      1.96		$       1.20		$       0.44
Diluted earnings per common share		$       1.86		$      1.13		$      0.43
Weighted average common shares outstanding - basic		46,370		45,281		44,181
Weighted average common shares outstanding - diluted		48,742		47,952		45,633

See Notes to Consolidated Financial Statements

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the years ended January 29, 2000, January 30, 1999, and January 31, 1998

(In thousands)

	Shares (1)	Common Stock	Contributed Capital		Retained Earnings		Treasury Stock		Deferred Compensation Expense		Other Comprehensive Loss		Stockholders' Equity
Balance at February 1, 1997	9,918	$   99	$58,299		$   17,119		$(1,625	)	$(2,836	)	$       —		$   71,056
Net income and comprehensive income	—	—	—		19,537		—		—		—		19,537
Exercise of stock options	115	1	973		—		—		—		—		974
Tax benefit realized on exercised stock options and vested restricted stock	—	—	277		—		—		—		—		277
Investment in Prophecy, Ltd.	—	—	(1,350	)	(900	)	—		—		—		(2,250	)
Restricted stock and stock option compensation	—	—	370		—		—		844		—		1,214
Three-for-two stock split-Jan. 5, 1998	4,978	50	(50	)	—		—		—		—		—
Balance at January 31, 1998	15,011	150	58,519		35,756		(1,625	)	(1,992	)	—		90,808
Net income and comprehensive income	—	—	—		54,118		—		—		—		54,118
Exercise of stock options	426	4	1,776		—		—		—		—		1,780
Tax benefit realized on exercised stock options and vested restricted stock	—	—	2,255		—		—		—		—		2,255
Restricted stock and stock option compensation	—	—	—		—		—		1,336		—		1,336
Restricted stock grant	64	1	1,417		—		345		(1,763	)	—		—
Merger costs incurred by Natco	—	—	900		—		—		—		—		900
Three-for-two stock split-May 8, 1998	7,554	76	(76	)	—		—		—		—		—
Two-for-one stock split-May 3, 1999	23,055	230	(230	)	—		—		—		—		—
Balance at January 30, 1999	46,110	461	64,561		89,874		(1,280	)	(2,419	)	—		151,197
Exercise of stock options	630	6	2,670		—		—		—		—		2,676
Tax benefit realized on exercised stock options and vested restricted stock	—	—	16,445		—		—		—		—		16,445
Restricted stock and stock option grant	—	—	6,794		—		—		(6,794	)	—		—
Restricted stock and stock option compensation	—	—	—		—		—		5,809				5,809
Retirement of treasury stock	—	—	(1,280)		—		1,280		—				—
Comprehensive income:
Net income	—	—	—		90,660		—		—		—		90,660
Unrealized loss on     investments, net of tax	—	—	—		—		—		—		(2,286	)	(2,286	)
Total comprehensive income	—	—	—		—		—		—		—		88,374
Balance at January 29, 2000	46,740	$467	$89,190		$180,534		$        —-		$(3,404	)	$(2,286	)	$264,501

(1) 125 million authorized, 47 million , 46 million, and 45 million issued and outstanding, $.01 par value common stock at January 29, 2000, January 30, 1999, and January 31, 1998, respectively. The Company has 5 million authorized with none issued or outstanding $.01 par value preferred stock at January 29, 2000.

See Notes to Consolidated Financial Statements

AMERICAN EAGLE OUTFITTERS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	For the Years Ended
	January 29, 2000		January 30, 1999		January 31, 1998
Operating activities:
Net income	$ 90,660		$ 54,118		$ 19,537
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	12,199		8,611		7,318
Loss on impairment and write-off of fixed assets	1,907		1,467		2,292
Restricted stock compensation	5,809		1,336		1,214
Deferred income taxes	(7,214	)	(2,753	)	(496	)
Investment expense	4,554		—		—
Merger costs incurred by Natco	—		900
Changes in assets and liabilities:
Merchandise inventory	(10,687	)	(13,410	)	(8,903	)
Receivables	(4,911	)	(913	)	(2,611	)
Prepaid and other	(6,205	)	2,445		(1,578	)
Receivables from officers	—		—		376
Accounts payable	12,121		(5,400	)	(1,657	)
Unredeemed stored value cards and gift certificates	4,331		1,669		(286	)
Accrued liabilities	30,348		11,751		10,962
Total adjustments	42,252		5,703		6,631
Net cash provided by operating activities	132,912		59,821		26,168
Investing activities:
Capital expenditures	(45,556	)	(24,913	)	(12,592	)
Purchase of short-term investments	(124,166	)	(54,559	)	—
Sale of short-term investments	38,775		41,199		—
Investment in Prophecy, Ltd.	—		—		(900	)
Net cash used for investing activities	(130,947	)	(38,273	)	(13,492	)
Financing activities:
Net proceeds from stock options exercised	2,676		2,033		1,357
Net cash provided by financing activities	2,676		2,033		1,357
Net increase in cash and cash equivalents	4,641		23,581		14,033
Cash and cash equivalents —beginning of period	71,940		48,359		34,326
Cash and cash equivalents —end of period	$76,581		$71,940		$48,359

See Notes to Consolidated Financial Statements

AMERICAN EAGLE OUTFITTERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED JANUARY 29, 2000

1.     Business Operations and Basis of Presentation

American Eagle Outfitters, Inc. (the "Company") is a specialty retailer of all-American casual apparel, accessories, and footwear for men and women between the ages of 16 and 34. The Company designs, markets, and sells its own brand of versatile, relaxed, and timeless classics like AE dungarees, khakis, and T-shirts, providing high quality merchandise at affordable prices. The Company operates retail stores located primarily in regional enclosed shopping malls principally in the Midwest, Northeast, and Southeast. The Consolidated Financial Statements include the accounts of the Company and its wholly-owned operating, royalty, investment, sourcing, and Mexican distribution subsidiaries. All inter-company transactions have been eliminated.

The following table sets forth the approximate percentage of net sales attributable to each merchandise group for each of the periods indicated:

	For the Years Ended
	January 29, 2000		January 30, 1999		January 31, 1998
Mens apparel	39	%	40	%	41	%
Womens apparel	53	%	52	%	50	%
Footwear and accessories —men's and women's	8	%	8	%	9	%
Total	100	%	100	%	100	%

Effective May 4, 1997, the Company acquired the operations of Prophecy, Ltd. partnership ("Prophecy"), a New York-based production and sourcing company. Prior to the acquisition, the majority partner of Prophecy was a related party. The goals of the acquisition were to leverage the talent and expense of the Company's New York design office and to use Prophecy's production and sourcing expertise and manufacturing relationships to shorten product delivery cycles and enable the Company to improve product quality and value. The terms of the acquisition included a cash payment of $0.9 million at closing as well as the assumption of net liabilities of approximately $2.7 million. The acquisition was accounted for as a purchase; however, the assets acquired and the liabilities assumed have been recorded at historic carrying value because Prophecy was under common control with the Company. The premium in excess of Prophecy's book value was recorded as a reduction to equity. The results of operations of Prophecy are included in the accompanying Consolidated Financial Statements from the date of acquisition.

In Fiscal 1999, the Company formed Eagle Trading Company, a Mexican distribution subsidiary with operations near Mexico City, Mexico.

2.     Summary of Significant Accounting Policies

Fiscal Year

The Company's financial year is a 52/53 week year that ends on the Saturday nearest to January 31. For tax purposes, the Company reports on a July year-end. As used herein, "Fiscal 1999," "Fiscal 1998" and "Fiscal 1997" refer to the twelve month periods ended January 29, 2000, January 30, 1999, and January 31, 1998, respectively.

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.

Recent Financial Accounting Standards Board Pronouncements

FASB 133, Accounting for Derivative Instruments and Hedging Activities

In 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes standards for the recognition and measurement of derivatives and hedging activities. This standard is effective for Fiscal 2000. The Company does not currently engage in these types of risk management or investment activities. Based upon current business practices, this statement is not anticipated to have any impact on the Company's financial statements.

Cash and Cash Equivalents

Cash includes cash equivalents. The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

Short-term investments and Other Comprehensive Loss

Cash in excess of operating requirements is invested in marketable equity or government debt obligations. As of January 29, 2000, short-term investments included investments with an original maturity of greater than three months (averaging approximately 10 months) and consisted primarily of tax-exempt municipal bonds classified as available for sale and marketable equity securities. During the fourth quarter of Fiscal 1999, the Company recognized expense of $4.6 million related to a valuation adjustment of a marketable equity. This charge is included in investment income (expense) in the Consolidated Statements of Operations.

Merchandise Inventory

Merchandise inventory is valued at the lower of average cost or market, utilizing the retail method. Average cost includes merchandise design and sourcing costs and related expenses.

The Company reviews its inventory levels in order to identify slow-moving merchandise and generally uses markdowns to clear merchandise. Markdowns may occur when inventory exceeds customer demand for reasons of style, seasonal adaptation, changes in customer preference, lack of consumer acceptance of fashion items, competition, or if it is determined that the inventory in stock will not sell at its currently ticketed price. Such markdowns may have an adverse impact on earnings, depending on the extent and amount of inventory affected.

Fixed Assets

Fixed assets are recorded on the basis of cost with depreciation computed utilizing the straight-line method over the estimated useful lives. Estimated useful lives range from three to ten years. Depreciation expense is summarized as follows:

           (Dollars in thousands)

	For the Years Ended
	January 29, 2000	January 30, 1999	January 31, 1998
Depreciation expense	$ 11,782	$ 8,215	$ 6,943

In accordance with FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-lived Assets to Be Disposed Of," impairment losses are recorded on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets.

Intangible assets

Intangible assets consist primarily of lease buyout costs and trademark costs. The lease buyout costs are amortized over the remaining life of the leases, generally for no greater than ten years. The trademark costs are amortized over five years. These assets, net of amortization, are included in other assets (long-term) on the Consolidated Balance Sheets. Details of intangible assets follow:

           (Dollars in thousands)

	For the Years Ended
	January 29, 2000		January 30, 1999		January 31, 1998
Intangible assets	$   3,899		$1,472		$1,016
Less: accumulated amortization	(1,164	)	(614	)	(83	)
Net intangible assets	$ 2,735		$ 858		$ 933

Amortization expense related to these intangibles is summarized as follows:

           (Dollars in thousands)

	For the Years Ended
	January 29, 2000	January 30, 1999	January 31, 1998
Amortization expense	$ 417	$ 396	$ 375

Stock Option Plan

In October 1995, the FASB issued Statement No. 123, "Accounting for Stock-Based Compensation," which establishes financial accounting and reporting standards for stock-based employee compensation plans. The Company continues to account for its stock-based employee compensation plan using the intrinsic value method under Accounting Principles Board Opinion No. 25. See pro forma disclosures required under FASB Statement No. 123 in Note 10 of the Consolidated Financial Statements.

Revenue Recognition

Revenue is recorded upon purchase of merchandise by customers. In connection with stored value cards and gift certificates, a deferred revenue amount is established upon purchase of the card by the customer and revenue is recognized upon redemption and purchase of the merchandise.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expense is summarized as follows:

           (Dollars in thousands)

	For the Years Ended
	January 29, 2000	January 30, 1999	January 31, 1998
Advertising expense	$ 27,243	$ 16,431	$ 10,067

Supplemental Disclosures of Cash Flow Information

           (Dollars in thousands)

	For the Years Ended
	January 29, 2000	January 30, 1999	January 31 1998
Cash paid during the periods for:
Income taxes	$45,741	$41,706	$9,675
Interest	$        —	$        —	$     —

Earnings Per Share

The following table shows the amounts used in computing earnings per share and the effect on income and the weighted average number of shares of dilutive potential common stock (stock options and restricted stock).

(In thousands)

	For the Years Ended
	January 29, 2000	January 30, 1999	January 31, 1998
Net income	$ 90,660	$ 54,118	$ 19,537
Weighted average common shares outstanding:
Basic shares	46,370	45,281	44,181
Dilutive effect of stock options and non-vested restricted stock	2,372	2,671	1,452
Diluted shares	48,742	47,952	45,633

Reclassification

Certain reclassifications have been made to the Consolidated Financial Statements for prior periods in order to conform to the Fiscal 1999 presentation.

3.    Related Party Transactions

The Company has various transactions with related parties. The nature of the relationship with each party is primarily common ownership. In September 1999, our distribution center facility, which is owned by a related party, was expanded to add 120,000 square feet which increases our capacity to handle distribution needs for future growth. As a result, the Company entered into an amended and restated operating lease for its corporate headquarters and distribution center with a related party. The lease, which commenced on September 1, 1999, and expires on December 31, 2020 provides for annual rental payments of approximately $2.0 million through 2000, $2.4 million through 2005, $2.6 million through 2015, and $2.7 million through the end of the lease.

In addition, the Company and its subsidiaries sell merchandise to various related parties and use the services of a related importing company (See Note 12 of the Consolidated Financial Statements).

The Company purchases merchandise from Azteca Production International ("Azteca"), a third party vendor, who because of significant beneficial ownership, was considered a related party in Fiscal 1997. Since Fiscal 1997, the beneficial ownership has been reduced and these purchases are not considered related party transactions. In Fiscal 1997, the Company purchased $31.5 million in merchandise from Azteca. As of January 31, 1998, accounts payable due Azteca was $1.9 million. These amounts are excluded from the table below.

Related party amounts follow:

           (Dollars in thousands)

	For the Years Ended
	January 29, 2000		January 30, 1999		January 31, 1998
Merchandise purchases through a related party importer	$	63,763	$	46,885		$	33,661
Accounts payable	$	682	$	—		$	5,914
Accounts receivable	$	2,436	$	2,829		$	1,865
Rent expense	$	1,896	$	1,548		$	1,549
Merchandise sales	$	7,388	$	3,289		$	8,669

4.    Accounts Receivable

Accounts receivable is comprised of the following:

           (Dollars in thousands)

	January 29, 2000	January 30, 1999	January 31, 1998
Accounts receivable—construction allowances	$     3,846	$   4,008	$   1,518
Related party accounts receivable	2,436	2,829	1,865
Accounts and note receivable—other	7,189	1,723	4,264
Total	$  13,471	$  8,560	$  7,647

5.    Notes Payable

The Company has an unsecured demand lending arrangement with a bank to provide a $100 million line of credit at either the lender's prime lending rate (8.50% at January 29, 2000) or a negotiated rate such as LIBOR. Because there were no borrowings during any of the past three years, there were no amounts paid for interest. The facility has a limit of $40 million to be used for direct borrowing. At January 29, 2000, letters of credit in the amount of $56.9 million were outstanding leaving a remaining available balance on the line of $43.1 million.

6.     Impairment of Assets

In accordance with FASB No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," management evaluates the ongoing value of leasehold improvements and store fixtures associated with retail stores which have been open longer than one year. There was no impairment expense recorded in Fiscal 1999. The expense included in selling, general and administrative expenses for Fiscal 1998 and Fiscal 1997 was $0.2 million and $1.7 million, respectively.

7.     Lease Commitments

All store operations are conducted from leased premises. These leases generally provide for base rentals and the payment of a percentage of sales as additional rent when sales exceed specified levels. Minimum rentals relating to these leases are recorded on a straight-line basis. In addition, the Company is typically responsible under its leases for common area maintenance charges, real estate taxes and certain other expenses. These leases are classified as operating leases.

Rent expense charged to operations, including amounts paid under short-term cancelable leases, was as follows:

(Dollars in thousands)

	For the Years Ended
	January 29, 2000	January 30, 1999	January 31, 1998
Minimum rentals	$   66,437	$   53,482	$   47,421
Contingent rentals	10,736	6,177	1,725
Total	$ 77,173	$ 59,659	$ 49,146

The table below summarizes future minimum lease obligations under operating leases in effect at January 29, 2000:

(In thousands)

Fiscal years:	Future Minimum Lease Obligations
2000	$   54,483
2001	51,083
2002	48,851
2003	48,058
2004	43,238
Thereafter	157,602
Total	$403,315

The Company may be contingently liable for the remaining rental payments that could total as much as $7.8 million for the outlet stores which were sold in October 1995. In January 2000, the company which owns the outlet stores sought protection under Chapter 11 of the Bankruptcy Act. Currently, there is insufficient information available to determine the amount of loss the Company may incur, if any, related to this potential contingent liability.

8.     Income Taxes

The significant components of the Company's deferred tax assets (there are no deferred tax liabilities) were as follows:

(Dollars in thousands)

	January 29, 2000	January 30, 1999	January 31, 1998
Current:
Inventories	$   4,048	$   2,826	$1,297
Accrued rent	4,055	3,375	2,545
Salaries and compensation	3,565	1,274	743
Marketable equity securities	1,530	—	—
Other	386	724	216
	13,584	8,199	4,801
Long Term:
Basis differences in fixed assets	2,410	2,200	2,790
Other comprehensive loss	1,472	—	—
Other	147	—	55
	4,029	2,200	2,845
Total	$17,613	$10,399	$7,646

           Significant components of the provision for income taxes are as follows:

	For the Years Ended
(Dollars in thousands)	January 29, 2000		January 30, 1999		January 31, 1998
Current:
Federal	$   54,684		$ 31,819		$ 12,366
State	10,806		6,305		2,250
Total current	65,490		38,124		14,616
Deferred:
Federal	(5,675	)	(2,298	)	(1,733	)
State	(1,121	)	(455	)	(142	)
Total deferred	(6,796	)	(2,753	)	(1,875	)
Provision for income taxes	$   58,694		$ 35,371		$   12,741

A tax benefit has been recognized as contributed capital, in the amount of $16.4 million for the year ended January 29, 2000, $2.3 million for the year ended January 30, 1999, and $0.3 million for the year ended January 31, 1998, resulting from additional tax deductions related to vested restricted stock grants and stock options exercised.

A reconciliation between the statutory federal income tax and the effective tax rate follows:

	For the Years Ended
	January 29, 2000		January 30, 1999		January 31, 1998
Federal income tax rate	35	%	35	%	35	%
State income taxes, net of federal income tax effect	4		4		4
Other items, net	-		1		1
	39	%	40	%	40	%

9.     Profit Sharing Plan and Employee Stock Purchase Plan

The Company maintains a 401(k) retirement plan and contributory profit sharing plan. Full-time employees and part-time employees are automatically enrolled to contribute 1% of their salary if they worked at least 1,000 hours of service per year, attained twenty and one-half years of age, and have completed sixty days of service. Individuals can decline enrollment or can contribute up to 20% of their salary to the 401(k) plan on a pre-tax basis, subject to IRS limitations. After one year of service, the Company will match up to 3% of participants' eligible compensation. Contributions to the profit sharing plan, as determined by the Board of Directors, are discretionary, but generally may not exceed 15% of defined annual compensation paid to all participating employees. The Company recognized $2.0 million, $2.9 million, and $1.2 million in expense during Fiscal 1999, Fiscal 1998, and Fiscal 1997, respectively, in connection with these plans.

The Employee Stock Purchase Plan covers employees who are at least 18 years old, have completed sixty days of service, and work at least 1,000 hours. Contributions are determined by the employee with a maximum of $1,560 annually with the Company matching 15% of the investment. These contributions are used to purchase shares of the Company stock in the open market.

10.     Stock Incentive Plan, Stock Option Plan, and Restricted Stock Agreements

Stock Incentive Plan

The 1999 Stock Incentive Plan (the "Plan") was approved by the shareholders on June 8, 1999. The Board of Directors authorized 4,000,000 shares for issuance under the Plan in the form of stock options, stock appreciation rights, restricted stock awards, performance units, or performance shares. Additionally, the Plan provides that the maximum number of shares awarded to one individual may not exceed 2,000,000 shares. The Plan allows the Compensation and Stock Option Committee to determine which employees and consultants will receive awards and the terms and conditions of these awards. The Plan provides for a grant of 15,000 stock options annually to directors who are not officers or employees of the Company. These options grant in quarterly increments, vest one year from date of grant, and are exercisable for a ten-year  

Stock Option Plan

On February 10, 1994, the Company's Board of Directors adopted the American Eagle Outfitters, Inc. 1994 Stock Option Plan (the "Plan"). The Plan provides for the grant of 2,700,000 incentive or non-qualified options to purchase common stock. On June 3, 1996, the Plan was amended to provide for the grant of an additional 1,350,000 shares for which options may be granted under the Plan. On May 7, 1997, the Plan was further amended to provide for the grant of an additional 1,350,000 shares for which options may be granted under the Plan. Additionally, the amendment provided that the maximum number of options which may be granted to one individual may not exceed 1,800,000 shares. All full-time employees and selected related party consultants to the Company are eligible to receive stock options which are approved by a committee of the Board of Directors. These options primarily vest over five years and are exercisable for a ten-year period from the date of grant. Directors who are not officers or employees of the Company were previously granted options for 11,250 shares of stock annually at fair value, which vest one year after the date of grant. On September 11, 1996, the Plan was amended to grant 4,500 options at fair value to the members of the Board of Directors who are not officers or employees of the Company on the first trading day of each fiscal quarter of the Company which vest one year after the date of grant and are exercisable for a ten-year period from the date of grant. This provision became effective for the third quarter of Fiscal 1996 but was superseded by the 1999 Stock Incentive Plan.

The Company has elected to follow Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees" and related interpretations in accounting for its employee stock options. This election was made because, as discussed below, the alternative fair value accounting provided for under FASB Statement No. 123 ("FASB 123"), "Accounting for Stock-Based Compensation" requires the use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.

Pro forma information regarding net income and earnings per share is required by FASB 123, which also requires that the information be determined as if the Company has accounted for its employee stock options granted beginning in the fiscal year subsequent to December 31, 1994 under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

	For the Years Ended
	Fiscal 1999		Fiscal 1998		Fiscal 1997
Risk-free interest rates	5.5	%	5.0	%	6.0	%
Dividend yield	None		None		None
Volatility factors of the expected market price of the Company's common stock	.600		.678		.644
Weighted-average expected life	5 years		6 years		6 years
Expected forfeiture rate	10.0	%	12.0	%	13.0	%

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options'; vesting period. The Company's pro forma information follows:

(In thousands, except earnings per share)	For the Years Ended
	January 29, 2000	January 30, 1999	January 31, 1998
Pro forma net income	$83,014	$52,467	$19,060
Pro forma net income per share
Basic	$     1.79	$     1.16	$     0.43
Diluted	$     1.70	$     1.09	$     0.42

A summary of the Company's stock option activity under all plans follows:

	For the Years Ended
	January 29, 2000 (2)			January 30, 1999 (2)			January 31, 1998 (2)
	Options		Weighted- Average Exercise Price	Options		Weighted- Average Exercise Price	Options		Weighted -Average Exercise Price
Outstanding—beginning of year	3,526,430		$  5.21	3,356,238		$  2.11	2,843,552		$1.98
Granted (Exercise Price equal to Fair Value)	2,028,900		$33.34	1,236,152		$11.16	1,035,000		$2.63
Exercised (1)	(627,720	)	$  4.26	(950,606	)	$  1.88	(442,214	)	$2.21
Cancelled	(73,580	)	$22.82	(115,354	)	$  6.19	(80,100	)	$2.27
Outstanding—end of year (3)	4,854,030		$16.81	3,526,430		$  5.21	3,356,238		$2.11
Exercisable—end of year (4)	1,010,547		$  5.05	553,224		$  2.37	664,424		$1.63
Weighted average fair value of options granted during the year			$20.69			$  6.91			$1.46

(1) Options exercised during Fiscal 1999 ranged in price from $1.39—$20.04 with an average of $4.26.

(2) As of January 29, 2000, January 30,1999, and January 31, 1998, the Company had 2,332,372 shares, 287,472 shares and 1,408,276 shares available for grant, respectively.

(3) As of January 29, 2000, the exercise price of 2,633,879 options outstanding ranged between $1.39 and $8.92 with weighted average remaining contractual lives between approximately 4 and 8 years. The exercise price of 1,880,751 options outstanding ranged between $17.69 and $34.19 with weighted average remaining contractual lives between approximately 8 and 10 years. The exercise price of 339,400 options outstanding ranged between $35.06 and $47.27 with weighted average remaining contractual lives between 9 and 10 years.

(4) As of January 29, 2000, the exercise price of 876,797 options exercisable ranged between $1.39 and $8.92.

Restricted Stock Grants

The Company maintains a restricted stock plan for compensating certain employees and selected related party consultants. This plan was superseded by the 1999 Stock Incentive Plan. At January 29, 2000, 1,369,607 shares of restricted stock were granted at prices ranging from $3.56 to $35.09, with 1,157,538 shares vested. During Fiscal 1999, 112,669 shares of restricted stock were granted at $35.09.

For Fiscal 1999, Fiscal 1998, and Fiscal 1997, the Company recorded $4.8 million, $1.3 million, and $1.2 million in compensation expense, respectively, on restricted stock and certain stock options granted during Fiscal 1996 where the exercise price is less than fair value of the underlying stock, and certain options granted to non-employees.

11.     Quarterly Financial Information—Unaudited

(In thousands, except earnings per share)	Quarters Ended (2)
	May 1, 1999	July 31, 1999	October 31, 1999	January 29, 2000
Net sales	$145,404	$178,582	$222,693	$285,425
Gross profit	59,027	72,589	95,844	129,048
Income before provision for income taxes	20,169	27,928	40,096	61,161
Net income	12,243	16,949	24,337	37,131
Basic earnings per common share (1)	$       0.27	$       0.36	$       0.52	$       0.80
Diluted earnings per common share (1)	$       0.25	$       0.35	$       0.50	$       0.76

	May 2, 1998	August 1, 1998	October 31, 1998	January 30, 1999
Net sales	$ 99,694	$ 125,731	$149,068	$ 213,107
Gross profit	37,217	49,063	60,420	87,811
Income before provision for income taxes	9,561	15,738	22,685	41,505
Net income	5,805	9,553	13,871	24,889
Basic earnings per common share (1)	$       0.13	$         0.21	$       0.31	$         0.55
Diluted earnings per common share (1)	$       0.12	$         0.20	$       0.29	$         0.52

(1) Net income per share amounts have been restated to reflect the adoption of FASB 128, the three-for-two stock splits, and the two-for-one stock split.

(2) Quarters are presented in 13-week periods consistent with the Company's fiscal year discussed in Note 2 of the Consolidated Financial Statements.

12.     Subsequent Events

Effective January 31, 2000, the Company acquired importing operations from Schottenstein Stores Corporation, a related party. The purpose of the acquisition was to integrate the expertise of the importing operation into the Company's supply chain process and to streamline and improve the efficiency of the process. The terms of the acquisition require a payment of $8.5 million to Schottenstein Stores Corporation which was made on March 6, 2000. The majority of the acquisition price will be recorded as goodwill and amortized on a straight-line basis over its anticipated useful life.

On February 24, 2000, the Company authorized the repurchase of up to 2.5 million shares of its stock. The repurchase of shares will occur at the discretion of the Company.

Report of Independent Auditors

To the Board of Directors and Stockholders of
American Eagle Outfitters, Inc.

We have audited the accompanying consolidated balance sheets of American Eagle Outfitters, Inc. as of January 29, 2000, January 30, 1999, and January 31, 1998 and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended. The financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Eagle Outfitters, Inc. at January 29, 2000, January 30, 1999, and January 31, 1998, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

Ernst & Young LLP

Pittsburgh, Pennsylvania

February 24, 2000, except for Note 12, as to which the date is

March 6, 2000

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

PART III

 

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.  

The information appearing under the captions "Nominees For Election As Directors", "Information Concerning Board of Directors" and "Executive Officers" in our Proxy Statement relating to the Annual Meeting of Stockholders to be held on June 12, 2000, is incorporated herein by reference.

 

ITEM 11.   EXECUTIVE COMPENSATION.

The information appearing in our Proxy Statement relating to the Annual Meeting of Stockholders to be held on June 12, 2000 under the captions "Executive Officer Compensation", "Option/SAR Grants in Last Fiscal Year", and "Aggregated Option Exercises and Fiscal Year-End Option Value" is incorporated herein by reference.

 

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.  

The information appearing under the caption "Security Ownership of Principal Stockholders and Management" in our Proxy Statement relating to the Annual Meeting of Stockholders to be held on June 12, 2000, is incorporated herein by reference.

 

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.  

The information appearing under the caption "Certain Relationships and Related Transactions" in the Company's Proxy Statement relating to the Company's Annual Meeting of Stockholders to be held on June 12, 2000, is incorporated herein by reference.

PART IV

 

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

 

(a)(1) The following consolidated financial statements are included in Item 8:

Consolidated Balance Sheets as of January 29, 2000, January 30, 1999, and January 31, 1998

Consolidated Statements of Operations for the years ended January 29, 2000, January 30, 1999, and January 31, 1998

Consolidated Statements of Stockholders' Equity for the years ended January 29, 2000, January 30, 1999, and January 31, 1998

Consolidated Statements of Cash Flows for the years ended January 29, 2000, January 30, 1999, and January 31, 1998

Notes to the Consolidated Financial Statements

(a)(2) No financial statement schedules are supplied because of the absence of the conditions under which they are required.

(a)(3) Exhibits:

Exhibit No.		Exhibit Index Page No.
2.1	Plan of Reorganization and Merger Agreement, dated as of November 30, 1998, among Natco Industries, Inc., Thorn Hill Acquisition Corp., Natco Limited Liability Company and American Eagle Outfitters, Inc.	Previously filed as Appendix A to the Prospectus included in the Registration Statement on Form S-4 (file no. 333-68609) filed December 9, 1998, as amended, and incorporated herein by reference.
3.1	Second Amended and Restated Certificate of Incorporation, as amended.	Previously filed as Exhibit 3.1 to Registration Statement on Form S-4 (file no. 333-68609) filed December 9, 1999, as amended, and incorporated herein by reference.
3.2	Amended and Restated Bylaws.	Previously filed as Exhibit 3.2 to Registration Statement on Form S-4 (file no. 333-68609) filed December 9, 1999, as amended, and incorporated herein by reference.
4.1	See Second Amended and Restated Articles of Incorporation, as amended, in Exhibit 3.1
4.2	See Amended and Restated Bylaws in Exhibit 3.2
10.1	Restated and Amended Office/Distribution Center Lease dated September 10, 1999 between the Registrant and Linmar Realty Company.	Previously filed as Exhibit 10.1 to the Form 10-Q for the period ended October 30, 1999, filed November 24, 1999, and incorporated herein by reference.
10.2	Form of Import Services Agreement.	Previously filed as Exhibit 10.2 to Registration Statement on Form S-1 (file no. 33-75294) filed February 14, 1994, as amended, and incorporated herein by reference.
10.3	Form of the Registrant's 1994 Stock Option Plan.	Previously filed as Exhibit 4(a) to Registration Statement on Form S-8 (file no. 33-79358) filed May 25, 1994, as amended on Form S-8 (file no. 33-12643) filed September 25, 1996 and incorporated herein by reference and Form S-8 (file no. 33-44759) filed January 22, 1998 and incorporated herein by reference.
10.4	Form of Restricted Stock Agreement	Previously filed as Exhibit 4(a) to Registration Statement on Form S-8 (file no. 33-79358) filed May 25, 1994 and incorporated herein by reference.
10.5	Form of Indemnification Agreement	Previously filed as Exhibit 10.7 to Registration Statement on Form S-1 (file no. 33-75294) filed February 14, 1994, as amended, and incorporated herein by reference.
10.6	Merchandise Royalty Agreement	Previously filed as Exhibit 10.8 to Form 10-K for the year ended July 29, 1995, filed May 1, 1996, and incorporated herein by reference.

10.7	Employee Stock Purchase Plan	Previously filed as Exhibit 4(a) to Registration Statement on Form S-8 (file no. 33-33278), filed on April 5, 1996 and incorporated herein by reference.
10.8	Form of the Registrant's 1999 Stock Incentive Plan	Previously filed as Exhibit A to the 1999 Proxy Statement, filed May 7, 1999, and incorporated herein by reference.
10.9	Employment Agreement between the Registrant and Roger S. Markfield dated September 9, 1999.	Previously filed as Exhibit 10.4 to the Form 10-Q for the period ended October 30, 1999, filed November 24, 1999, and incorporated herein by reference.
10.10	Purchase and Sale Agreement between Blue Star Imports, L.P. and Schottenstein Stores Corporation.
21	Subsidiaries.
23	Consent of Ernst & Young LLP.
24	Power of Attorney.
27	Financial Data Schedule.

(b)	Reports on Form 8-K
	None.
(c)	Exhibits
	The exhibits to this report begin on page 18.
(d)	Financial Statement Schedules
	None

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AMERICAN EAGLE OUTFITTERS, INC.

By:               /s/ Jay L. Schottenstein

Jay L. Schottenstein, Chairman

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on April 12, 2000.

Signature	Title
/s/ Jay L. Schottenstein Jay L. Schottenstein (Principal Executive Officer)	Chairman of the Board and Chief Executive Officer
/s/ George Kolber George Kolber	Vice Chairman and Chief Operating Officer
/s/ Roger S. Markfield Roger S. Markfield	President, Chief Merchandising Officer and Director
/s/ Laura A. Weil Laura A. Weil	Executive Vice President and Chief Financial Officer
/s/ Dale E. Clifton Dale E. Clifton	Vice President, Controller, and Chief Accounting Officer
/s/ Saul Schottenstein Saul Schottenstein	Vice Chairman
/s/ Ari Deshe Ari Deshe	Director
/s/ Jon P. Diamond Jon P. Diamond	Director
/s/ Martin P. Doolan Martin P. Doolan	Director
/s/ Gilbert W. Harrison Gilbert W. Harrison	Director
/s/ Michael G. Jesselson Michael G. Jesselson	Director
/s/ Thomas R. Ketteler Thomas R. Ketteler	Director
/s/ John L. Marakas John L. Marakas	Director
/s/ David W. Thompson David W. Thompson	Director
/s/ Gerald E. Wedren Gerald E. Wedren	Director

  *By:              /s/    Laura A. Weil   Laura A. Weil, Attorney-in-Fact

EX-10.10 2 PURCHASE AND SALE AGREEMENT

Exhibit 10.10

PURCHASE AND SALE AGREEMENT

Dated as of March 10, 2000

effective as of January 31, 2000

by and between

BLUE STAR IMPORTS, L. P.

And

SCHOTTENSTEIN STORES CORPORATION

PURCHASE AND SALE AGREEMENT

        THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is dated as of March 10, 2000, effective as of the 31st day of January, 2000, by and between SCHOTTENSTEIN STORES CORPORATION, a Delaware corporation ("Seller") and BLUE STAR IMPORTS, L.P., a Pennsylvania limited partnership ("Buyer ").

BACKGROUND

        A.         The Value City Imports Division of Seller (the "Division") is engaged in the business of importing into the United States goods and merchandise for resale for the account of Buyer and certain of its affiliates as well as certain other retail store chains and affiliates of Seller.

        B.         Buyer desires to acquire from Seller, and Seller desires to transfer to Buyer, all of the Division's assets and business that pertain to the importation into the United States, for the account of Buyer, American Eagle Outfitters, Inc., a Delaware corporation and an affiliate of Buyer ("AEOI") and any and all other subsidiaries of Buyer or AEOI (Buyer, AEOI and their subsidiaries are hereinafter collectively referred to as the "AEO Companies"), of goods and merchandise for resale by any of the AEO Companies (collectively, "AEO Merchandise") which merchandise may include but shall not be limited to wearing apparel, textile goods, shoes and other goods and accessories, all in accordance with and subject to the terms of this Agreement.

PROVISIONS

        In consideration of the foregoing premises and of the mutual covenants hereinafter contained and intending to be legally bound hereby, the parties covenant and agree as follows:

ARTICLE I
DEFINITIONS

        Section 1.01. Definitions. As used herein, the following terms have the meanings assigned to them below, unless the context in which any such term is used requires otherwise:

        "AAA" means American Arbitration Association.

        "AEO Companies" has the meaning ascribed to such term in the second recital to this Agreement.

        "AEOI" has the meaning ascribed to such term in the second recital to this Agreement.

        "AEO Merchandise " has the meaning ascribed to such term in the second recital to this Agreement.

        "Agreement " means this Purchase and Sale Agreement as amended from time to time.

        "Assignment and Assumption Agreement" means the agreement, substantially in the form of Exhibit A hereto, pursuant to which (i) Buyer will assume and undertake to perform, satisfy and discharge the Assumed Liabilities and (ii) subject to the provisions of Section 3.04 hereof, Seller will assign the Assumed Contracts and the Prepaid Expenses to Buyer.

        "Assumed Contracts " means all rights and interests of the Division and/or Seller under all contracts, agreements, deposits, bonds, manifests, and open purchase and sale orders of the Business, including but not limited to those other contracts, etc. identified on Schedule 1 hereto.

        "Assumed Liabilities " has the meaning ascribed to such term in Section 3.04 hereof.

        "Bill of Sale " means a bill of sale from Seller to Buyer in substantially the form attached hereto as Exhibit B.

        "Board of Directors " means the Board of Directors of AEOI.

        "Books and Records " means all books, records, logs, customer lists and other commercial records or documents of Seller relating to the Business.

        "Business" means the business of the Division relating to the importation of AEO Merchandise for the AEO Companies, the document production and administration arising from or relating to the importation of the AEO Merchandise and all assets, goodwill and relationships with customers, suppliers, shippers and customs agents associated therewith.

        "Buyer" has the meaning described to such term in the preamble to this Agreement.

        "Buyer's Accountants " means Buyer's in-house accounting personnel and such other accountants as may be selected by Buyer.

        "Closing" has the meaning ascribed to such term in Section 6.01 hereof.

        "Closing Balance Sheet" has the meaning ascribed to such term in Section 3.03 hereof.

        "Closing Date " has the meaning ascribed to such term in Section 6.01 hereof.

        "Closing Financial Statements" has the meaning ascribed to such term in Section 3.03 hereof.

        "Closing Profit and Loss Statement" has the meaning ascribed to such term in Section 3.03 hereof.

        "Committee " means the Independent Committee of the Board of Directors of AEOI.

        "Default" means any default or breach that arises out of or results from the Closing or any act, omission or occurrence prior to the Closing.

        "Detailed Accounting " has the meaning ascribed to such term in Section 3.03 hereof.

        "Dispute" is used as defined in Section 3.06 hereof.

        "Division" is used as defined in the first recital to this Agreement.

        "Employee Benefit Plan" means any "employee benefit plan", as such term is defined in Section 3(3) of ERISA, and all other employee compensation and benefit plans of Seller that relate to the employees engaged in the Business (including all bonus, profit sharing, incentive compensation and deferred compensation plans maintained by Seller or to which Seller contributes or has contributed that relate to the Business).

        "Employment Agreements" means the Employment Agreements between Buyer and Guy Bradford and Hank Shechtman, and pursuant to which Buyer shall hire Messrs. Bradford and Shechtman effective as of the Closing Date.

        "Employment Practices and Shared Services Agreement" means the Employment Practices and Shared Services Agreement between Seller and Buyer substantially in the form of Exhibit C hereto, pursuant to which Buyer and Seller will undertake to address the allocation of cost and expense of certain shared services, and the use of the Software and Intellectual Property by Buyer, following the Closing Date and to observe certain prohibitions with respect to hiring current employees of each other with respect to the Business.

        "Encumbrance" means any lien, claim, charge, security interest, restriction or encumbrance of any nature or kind, other than Permitted Encumbrances.

        "ERISA" means the Employee Income Security Act of 1974, as amended.

        "ERISA Affiliate" means any trade or business, whether or not incorporated, which is part of a controlled group as determined under ERISA Section 4001(a)(14).

        "Excluded Liabilities" has the meaning ascribed to such term in Section 3.05 hereof.

        "Fairness Opinion" means the opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc. dated March 9, 2000 to the Committee, in which such firm opined as to the fairness of the Purchase Price to be paid by Buyer in exchange for the Purchased Assets and the Business.

        "Financial Statements" means, collectively, the Year-End Financial Statements and the Monthly Financial Statements of the Business.

        "Good Standing Certificate" means one or more certificates from the secretary of the state and/or the department of revenue or taxation of a jurisdiction to the effect that the corporation that is the subject of such certificate is a corporation presently subsisting in good standing under the laws of such jurisdiction and has paid all franchise and/or capital stock taxes required to be paid by such corporation to such jurisdiction.

        "Insurance Policies" has the meaning ascribed to such term in Section 4.01(r) hereof.

        "Intellectual Property" means all United States and foreign patents and patent applications, the inventions claimed in said patents and patent applications, all related trade secrets, know-how, methods and processes, and all copyrights, technology and proprietary information necessary for, relating to, or used or useful in connection with, the Business, the Contracts and/or the Work in Process.

        "Law" means any presently existing law, statute, ordinance, rule, regulation or code adopted, enacted or promulgated by any government or governmental agency.

        "Material Adverse Effect" means a material adverse effect on the results of operations or financial condition of any of the Business or the Purchased Assets.

        "Monthly Financial Statements" means Seller's interim financial statements for the Division as of the following dates and for the periods then ended: October, 1999 and December, 1999, copies of which have been provided to Buyer.

        "Officers' Certificate" means a certificate signed by the Chairman of the Board of Directors, the President or Vice President and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of any corporation delivering such certificate, or by the same such officers of the corporate general partner of any partnership delivering such certificate.

        "OSHA" means the Occupational Safety and Health Act.

        "Other Seller Documents" has the meaning ascribed to in Section 3.05(a) hereof.

        "Permits and Licenses" means all of the licenses and permits, certificates of authority and other approvals and authorizations of Seller, governmental or otherwise, that relate to or are necessary for or used in connection with the Business or the Purchased Assets including, without limitation, those identified on Schedule 2 hereto.

        "Permitted Encumbrances" means, collectively, mechanics', carriers', workmen's, repairmen's or other like liens arising or incurred in the ordinary course of conduct of the Business, liens for taxes, assessments and other governmental charges that are not due and payable or that may thereafter be paid without penalty and other imperfections of title or encumbrances, if any, that do not materially (i) detract from the value of the property subject thereto or (ii) impair the operation of the Business.

        "Personal Property" means all machinery, equipment, software, systems, and all other personal property, tangible and intangible, of Seller that are listed or referred to on Schedule 3 hereto.

        "Pre-Closing Adjustment" has the meaning ascribed to such term in Section 3.02 hereof.

        "Pre-Closing Liabilities" means all liabilities arising out of ownership of the Purchased Assets and conduct of the Business by Seller prior to the Closing Date.

        "Prepaid Expenses" means all prepaid expenses and deposits in connection with the Business.

        "Purchase Price" has the meaning ascribed to such term in Section 3.01 hereof.

        "Purchased Assets" has the meaning ascribed to such term in Section 2.01 hereof.

        "Seller" has the meaning ascribed to such term in the preamble to this Agreement.

        "Seller Operational Liabilities" means all Pre-Closing Liabilities arising in whole or in substantial part out of the actions of a Seller Responsible Party.

        "Seller Responsible Party" means the Seller, its officers, directors, contractors, agents and/or employees

        "Seller Transfer Documents" means, collectively, the Assignment and Assumption Agreement, and the Bill of Sale.

        "Seller's Accountants" means Seller's in-house accounting personnel and/or such other accountants as Seller may select.

        "Software" means all computer programs and licenses therefor (including user manuals, bug fixes, corrections, enhancements, updates, or other modifications to such programs or manuals) used or useful in connection with, or otherwise relating to, the Business, including without limitation the software identified on Schedule 4 hereto.

        "Year-End Financial Statements" means the Division's unaudited financial statements as of July 31, 1999, 1998, 1997 and for the years then ended, copies of which have been provided to Buyer.

ARTICLE II
PURCHASE AND SALE; DESCRIPTION OF ASSETS

        Section 2.01. Purchased Assets. In accordance with, and subject to the terms and conditions of, this Agreement, Buyer shall purchase from Seller, and Seller shall sell, assign, convey, transfer and deliver to Buyer, free and clear of any and all Encumbrances, the Business including, without limitation, the following assets and properties (collectively, the "Purchased Assets"):

        (a)         the Personal Property;

        (b)         the Assumed Contracts (provided that where Seller is required to continue to be a party to such contracts or where Seller will continue to require or perform services under such contracts, Seller shall use its best efforts to add Buyer as an additional party, rather than the sole transferee, of such contracts);

        (c)         the right to use the Intellectual Property and Software pursuant to the Employment Practices and Shared Services Agreement;

        (d)         the Permits and Licenses;

        (e)         the Books and Records as identified on Schedule 14 (which listed items identified on Schedule 14 are to be delivered to Buyer at Closing; and Buyer shall have access to and the right to copy all other Books and Records);

        (f)         the Prepaid Expenses.

        Seller acknowledges and agrees that, with respect to any Assumed Contracts, which are, in their nature, by law, by their terms or otherwise, nonassignable, or which contain a covenant against assignment, this instrument shall, notwithstanding anything elsewhere herein contained, be construed as an assignment to Buyer of the equitable interest in the same insofar as is legally permissible without violation of law or breach of the terms or condition thereof, with the right in Buyer or its successors and assigns (i) to have said claims, contracts, commitments or other agreement, if any, held in trust by Seller so as to enable Buyer or its successors and assigns to use and enjoy the full benefit thereof, (ii) to have transferred to Buyer or its successors or assigns any and all such property or rights which shall become assignable as soon as the same shall become assignable, and (iii) to take and have taken any action which may be taken without violation of law and without any breach as aforesaid which is necessary or appropriate to make such contract, property or rights assignable. Seller agrees that in any instance in which nonassignability of any such contract, property or rights may be removed by the consent of any party or parties, Seller will use its best efforts to obtain the consent of all such parties to the assignment of the property or rights in question to Buyer. If such a consent is not obtained, or if an attempted assignment would be ineffective or would affect Seller's rights so that Buyer or its successors and assigns in fact would not receive such contract, property or rights, Seller will cooperate with Buyer or its successors and assigns on any reasonable arrangement, not contrary to law, designed to provide for Buyer or its successors and assigns the benefit under any such Assumed Contracts and enforcement thereof, and for the benefit of Buyer or its successors and assigns, of any and all rights of Seller against any party thereto arising out of breach or cancellation by such party or otherwise.

ARTICLE III
PURCHASE PRICE

        Section 3.01. Purchase Price. In exchange for the Business and the Purchased Assets, Buyer shall deliver to Seller, by wire transfer of immediately available funds at the Closing the sum of Eight Million Five Hundred Thousand Dollars ($8,500,000) (the "Purchase Price"), plus or minus customary prorations.

        Section 3.02. Pre-Closing Adjustment. On the day immediately prior to Closing, Seller shall apply any deposits and sums previously received from the AEO Companies as of such date, in the following manner: First to billed accounts receivable balances, then to any unbilled receivables relating to the importation of AEO Merchandise for any AEO Companies. Seller acknowledges and agrees that after January 31, 2000 no profit shall be charged by Seller to Buyer for importing or other services provided by Seller after January  31, 2000 to Buyer in connection with the Business. The adjustment as described in this Section 3.02 is called the "Pre-Closing Adjustment".

        Section 3.03. Post Closing Adjustment. Within forty-five (45) days following the Closing, Seller shall prepare and deliver to Buyer a balance sheet for the Division dated as of the Closing Date (the "Closing Balance Sheet"), a profit and loss statement for the Division for the period commencing August 1, 1999 and ending on the Closing Date (the "Closing Profit and Loss Statement"), a detailed accounting of all prepaid expenses and accounts payable of the Business and all unbilled costs and expenses paid by Seller prior to Closing for Buyer's account with respect to importation of AEO Merchandise by Seller (the "Detailed Accounting") (the Closing Balance Sheet, the Closing Profit and Loss Statement and Detailed Accounting being collectively called the "Closing Financial Statements"), each of which shall be prepared in a manner consistent with the Financial Statements and in accordance with generally accepted accounting principles. Following the Closing, Buyer's Accountants and Seller's Accountants shall have the right to review and audit the Closing Financial Statements. Buyer's Accountants shall notify Seller of their disagreement with any amount shown on or underlying the Closing Financial Statements within ninety (90) days following delivery thereof. In the event that Buyer's Accountants deliver notice of any disagreement, Buyer's Accountants and Seller and/or Seller's Accountants shall meet and attempt to resolve such disagreement and to agree upon a mutually acceptable presentation of such statements and/or schedule. Should Buyer's Accountants and Seller and/or Seller's Accountants be unable to reach such an agreement within thirty (30) days after delivery by Buyer's Accountants of a notice of disagreement, the matter shall be submitted within five (5) business days following expiry of such thirty (30) day period to a "Big Five" accounting firm selected by Seller and Buyer or, if Buyer and Seller are unable to agree on such accounting firm within such five (5) business day period, the matter shall be submitted by the parties to Price Waterhouse Coopers on the first business day following expiry of such five (5) business day period, and the parties agree to use their best efforts to cause the decision of such third accounting firm to be rendered within thirty (30) days following such submission. The decision of such third accounting firm shall be conclusive and binding on the parties. The parties agree to effect appropriate adjustments between them based upon the Closing Financial Statements as they exist following resolution of any disagreement in accordance with the foregoing.

        Seller shall bear the costs and expenses of Seller's Accountants, Buyer shall bear the cost and expenses of Buyer's Accountants and, in the event of any referral of a dispute to a third accounting firm in accordance with the foregoing, Seller and Buyer agree to share equally the costs and expenses of such third accounting firm.

        Section 3.04. Assumption of Liabilities. At the Closing, Buyer and Seller shall execute and deliver the Assignment and Assumption Agreement pursuant to which Buyer shall assume, undertake to perform, satisfy and discharge only the following liabilities and obligations of Seller and/or the Division (collectively, the "Assumed Liabilities"):

        (a)         the liabilities arising out of ownership of the Purchased Assets and conduct of the Business by Buyer (and not caused by a Seller Responsible Party) as arise out of events first occurring or conditions first existing after the Closing Date; and

        (b)         those Pre-Closing Liabilities (other than Seller Operational Liabilities) arising with respect to the importation of AEO Merchandise prior to the Closing Date which were not caused by a Seller Responsible Party (such as, for example, a customs audit liability of the Seller following Closing Date that resulted from incomplete or inaccurate information provided by Buyer, or another party other than a Seller Responsible Party, to the Seller).

        Buyer shall be solely responsible for all liabilities, demands, damages, costs and expenses (including reasonable attorney's fees), and shall indemnify, defend and hold harmless the Seller and its affiliates and their respective officers and directors, shareholders and representatives, from and against the Assumed Liabilities and all liabilities, claims, demands, damages, costs and expenses (including reasonable attorney fees) arising from the conduct, actions, inactions or omissions of Buyer, its officers, directors, contractors, agents or employees (and not caused by a Seller Responsible Party) after the Closing Date.

                 Section 3.05. Excluded Liabilities. Anything in this Agreement to the contrary notwithstanding, Buyer shall not assume (other than only the Assumed Liabilities expressly agreed to be assumed by Buyer pursuant to the provisions of paragraph 3.04 of this Agreement) and shall not undertake to pay, perform, satisfy or discharge any liability or obligation of Seller, the Business or the Division or any other person or entity of any kind, absolute or contingent, known or unknown (collectively, the "Excluded Liabilities"), including without limitation the following:

        (a)         any liability or obligation of Seller that arises out of the transactions contemplated to occur pursuant to this Agreement or that results from any breach or default by Seller under this Agreement, the Seller Transfer Documents or any other agreement, certificate, assignment, document or instrument that may be executed or delivered in connection with this Agreement or the transactions contemplated to occur hereunder (the Seller Transfer Documents and such other documents being sometimes collectively referred to as the "Other Seller Documents");

        (b)         any liability or obligation relating to income, franchise, sales, use, payroll, unemployment, withholding real or personal property or any other taxes of Seller or the Division, including any interest or penalties related thereto;

        (c)         any liability or obligation of Seller or the Division relating to indebtedness for borrowed money;

        (d)         any liability or obligation relating to any Default by Seller under any of the Assumed Contracts or the Permits and Licenses;

        (e)         Reserved.

        (f)         any liability or obligation of Seller or the Division relating to any illness, injury, occupational or other disease or other health or safety risk that arises out of or results from any act, omission or occurrence prior to the Closing, including without limitation those arising under Section 7.04 hereof;

        (g)         any liability or obligation relating to the employees of Seller or the Division (other than only accrued vacation pay and sick pay for Guy Bradford, Hank Shechtman, and for any other employee of Seller who Buyer hires effective as of the Closing Date), including any severance obligation and any compensation required to be paid and benefits required to be provided under any of the Employee Benefit Plans;

        (h)         any liability or obligation as shown on the Financial Statements (other than those liabilities mutually agreed to by Seller and Buyer (or as determined by the dispute resolution procedures) in accordance with the post-Closing adjustments contemplated pursuant to Section 3.03 hereof) or otherwise relating to any services performed by Seller or the Division prior to the Closing;

        (i)         that portion of any liability or obligation relating to the violation of any Law relating to the Business or the Division that arises out of or results from any act, omission or occurrence of a Seller Responsible Party prior to the Closing;

        (a)         any liability or obligation of the Division to any of affiliates of Seller, except as expressly set forth in this Agreement; and

        (b)         any Pre-Closing Liability (other than only the Assumed Liabilities).

        Seller shall be solely responsible for all liabilities, demands, damages, costs and expenses (including reasonable attorney's fees), and shall indemnify, defend and hold harmless the AEO Companies and their respective officers, directors, shareholders and representatives, from and against all liabilities, claims, demands, damages, costs and expenses (including reasonable attorney's fees) arising or resulting from the Excluded Liabilities and/or the conduct, actions, inactions or omissions of a Seller Responsible Party prior to the Closing Date. To the extent that a third party, not Buyer or a Seller Responsible Party, is responsible for such liabilities, damages, costs or expenses being imposed against Buyer, then the Seller and Buyer will use their best efforts to pursue such third party and obtain a recovery therefrom.

        Section 3.06. Disputes as to Assumed Liabilities or Excluded Liabilities. In the event that a dispute or controversy (each a "Dispute") arises between Seller and Buyer as to whether and/or to what extent Buyer, a Seller Responsible Party, or another party is responsible (as a result of the conduct, actions, inactions or omissions of Buyer, such Seller Responsible Party, or such other party) for a liability, loss, damage, demand, cost or expense, and if the Dispute cannot be settled through direct discussions, then Seller and Buyer shall resolve the Dispute by binding arbitration administered by the American Arbitration Association ( "AAA") in Pittsburgh, PA in accordance with its Commercial Arbitration Rules and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction. The arbitration proceedings shall be conducted on an expedited basis before a neutral arbitrator (to be selected by Seller and Buyer, or if they cannot agree, then by the chairman of the Pittsburgh office of the AAA) who has been actively engaged in the practice of law for at least fifteen (15) years, specializing in commercial transactions with substantial experience in customs and importation matters. The cost of any arbitration proceedings shall be split equally between Seller and Buyer.

        Section 3.07. Purchase Price Allocation. The Purchase Price shall be allocated among the Purchased Assets in accordance with Schedule 5 hereto and the parties hereto shall use such allocations in preparing all income tax returns and related reports

(including Form 8594) required to be filed with the Internal Revenue Service and any state or local tax authority.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES

        Section 4.01. Seller's Representations and Warranties. Seller hereby represents and warrants to Buyer that:

        (a)         Organization and Standing. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Seller has all requisite power and authority to own and operate the Division and the Business. Seller is duly qualified to do business and is in good standing in the jurisdictions of Ohio, Delaware and Pennsylvania as listed on Schedule 6. Such jurisdictions are the only jurisdictions where the character of the properties owned or leased by Seller in its conduct of the Business, or the nature of the activities conducted by it in connection therewith, makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect.

        (b)         Due Authorization and Execution, etc. Seller has all requisite power and authority (corporate or otherwise) to enter into and perform this Agreement and to consummate the transactions contemplated hereby; this Agreement has been duly authorized, executed and delivered by Seller and constitutes a valid, binding and legal obligation of Seller, enforceable against Seller in accordance with its terms; and, when executed and delivered by Seller, each of the Other Seller Documents shall be duly authorized, executed and delivered by Seller and shall constitute a valid, binding and legal obligation of Seller, enforceable against Seller in accordance with its terms.

        (c)         Absence of Conflict. The execution, delivery and performance of this Agreement and the Other Seller Documents, and the consummation of the transactions contemplated to occur pursuant hereto and thereto (i) do not violate or conflict with the articles of incorporation or by-laws of Seller, (ii) to the best of Seller's knowledge (after due inquiry by Seller of Guy Bradford, Hank Shechtman and Mort Love of the Division) do not violate, conflict with, result in a breach of or a default under, or give any person or entity any right to terminate or modify, any right or obligation of Seller applicable to the Division, the Business or the Purchased Assets, (iii) do not violate, conflict with, or result in a breach of or a default under, any governmental or court-issued order, writ, judgment, decree, license, permit, approval or authorization of any kind applicable to the Division, the Business or the Purchased Assets, (iv) to the best of Seller's knowledge (after due inquiry by Seller of Guy Bradford, Hank Shechtman and Mort Love of the Division) do not and will not violate or conflict with any Law, and (v) to the best of Seller's knowledge (after due inquiry by Seller of Guy Bradford, Hank Shechtman and Mort Love of the Division) do not result in the loss of, or the creation or imposition of any Encumbrance against or with respect to, any of the rights, properties or assets of the Division, the Business or the Purchased Assets, other than such violations, conflicts, breaches or defaults in the case of any and all of the foregoing clauses (i) through (v) that, individually or in the aggregate, would not have a Material Adverse Effect.

        (d)         Title; Condition of Purchased Assets. Seller has good and valid title to all of the Purchased Assets. The execution and delivery of the Seller Transfer Documents at the Closing shall convey, transfer to and vest in Buyer good and valid title to all of the Purchased Assets, free and clear of any and all Encumbrances. The Purchased Assets constitute, in the aggregate, all of the property necessary for the operation of the Business in the manner in which and to the extent that it is currently being operated by Seller. All of the tangible Purchased Assets are in good operating condition and repair, subject to normal wear and maintenance, and are usable in the ordinary course of business as heretofore conducted by Seller.

        (e)         Financial Statements and Budget. Seller has furnished to Buyer the Financial Statements and the Budget for the Division. The Financial Statements were prepared in conformity with generally accepted accounting principles applied on a consistent basis and the Financial Statements present fairly the financial condition of the Division as of the dates thereof, and the results of its operations for the periods therein indicated (subject, in the case of the Monthly Financial Statements, to periodic and year-end adjustments). Except as disclosed in the Financial Statements, the results of operations of the Division reflected therein were not affected to a material extent by changes or inconsistencies in accounting policies or by the inclusion of extraordinary or exceptional items. The Financial Statements include as an accrued liability adequate provision for payments not yet due as of the date of the Financial Statements relating to the importation of merchandise for the Business. The Budget was prepared on the basis of good faith assumptions concerning the future prospects of the Business and in a manner consistent with prior results of operations.

        (f)         Absence of Material Adverse Change, etc. Except as set forth on Schedule 7, since July 31, 1999, (i) there has been no material adverse change with respect to the rights, properties, assets, liabilities, financial condition or operations of Seller in respect of the Division, (ii) the Business has been carried on and conducted in the ordinary and usual course in all material respects, (iii) Seller has preserved and maintained in all material respects each of the Permits and Licenses and the relationship of the Business with each of its material customers, customs agents, suppliers, shippers, and employees, (iv) reserved, (v) Seller has not on account of or with respect to the Business made any capital commitment or expenditure, or any unusual or extraordinary commitment or expenditure, or incurred or become liable for any debt or other obligation or liability (except for liabilities incurred in the ordinary course of business), or, except in the ordinary course of business, entered into any guaranty or agreement for the production or manufacture of goods or equipment or the providing of services, other than such commitments or expenditures that, individually or in the aggregate, would not have a Material Adverse Effect, (vi) Seller has not disposed of any of the Personal Property other than in the ordinary course of conduct of the Business and which disposition would not have a Material Adverse Effect, (vii) Seller has maintained the Personal Property in good repair (ordinary wear and tear excepted) and the Personal Property is in good operating condition, (viii) Seller is not in breach of or default under any contract or agreement relating to the Division or the Business, other than breaches or defaults that, individually or in the aggregate, would not have a Material Adverse Effect and, to the best of Seller's knowledge, no third party to any contract or agreement is in breach of or default under any such contract or agreement, other than any such breaches or defaults that, individually or in the aggregate, would not have a Material Adverse Effect, and (ix) except in the ordinary course of business, there have been no intercompany transactions or creations of payables among Seller or any of its affiliates relating to the Business.

        (g)         Intellectual Property. Except as set forth on Schedule 8 hereto, Seller owns and has good and valid title to, or has a valid and effective license to use, all patents, applications therefor, inventions, trade secrets, trademarks, service marks and applications therefor, trade names, copyrights and copyright registrations and applications therefor that cover any processes that are material to the Business, Seller has not been charged with (or threatened to be charged with) the infringement of, and, to the best of Seller's knowledge, Seller is not infringing on, any unexpired patent, common law or registered trademark, trade name or copyright (whether registered or not), trade secret or other proprietary right of any party in the United States or in any foreign country which is material to the Business.

        (h)         Taxes, Duties and Tariffs. All duties, tariffs, import/export charges and fees and all required federal, state and local tax returns of Seller and the Division as it relates to the Business have been prepared and duly filed, and all duties, tariffs, import/export charges and fees and all federal, state and local taxes required to be paid with respect to the periods covered by such filings and returns as related in any manner to the Business have been paid or are being contested in good faith. Any such material good faith contests are correctly identified on Schedule 9 hereto. Seller shall timely file all returns and shall pay as and when due all taxes imposed on the sale of the Purchased Assets hereunder, and shall timely file all returns and pay as and when due all tax liabilities incurred in connection with the ownership and operation of the Business by Seller. Neither Seller nor the Division has received any notice (relating to the Business) that it is delinquent in the payment of any duty, tariff, import charge or fee, tax, assessment or government charge, and neither is liable for the payment of any assessed charge or penalty in respect of any duty, tariff, import/export charge, fee, tax or tax deficiency.

        (i)         Governmental Consents. To the best of Seller's knowledge (after due inquiry by Seller of Guy Bradford, Hank Shechtman and Mort Love of the Division), no authorization, consent, order, permit or approval of, or filing with, any governmental agency is necessary for the consummation by Seller of the transactions contemplated by this Agreement.

        (j)         Contracts, Agreements and Commitments, etc. Except for the Assumed Contracts, Seller is not a party to any material lease, contract, agreement or commitment of any kind, oral or written, relating to the conduct of the Business, nor are there any material leases, contracts, agreements or commitments of any kind, oral or written, that directly relate to the conduct of the Business or the Purchased Assets. All of the Assumed Contracts are valid, binding and enforceable obligations of Seller and in full force and effect in accordance with their terms (except to the extent that enforcement may be limited by applicable bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights generally and except to the extent that enforcement may be limited by general equitable principles). Seller is not in breach of or default under any of the Assumed Contracts other than any breaches or defaults that, individually or in the aggregate, would not have a Material Adverse Effect and, to the best of Seller's knowledge, no other party to any of the Assumed Contracts is in breach thereof or default thereunder, other than any breaches or defaults that, individually or in the aggregate, would not have a Material Adverse Effect.

        (k)         Permits, Licenses, Certificates of Authority, etc. To the best of Seller's knowledge (after due inquiry by Seller of Guy Bradford, Hank Shechtman and Mort Love of the Division), the Permits and Licenses constitute all of the permits, licenses, franchises, authorizations and concessions required by law and necessary to operate the Business, other than such permits, licenses, franchises, authorizations and concessions that the failure to obtain would not have, individually or in the aggregate, a Material Adverse Effect; the Permits and Licenses are valid and in full force and effect in accordance with their terms; and Seller is not in breach of or default under any of the Permits and Licenses other than any breaches or defaults that, individually or in the aggregate, would not have a Material Adverse Effect and, to the best of Seller's knowledge, no other party to any of the Permits and Licenses is in breach thereof or default thereunder, other than any breaches or defaults that, individually or in the aggregate, would not have a Material Adverse Effect.

        (l)         Litigation, Arbitration Proceedings, etc. Except as disclosed on Schedule 10 hereto or otherwise disclosed in writing to Buyer, (i) no litigation or investigation is pending or, to the best of Seller's knowledge, threatened against Seller in connection with or that might affect the Business, the Division (relating in any way to the importation of the AEO Merchandise) or the Purchased Assets and that is reasonably likely to have a Material Adverse Effect nor, to the best of Seller's knowledge, is there any basis therefor; (ii) to the best of Seller's knowledge, no litigation or investigation has been asserted against any third party with respect to the Business, the Division (relating in any way to the importation of the AEO Merchandise) or the Purchased Assets, whether by Seller, any affiliate of Seller or any third party, and that is reasonably likely to have a Material Adverse Effect; and (iii) no litigation or investigation has been asserted, instituted or threatened by Seller against any third party that affects or relates in any manner to the Business, the Division (relating in any way to the importation of the AEO Merchandise) or the Purchased Assets. Set forth on Schedule 10 is a true, correct and complete list of all litigation and claims made by or against Seller against or by customers and/or suppliers of the Business during the three year period immediately preceding the date hereof which would have a Material Adverse Effect on the Business or the Purchased Assets. Seller has made available to Buyer access to Seller's complete files with respect to each such litigation or claim.

        (m)         Compliance with Laws. To the best of Seller's knowledge (after due inquiry by Seller of Guy Bradford, Hank Shechtman and Mort Love of the Division), the Business and the Purchased Assets are in compliance with and, since July 31, 1999, have been conducted or used in conformity with all applicable Laws including, without limitation, labor and wage Laws, Laws relating to the health and safety of employees and consumers (including any applicable "right-to-know" Laws and OSHA Laws), Laws relating to the labeling, delivery, and operation of products, materials, machinery and equipment, Laws relating to the exportation and importation of the AEO Merchandise and all environmental Laws; except for such instances of noncompliance with any of the foregoing that, individually or in the aggregate, would not have a Material Adverse Effect. Except as to existing claims under forms CF28 and CF29 - none of which individually and in the aggregate would have a Material Adverse Effect, and except as otherwise disclosed in writing to Buyer, Seller has received no notices of any violation of Laws with respect to the Business, Division (relating to importation of AEO Merchandise), or the Purchased Assets which, following receipt of such notice, have not been fully and timely cured by Seller. Seller is not the subject of any outstanding OSHA citations or pending abatements based on any such citation which relate to the Business or the Purchased Assets; and none of the rights, properties, assets, liabilities, businesses or operations of the Division or the Business is subject to any judicial, regulatory or governmental order, writ, judgment, investigation, audit or decree of any kind directed to Seller or any of its affiliates.

        (n)         Employee Benefit Plans. Seller has delivered to Buyer complete and accurate copies of all Employee Benefit Plans. Seller has made on a timely basis all required contributions to all "employee benefit plans", as defined in Section 3(3) of ERISA, that relate to the Business. None of Seller or any of its ERISA Affiliates has incurred or will incur as of the Closing Date, or as a consequence of events occurring prior to the Closing Date, any of the following that relates to the Division or the Business: (i) any liability to the Pension Benefit Guaranty Corporation (other than for the payment of required premiums), (ii) any liability under Sections 4041, 4062, 4063, 4064 or 4069 of ERISA, (iii) any "withdrawal liability" to any "multi-employer pension plan", as defined in ERISA or (iv) any "accumulated funding deficiency", as defined in Section 302 of ERISA.

        (o)         Relations with Employees. Seller is not a party to nor is it bound by any collective bargaining or other union agreement with respect to the Business. Seller has made all payments it is contractually obligated to make in respect of persons employed by it with respect to the Business (other than payments not yet due for the current payroll period). No employee claim or grievance is pending against Seller with respect to those key employees of the Business identified on Schedule 11 hereto and, with respect to all other persons who are in the Seller's employment with respect to the Business, no claims or grievances are pending against Seller, other than such claims or grievances that, individually or in the aggregate, would not have a Material Adverse Effect.

        (p)         Full Disclosure. No representation or warranty made by Seller in this Agreement, or in any Other Seller Document or exhibit provided to Buyer in connection with the transactions contemplated by this Agreement, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made therein, taken as a whole, not misleading.

        (q)         Reserved.

        (r)         Insurance Policies. Set forth on Schedule  13 hereto is a true, correct and complete listing of all insurance policies applicable to the Business including, without limitation, those relating to product liability and comprehensive general liability (collectively, the "Insurance Policies"). The Insurance Policies are in full force and effect in accordance with their terms and no premium payable thereunder which relates to any period prior to the Closing is unpaid or outstanding as of the date of this Agreement, or will be unpaid or outstanding as of the Closing Date. Set forth on Schedule 13 is a true, correct and complete listing of all claims relating to the Business as made by Seller under the Insurance Policies in respect of any claims of customers and/or suppliers of the Business during the three year period immediately preceding the date hereof. Seller has made available to Buyer access to Seller's complete files with respect to each such claim.

        (s)         Location of Business and Names. During the one (1) year-period immediately preceding the Closing (i) the Division has operated exclusively under the names Value City Imports, (ii) the Division's principal place of business has been and continues to be at 1800 Moler Road, Columbus, OH 43207 and/or at 2025 Corvair Avenue, Columbus, Ohio 43207 and (iii) all of the Personal Property has been located exclusively at 1800 Moler Road, Columbus, OH 43207 and/or at 2025 Corvair Avenue, Columbus, Ohio 43207.

        (t)         Liabilities. Except for such claims, debts and liabilities as are reflected in the Financial Statements or as otherwise disclosed in writing to Buyer, to the best of Seller's knowledge (after due inquiry by Seller of Guy Bradford, Hank Shechtman and Mort Love) neither the Division (as related in any manner to the importation of the AEO Merchandise) nor the Business has any outstanding indebtedness and is not subject to any claims, investigations or liabilities, pending or threatened, contingent or otherwise, (and Seller has received no notice of any such matters) other than trade obligations incurred in the ordinary course of business in amounts that are usual and normal, both individually and in the aggregate. Seller has provided to Buyer a true, accurate and complete list of the Assumed Liabilities (known to Seller as of the date of Closing) to be assumed by Buyer pursuant to the Assignment and Assumption Agreement as of the most recent practicable date prior to the date of this Agreement.

        (u)         No Broker or Finder. Seller has not directly or indirectly retained or hired any broker, finder, financial adviser or other similar agent or representative in connection with this Agreement or a of the transactions contemplated hereby.

        Section 4.02. Buyer's Representations and Warranties. Buyer hereby represents and warrants to Seller as follows:

        (a)         Organization and Standing. Buyer is a Limited Partnership duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. Buyer has all requisite power and authority to own and operate its property and assets and to conduct its business as now conducted.

        (b)         Due Authorization and Execution, etc. Buyer has all requisite power and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby; this Agreement has been, and the Assignment and Assumption Agreement, when executed, will be, duly authorized, executed and delivered by Buyer and constitutes, or when executed, will constitute, valid, binding and legal obligations of Buyer, enforceable in accordance with their terms.

        (c)         Absence of Conflict. The execution, delivery and performance of this Agreement and the Assignment and Assumption Agreement and the consummation of the transactions contemplated to occur pursuant hereto and thereto (i) do not and will not violate or conflict with the Limited Partnership Agreement of Buyer, (ii) to the best of Buyer's knowledge do not and will not violate, conflict with, result in a breach of or default under, or give any person or entity any right to terminate or modify, any material contract or agreement applicable to Buyer or any of the rights, properties, assets, liabilities, operations or businesses of Buyer, (iii) do not and will not violate, conflict with, result in a breach of or default under, or give any person or entity any right to terminate or modify, any governmental or court-issued order, writ, judgment, decree, license, permit, approval or authorization of any kind applicable to Buyer or any of the rights, properties, assets, liabilities, operation or businesses of Buyer, and (iv) to the best of Buyer's knowledge, do not and will not violate or conflict with any Law applicable to Buyer.

        (d)         No Broker or Finder. Buyer has not directly or indirectly retained or hired any broker, finder, financial advisor or other similar agent or representative in connection with the transactions contemplated hereby.

        (e)         Governmental Consents. No authorization, consent, order, permit or approval of, or filing with, any governmental agency is necessary for the consummation by Buyer of the transactions contemplated by this Agreement.

        (f)         Full Disclosure. No representation or warranty made by Buyer in this Agreement, or in any exhibit provided to Seller in connection with the transactions contemplated by this Agreement, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made therein, taken as a whole, not misleading.

ARTICLE V
CONDUCT OF BUSINESS PRIOR TO CLOSING

Section 5.01. Preservation of Business Relationships and Conduct of Business. Seller hereby covenants to Buyer that, during the period from the date hereof through the Closing Date, (i) Seller shall conduct the Business in the ordinary and usual course in all respects; and (ii) Seller shall, except as mutually agreed, use its best efforts to preserve and maintain the Business organization intact, to keep available the services of the Business' current employees, to perform its obligations under the contracts to comprise the Assumed Contracts, to preserve its existing relationships with its customers, suppliers, customs brokers, and others having business relationships with it and to maintain the goodwill enjoyed by Seller with such persons for the benefit of Buyer. Buyer and Seller will cooperate with each other and proceed to prepare and file any necessary governmental or third party consents required to complete the transaction contemplated to occur pursuant hereto.

        Section 5.02. Other Pre-Closing Actions of Seller. Seller covenants and agrees that, pending the Closing, (i) Seller shall not take any action that is inconsistent with the satisfaction of any condition set forth in Section 6.02 hereof; (ii) Seller shall furnish Buyer, as promptly as practicable, with such documents and information relating to the Business and the Purchased Assets as Buyer may from time to time reasonably request; (iii) Seller shall provide Buyer and its representatives with such access to the Business and the Purchased Assets as Buyer may from time to time reasonably request during normal business hours to conduct one or more inspections and investigations thereof; provided, that such inspections shall not unreasonably interfere with Seller's conduct of the Business; (iv) Seller shall pay and perform all of the debts, obligations and liabilities of the Business as and when they become due in the ordinary course; (v) cooperate with Buyer and its counsel in providing such other information (financial and otherwise) as Buyer or such counsel determines to be necessary or appropriate to prepare any filing with the Securities and Exchange Commission or other governmental authority as necessitated by this transaction (and the Seller agrees that, upon request by Buyer, it shall make available such of its officers, employees, agents and consultants, including its independent public accountants, as are reasonably necessary to assist Buyer in preparing such filings); and (vi) Seller shall use its best efforts to obtain the consents, which shall be reasonably satisfactory in form and substance to Buyer's counsel, of all parties whose consents are necessary to the conveyance, assignment, delivery and transfer of the Purchased Assets and/or the Buyer's operation of the Business following the Closing.

        Section 5.03. Pre-Closing Actions of Buyer. Buyer covenants and agrees that, pending the Closing, Buyer shall not take any action that is inconsistent with the satisfaction of any condition set forth in Section 6.02 hereof.

ARTICLE VI
CLOSING DATE; CONDITIONS AND TRANSACTIONS

        Section 6.01. Closing Date. Subject to the satisfaction or waiver of each of the conditions set forth in Section 6.02 hereof, the closing of the purchase and sale transactions contemplated to occur pursuant to this Agreement (the "Closing") shall be effective as of January 31, 2000 (the date on which the Closing is effective is hereafter referred to as the "Closing Date").

        Section 6.02. Conditions to Closing.

        (a)         All Parties. The obligations of each party hereto to consummate the purchase and sale transactions contemplated by this Agreement are subject to the following condition: no judicial, governmental or other action or proceeding shall have been instituted or be threatened that materially challenges this Agreement or any of the transactions contemplated hereby.

        (b)         Seller. In addition to the condition set forth in Section 6.02(a) hereof, the obligations of Seller to consummate the purchase and sale transactions contemplated by this Agreement are subject to the following conditions:

        (i)         Each of the warranties and representations made by Buyer in Section 4.02 hereof shall be true and correct in all material respects as of the Closing as if made on and as of the Closing Date;

        (ii)         Buyer shall have performed all of the obligations and satisfied all of the conditions required to be performed or satisfied by it at or prior to the Closing in connection with this Agreement and the transactions contemplated to occur pursuant hereto in all material respects;

        (iii)        At the Closing, Seller shall have received an Officers' Certificate from Buyer confirming the satisfaction of the conditions set forth in clauses (i) and (ii) of this Section 6.02(b);

        (iv)        Any and all consents, authorizations, approvals, waivers, estoppel certificates and releases from third parties that may, in the reasonable opinion of Seller or its legal counsel, be necessary to carry out and complete all of the transactions contemplated to occur pursuant to this Agreement shall have been obtained and be in full force and effect as of the Closing;

        (v)         RESERVED;

        (vi)         Buyer shall have delivered to Seller (A) a Good Standing Certificate from the State of Pennsylvania, (B) copies of Buyer's Certificate of Limited Partnership as currently in effect and all resolutions of Buyer's general partner adopted in connection with this Agreement and the transactions contemplated to occur pursuant hereto, each of which shall be certified by the general partner of Buyer to be true, correct and complete copies thereof and (C) an incumbency certificate of the general partner of Buyer;

        (vii)         Buyer shall have executed and delivered to Seller the Assignment and Assumption Agreement and the Employment Practices and Shared Services Agreement; and

        (viii)         Buyer shall have paid to Seller the Purchase Price.

        (c)         Buyer. In addition to the conditions set forth in Section 6.02(a) hereof, the obligations of Buyer to consummate the purchase and sale transactions contemplated by this Agreement are subject to the following conditions:

        (i)         Each of the representations and warranties made by Seller in Section 4.01 hereof shall be true and correct in all material respects as of the Closing as if made on and as of the Closing Date;

        (ii)         Seller shall have made all Pre-Closing Adjustments and performed all of the obligations and satisfied all of the conditions required to be performed or satisfied by it at or prior to the Closing in connection with this Agreement and the transactions contemplated to occur pursuant hereto in all material respects;

        (iii)         At the Closing, Buyer shall have received an Officers' Certificate from Seller confirming the satisfaction of the conditions set forth in clauses (i) and (ii) of this Section 6.02(c);

        (iv)         Any and all consents, authorizations, approvals, waivers, estoppel certificates and releases from third parties that may, in the reasonable opinion of Buyer hereto or its legal counsel, be necessary to carry out and complete all of the transactions contemplated to occur pursuant to this Agreement shall have been obtained and be in full force and effect as of the Closing;

        (v)         RESERVED;

        (vi)         Seller shall have delivered to Buyer (A) a Good Standing Certificate from Ohio, Delaware and Pennsylvania, dated as of a recent date, (B) copies of all documents evidencing Seller's authority to enter into this Agreement adopted in connection with this Agreement and the transactions contemplated to occur pursuant hereto, each of which shall be certified by a duly authorized officer or agent of Seller to be true, correct and complete copies of such resolutions, and (C) an incumbency certificate of Seller;

         (vii)        Seller shall have executed and delivered the Seller Transfer Documents and the Employment Practices and Shared Services Agreement;

        (viii)        Buyer shall have entered into the Employment Agreements with those individuals whose names are listed on Schedule 11 hereto;

        (ix)         The Buyer and the Committee shall have received the Fairness Opinion, and any other written opinions requested by Buyer or the Committee, in form and content acceptable to Buyer and the Committee in their respective sole discretion, regarding the valuation of the Purchased Assets and the Business and the entering into and consummation of the transactions set forth in this Agreement;

        (x)         The Board of Directors (including a majority of the Committee) shall have approved the transactions contemplated to occur pursuant hereto;

        (xi)         The obtaining by the Buyer of all third party consents and governmental approvals, licenses and permits necessary for the Buyer to consummate the transaction set forth in this Agreement and to operate the Business as it was operated by Seller prior to the Closing; and

        (xii)        There shall have occurred no material adverse change in or to the financial condition, results of operations, assets or employees of the Division, or to Seller, or any of their affiliates to the extent that such material adverse change would have a Material Adverse Effect, since July 31, 1999 including, without limitation, any bankruptcy, liquidation, dissolution, creditor standstill agreement, material Default, or other similar event. No suit, action or other proceeding shall be threatened or pending before any court or governmental agency which seeks to restrain, enjoin or otherwise prohibit this transaction, or seeks the payment of significant damages from the AEO Companies in the event that the transactions contemplated by this Agreement are consummated.

        The failure of any condition set forth in this Article VI, unless waived by Seller with respect to any condition set forth in Section 6.02(b) above, or waived by Buyer with respect to any condition set forth in Section 6.02(c) above, or waived by both Seller and Buyer with respect to any condition set forth in Section 6.02(a) above, shall cause this Agreement to terminate, in which event Seller and Buyer shall have no liability or obligation to each other.

ARTICLE VII
POST CLOSING COVENANTS

        Section 7.01. Transition Period. If so requested by Buyer, Seller will, to the extent permitted by applicable law, perform services and process matters that constitute all or part of the conduct of the Business for and on behalf of Buyer for a transition period of one year after the Closing. To the extent that Buyer requests any such services be provided by Seller after the Closing, Buyer will reimburse Seller for its actual, reasonable cost (as mutually agreed to by Seller and Buyer in the Employment Practices and Shared Services Agreement) to provide such requested services, and all profits earned with respect to the operation of the Business and/or use of the Purchased Assets following the Closing shall belong to Buyer.

        Section 7.02. Protection of Business and Purchased Assets. Without in any way limiting the rights and remedies available to Buyer for any actual or threatened violation of any covenant or agreement of Seller contained in Sections 5.01 and 5.02 above, Seller acknowledges and agrees that such other rights and remedies cannot fully compensate Buyer, and Buyer shall be entitled to injunctive relief to prevent or remedy any actual or threatened violation of any covenant or agreement of Seller contained in Sections 5.01 and 5.02 above.

        Section 7.03. Books and Records. Following the Closing, Seller shall make available to Buyer, upon reasonable notice during normal business hours, for review and copying for the purpose of preparing tax returns and related reports and any other proper purpose, any and all of the books and records relating to the Business, the Division or the Purchased Assets that may then be in the possession or control of Seller, and to provide to Buyer-original copies thereof where such originals are necessary. Seller shall not willfully and knowingly destroy any of such books and records for a period of five (5) years after the Closing without first offering to deliver such books and records to be destroyed to Buyer.

        Section 7.04. Workmen's Compensation Claims. In the event that any workers compensation claim is asserted after the Closing Date for a claim occurring prior the Closing Date by any person who was employed with the Division at a time prior to the Closing Date, Seller agrees to accept all liability for those workers compensation claims under the workers compensation laws of the State of Ohio. In the event that any workers compensation claim is asserted after the Closing Date for a claim occurring after the Closing Date by any person who was employed with the Division at a time prior to the Closing Date and who is hired by the Buyer, Buyer agrees to accept all liability for those workers compensation claims under the workers compensation laws of the State in which the claimant is employed for those claims occurring after the Closing Date. In the event that any workers compensation claim is asserted after the Closing Date by any person who was employed with the Division at a time prior to the Closing Date and who is hired by the Buyer, and the date of the occurrence giving rise to the claim cannot readily be determined as being either before or after the Closing Date, all liabilities and obligations in respect of such claim shall be handled; in compliance with the Worker's Compensation laws of the state governing the employer (either Buyer or Seller) who ultimately is determined, either through discovery or otherwise, to have employed the person at the time of the occurrence giving rise to the claim.

        Section 7.05. Reserved.

        Section 7.06. Further Assurances. If at any time after the Closing, either party hereto should determine that any further instruments of sale, assignment, conveyance, transfer or delivery, instruments of assumption, security documents, releases of security interests, consents to assignment, or other documents and instruments are necessary or desirable to carry out more effectively and complete the transactions contemplated to occur pursuant to this Agreement, each party hereto shall (i) execute and deliver any and all such further documents and instruments as the other party hereto may reasonably request, and (ii) use its best efforts to obtain the execution and delivery of any such further documents and instruments from any third party as either party hereto may reasonably request.

ARTICLE VIII
REMEDIES

        Section 8.01. The parties agree that, in the event of a breach by either party of any of the terms hereof or of any of the other documents or instruments executed and delivered pursuant to this Agreement or in connection with the transactions contemplated to occur pursuant hereto, which breach becomes the basis for any claim or lawsuit among the parties, then, in such event, the prevailing party in any such claim or lawsuit shall be entitled, as part of its proper damages, to reimbursement for its reasonable attorneys' fees and expenses incurred in connection with such claim or litigation.

ARTICLE IX
MISCELLANEOUS PROVISIONS

        Section 9.01. Survival of Warranties, Representations, Agreements, etc. All of the warranties, representations, and agreements of the parties hereto shall survive the Closing and the consummation of the transactions contemplated by this Agreement for a period of two (2) years, except for the representations and warranties contained in Sections 4.01(h) and 4.01(u) which shall survive the Closing until the applicable statute of limitations has expired, regardless of any investigations made by, any party, either prior to or after the Closing; provided, however, that (i) nothing contained in the foregoing provision shall limit or modify the obligations of the parties to indemnify each other pursuant to Sections 3.04 and 3.05, and (ii) if any customs duty is owed for the importation of AEO Merchandise (notwithstanding Seller's representation set forth in Section 4.01(h) hereof), the amount of the duty itself (as opposed to any penalty or other charges) shall be payable by Buyer. The rights and remedies of the parties hereto with respect to any inaccuracy in any warranty or representation or with respect to any breach or default under any covenant or agreement shall not be limited or restricted by the fact that the act, omission, occurrence or other state of facts giving rise to such inaccuracy or such breach or default is also the subject of another warranty or representation as to which there is no inaccuracy or another covenant or agreement as to which there is no breach or default.

        Section 9.02. Third Party Actions. If any third party should institute or assert any claim, action or proceeding against any party hereto with respect to which such party determines it may seek to be indemnified, held harmless and/or defended, pursuant to the assumption or exclusion of liabilities set forth in Sections 3.03 and 3.04 hereof, the party hereto against whom such claim, action or proceeding has been instituted or asserted (the "indemnified party") shall promptly notify each party hereto by whom it may seek to be indemnified, held harmless and/or defended (an "indemnifying party") of the institution or assertion of such claim, action or proceeding, and, if so requested by an indemnifying party, shall promptly furnish such indemnifying party with a copy of any written claim, complaint, notice of violation or other similar document the indemnified party may have received from the third party instituting or asserting such claim, action or proceeding. An indemnified party shall have the right (but not the obligation) (i) to direct and control, through legal counsel of its own choosing, the defense of any third party claim, action or proceeding and (ii) to compromise and settle any third party claim, action or proceeding on any basis and in any manner such indemnified party deems necessary or appropriate; provided, however, that (a) each indemnifying party shall have the right to participate, at its own cost and expense, through legal counsel of its own choosing, subject to the control of the indemnified party and its legal counsel, in the defense of any third-party claim, action or proceeding with respect to which indemnity is sought hereunder, (b) prior to compromising or settling any third-party claim, action or proceeding with respect to which indemnity is sought hereunder, the indemnified party shall notify such indemnifying party of the proposed terms and conditions of the compromise or settlement and (c) in the case of any third-party claim, action or proceeding with respect to which indemnity is sought hereunder that involves only the payment of money damages by the indemnified party, such indemnifying party may assume (jointly with any and all other indemnifying parties), at its own cost and expense, through legal counsel of its own choosing reasonably acceptable to the indemnified party, the direction and control of the defense of such third-party claim if, but only if (i) such indemnifying party acknowledges that it is obligated to indemnify and hold harmless the indemnified party with respect to all judgments, settlements, compromises and other losses, damages, costs and expenses in connection with such third-party claim, action or proceeding and (2) such third-party claim, action or proceeding continues to involve only the payment of money damages by the indemnified party.

        Section 9.03. Miscellaneous Provisions.

        (a)         Entire Agreement. This Agreement, together with all Exhibits, Transfer Documents and Other Documents, constitutes the entire agreement and understanding of the parties hereto with respect to the transactions contemplated hereby and supersedes any and all prior negotiations, discussions, agreements and understandings, oral or written, among the parties hereto, or any of them, with respect to this Agreement or the transactions contemplated hereby.

        (b)         Amendment. This Agreement may be amended, superseded, extended or modified only by an instrument or instruments in writing signed by each of the parties hereto (or their respective successors in interest or permitted assigns), and no waiver or consent with respect to this Agreement or any of the transactions contemplated hereby shall be effective against any party hereto unless and until such waiver or consent is set forth in any instrument or instruments in writing signed by such party (or its successor in interest or permitted assign).

        (c)         No Waiver. No delay by any party hereto in exercising any right or remedy shall operate as a waiver of such right or remedy, and no waiver of any right or remedy by any party shall operate to waive future compliance with such right or future exercise of such remedy or affect any other right or remedy.

        (d)         Remedies Cumulative. The rights and remedies of the parties hereto are cumulative, and the rights and remedies granted to the parties pursuant to this Agreement are not exclusive of, but are in addition to, any and all other rights and remedies that the parties hereto may have at law or in equity or under any other contract, agreement or other document or instrument.

        (e)         Severability. The provisions of this Agreement are severable and the invalidity or unenforceability of any provision of this Agreement as to one or more parties shall not affect the validity or enforceability of such provision as to any other party or the validity or enforceability of any other provision of this Agreement.

        (f)         Exhibits and Headings. The exhibits and schedules hereto and the Other Seller Documents constitute an integral part of this Agreement. The captions and headings in the articles, sections and subsections of this Agreement and the exhibits and schedules hereto are for purposes of convenience only and are not intended to affect the interpretation of this Agreement.

        (g)         Notices, etc. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by reputable courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

If to Seller: Schottenstein Stores Corporation
1800 Moler Road
Columbus, OH 43207
Attention: Jeffrey Swanson

with a copy to:  Irwin Bain, Esquire
1800 Moler Road
Columbus, OH 43207        

If to Buyer:  Blue Star Imports, L.P
150 Thorn Hill Drive
Warrendale, PA 15095
Attention: George Kolber

with a copy to:  Sable, Pusateri, Rosen, Gordon & Adams, LLC
437 Grant Street
7^th Floor, Frick Building
Pittsburgh, PA 15219
Attn.: Alan B. Gordon, Esquire

        (h)         Counterparts. This Agreement may be executed in two or more counterparts and shall become effective as of the date first above written when each party hereto has signed at least one counterpart hereof.

        (i)         Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to conflicts of law principles.

        (j)         Parties Bound and Benefited. This Agreement shall be binding upon and enforceable against, and shall inure to the benefit of, the parties hereto and their respective successors in interest and permitted assigns; provided, however, that neither this Agreement, nor any of the rights, privileges or obligations hereunder shall be assignable by any of the parties without the other parties' prior written consent; provided, however, that Seller may not withhold its consent to any assignment of this Agreement or Buyer's rights and obligations hereunder by Buyer to any entity controlled by or under common control with the Buyer. Nothing contained in this Agreement, express or implied, shall or is intended to confer on any person or entity other than the parties hereto and their successors in interest, any rights or remedies under or by reason of this Agreement unless so stated expressly to the contrary.

        IN WITNESS WHEREOF, each of the parties hereto has executed and delivered this Agreement as of the day and year first above written.

SELLER:

SCHOTTENSTEIN STORES CORPORATION

 By: /s/ Jeffrey Swanson

  BUYER;

BLUE STAR IMPORTS, L.P.

 By: BSI IMPORTS CO., LLC, general partner

 By: /s/ Dale E. Clifton

LIST OF EXHIBITS

Description	Designation
Assignment and Assumption Agreement	A
Bill of Sale and Assignment	B
Employment Practices and Shared Services Agreement	C

LIST OF SCHEDULES

Description	Designation
List of Assumed Contracts	1
List of Permits and Licenses	2
List of Personal Property	3
List of Software	4
Purchase Price Allocation	5
List of Jurisdictions	6
Material Adverse Changes	7
Intellectual Property	8
Taxes, Duties and Tariffs	9
Schedule of Litigation	10
Key Employees	11
List of Inventory	12
Insurance Policies	13
List of Books and Records being delivered to Buyer	14

ASSIGNMENT AND ASSUMPTION AGREEMENT

        This Assignment and Assumption Agreement (this "Agreement") is made as of this 10th day of March, 2000, effective as of the 31st day of January, 2000, by and between SCHOTTENSTEIN STORES CORPORATION, a Delaware corporation ("Assignor"), and BLUE STAR IMPORTS, L.P., a Pennsylvania limited partnership ("Assignee"), pursuant to that certain Purchase and Sale Agreement (the "Purchase Agreement") of even date herewith made by and between Assignor and Assignee. Capitalized terms used but not defined herein are used as defined in the Purchase Agreement.

ASSIGNMENT AND ASSUMPTION AGREEMENT

        This Assignment and Assumption Agreement (this "Agreement") is made as of this 10th day of March, 2000, effective as of the 31st day of January, 2000, by and between SCHOTTENSTEIN STORES CORPORATION, a Delaware corporation ("Assignor"), and BLUE STAR IMPORTS, L.P., a Pennsylvania limited partnership ("Assignee"), pursuant to that certain Purchase and Sale Agreement (the "Purchase Agreement") of even date herewith made by and between Assignor and Assignee. Capitalized terms used but not defined herein are used as defined in the Purchase Agreement.

        For and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, as of the date hereof, (i) Assignor does hereby transfer and assign to Assignee all of Assignor's right, title and interest in and to the Assumed Contracts (provided that where Assignor is required to continue to be a party to such contracts or where Assignor will continue to require or perform services under such contracts, Assignor shall use its best efforts to add Assignee as an additional party, rather than the sole transferee, of such contracts), the Permits and Licenses, and the Prepaid Expenses, (ii) Assignee does hereby accept such transfer and assignment, and (iii) Assignee does hereby (a) undertake and assume all of the Assumed Liabilities and (b) disclaims any liability or obligation under the Excluded Liabilities.

        Without in any way affecting any of Assignee's or Assignor's respective obligations under the Purchase Agreement, Assignee and Assignor each hereby specifically confirm to the other their indemnification obligations under and pursuant to the Purchase Agreement.

        Each party hereto agrees, at any time and from time to time, upon the request of the other party, to forthwith execute and deliver such instruments of assignment, release, endorsement, direction and authorization as will be sufficient, requisite or advisable, in the reasonable opinion of Assignor, Assignee or their respective counsel, to effect the assignment hereunder, but the parties specifically agree that this instrument and these presents are intended to and shall be, and the same hereby are, declared to be sufficient in all respects to, and the same do hereby, effect the assignment hereunder.

        Assignor acknowledges and agrees that, with respect to any Assumed Contracts, which are, in their nature, by law, by their terms or otherwise, nonassignable, or which contain a covenant against assignment, this instrument shall, notwithstanding anything elsewhere herein contained, be construed as an assignment to Assignee of the equitable interest in the same insofar as is legally permissible without violation of law or breach of the terms or condition thereof, with the right in Assignee or its successors and assigns (i) to have said claims, contracts, commitments or other agreement, if any, held in trust by Assignor so as to enable Assignee or its successors and assigns to use and enjoy the full benefit thereof, (ii) to have transferred to Assignee or its successors or assigns any and all such property or rights which shall become assignable as soon as the same shall become assignable, and (iii) to take and have taken any action which may be taken without violation of law and without any breach as aforesaid which is necessary or appropriate to make such contract, property or rights assignable. Assignor agrees that in any instance in which nonassignability of any such contract, property or rights may be removed by the consent of any party or parties, Assignor will use its best efforts to obtain the consent of all such parties to the assignment of the property or rights in question to Assignee. If such a consent is not obtained, or if an attempted assignment would be ineffective or would affect Assignor's rights so that Assignee or its successors and assigns in fact would not receive such contract, property or rights, Assignor will cooperate with Assignee or its successors and assigns on any reasonable arrangement, not contrary to law, designed to provide for Assignee or its successors and assigns the benefit under any such Assumed Contracts and enforcement thereof, and for the benefit of Assignee or its successors and assigns, of any and all rights of Assignor against any party thereto arising out of breach or cancellation by such party or otherwise.

        Nothing in this Agreement shall preclude or prohibit Assignee from contesting in good faith the legality, validity or enforceability of any debt, liability, obligation under any Assumed Contract, provided that the foregoing shall not affect the legality, validity or enforceability of the terms and provisions of this Agreement.

       This Agreement shall be binding upon and inure to the benefit of Assignor and Assignee and their respective heirs, successors and assigns.

        IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment and Assumption of Agreements effective as of January 31, 2000.

ATTEST:	ASSIGNOR: Schottenstein Stores Corporation, a Delaware corporation
By: /s/ Tod Friedman  ATTEST:	By: /s/ Jeffrey Swanson ASSIGNEE: Blue Star Imports, L.P., a Pennsylvania limited partnership By:  BSI Imports Company, LLC, a        Delaware limited liability company and its sole General Partner
By: /s/ William P. Tait	By: /s/ Dale E. Clifton

BILL OF SALE AND ASSIGNMENT

        This Bill of Sale and Assignment (this "Instrument") is made this 10th day of March, 2000, effective as of the 31st day of January, 2000, by SCHOTTENSTEIN STORES CORPORATION, a Delaware corporation ("Assignor"), in favor of BLUE STAR IMPORTS, L.P., a Pennsylvania limited partnership ("Assignee"), pursuant to that certain Purchase and Sale Agreement (the "Purchase Agreement") of even date herewith made by and between Assignor and Assignee. Capitalized terms used but not defined herein are used as defined in the Purchase Agreement.

        For and in consideration of the sum of Ten and No/100 ($10.00) Dollars cash in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, Assignor does hereby transfer and assign the Personal Property to Assignee and Assignee does hereby accept such assignment and transfer.

        Assignor warrants that it is the owner of the Personal Property and that its right, title and interest in and to the Personal Property is hereby transferred and assigned to Assignee free and clear of all liens, security interests and encumbrances.

        Assignee hereby agrees to perform, execute and/or deliver, or cause to be performed, executed and/or delivered, any and all such further acts and assurances as Assignee may reasonably require to perfect Assignee's interest in the Personal Property hereby transferred, but Assignee and Assignor agree that this Instrument and these presents shall be, and the same hereby are, declared to be sufficient in all respects to, and the same do hereby, effect the transfer and assignment made hereunder.

        This Bill of Sale and Assignment shall be binding upon and inure to the benefit of Assignor and Assignee, and their respective successors and assigns.

        IN WITNESS WHEREOF, Assignor has duly executed and delivered this Bill of Sale and Assignment, and Assignee has accepted this Bill of Sale and Assignment, effective as of the 31^st day of January, 2000.

            ASSIGNOR:
SCHOTTENSTEIN STORES CORPORATION, a Delaware
          corporation

By: /s/ Jeffrey Swanson
Name:
Title:  President

[signatures continued on following page]

ASSIGNEE
BLUE STAR IMPORTS, L.P., a
Pennsylvania limited partnership        

By:   BSI Imports Company, LLC, a
        Delaware limited liability
company and its sole General Partner     

By: /s/ Dale E. Clifton
      Name: Dale E. Clifton
      Title: VP, Controller, and Chief Accounting
      Office

EMPLOYMENT PRACTICES AND SHARED SERVICES AGREEMENT

        THIS AGREEMENT is dated as of the 10th day of March, 2000, effective as of January 31, 2000, between SCHOTTENSTEIN STORES CORPORATION, a Delaware corporation, ( "Schottenstein") and BLUE STAR IMPORTS, L.P., a Pennsylvania Limited Partnership ("Blue Star").

R E C I T A L

        A.         Blue Star and Schottenstein have entered into a Purchase and Sale Agreement effective as of January 31, 2000 ("Purchase Agreement") whereby Blue Star is purchasing the Purchased Assets and the Business of Value City Imports, a division of Schottenstein, relating to the importation of the AEO Merchandise (as such capitalized terms are defined in the Purchase Agreement). All capitalized terms not otherwise defined herein shall have the meaning given to such terms in the Purchase Agreement.

        B.         Blue Star desires to receive, on a transitional basis, certain services currently provided by Schottenstein for the Purchased Assets and the Business on the terms and conditions contained herein.

        C.         Schottenstein is willing to provide, on a transitional basis, at reasonable times and upon reasonable prior notice, certain services currently provided by Schottenstein for the Purchased Assets and the Business on the terms and conditions contained herein.

        D.         In connection with its acquisition of the Purchased Assets and the Business from Schottenstein, Blue Star has hired certain employees, Guy Bradford and Hank Shechtman (the "Blue Star Employees "), who formerly were employed by Schottenstein.

        E.         Schottenstein desires to receive, on a transitional basis, certain services to be provided by the Blue Star Employees in connection with the importation of merchandise for Value City Department Stores and Value City Furniture stores, on the terms and conditions contained herein.

        F.         Blue Star is willing to provide, on a transitional basis, at reasonable times and upon reasonable prior notice, the services of the Blue Star Employees to assist Schottenstein in connection with its importation of merchandise, on the terms and conditions contained herein.

        NOW THEREFORE, for good and valuable consideration, the sufficiency of which is hereby acknowledged, and intending to be legally bound, the parties agree that the transitional services shall be provided in accordance with the following:

        1.         Supply of Services.

                 a.         Schottenstein shall, upon the request of Blue Star, supply to Blue Star the services (at the cost) as described in Attachment A hereto (the "Defined Services) according to the terms of this Agreement. In addition, to the extent Blue Star needs services historically provided by Schottenstein in addition to the Defined Services, the parties agree to amend Attachment A to add such services (the "New Services"). The New Services and the Defined Services are collectively referred to as the "Services". Schottenstein shall furnish Blue Star with such current merchandise in transit, orders and other reports and documents that it has normally produced with respect to its provision of the Services. All Services provided hereunder shall be performed in compliance with all applicable laws and regulations and in substantially the same manner as historically performed by Schottenstein and as revised from time to time by Schottenstein consistent with the methods used for the importation of Schottenstein's own merchandise. Blue Star may, at its discretion, decrease or discontinue any of the Services to be provided hereunder. The parties hereto also agree that Blue Star shall have no obligation to order any Services whatsoever. Schottenstein shall provide Blue Star with reasonable access to its facility and the Purchased Assets. During the Transition Period and the Extended Term, Blue Star may elect to remove the Purchased Assets from the Facility for the purpose of relocating such assets to facilities owned or operated by Blue Star or its affiliates.

                 b.         Blue Star shall, upon the request of Schottenstein, supply to Schottenstein, at reasonable times, the services of the Blue Star Employees (and any other current employee of Blue Star who had previously worked for Schottenstein in connection with the importation of its merchandise and its customs compliance program) in order to assist Schottenstein in connection with the importation of merchandise and customs compliance program for Schottenstein and its affiliated entities (the "Blue Star Employees' Services"). The Blue Star Employees' Services shall be performed in compliance with all applicable laws and regulations, and in substantially the same manner as historically performed by the Blue Star Employees, and as revised from time to time by Blue Star consistent with past practice. The Blue Star Employees' Services shall be the same services as have historically been provided to Schottenstein by such employees prior to the Closing, and shall also include reasonable training of any of Schottenstein's remaining or newly hired employee(s). Schottenstein shall use its best efforts to hire, as soon as is reasonably practical, its own employee(s) to perform the services that are now being provided to it by the Blue Star Employees hereunder. The Blue Star Employees' Services shall be provided to Schottenstein in accordance with the terms of this Agreement and at the costs as set forth on Attachment B hereto.

                 c.         Schottenstein hereby perpetually and irrevocably licenses or sublicenses, as the case may be, to Blue Star and its affiliates (on a non-exclusive basis) the Software and Intellectual Property used or useful in connection with the ownership and/or operation of the Business. The license and/or sublicense granted by Schottenstein to Blue Star and its affiliates herein shall be considered a fully paid license and/or sublicense, and no license fee, royalty or other fee shall be due for the privilege of exercising the rights licensed or sublicensed herein. Schottenstein shall maintain the Software in an operating condition and will timely and fully pay all charged license or sublicense fees and maintenance fees necessary to enable Blue Star and its affiliates to fully access, use, and enter and retrieve data in connection with the Software. Schottenstein shall make available to Blue Star and its affiliates all Software and all currently existing and future associated technical information regarding the Software which might be reasonably necessary, useful or helpful to Blue Star and its affiliates in the exercise of the rights licensed, sublicensed or otherwise granted. There shall be no fees or other charges associated with providing the documents and materials contemplated by this Subparagraph c.         

        2.          Term.

        This Agreement shall commence upon the date hereof and continue in effect for a term of one year (the "Transition Period") ending on (the "Original Termination Date") January 31, 2001, subject to extension in accordance with this Section 2. Either party may, at its option and by notice given to the other party at least 30 days prior to the Original Termination Date (and 30 days prior to the expiration of the initial 3 month extension period, if applicable), extend such term of this Agreement, for a total of up to two additional periods of three months each (the "Extended Term").

        3.         Termination.

                 a.         Blue Star may terminate this Agreement as to any one or more Services at any time upon 10 days' prior written notice. Blue Star shall not terminate this Agreement during the Transition Period and the Extended Term with respect to its obligation to make available the Blue Star Employees and provide the Blue Star Employees' Services to Schottenstein except in the event that Schottenstein fails to make any payment due hereunder within five (5) days after delivery of written notice by Blue Star, or if Schottenstein breaches any nonmonetary obligation hereunder and such breach is not cured within thirty (30) days after delivery of written notice by Blue Star unless Schottenstein has undertaken a course of action reasonably calculated to cure such nonmonetary breach and continuously pursues the same until cured.

                 b.         Schottenstein may terminate this Agreement as to its use of the Blue Star Employees or the providing of any of the Blue Star Employees' Services at any time upon 10 days' prior written notice. Schottenstein shall not terminate this Agreement during the Transition Period and the Extended Term for any Service except in the event that Blue Star fails to make any payment due hereunder within five (5) days after delivery of written notice by Schottenstein, or if Blue Star breaches any nonmonetary obligation hereunder and such breach is not cured within thirty (30) days after delivery of written notice by Schottenstein unless Blue Star has undertaken a course of action reasonably calculated to cure such nonmonetary breach and continuously pursues the same until cured.

        4.          Price.

                 a.         The price for each Defined Service shall be its cost as described on Attachment A hereto. The price for each New Service shall be set forth on Attachment A and shall be calculated by Schottenstein and agreed to by Blue Star in the same manner as the cost (with no corporate overhead charges) for each Defined Service was calculated for this Agreement.

                 b.         The price for each Blue Star Employee and the Blue Star Employees' Services shall be as described on Attachment B hereto. If Schottenstein desires to utilize any additional employees of Blue Star, the price for each additional employee shall be calculated by Blue Star and agreed to by Schottenstein in the same manner as the cost for the Blue Star Employees was calculated for this Agreement. To the extent that a cost for a particular service included in the Blue Star Employees' Services is not specifically listed on Attachment B, the cost to be charged by Blue Star shall be its actual cost (with no corporate overhead charges) for such service.

        5.         Past Practice.

        Schottenstein has been supplying importation services to the American Eagle Outfitters, parent of Blue Star, for several years. To the extent that questions arise as to the nature of a particular Service or a Blue Star Employees' Service, the manner in which Services or Blue Star Employees' Service are to be provided, or any responsibilities of Schottenstein or Blue Star hereunder, the parties shall be guided by past reasonable practices of Schottenstein or American Eagle Outfitters.

        6.         Invoicing and Payment.

                 a.         Schottenstein shall invoice Blue Star monthly for the Services supplied hereunder. Schottenstein may use one or more invoices. Payment shall be due 30 days after the invoice(s) are sent. The provisions of this Section 6 shall survive the termination of this Agreement.

                 b.         Blue Star shall invoice Schottenstein monthly for the Blue Star Employees and Blue Star Employees' Services supplied hereunder. Blue Star may use one or more invoices. Payment shall be due 30 days after the invoice(s) are sent. The provisions of this Section 6 shall survive the termination of this Agreement.

        7.         Right to Audit.

        For purposes of verifying the accuracy of charges for the Services supplied hereunder and to verify the proper performance of the Services by Schottenstein and its affiliates and assignees hereunder, Blue Star shall be entitled, prior or subsequent to any payment of charges hereunder, to have access at all reasonable times during normal business hours at the Facility, to the Books and Records of Schottenstein (and its affiliates providing the Services) relating to the Division hereunder as may be reasonably related to such inquiry, all at Blue Star's sole expense. Blue Star shall maintain the confidentiality of information supplied to it in the course of performing such audit and shall not disclose such information to persons who do not have a need to know. Schottenstein shall have the right to audit the charges for the Blue Star Employees and Blue Star Employees' Services in accordance with the same terms and conditions which govern Blue Star's right to audit as set forth hereinabove.

        8.         Independent Contractor Status.

        a.         Schottenstein shall be an independent contract with respect to the Services. Blue Star shall be an independent contractor with respect to the Blue Star Employees' Services. Each party shall be responsible for its own employees, and employees of each party shall not be deemed to have an employment relationship with the other party. Upon Buyer's request, Schottenstein shall use its best efforts to make available to Blue Star the Schottenstein employees engaged in the Business (regardless of whether or not Blue Star shall have extended offers of employment to such persons) to provide reasonable assistance in the training of Blue Star's employees to enable such employees to operate and utilize the Purchased Assets and to deliver Services of a quality at least similar to the quality of such Services as were provided by Schottenstein with such Purchased Assets and the Business. Blue Star shall have, for a period of ninety (90) days following the Closing, the right to extend offers of employment to, and hire, those of Schottenstein's employees as listed on Attachment C attached hereto who are presently engaged in providing the Services with respect to the Business, and Schottenstein will not engage in conduct or actions (including, but not limited to, the offering of additional incentives or compensation to such employees) with the intention or for the purpose of deterring such employees from accepting offers from Blue Star. Schottenstein further agrees that it will not, for a period of two years following the date of the Closing, solicit, offer to hire, or rehire any employees whom Blue Star hires to assist Blue Star in the operation of the Business. Blue Star further agrees that it will not, for a period of two years following the date of the Closing, solicit, or offer to hire any employees of Schottenstein who are not listed on Attachment C to assist Blue Star in the operation of the Business. This Paragraph 8 shall survive the expiration or earlier termination of this Agreement.

        b.         Blue Star shall be solely responsible for all liabilities, demands, damages, costs and expenses (including reasonable attorney's fees), and shall indemnify, defend and hold harmless the Schottenstein and its affiliates and their respective officers and directors, shareholders and representatives, from and against all liabilities, claims, demands, damages, costs and expenses (including reasonable attorney fees) arising from the conduct, actions, inactions or omissions of the Blue Star Employees (and not caused by Schottenstein, its employees or contractors) in connection with the Blue Star Employees' Services hereunder.

        c.         Schottenstein shall be solely responsible for all liabilities, demands, damages, costs and expenses (including reasonable attorney's fees), and shall indemnify, defend and hold harmless Blue Star and its affiliates and their respective officers and directors, shareholders and representatives, from and against all liabilities, claims, demands, damages, costs and expenses (including reasonable attorney fees) arising from the conduct, actions, inactions or omissions of Schottenstein (and not caused by Blue Star, its employees or contractors) in connection with the Services hereunder.

        9.         Negotiation of Contracts.

                 a.         For a period of five (5) years following the Closing Date, Schottenstein agrees, upon request of the Blue Star, to use its best efforts to negotiate any number or all freight, shipping and transportation rates in combination with Blue Star for the importation of similar merchandise by Schottenstein and its affiliates, including but not limited to Value City Department Stores (so as to take full advantage of all volume and other discounts available by combining Schottenstein's importation volume with Blue Star's importation volume). Schottenstein will advise Blue Star of all scheduled negotiation sessions. Blue Star may or may not choose to have a representative present at the negotiations. . Schottenstein will make available the use of the negotiated contracted rates to Blue Star. Blue Star shall have the right to accept or decline those contracted rates. If Blue Star accepts those contracted rates, Schottenstein may charge a mutually agreed upon fee. Schottenstein and Blue Star shall split equally the reasonable out-of-pocket costs incurred by Mort Love (as shown on Attachment A) in the negotiation of such freight, transportation and shipping contracts. The provisions of this Section 9 shall survive the expiration or termination of this Agreement.

        10.         Assignment and Delegation.

                 a.         This Agreement and any rights pursuant hereto to utilize the Blue Star Employees shall be assignable by Schottenstein to (i) any of its business units, subsidiaries or affiliates without the consent of Blue Star, or (ii) any third party entity which acquires, is acquired by, merges or otherwise consolidates with, purchases or otherwise acquires a majority of shares or other interests, or acquires a portion of the assets or business of, Schottenstein, or any of their subsidiaries or affiliates, without the consent of Blue Star. Any other assignment or transfer of this Agreement shall require the prior written consent of Blue Star, which consent shall not be unreasonably withheld. Schottenstein shall have the right to delegate its duties to perform Services hereunder to any of its business units, subsidiaries or affiliates without the prior consent of Blue Star. In no event shall any such delegation of duties hereunder release Schottenstein from liability to Blue Star for the performance of the Services provided hereunder.

                 b.         Blue Star may assign or delegate all or a portion of this Agreement to (i) any parent, subsidiaries or affiliated entities of Blue Star or American Eagle Outfitters, Inc., or (ii) any third party entity which acquires, is acquired by, merges or otherwise consolidates with, purchases or otherwise acquires a majority of shares or other interests, or acquires a portion of the assets or business of, Blue Star or American Eagle Outfitters, Inc. or any of their subsidiaries or affiliates, without the consent of Schottenstein.

        11.         Force Majeure.

        Neither Schottenstein nor Blue Star shall be liable for any failure to perform hereunder arising from causes or events beyond the reasonable control and without the fault or negligence of the party failing to perform including, without limitation, labor disputes of any kind. If it appears to either party that an event is likely to occur which would interfere with such party's performance hereunder, such party shall notify the other party immediately of the event and of its likely duration. In the event of such failure, the obligation of the party shall be suspended until the cause of such suspension shall have been removed.

        12.         Governing Law.

        This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to conflicts of law principles.

        13.         Notices.

        Any notice, request, consent, approval, waiver and other communication to a party hereunder shall be in writing and shall be deemed duly given when sent by first class mail, postage prepaid, or delivered by hand, or by telex or facsimile transmission to such party. Unless changed by written notice to the other hereunder, all notices shall be addressed sent to the address shown below:

As to Blue Star Imports, L.P.:

         Blue Star Imports, L.P.
        150 Thorn Hill Drive
        Warrendale, PA 15086
        Attention of George Kolber

As to Schottenstein Stores Corporation:

        Schottenstein Stores Corporation
        1800 Moler Road
        Columbus, OH 43207
        Attention of Jeffrey Swanson

        14.         Dispute Resolution.

                 a.        In the event of any dispute arising in connection with this Agreement, the parties shall endeavor to resolve such dispute amicable by discussion and mutual accord. Such discussions shall include face-to-face meetings at senior managerial levels of Blue Star and Schottenstein. In the event that the parties are unable to mutually resolve such dispute within thirty (30) days after the initial face to face meeting referred to above, then either party may submit any unresolved controversy or claim arising out of or relating to this contract, or the breach thereof, to be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, in Pittsburgh, Pennsylvania, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The parties shall split equally the cost of the arbitrators. Any award rendered by the Arbitrator(s) may include compensatory damages and costs but under no circumstances shall either party be liable for nor shall the arbitrator(s) award any incidental, consequential or special (including punitive or multiple) damages.

                 b.         Notwithstanding anything herein to the contrary, the existence of a dispute (other than payment of the price) shall not reduce the obligation of Schottenstein to continue to provide Services (or the obligation of Blue Star to make available the Blue Star Employees or to provide the Blue Star Employees' Services) hereunder during the pendency of the dispute resolution procedure, or following the resolution of such dispute, unless the resolution of the dispute contains a finding of a material default by Blue Star or Schottenstein as the case may be; provided, however, the foregoing shall in no way limit the amount of damages or type of relief (whether monetary or injunctive) to which Blue Star or Schottenstein is entitled under law or the provisions of this Agreement.

        15.         Integration.

        This Agreement supersedes all prior negotiations, commitments and writings pertaining to the subject matter hereof. Except as otherwise provided in this Agreement, this Agreement may be amended only by a written instrument duly executed by both Schottenstein and Blue Star.

        16.         Waiver.

        Any waiver at any time, by either Schottenstein or Blue Star, of its rights with respect to the other party to this Agreement, or with respect to any other matter arising in connection with this Agreement, shall not be considered waived with respect to any subsequent default or matter.

        17.         No Third Party Beneficiaries.

        Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any person other than the parties and their respective successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third persons to a party to this Agreement, nor shall any provision hereof give any third persons any right or subrogation or action against any party to this Agreement.

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.

BLUE STAR IMPORTS, L.P. By: BSI Imports Co., LLC       General Partner	SCHOTTENSTEIN STORES CORPORATION
By /s/ Dale E. Clifton	By /s/ Jeffrey Swanson

Attachment A

The Price of each Defined Service will be equal to the total expense recorded on Division's books in each month during the term of the Agreement for the Defined Services listed below multiplied by a Percent Allocation determined according to the methods described below.

For purposes of this Schedule, the following terms have the meanings assigned to them below:

1. Headcount Allocation Percentage shall be the percentage of time worked that each employee devotes to Blue Star Imports Matters;
2. Payroll Allocation Expense shall be an employee's Headcount Allocation Percentage times his annualized earnings.

Blue Star may audit the calculations used to determine the Percent Allocations at any time upon reasonable notice to Schottenstein. The parties agree to use the Percent Allocations listed below; however, either party may request a change to a Percent Allocation for any Defined Service at any time, and the parties agree to negotiate in good faith to determine whether a change in any of the percentages is required. In the event that the parties cannot agree on whether a change to a Percent Allocation is required, or as to the amount of any such change, then the disagreement will be resolved in accordance with the provisions for Dispute Resolution as set forth in Paragraph 14 of the Agreement.

Defined Service	Percent Allocation	Method
Payroll and Related Expenses	35.86%	Equal to the total of all Payroll Allocation Expenses divided by Value City Imports total annualized earnings.
Classification Fees	60.90%	Equal to the number of entries processed for BSI as a % of total entries processed by VCI
Data Processing	60.90%	Equal to the number of entries processed for BSI as a % of total entries processed by VCI
Delivery	60.90%	Equal to the number of entries processed for BSI as a % of total entries processed by VCI
Depreciation (See Note 1 Below)		See Note 1 Below
Dues & Subscriptions, Fees & Licenses	37.84%	Equal to the total of all Headcount Allocation Percentages divided by Value City Imports total headcount.
Equipment Rental	37.84%	Equal to the total of all Headcount Allocation Percentages divided by Value City Imports total headcount.

Office Supplies

37.84%  

Equal to the total of all Headcount Allocation Percentages divided by Value City Imports total headcount.

Defined Service	Percent Allocation	Method
Outside Services (brokers)		Based on actual direct expenses related to the Business
Professional fees		Based on actual direct expenses related to the Business
Rent	37.84%	Equal to the total of all Headcount Allocation Percentages divided by Value City Imports total headcount.
Repairs & Maint.	37.84%	Equal to the total of all Headcount Allocation Percentages divided by Value City Imports total headcount.
Taxes - Personal Property (Exclusive of PPT on Software)	60.90%	Equal to the number of entries processed for BSI as a % of total entries processed by VCI
Telephone	37.84%	Equal to the total of all Headcount Allocation Percentages divided by Value City Imports total headcount.
Travel		Based on actual direct expenses related to the Business
Other		Based on actual direct expenses related to the Business

Note 1: Calculation of Monthly Depreciation Charge to Blue Star
Total Depreciation/Month (Division)	14,260.00
CFP Software Related	(10,510.00)
Automobile Depreciation	(278.00)
Estimate for GB/HS Hdware Depr.	(63.00)
Net Depreciation/Month (Division)	3,409.00
Total of all Headcount Allocation Percentages divided by Value City Imports total headcount	37.84%
Initial Monthly Allocation of Depreciation to Blue Star	1,289.97

Schedule B

Allocation of costs for Shared Services provided by Blue Star Imports as it relates to the importation business of Schottenstein Stores Corporation or its affiliates:

Costs	Method of Allocations
Salaries	Salaries will be allocated based upon time spent on services provided to Schottenstein Stores Corporation or its affiliates, with the exception of Guy Bradford. Initially Guy Bradford wages will be allocated based upon the number of custom entries related to Schottenstein Stores Corporation or its affiliates. On a monthly or quarterly basis Guy Bradford's allocation will be reviewed as his duties change.
Other costs	Based on actual expenses related to services provided to Schottenstein Stores Corporation or its affiliates.

EX-21 3 SUBSIDIARIES OF THE REGISTRANT

Exhibit 21

Subsidiaries

American Eagle Outfitters, Inc. has the following wholly owned subsidiaries:

AE Stores Company, a Delaware corporation
AEO International Corp., a Delaware corporation*
AEH Holding Company, a Delaware C-corporation*
Retail Commerce Company, a Nevada corporation*
Retail Royalty Company, a Nevada corporation*
Prophecy Co., an Ohio corporation*
Eagle Trading Company, a Mexican corporation
BSI Imports Company, LLC, a Delaware limited liability company*
Blue Star Imports, Ltd., a Delaware C-corporation*
Blue Star Imports, L.P., a Pennsylvania limited partnership*


*denotes second or third tier subsidiary owned by AE Stores Company

EX-23 4 CONSENT OF ERNST & YOUNG LLP

Exhibit 23

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statements (Forms S-8) pertaining to the American Eagle Outfitters, Inc. Employee Stock Purchase Plan (Registration No. 333-3278), the American Eagle Outfitters, Inc. 1994 Restricted Stock Plan (Registration No. 33-79358), the American Eagle Outfitters, Inc. 1994 Stock Option Plan (Registration Nos. 333-44759, 333-79358, and 333-12661), and the American Eagle Outfitters, Inc. Stock Fund of American Eagle Outfitters, Inc. Profit Sharing and 401(k) Plan (Registration No. 33-84796), and the American Eagle Outfitters, Inc. Registration Statement (Form S-3) (Registration No. 333-68875) of our report dated February 24, 2000 (except for Note 12, as to which the date is March 6, 2000), with respect to the consolidated financial statements of American Eagle Outfitters, Inc. included in the Annual Report (Form 10-K) for the year ended January 29, 2000.

Pittsburgh, Pennsylvania
April 10, 2000

EX-24 5 POWER OF ATTORNEY
Exhibit 24
Power of Attorney
Each director and/or officer of American Eagle Outfitters, Inc. (The "Corporation") whose signature appears below hereby appoints Laura Weil or Dale E. Clifton as his or her attorneys or any of them individually as his or her attorney, to sign, in his or her name and behalf and in any and all capacities stated below, and to cause to be filed with the Securities and Exchange Commission (the "Commission"), the Corporation's Annual Report on Form 10-K (the "Form 10-K") for the year ended January 30, 1999, and likewise to sign and file with the Commission any and all amendments to the Form 10-K, and the Corporation hereby appoints such persons as its attorneys-in-fact and each of them as its attorney-in-fact with like authority to sign and file the Form 10-K and any amendments thereto granting to each such attorney-in-fact full power of substitution and revocation, and hereby ratifying all that any such attorney-in-fact or his substitute may do by virtue hereof.
           IN WITNESS WHEREOF, we have hereunto set our hands as of April 12, 2000.

Signature	Title
/s/     Jay L. Schottenstein      Jay L. Schottenstein	Chairman and Chief Executive Officer (Principal Executive Officer)
/s/     Saul Schottenstein         Saul Schottenstein	Vice Chairman and Director
/s/     George Kolber        George Kolber	Vice Chairman, Chief Operating Officer and Director
/s/     Roger S. Markfield      Roger S. Markfield	President, Chief Merchandising Officer and Director
/s/     Laura Weil           Laura Weil	Executive Vice President and Chief Financial Officer (Principal Financial Officer)
/s/     Dale E. Clifton      Dale E. Clifton	Vice President, Controller, and Chief Accounting Officer (Principal Accounting Officer)
/s/     Ari Deshe  Ari Deshe	Director
/s/     Jon P. Diamond    Jon P. Diamond	Director
/s/     Martin P. Doolan Martin P. Doolan	Director
/s/     Gilbert W. Harrison       Gilbert W. Harrison	Director
/s/     Michael G. Jesselson     Michael G. Jesselson	Director
/s/     Thomas R. Ketteler       Thomas R. Ketteler	Director
/s/     John L. Marakas       John L. Marakas	Director
/s/     David W. Thompson        David W. Thompson	Director
/s/     Gerald E. Wedren       Gerald E. Wedren	Director

EX-27 6 FINANCIAL DATA SCHEDULE
<ARTICLE> 5 <PERIOD-TYPE> 12-MOS <FISCAL-YEAR-END> JAN-29-2000 <PERIOD-START> JAN-31-1999 <PERIOD-END> JAN-29-2000 <CASH> 76,581 <SECURITIES> 91,911 <RECEIVABLES> 13,471 <ALLOWANCES> 0 <INVENTORY> 60,375 <CURRENT-ASSETS> 262,562 <PP&E> 122,561 <DEPRECIATION> 37,635 <TOTAL-ASSETS> 354,628 <CURRENT-LIABILITIES> 88,425 <BONDS> 0 <PREFERRED-MANDATORY> 0 <PREFERRED> 0 <COMMON> 467 <OTHER-SE> 264,034 <TOTAL-LIABILITY-AND-EQUITY> 354,628 <SALES> 832,104 <TOTAL-REVENUES> 832,104 <CGS> 475,596 <TOTAL-COSTS> 475,596 <OTHER-EXPENSES> 206,994 <LOSS-PROVISION> 0 <INTEREST-EXPENSE> 160 <INCOME-PRETAX> 149,354 <INCOME-TAX> 58,694 <INCOME-CONTINUING> 90,660 <DISCONTINUED> 0 <EXTRAORDINARY> 0 <CHANGES> 0 <NET-INCOME> 90,660 <EPS-BASIC> 1.96 <EPS-DILUTED> 1.86
-----END PRIVACY-ENHANCED MESSAGE-----

EX-10.10

Exhibit 10.10

PURCHASE AND SALE AGREEMENT

Dated as of March 10, 2000

effective as of January 31, 2000

by and between

BLUE STAR IMPORTS, L. P.

And

SCHOTTENSTEIN STORES CORPORATION

PURCHASE AND SALE AGREEMENT

        THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is dated as of March 10, 2000, effective as of the 31st day of January, 2000, by and between SCHOTTENSTEIN STORES CORPORATION, a Delaware corporation ("Seller") and BLUE STAR IMPORTS, L.P., a Pennsylvania limited partnership ("Buyer ").

BACKGROUND

        A.         The Value City Imports Division of Seller (the "Division") is engaged in the business of importing into the United States goods and merchandise for resale for the account of Buyer and certain of its affiliates as well as certain other retail store chains and affiliates of Seller.

        B.         Buyer desires to acquire from Seller, and Seller desires to transfer to Buyer, all of the Division's assets and business that pertain to the importation into the United States, for the account of Buyer, American Eagle Outfitters, Inc., a Delaware corporation and an affiliate of Buyer ("AEOI") and any and all other subsidiaries of Buyer or AEOI (Buyer, AEOI and their subsidiaries are hereinafter collectively referred to as the "AEO Companies"), of goods and merchandise for resale by any of the AEO Companies (collectively, "AEO Merchandise") which merchandise may include but shall not be limited to wearing apparel, textile goods, shoes and other goods and accessories, all in accordance with and subject to the terms of this Agreement.

PROVISIONS

        In consideration of the foregoing premises and of the mutual covenants hereinafter contained and intending to be legally bound hereby, the parties covenant and agree as follows:

ARTICLE I
DEFINITIONS

        Section 1.01. Definitions. As used herein, the following terms have the meanings assigned to them below, unless the context in which any such term is used requires otherwise:

        "AAA" means American Arbitration Association.

        "AEO Companies" has the meaning ascribed to such term in the second recital to this Agreement.

        "AEOI" has the meaning ascribed to such term in the second recital to this Agreement.

        "AEO Merchandise " has the meaning ascribed to such term in the second recital to this Agreement.

        "Agreement " means this Purchase and Sale Agreement as amended from time to time.

        "Assignment and Assumption Agreement" means the agreement, substantially in the form of Exhibit A hereto, pursuant to which (i) Buyer will assume and undertake to perform, satisfy and discharge the Assumed Liabilities and (ii) subject to the provisions of Section 3.04 hereof, Seller will assign the Assumed Contracts and the Prepaid Expenses to Buyer.

        "Assumed Contracts " means all rights and interests of the Division and/or Seller under all contracts, agreements, deposits, bonds, manifests, and open purchase and sale orders of the Business, including but not limited to those other contracts, etc. identified on Schedule 1 hereto.

        "Assumed Liabilities " has the meaning ascribed to such term in Section 3.04 hereof.

        "Bill of Sale " means a bill of sale from Seller to Buyer in substantially the form attached hereto as Exhibit B.

        "Board of Directors " means the Board of Directors of AEOI.

        "Books and Records " means all books, records, logs, customer lists and other commercial records or documents of Seller relating to the Business.

        "Business" means the business of the Division relating to the importation of AEO Merchandise for the AEO Companies, the document production and administration arising from or relating to the importation of the AEO Merchandise and all assets, goodwill and relationships with customers, suppliers, shippers and customs agents associated therewith.

        "Buyer" has the meaning described to such term in the preamble to this Agreement.

        "Buyer's Accountants " means Buyer's in-house accounting personnel and such other accountants as may be selected by Buyer.

        "Closing" has the meaning ascribed to such term in Section 6.01 hereof.

        "Closing Balance Sheet" has the meaning ascribed to such term in Section 3.03 hereof.

        "Closing Date " has the meaning ascribed to such term in Section 6.01 hereof.

        "Closing Financial Statements" has the meaning ascribed to such term in Section 3.03 hereof.

        "Closing Profit and Loss Statement" has the meaning ascribed to such term in Section 3.03 hereof.

        "Committee " means the Independent Committee of the Board of Directors of AEOI.

        "Default" means any default or breach that arises out of or results from the Closing or any act, omission or occurrence prior to the Closing.

        "Detailed Accounting " has the meaning ascribed to such term in Section 3.03 hereof.

        "Dispute" is used as defined in Section 3.06 hereof.

        "Division" is used as defined in the first recital to this Agreement.

        "Employee Benefit Plan" means any "employee benefit plan", as such term is defined in Section 3(3) of ERISA, and all other employee compensation and benefit plans of Seller that relate to the employees engaged in the Business (including all bonus, profit sharing, incentive compensation and deferred compensation plans maintained by Seller or to which Seller contributes or has contributed that relate to the Business).

        "Employment Agreements" means the Employment Agreements between Buyer and Guy Bradford and Hank Shechtman, and pursuant to which Buyer shall hire Messrs. Bradford and Shechtman effective as of the Closing Date.

        "Employment Practices and Shared Services Agreement" means the Employment Practices and Shared Services Agreement between Seller and Buyer substantially in the form of Exhibit C hereto, pursuant to which Buyer and Seller will undertake to address the allocation of cost and expense of certain shared services, and the use of the Software and Intellectual Property by Buyer, following the Closing Date and to observe certain prohibitions with respect to hiring current employees of each other with respect to the Business.

        "Encumbrance" means any lien, claim, charge, security interest, restriction or encumbrance of any nature or kind, other than Permitted Encumbrances.

        "ERISA" means the Employee Income Security Act of 1974, as amended.

        "ERISA Affiliate" means any trade or business, whether or not incorporated, which is part of a controlled group as determined under ERISA Section 4001(a)(14).

        "Excluded Liabilities" has the meaning ascribed to such term in Section 3.05 hereof.

        "Fairness Opinion" means the opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc. dated March 9, 2000 to the Committee, in which such firm opined as to the fairness of the Purchase Price to be paid by Buyer in exchange for the Purchased Assets and the Business.

        "Financial Statements" means, collectively, the Year-End Financial Statements and the Monthly Financial Statements of the Business.

        "Good Standing Certificate" means one or more certificates from the secretary of the state and/or the department of revenue or taxation of a jurisdiction to the effect that the corporation that is the subject of such certificate is a corporation presently subsisting in good standing under the laws of such jurisdiction and has paid all franchise and/or capital stock taxes required to be paid by such corporation to such jurisdiction.

        "Insurance Policies" has the meaning ascribed to such term in Section 4.01(r) hereof.

        "Intellectual Property" means all United States and foreign patents and patent applications, the inventions claimed in said patents and patent applications, all related trade secrets, know-how, methods and processes, and all copyrights, technology and proprietary information necessary for, relating to, or used or useful in connection with, the Business, the Contracts and/or the Work in Process.

        "Law" means any presently existing law, statute, ordinance, rule, regulation or code adopted, enacted or promulgated by any government or governmental agency.

        "Material Adverse Effect" means a material adverse effect on the results of operations or financial condition of any of the Business or the Purchased Assets.

        "Monthly Financial Statements" means Seller's interim financial statements for the Division as of the following dates and for the periods then ended: October, 1999 and December, 1999, copies of which have been provided to Buyer.

        "Officers' Certificate" means a certificate signed by the Chairman of the Board of Directors, the President or Vice President and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of any corporation delivering such certificate, or by the same such officers of the corporate general partner of any partnership delivering such certificate.

        "OSHA" means the Occupational Safety and Health Act.

        "Other Seller Documents" has the meaning ascribed to in Section 3.05(a) hereof.

        "Permits and Licenses" means all of the licenses and permits, certificates of authority and other approvals and authorizations of Seller, governmental or otherwise, that relate to or are necessary for or used in connection with the Business or the Purchased Assets including, without limitation, those identified on Schedule 2 hereto.

        "Permitted Encumbrances" means, collectively, mechanics', carriers', workmen's, repairmen's or other like liens arising or incurred in the ordinary course of conduct of the Business, liens for taxes, assessments and other governmental charges that are not due and payable or that may thereafter be paid without penalty and other imperfections of title or encumbrances, if any, that do not materially (i) detract from the value of the property subject thereto or (ii) impair the operation of the Business.

        "Personal Property" means all machinery, equipment, software, systems, and all other personal property, tangible and intangible, of Seller that are listed or referred to on Schedule 3 hereto.

        "Pre-Closing Adjustment" has the meaning ascribed to such term in Section 3.02 hereof.

        "Pre-Closing Liabilities" means all liabilities arising out of ownership of the Purchased Assets and conduct of the Business by Seller prior to the Closing Date.

        "Prepaid Expenses" means all prepaid expenses and deposits in connection with the Business.

        "Purchase Price" has the meaning ascribed to such term in Section 3.01 hereof.

        "Purchased Assets" has the meaning ascribed to such term in Section 2.01 hereof.

        "Seller" has the meaning ascribed to such term in the preamble to this Agreement.

        "Seller Operational Liabilities" means all Pre-Closing Liabilities arising in whole or in substantial part out of the actions of a Seller Responsible Party.

        "Seller Responsible Party" means the Seller, its officers, directors, contractors, agents and/or employees

        "Seller Transfer Documents" means, collectively, the Assignment and Assumption Agreement, and the Bill of Sale.

        "Seller's Accountants" means Seller's in-house accounting personnel and/or such other accountants as Seller may select.

        "Software" means all computer programs and licenses therefor (including user manuals, bug fixes, corrections, enhancements, updates, or other modifications to such programs or manuals) used or useful in connection with, or otherwise relating to, the Business, including without limitation the software identified on Schedule 4 hereto.

        "Year-End Financial Statements" means the Division's unaudited financial statements as of July 31, 1999, 1998, 1997 and for the years then ended, copies of which have been provided to Buyer.

ARTICLE II
PURCHASE AND SALE; DESCRIPTION OF ASSETS

        Section 2.01. Purchased Assets. In accordance with, and subject to the terms and conditions of, this Agreement, Buyer shall purchase from Seller, and Seller shall sell, assign, convey, transfer and deliver to Buyer, free and clear of any and all Encumbrances, the Business including, without limitation, the following assets and properties (collectively, the "Purchased Assets"):

        (a)         the Personal Property;

        (b)         the Assumed Contracts (provided that where Seller is required to continue to be a party to such contracts or where Seller will continue to require or perform services under such contracts, Seller shall use its best efforts to add Buyer as an additional party, rather than the sole transferee, of such contracts);

        (c)         the right to use the Intellectual Property and Software pursuant to the Employment Practices and Shared Services Agreement;

        (d)         the Permits and Licenses;

        (e)         the Books and Records as identified on Schedule 14 (which listed items identified on Schedule 14 are to be delivered to Buyer at Closing; and Buyer shall have access to and the right to copy all other Books and Records);

        (f)         the Prepaid Expenses.

        Seller acknowledges and agrees that, with respect to any Assumed Contracts, which are, in their nature, by law, by their terms or otherwise, nonassignable, or which contain a covenant against assignment, this instrument shall, notwithstanding anything elsewhere herein contained, be construed as an assignment to Buyer of the equitable interest in the same insofar as is legally permissible without violation of law or breach of the terms or condition thereof, with the right in Buyer or its successors and assigns (i) to have said claims, contracts, commitments or other agreement, if any, held in trust by Seller so as to enable Buyer or its successors and assigns to use and enjoy the full benefit thereof, (ii) to have transferred to Buyer or its successors or assigns any and all such property or rights which shall become assignable as soon as the same shall become assignable, and (iii) to take and have taken any action which may be taken without violation of law and without any breach as aforesaid which is necessary or appropriate to make such contract, property or rights assignable. Seller agrees that in any instance in which nonassignability of any such contract, property or rights may be removed by the consent of any party or parties, Seller will use its best efforts to obtain the consent of all such parties to the assignment of the property or rights in question to Buyer. If such a consent is not obtained, or if an attempted assignment would be ineffective or would affect Seller's rights so that Buyer or its successors and assigns in fact would not receive such contract, property or rights, Seller will cooperate with Buyer or its successors and assigns on any reasonable arrangement, not contrary to law, designed to provide for Buyer or its successors and assigns the benefit under any such Assumed Contracts and enforcement thereof, and for the benefit of Buyer or its successors and assigns, of any and all rights of Seller against any party thereto arising out of breach or cancellation by such party or otherwise.

ARTICLE III
PURCHASE PRICE

        Section 3.01. Purchase Price. In exchange for the Business and the Purchased Assets, Buyer shall deliver to Seller, by wire transfer of immediately available funds at the Closing the sum of Eight Million Five Hundred Thousand Dollars ($8,500,000) (the "Purchase Price"), plus or minus customary prorations.

        Section 3.02. Pre-Closing Adjustment. On the day immediately prior to Closing, Seller shall apply any deposits and sums previously received from the AEO Companies as of such date, in the following manner: First to billed accounts receivable balances, then to any unbilled receivables relating to the importation of AEO Merchandise for any AEO Companies. Seller acknowledges and agrees that after January 31, 2000 no profit shall be charged by Seller to Buyer for importing or other services provided by Seller after January  31, 2000 to Buyer in connection with the Business. The adjustment as described in this Section 3.02 is called the "Pre-Closing Adjustment".

        Section 3.03. Post Closing Adjustment. Within forty-five (45) days following the Closing, Seller shall prepare and deliver to Buyer a balance sheet for the Division dated as of the Closing Date (the "Closing Balance Sheet"), a profit and loss statement for the Division for the period commencing August 1, 1999 and ending on the Closing Date (the "Closing Profit and Loss Statement"), a detailed accounting of all prepaid expenses and accounts payable of the Business and all unbilled costs and expenses paid by Seller prior to Closing for Buyer's account with respect to importation of AEO Merchandise by Seller (the "Detailed Accounting") (the Closing Balance Sheet, the Closing Profit and Loss Statement and Detailed Accounting being collectively called the "Closing Financial Statements"), each of which shall be prepared in a manner consistent with the Financial Statements and in accordance with generally accepted accounting principles. Following the Closing, Buyer's Accountants and Seller's Accountants shall have the right to review and audit the Closing Financial Statements. Buyer's Accountants shall notify Seller of their disagreement with any amount shown on or underlying the Closing Financial Statements within ninety (90) days following delivery thereof. In the event that Buyer's Accountants deliver notice of any disagreement, Buyer's Accountants and Seller and/or Seller's Accountants shall meet and attempt to resolve such disagreement and to agree upon a mutually acceptable presentation of such statements and/or schedule. Should Buyer's Accountants and Seller and/or Seller's Accountants be unable to reach such an agreement within thirty (30) days after delivery by Buyer's Accountants of a notice of disagreement, the matter shall be submitted within five (5) business days following expiry of such thirty (30) day period to a "Big Five" accounting firm selected by Seller and Buyer or, if Buyer and Seller are unable to agree on such accounting firm within such five (5) business day period, the matter shall be submitted by the parties to Price Waterhouse Coopers on the first business day following expiry of such five (5) business day period, and the parties agree to use their best efforts to cause the decision of such third accounting firm to be rendered within thirty (30) days following such submission. The decision of such third accounting firm shall be conclusive and binding on the parties. The parties agree to effect appropriate adjustments between them based upon the Closing Financial Statements as they exist following resolution of any disagreement in accordance with the foregoing.

        Seller shall bear the costs and expenses of Seller's Accountants, Buyer shall bear the cost and expenses of Buyer's Accountants and, in the event of any referral of a dispute to a third accounting firm in accordance with the foregoing, Seller and Buyer agree to share equally the costs and expenses of such third accounting firm.

        Section 3.04. Assumption of Liabilities. At the Closing, Buyer and Seller shall execute and deliver the Assignment and Assumption Agreement pursuant to which Buyer shall assume, undertake to perform, satisfy and discharge only the following liabilities and obligations of Seller and/or the Division (collectively, the "Assumed Liabilities"):

        (a)         the liabilities arising out of ownership of the Purchased Assets and conduct of the Business by Buyer (and not caused by a Seller Responsible Party) as arise out of events first occurring or conditions first existing after the Closing Date; and

        (b)         those Pre-Closing Liabilities (other than Seller Operational Liabilities) arising with respect to the importation of AEO Merchandise prior to the Closing Date which were not caused by a Seller Responsible Party (such as, for example, a customs audit liability of the Seller following Closing Date that resulted from incomplete or inaccurate information provided by Buyer, or another party other than a Seller Responsible Party, to the Seller).

        Buyer shall be solely responsible for all liabilities, demands, damages, costs and expenses (including reasonable attorney's fees), and shall indemnify, defend and hold harmless the Seller and its affiliates and their respective officers and directors, shareholders and representatives, from and against the Assumed Liabilities and all liabilities, claims, demands, damages, costs and expenses (including reasonable attorney fees) arising from the conduct, actions, inactions or omissions of Buyer, its officers, directors, contractors, agents or employees (and not caused by a Seller Responsible Party) after the Closing Date.

                 Section 3.05. Excluded Liabilities. Anything in this Agreement to the contrary notwithstanding, Buyer shall not assume (other than only the Assumed Liabilities expressly agreed to be assumed by Buyer pursuant to the provisions of paragraph 3.04 of this Agreement) and shall not undertake to pay, perform, satisfy or discharge any liability or obligation of Seller, the Business or the Division or any other person or entity of any kind, absolute or contingent, known or unknown (collectively, the "Excluded Liabilities"), including without limitation the following:

        (a)         any liability or obligation of Seller that arises out of the transactions contemplated to occur pursuant to this Agreement or that results from any breach or default by Seller under this Agreement, the Seller Transfer Documents or any other agreement, certificate, assignment, document or instrument that may be executed or delivered in connection with this Agreement or the transactions contemplated to occur hereunder (the Seller Transfer Documents and such other documents being sometimes collectively referred to as the "Other Seller Documents");

        (b)         any liability or obligation relating to income, franchise, sales, use, payroll, unemployment, withholding real or personal property or any other taxes of Seller or the Division, including any interest or penalties related thereto;

        (c)         any liability or obligation of Seller or the Division relating to indebtedness for borrowed money;

        (d)         any liability or obligation relating to any Default by Seller under any of the Assumed Contracts or the Permits and Licenses;

        (e)         Reserved.

        (f)         any liability or obligation of Seller or the Division relating to any illness, injury, occupational or other disease or other health or safety risk that arises out of or results from any act, omission or occurrence prior to the Closing, including without limitation those arising under Section 7.04 hereof;

        (g)         any liability or obligation relating to the employees of Seller or the Division (other than only accrued vacation pay and sick pay for Guy Bradford, Hank Shechtman, and for any other employee of Seller who Buyer hires effective as of the Closing Date), including any severance obligation and any compensation required to be paid and benefits required to be provided under any of the Employee Benefit Plans;

        (h)         any liability or obligation as shown on the Financial Statements (other than those liabilities mutually agreed to by Seller and Buyer (or as determined by the dispute resolution procedures) in accordance with the post-Closing adjustments contemplated pursuant to Section 3.03 hereof) or otherwise relating to any services performed by Seller or the Division prior to the Closing;

        (i)         that portion of any liability or obligation relating to the violation of any Law relating to the Business or the Division that arises out of or results from any act, omission or occurrence of a Seller Responsible Party prior to the Closing;

        (a)         any liability or obligation of the Division to any of affiliates of Seller, except as expressly set forth in this Agreement; and

        (b)         any Pre-Closing Liability (other than only the Assumed Liabilities).

        Seller shall be solely responsible for all liabilities, demands, damages, costs and expenses (including reasonable attorney's fees), and shall indemnify, defend and hold harmless the AEO Companies and their respective officers, directors, shareholders and representatives, from and against all liabilities, claims, demands, damages, costs and expenses (including reasonable attorney's fees) arising or resulting from the Excluded Liabilities and/or the conduct, actions, inactions or omissions of a Seller Responsible Party prior to the Closing Date. To the extent that a third party, not Buyer or a Seller Responsible Party, is responsible for such liabilities, damages, costs or expenses being imposed against Buyer, then the Seller and Buyer will use their best efforts to pursue such third party and obtain a recovery therefrom.

        Section 3.06. Disputes as to Assumed Liabilities or Excluded Liabilities. In the event that a dispute or controversy (each a "Dispute") arises between Seller and Buyer as to whether and/or to what extent Buyer, a Seller Responsible Party, or another party is responsible (as a result of the conduct, actions, inactions or omissions of Buyer, such Seller Responsible Party, or such other party) for a liability, loss, damage, demand, cost or expense, and if the Dispute cannot be settled through direct discussions, then Seller and Buyer shall resolve the Dispute by binding arbitration administered by the American Arbitration Association ( "AAA") in Pittsburgh, PA in accordance with its Commercial Arbitration Rules and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction. The arbitration proceedings shall be conducted on an expedited basis before a neutral arbitrator (to be selected by Seller and Buyer, or if they cannot agree, then by the chairman of the Pittsburgh office of the AAA) who has been actively engaged in the practice of law for at least fifteen (15) years, specializing in commercial transactions with substantial experience in customs and importation matters. The cost of any arbitration proceedings shall be split equally between Seller and Buyer.

        Section 3.07. Purchase Price Allocation. The Purchase Price shall be allocated among the Purchased Assets in accordance with Schedule 5 hereto and the parties hereto shall use such allocations in preparing all income tax returns and related reports

(including Form 8594) required to be filed with the Internal Revenue Service and any state or local tax authority.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES

        Section 4.01. Seller's Representations and Warranties. Seller hereby represents and warrants to Buyer that:

        (a)         Organization and Standing. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Seller has all requisite power and authority to own and operate the Division and the Business. Seller is duly qualified to do business and is in good standing in the jurisdictions of Ohio, Delaware and Pennsylvania as listed on Schedule 6. Such jurisdictions are the only jurisdictions where the character of the properties owned or leased by Seller in its conduct of the Business, or the nature of the activities conducted by it in connection therewith, makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect.

        (b)         Due Authorization and Execution, etc. Seller has all requisite power and authority (corporate or otherwise) to enter into and perform this Agreement and to consummate the transactions contemplated hereby; this Agreement has been duly authorized, executed and delivered by Seller and constitutes a valid, binding and legal obligation of Seller, enforceable against Seller in accordance with its terms; and, when executed and delivered by Seller, each of the Other Seller Documents shall be duly authorized, executed and delivered by Seller and shall constitute a valid, binding and legal obligation of Seller, enforceable against Seller in accordance with its terms.

        (c)         Absence of Conflict. The execution, delivery and performance of this Agreement and the Other Seller Documents, and the consummation of the transactions contemplated to occur pursuant hereto and thereto (i) do not violate or conflict with the articles of incorporation or by-laws of Seller, (ii) to the best of Seller's knowledge (after due inquiry by Seller of Guy Bradford, Hank Shechtman and Mort Love of the Division) do not violate, conflict with, result in a breach of or a default under, or give any person or entity any right to terminate or modify, any right or obligation of Seller applicable to the Division, the Business or the Purchased Assets, (iii) do not violate, conflict with, or result in a breach of or a default under, any governmental or court-issued order, writ, judgment, decree, license, permit, approval or authorization of any kind applicable to the Division, the Business or the Purchased Assets, (iv) to the best of Seller's knowledge (after due inquiry by Seller of Guy Bradford, Hank Shechtman and Mort Love of the Division) do not and will not violate or conflict with any Law, and (v) to the best of Seller's knowledge (after due inquiry by Seller of Guy Bradford, Hank Shechtman and Mort Love of the Division) do not result in the loss of, or the creation or imposition of any Encumbrance against or with respect to, any of the rights, properties or assets of the Division, the Business or the Purchased Assets, other than such violations, conflicts, breaches or defaults in the case of any and all of the foregoing clauses (i) through (v) that, individually or in the aggregate, would not have a Material Adverse Effect.

        (d)         Title; Condition of Purchased Assets. Seller has good and valid title to all of the Purchased Assets. The execution and delivery of the Seller Transfer Documents at the Closing shall convey, transfer to and vest in Buyer good and valid title to all of the Purchased Assets, free and clear of any and all Encumbrances. The Purchased Assets constitute, in the aggregate, all of the property necessary for the operation of the Business in the manner in which and to the extent that it is currently being operated by Seller. All of the tangible Purchased Assets are in good operating condition and repair, subject to normal wear and maintenance, and are usable in the ordinary course of business as heretofore conducted by Seller.

        (e)         Financial Statements and Budget. Seller has furnished to Buyer the Financial Statements and the Budget for the Division. The Financial Statements were prepared in conformity with generally accepted accounting principles applied on a consistent basis and the Financial Statements present fairly the financial condition of the Division as of the dates thereof, and the results of its operations for the periods therein indicated (subject, in the case of the Monthly Financial Statements, to periodic and year-end adjustments). Except as disclosed in the Financial Statements, the results of operations of the Division reflected therein were not affected to a material extent by changes or inconsistencies in accounting policies or by the inclusion of extraordinary or exceptional items. The Financial Statements include as an accrued liability adequate provision for payments not yet due as of the date of the Financial Statements relating to the importation of merchandise for the Business. The Budget was prepared on the basis of good faith assumptions concerning the future prospects of the Business and in a manner consistent with prior results of operations.

        (f)         Absence of Material Adverse Change, etc. Except as set forth on Schedule 7, since July 31, 1999, (i) there has been no material adverse change with respect to the rights, properties, assets, liabilities, financial condition or operations of Seller in respect of the Division, (ii) the Business has been carried on and conducted in the ordinary and usual course in all material respects, (iii) Seller has preserved and maintained in all material respects each of the Permits and Licenses and the relationship of the Business with each of its material customers, customs agents, suppliers, shippers, and employees, (iv) reserved, (v) Seller has not on account of or with respect to the Business made any capital commitment or expenditure, or any unusual or extraordinary commitment or expenditure, or incurred or become liable for any debt or other obligation or liability (except for liabilities incurred in the ordinary course of business), or, except in the ordinary course of business, entered into any guaranty or agreement for the production or manufacture of goods or equipment or the providing of services, other than such commitments or expenditures that, individually or in the aggregate, would not have a Material Adverse Effect, (vi) Seller has not disposed of any of the Personal Property other than in the ordinary course of conduct of the Business and which disposition would not have a Material Adverse Effect, (vii) Seller has maintained the Personal Property in good repair (ordinary wear and tear excepted) and the Personal Property is in good operating condition, (viii) Seller is not in breach of or default under any contract or agreement relating to the Division or the Business, other than breaches or defaults that, individually or in the aggregate, would not have a Material Adverse Effect and, to the best of Seller's knowledge, no third party to any contract or agreement is in breach of or default under any such contract or agreement, other than any such breaches or defaults that, individually or in the aggregate, would not have a Material Adverse Effect, and (ix) except in the ordinary course of business, there have been no intercompany transactions or creations of payables among Seller or any of its affiliates relating to the Business.

        (g)         Intellectual Property. Except as set forth on Schedule 8 hereto, Seller owns and has good and valid title to, or has a valid and effective license to use, all patents, applications therefor, inventions, trade secrets, trademarks, service marks and applications therefor, trade names, copyrights and copyright registrations and applications therefor that cover any processes that are material to the Business, Seller has not been charged with (or threatened to be charged with) the infringement of, and, to the best of Seller's knowledge, Seller is not infringing on, any unexpired patent, common law or registered trademark, trade name or copyright (whether registered or not), trade secret or other proprietary right of any party in the United States or in any foreign country which is material to the Business.

        (h)         Taxes, Duties and Tariffs. All duties, tariffs, import/export charges and fees and all required federal, state and local tax returns of Seller and the Division as it relates to the Business have been prepared and duly filed, and all duties, tariffs, import/export charges and fees and all federal, state and local taxes required to be paid with respect to the periods covered by such filings and returns as related in any manner to the Business have been paid or are being contested in good faith. Any such material good faith contests are correctly identified on Schedule 9 hereto. Seller shall timely file all returns and shall pay as and when due all taxes imposed on the sale of the Purchased Assets hereunder, and shall timely file all returns and pay as and when due all tax liabilities incurred in connection with the ownership and operation of the Business by Seller. Neither Seller nor the Division has received any notice (relating to the Business) that it is delinquent in the payment of any duty, tariff, import charge or fee, tax, assessment or government charge, and neither is liable for the payment of any assessed charge or penalty in respect of any duty, tariff, import/export charge, fee, tax or tax deficiency.

        (i)         Governmental Consents. To the best of Seller's knowledge (after due inquiry by Seller of Guy Bradford, Hank Shechtman and Mort Love of the Division), no authorization, consent, order, permit or approval of, or filing with, any governmental agency is necessary for the consummation by Seller of the transactions contemplated by this Agreement.

        (j)         Contracts, Agreements and Commitments, etc. Except for the Assumed Contracts, Seller is not a party to any material lease, contract, agreement or commitment of any kind, oral or written, relating to the conduct of the Business, nor are there any material leases, contracts, agreements or commitments of any kind, oral or written, that directly relate to the conduct of the Business or the Purchased Assets. All of the Assumed Contracts are valid, binding and enforceable obligations of Seller and in full force and effect in accordance with their terms (except to the extent that enforcement may be limited by applicable bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights generally and except to the extent that enforcement may be limited by general equitable principles). Seller is not in breach of or default under any of the Assumed Contracts other than any breaches or defaults that, individually or in the aggregate, would not have a Material Adverse Effect and, to the best of Seller's knowledge, no other party to any of the Assumed Contracts is in breach thereof or default thereunder, other than any breaches or defaults that, individually or in the aggregate, would not have a Material Adverse Effect.

        (k)         Permits, Licenses, Certificates of Authority, etc. To the best of Seller's knowledge (after due inquiry by Seller of Guy Bradford, Hank Shechtman and Mort Love of the Division), the Permits and Licenses constitute all of the permits, licenses, franchises, authorizations and concessions required by law and necessary to operate the Business, other than such permits, licenses, franchises, authorizations and concessions that the failure to obtain would not have, individually or in the aggregate, a Material Adverse Effect; the Permits and Licenses are valid and in full force and effect in accordance with their terms; and Seller is not in breach of or default under any of the Permits and Licenses other than any breaches or defaults that, individually or in the aggregate, would not have a Material Adverse Effect and, to the best of Seller's knowledge, no other party to any of the Permits and Licenses is in breach thereof or default thereunder, other than any breaches or defaults that, individually or in the aggregate, would not have a Material Adverse Effect.

        (l)         Litigation, Arbitration Proceedings, etc. Except as disclosed on Schedule 10 hereto or otherwise disclosed in writing to Buyer, (i) no litigation or investigation is pending or, to the best of Seller's knowledge, threatened against Seller in connection with or that might affect the Business, the Division (relating in any way to the importation of the AEO Merchandise) or the Purchased Assets and that is reasonably likely to have a Material Adverse Effect nor, to the best of Seller's knowledge, is there any basis therefor; (ii) to the best of Seller's knowledge, no litigation or investigation has been asserted against any third party with respect to the Business, the Division (relating in any way to the importation of the AEO Merchandise) or the Purchased Assets, whether by Seller, any affiliate of Seller or any third party, and that is reasonably likely to have a Material Adverse Effect; and (iii) no litigation or investigation has been asserted, instituted or threatened by Seller against any third party that affects or relates in any manner to the Business, the Division (relating in any way to the importation of the AEO Merchandise) or the Purchased Assets. Set forth on Schedule 10 is a true, correct and complete list of all litigation and claims made by or against Seller against or by customers and/or suppliers of the Business during the three year period immediately preceding the date hereof which would have a Material Adverse Effect on the Business or the Purchased Assets. Seller has made available to Buyer access to Seller's complete files with respect to each such litigation or claim.

        (m)         Compliance with Laws. To the best of Seller's knowledge (after due inquiry by Seller of Guy Bradford, Hank Shechtman and Mort Love of the Division), the Business and the Purchased Assets are in compliance with and, since July 31, 1999, have been conducted or used in conformity with all applicable Laws including, without limitation, labor and wage Laws, Laws relating to the health and safety of employees and consumers (including any applicable "right-to-know" Laws and OSHA Laws), Laws relating to the labeling, delivery, and operation of products, materials, machinery and equipment, Laws relating to the exportation and importation of the AEO Merchandise and all environmental Laws; except for such instances of noncompliance with any of the foregoing that, individually or in the aggregate, would not have a Material Adverse Effect. Except as to existing claims under forms CF28 and CF29 - none of which individually and in the aggregate would have a Material Adverse Effect, and except as otherwise disclosed in writing to Buyer, Seller has received no notices of any violation of Laws with respect to the Business, Division (relating to importation of AEO Merchandise), or the Purchased Assets which, following receipt of such notice, have not been fully and timely cured by Seller. Seller is not the subject of any outstanding OSHA citations or pending abatements based on any such citation which relate to the Business or the Purchased Assets; and none of the rights, properties, assets, liabilities, businesses or operations of the Division or the Business is subject to any judicial, regulatory or governmental order, writ, judgment, investigation, audit or decree of any kind directed to Seller or any of its affiliates.

        (n)         Employee Benefit Plans. Seller has delivered to Buyer complete and accurate copies of all Employee Benefit Plans. Seller has made on a timely basis all required contributions to all "employee benefit plans", as defined in Section 3(3) of ERISA, that relate to the Business. None of Seller or any of its ERISA Affiliates has incurred or will incur as of the Closing Date, or as a consequence of events occurring prior to the Closing Date, any of the following that relates to the Division or the Business: (i) any liability to the Pension Benefit Guaranty Corporation (other than for the payment of required premiums), (ii) any liability under Sections 4041, 4062, 4063, 4064 or 4069 of ERISA, (iii) any "withdrawal liability" to any "multi-employer pension plan", as defined in ERISA or (iv) any "accumulated funding deficiency", as defined in Section 302 of ERISA.

        (o)         Relations with Employees. Seller is not a party to nor is it bound by any collective bargaining or other union agreement with respect to the Business. Seller has made all payments it is contractually obligated to make in respect of persons employed by it with respect to the Business (other than payments not yet due for the current payroll period). No employee claim or grievance is pending against Seller with respect to those key employees of the Business identified on Schedule 11 hereto and, with respect to all other persons who are in the Seller's employment with respect to the Business, no claims or grievances are pending against Seller, other than such claims or grievances that, individually or in the aggregate, would not have a Material Adverse Effect.

        (p)         Full Disclosure. No representation or warranty made by Seller in this Agreement, or in any Other Seller Document or exhibit provided to Buyer in connection with the transactions contemplated by this Agreement, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made therein, taken as a whole, not misleading.

        (q)         Reserved.

        (r)         Insurance Policies. Set forth on Schedule  13 hereto is a true, correct and complete listing of all insurance policies applicable to the Business including, without limitation, those relating to product liability and comprehensive general liability (collectively, the "Insurance Policies"). The Insurance Policies are in full force and effect in accordance with their terms and no premium payable thereunder which relates to any period prior to the Closing is unpaid or outstanding as of the date of this Agreement, or will be unpaid or outstanding as of the Closing Date. Set forth on Schedule 13 is a true, correct and complete listing of all claims relating to the Business as made by Seller under the Insurance Policies in respect of any claims of customers and/or suppliers of the Business during the three year period immediately preceding the date hereof. Seller has made available to Buyer access to Seller's complete files with respect to each such claim.

        (s)         Location of Business and Names. During the one (1) year-period immediately preceding the Closing (i) the Division has operated exclusively under the names Value City Imports, (ii) the Division's principal place of business has been and continues to be at 1800 Moler Road, Columbus, OH 43207 and/or at 2025 Corvair Avenue, Columbus, Ohio 43207 and (iii) all of the Personal Property has been located exclusively at 1800 Moler Road, Columbus, OH 43207 and/or at 2025 Corvair Avenue, Columbus, Ohio 43207.

        (t)         Liabilities. Except for such claims, debts and liabilities as are reflected in the Financial Statements or as otherwise disclosed in writing to Buyer, to the best of Seller's knowledge (after due inquiry by Seller of Guy Bradford, Hank Shechtman and Mort Love) neither the Division (as related in any manner to the importation of the AEO Merchandise) nor the Business has any outstanding indebtedness and is not subject to any claims, investigations or liabilities, pending or threatened, contingent or otherwise, (and Seller has received no notice of any such matters) other than trade obligations incurred in the ordinary course of business in amounts that are usual and normal, both individually and in the aggregate. Seller has provided to Buyer a true, accurate and complete list of the Assumed Liabilities (known to Seller as of the date of Closing) to be assumed by Buyer pursuant to the Assignment and Assumption Agreement as of the most recent practicable date prior to the date of this Agreement.

        (u)         No Broker or Finder. Seller has not directly or indirectly retained or hired any broker, finder, financial adviser or other similar agent or representative in connection with this Agreement or a of the transactions contemplated hereby.

        Section 4.02. Buyer's Representations and Warranties. Buyer hereby represents and warrants to Seller as follows:

        (a)         Organization and Standing. Buyer is a Limited Partnership duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. Buyer has all requisite power and authority to own and operate its property and assets and to conduct its business as now conducted.

        (b)         Due Authorization and Execution, etc. Buyer has all requisite power and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby; this Agreement has been, and the Assignment and Assumption Agreement, when executed, will be, duly authorized, executed and delivered by Buyer and constitutes, or when executed, will constitute, valid, binding and legal obligations of Buyer, enforceable in accordance with their terms.

        (c)         Absence of Conflict. The execution, delivery and performance of this Agreement and the Assignment and Assumption Agreement and the consummation of the transactions contemplated to occur pursuant hereto and thereto (i) do not and will not violate or conflict with the Limited Partnership Agreement of Buyer, (ii) to the best of Buyer's knowledge do not and will not violate, conflict with, result in a breach of or default under, or give any person or entity any right to terminate or modify, any material contract or agreement applicable to Buyer or any of the rights, properties, assets, liabilities, operations or businesses of Buyer, (iii) do not and will not violate, conflict with, result in a breach of or default under, or give any person or entity any right to terminate or modify, any governmental or court-issued order, writ, judgment, decree, license, permit, approval or authorization of any kind applicable to Buyer or any of the rights, properties, assets, liabilities, operation or businesses of Buyer, and (iv) to the best of Buyer's knowledge, do not and will not violate or conflict with any Law applicable to Buyer.

        (d)         No Broker or Finder. Buyer has not directly or indirectly retained or hired any broker, finder, financial advisor or other similar agent or representative in connection with the transactions contemplated hereby.

        (e)         Governmental Consents. No authorization, consent, order, permit or approval of, or filing with, any governmental agency is necessary for the consummation by Buyer of the transactions contemplated by this Agreement.

        (f)         Full Disclosure. No representation or warranty made by Buyer in this Agreement, or in any exhibit provided to Seller in connection with the transactions contemplated by this Agreement, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made therein, taken as a whole, not misleading.

ARTICLE V
CONDUCT OF BUSINESS PRIOR TO CLOSING

Section 5.01. Preservation of Business Relationships and Conduct of Business. Seller hereby covenants to Buyer that, during the period from the date hereof through the Closing Date, (i) Seller shall conduct the Business in the ordinary and usual course in all respects; and (ii) Seller shall, except as mutually agreed, use its best efforts to preserve and maintain the Business organization intact, to keep available the services of the Business' current employees, to perform its obligations under the contracts to comprise the Assumed Contracts, to preserve its existing relationships with its customers, suppliers, customs brokers, and others having business relationships with it and to maintain the goodwill enjoyed by Seller with such persons for the benefit of Buyer. Buyer and Seller will cooperate with each other and proceed to prepare and file any necessary governmental or third party consents required to complete the transaction contemplated to occur pursuant hereto.

        Section 5.02. Other Pre-Closing Actions of Seller. Seller covenants and agrees that, pending the Closing, (i) Seller shall not take any action that is inconsistent with the satisfaction of any condition set forth in Section 6.02 hereof; (ii) Seller shall furnish Buyer, as promptly as practicable, with such documents and information relating to the Business and the Purchased Assets as Buyer may from time to time reasonably request; (iii) Seller shall provide Buyer and its representatives with such access to the Business and the Purchased Assets as Buyer may from time to time reasonably request during normal business hours to conduct one or more inspections and investigations thereof; provided, that such inspections shall not unreasonably interfere with Seller's conduct of the Business; (iv) Seller shall pay and perform all of the debts, obligations and liabilities of the Business as and when they become due in the ordinary course; (v) cooperate with Buyer and its counsel in providing such other information (financial and otherwise) as Buyer or such counsel determines to be necessary or appropriate to prepare any filing with the Securities and Exchange Commission or other governmental authority as necessitated by this transaction (and the Seller agrees that, upon request by Buyer, it shall make available such of its officers, employees, agents and consultants, including its independent public accountants, as are reasonably necessary to assist Buyer in preparing such filings); and (vi) Seller shall use its best efforts to obtain the consents, which shall be reasonably satisfactory in form and substance to Buyer's counsel, of all parties whose consents are necessary to the conveyance, assignment, delivery and transfer of the Purchased Assets and/or the Buyer's operation of the Business following the Closing.

        Section 5.03. Pre-Closing Actions of Buyer. Buyer covenants and agrees that, pending the Closing, Buyer shall not take any action that is inconsistent with the satisfaction of any condition set forth in Section 6.02 hereof.

ARTICLE VI
CLOSING DATE; CONDITIONS AND TRANSACTIONS

        Section 6.01. Closing Date. Subject to the satisfaction or waiver of each of the conditions set forth in Section 6.02 hereof, the closing of the purchase and sale transactions contemplated to occur pursuant to this Agreement (the "Closing") shall be effective as of January 31, 2000 (the date on which the Closing is effective is hereafter referred to as the "Closing Date").

        Section 6.02. Conditions to Closing.

        (a)         All Parties. The obligations of each party hereto to consummate the purchase and sale transactions contemplated by this Agreement are subject to the following condition: no judicial, governmental or other action or proceeding shall have been instituted or be threatened that materially challenges this Agreement or any of the transactions contemplated hereby.

        (b)         Seller. In addition to the condition set forth in Section 6.02(a) hereof, the obligations of Seller to consummate the purchase and sale transactions contemplated by this Agreement are subject to the following conditions:

        (i)         Each of the warranties and representations made by Buyer in Section 4.02 hereof shall be true and correct in all material respects as of the Closing as if made on and as of the Closing Date;

        (ii)         Buyer shall have performed all of the obligations and satisfied all of the conditions required to be performed or satisfied by it at or prior to the Closing in connection with this Agreement and the transactions contemplated to occur pursuant hereto in all material respects;

        (iii)        At the Closing, Seller shall have received an Officers' Certificate from Buyer confirming the satisfaction of the conditions set forth in clauses (i) and (ii) of this Section 6.02(b);

        (iv)        Any and all consents, authorizations, approvals, waivers, estoppel certificates and releases from third parties that may, in the reasonable opinion of Seller or its legal counsel, be necessary to carry out and complete all of the transactions contemplated to occur pursuant to this Agreement shall have been obtained and be in full force and effect as of the Closing;

        (v)         RESERVED;

        (vi)         Buyer shall have delivered to Seller (A) a Good Standing Certificate from the State of Pennsylvania, (B) copies of Buyer's Certificate of Limited Partnership as currently in effect and all resolutions of Buyer's general partner adopted in connection with this Agreement and the transactions contemplated to occur pursuant hereto, each of which shall be certified by the general partner of Buyer to be true, correct and complete copies thereof and (C) an incumbency certificate of the general partner of Buyer;

        (vii)         Buyer shall have executed and delivered to Seller the Assignment and Assumption Agreement and the Employment Practices and Shared Services Agreement; and

        (viii)         Buyer shall have paid to Seller the Purchase Price.

        (c)         Buyer. In addition to the conditions set forth in Section 6.02(a) hereof, the obligations of Buyer to consummate the purchase and sale transactions contemplated by this Agreement are subject to the following conditions:

        (i)         Each of the representations and warranties made by Seller in Section 4.01 hereof shall be true and correct in all material respects as of the Closing as if made on and as of the Closing Date;

        (ii)         Seller shall have made all Pre-Closing Adjustments and performed all of the obligations and satisfied all of the conditions required to be performed or satisfied by it at or prior to the Closing in connection with this Agreement and the transactions contemplated to occur pursuant hereto in all material respects;

        (iii)         At the Closing, Buyer shall have received an Officers' Certificate from Seller confirming the satisfaction of the conditions set forth in clauses (i) and (ii) of this Section 6.02(c);

        (iv)         Any and all consents, authorizations, approvals, waivers, estoppel certificates and releases from third parties that may, in the reasonable opinion of Buyer hereto or its legal counsel, be necessary to carry out and complete all of the transactions contemplated to occur pursuant to this Agreement shall have been obtained and be in full force and effect as of the Closing;

        (v)         RESERVED;

        (vi)         Seller shall have delivered to Buyer (A) a Good Standing Certificate from Ohio, Delaware and Pennsylvania, dated as of a recent date, (B) copies of all documents evidencing Seller's authority to enter into this Agreement adopted in connection with this Agreement and the transactions contemplated to occur pursuant hereto, each of which shall be certified by a duly authorized officer or agent of Seller to be true, correct and complete copies of such resolutions, and (C) an incumbency certificate of Seller;

         (vii)        Seller shall have executed and delivered the Seller Transfer Documents and the Employment Practices and Shared Services Agreement;

        (viii)        Buyer shall have entered into the Employment Agreements with those individuals whose names are listed on Schedule 11 hereto;

        (ix)         The Buyer and the Committee shall have received the Fairness Opinion, and any other written opinions requested by Buyer or the Committee, in form and content acceptable to Buyer and the Committee in their respective sole discretion, regarding the valuation of the Purchased Assets and the Business and the entering into and consummation of the transactions set forth in this Agreement;

        (x)         The Board of Directors (including a majority of the Committee) shall have approved the transactions contemplated to occur pursuant hereto;

        (xi)         The obtaining by the Buyer of all third party consents and governmental approvals, licenses and permits necessary for the Buyer to consummate the transaction set forth in this Agreement and to operate the Business as it was operated by Seller prior to the Closing; and

        (xii)        There shall have occurred no material adverse change in or to the financial condition, results of operations, assets or employees of the Division, or to Seller, or any of their affiliates to the extent that such material adverse change would have a Material Adverse Effect, since July 31, 1999 including, without limitation, any bankruptcy, liquidation, dissolution, creditor standstill agreement, material Default, or other similar event. No suit, action or other proceeding shall be threatened or pending before any court or governmental agency which seeks to restrain, enjoin or otherwise prohibit this transaction, or seeks the payment of significant damages from the AEO Companies in the event that the transactions contemplated by this Agreement are consummated.

        The failure of any condition set forth in this Article VI, unless waived by Seller with respect to any condition set forth in Section 6.02(b) above, or waived by Buyer with respect to any condition set forth in Section 6.02(c) above, or waived by both Seller and Buyer with respect to any condition set forth in Section 6.02(a) above, shall cause this Agreement to terminate, in which event Seller and Buyer shall have no liability or obligation to each other.

ARTICLE VII
POST CLOSING COVENANTS

        Section 7.01. Transition Period. If so requested by Buyer, Seller will, to the extent permitted by applicable law, perform services and process matters that constitute all or part of the conduct of the Business for and on behalf of Buyer for a transition period of one year after the Closing. To the extent that Buyer requests any such services be provided by Seller after the Closing, Buyer will reimburse Seller for its actual, reasonable cost (as mutually agreed to by Seller and Buyer in the Employment Practices and Shared Services Agreement) to provide such requested services, and all profits earned with respect to the operation of the Business and/or use of the Purchased Assets following the Closing shall belong to Buyer.

        Section 7.02. Protection of Business and Purchased Assets. Without in any way limiting the rights and remedies available to Buyer for any actual or threatened violation of any covenant or agreement of Seller contained in Sections 5.01 and 5.02 above, Seller acknowledges and agrees that such other rights and remedies cannot fully compensate Buyer, and Buyer shall be entitled to injunctive relief to prevent or remedy any actual or threatened violation of any covenant or agreement of Seller contained in Sections 5.01 and 5.02 above.

        Section 7.03. Books and Records. Following the Closing, Seller shall make available to Buyer, upon reasonable notice during normal business hours, for review and copying for the purpose of preparing tax returns and related reports and any other proper purpose, any and all of the books and records relating to the Business, the Division or the Purchased Assets that may then be in the possession or control of Seller, and to provide to Buyer-original copies thereof where such originals are necessary. Seller shall not willfully and knowingly destroy any of such books and records for a period of five (5) years after the Closing without first offering to deliver such books and records to be destroyed to Buyer.

        Section 7.04. Workmen's Compensation Claims. In the event that any workers compensation claim is asserted after the Closing Date for a claim occurring prior the Closing Date by any person who was employed with the Division at a time prior to the Closing Date, Seller agrees to accept all liability for those workers compensation claims under the workers compensation laws of the State of Ohio. In the event that any workers compensation claim is asserted after the Closing Date for a claim occurring after the Closing Date by any person who was employed with the Division at a time prior to the Closing Date and who is hired by the Buyer, Buyer agrees to accept all liability for those workers compensation claims under the workers compensation laws of the State in which the claimant is employed for those claims occurring after the Closing Date. In the event that any workers compensation claim is asserted after the Closing Date by any person who was employed with the Division at a time prior to the Closing Date and who is hired by the Buyer, and the date of the occurrence giving rise to the claim cannot readily be determined as being either before or after the Closing Date, all liabilities and obligations in respect of such claim shall be handled; in compliance with the Worker's Compensation laws of the state governing the employer (either Buyer or Seller) who ultimately is determined, either through discovery or otherwise, to have employed the person at the time of the occurrence giving rise to the claim.

        Section 7.05. Reserved.

        Section 7.06. Further Assurances. If at any time after the Closing, either party hereto should determine that any further instruments of sale, assignment, conveyance, transfer or delivery, instruments of assumption, security documents, releases of security interests, consents to assignment, or other documents and instruments are necessary or desirable to carry out more effectively and complete the transactions contemplated to occur pursuant to this Agreement, each party hereto shall (i) execute and deliver any and all such further documents and instruments as the other party hereto may reasonably request, and (ii) use its best efforts to obtain the execution and delivery of any such further documents and instruments from any third party as either party hereto may reasonably request.

ARTICLE VIII
REMEDIES

        Section 8.01. The parties agree that, in the event of a breach by either party of any of the terms hereof or of any of the other documents or instruments executed and delivered pursuant to this Agreement or in connection with the transactions contemplated to occur pursuant hereto, which breach becomes the basis for any claim or lawsuit among the parties, then, in such event, the prevailing party in any such claim or lawsuit shall be entitled, as part of its proper damages, to reimbursement for its reasonable attorneys' fees and expenses incurred in connection with such claim or litigation.

ARTICLE IX
MISCELLANEOUS PROVISIONS

        Section 9.01. Survival of Warranties, Representations, Agreements, etc. All of the warranties, representations, and agreements of the parties hereto shall survive the Closing and the consummation of the transactions contemplated by this Agreement for a period of two (2) years, except for the representations and warranties contained in Sections 4.01(h) and 4.01(u) which shall survive the Closing until the applicable statute of limitations has expired, regardless of any investigations made by, any party, either prior to or after the Closing; provided, however, that (i) nothing contained in the foregoing provision shall limit or modify the obligations of the parties to indemnify each other pursuant to Sections 3.04 and 3.05, and (ii) if any customs duty is owed for the importation of AEO Merchandise (notwithstanding Seller's representation set forth in Section 4.01(h) hereof), the amount of the duty itself (as opposed to any penalty or other charges) shall be payable by Buyer. The rights and remedies of the parties hereto with respect to any inaccuracy in any warranty or representation or with respect to any breach or default under any covenant or agreement shall not be limited or restricted by the fact that the act, omission, occurrence or other state of facts giving rise to such inaccuracy or such breach or default is also the subject of another warranty or representation as to which there is no inaccuracy or another covenant or agreement as to which there is no breach or default.

        Section 9.02. Third Party Actions. If any third party should institute or assert any claim, action or proceeding against any party hereto with respect to which such party determines it may seek to be indemnified, held harmless and/or defended, pursuant to the assumption or exclusion of liabilities set forth in Sections 3.03 and 3.04 hereof, the party hereto against whom such claim, action or proceeding has been instituted or asserted (the "indemnified party") shall promptly notify each party hereto by whom it may seek to be indemnified, held harmless and/or defended (an "indemnifying party") of the institution or assertion of such claim, action or proceeding, and, if so requested by an indemnifying party, shall promptly furnish such indemnifying party with a copy of any written claim, complaint, notice of violation or other similar document the indemnified party may have received from the third party instituting or asserting such claim, action or proceeding. An indemnified party shall have the right (but not the obligation) (i) to direct and control, through legal counsel of its own choosing, the defense of any third party claim, action or proceeding and (ii) to compromise and settle any third party claim, action or proceeding on any basis and in any manner such indemnified party deems necessary or appropriate; provided, however, that (a) each indemnifying party shall have the right to participate, at its own cost and expense, through legal counsel of its own choosing, subject to the control of the indemnified party and its legal counsel, in the defense of any third-party claim, action or proceeding with respect to which indemnity is sought hereunder, (b) prior to compromising or settling any third-party claim, action or proceeding with respect to which indemnity is sought hereunder, the indemnified party shall notify such indemnifying party of the proposed terms and conditions of the compromise or settlement and (c) in the case of any third-party claim, action or proceeding with respect to which indemnity is sought hereunder that involves only the payment of money damages by the indemnified party, such indemnifying party may assume (jointly with any and all other indemnifying parties), at its own cost and expense, through legal counsel of its own choosing reasonably acceptable to the indemnified party, the direction and control of the defense of such third-party claim if, but only if (i) such indemnifying party acknowledges that it is obligated to indemnify and hold harmless the indemnified party with respect to all judgments, settlements, compromises and other losses, damages, costs and expenses in connection with such third-party claim, action or proceeding and (2) such third-party claim, action or proceeding continues to involve only the payment of money damages by the indemnified party.

        Section 9.03. Miscellaneous Provisions.

        (a)         Entire Agreement. This Agreement, together with all Exhibits, Transfer Documents and Other Documents, constitutes the entire agreement and understanding of the parties hereto with respect to the transactions contemplated hereby and supersedes any and all prior negotiations, discussions, agreements and understandings, oral or written, among the parties hereto, or any of them, with respect to this Agreement or the transactions contemplated hereby.

        (b)         Amendment. This Agreement may be amended, superseded, extended or modified only by an instrument or instruments in writing signed by each of the parties hereto (or their respective successors in interest or permitted assigns), and no waiver or consent with respect to this Agreement or any of the transactions contemplated hereby shall be effective against any party hereto unless and until such waiver or consent is set forth in any instrument or instruments in writing signed by such party (or its successor in interest or permitted assign).

        (c)         No Waiver. No delay by any party hereto in exercising any right or remedy shall operate as a waiver of such right or remedy, and no waiver of any right or remedy by any party shall operate to waive future compliance with such right or future exercise of such remedy or affect any other right or remedy.

        (d)         Remedies Cumulative. The rights and remedies of the parties hereto are cumulative, and the rights and remedies granted to the parties pursuant to this Agreement are not exclusive of, but are in addition to, any and all other rights and remedies that the parties hereto may have at law or in equity or under any other contract, agreement or other document or instrument.

        (e)         Severability. The provisions of this Agreement are severable and the invalidity or unenforceability of any provision of this Agreement as to one or more parties shall not affect the validity or enforceability of such provision as to any other party or the validity or enforceability of any other provision of this Agreement.

        (f)         Exhibits and Headings. The exhibits and schedules hereto and the Other Seller Documents constitute an integral part of this Agreement. The captions and headings in the articles, sections and subsections of this Agreement and the exhibits and schedules hereto are for purposes of convenience only and are not intended to affect the interpretation of this Agreement.

        (g)         Notices, etc. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by reputable courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

If to Seller: Schottenstein Stores Corporation
1800 Moler Road
Columbus, OH 43207
Attention: Jeffrey Swanson

with a copy to:  Irwin Bain, Esquire
1800 Moler Road
Columbus, OH 43207        

If to Buyer:  Blue Star Imports, L.P
150 Thorn Hill Drive
Warrendale, PA 15095
Attention: George Kolber

with a copy to:  Sable, Pusateri, Rosen, Gordon & Adams, LLC
437 Grant Street
7^th Floor, Frick Building
Pittsburgh, PA 15219
Attn.: Alan B. Gordon, Esquire

        (h)         Counterparts. This Agreement may be executed in two or more counterparts and shall become effective as of the date first above written when each party hereto has signed at least one counterpart hereof.

        (i)         Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to conflicts of law principles.

        (j)         Parties Bound and Benefited. This Agreement shall be binding upon and enforceable against, and shall inure to the benefit of, the parties hereto and their respective successors in interest and permitted assigns; provided, however, that neither this Agreement, nor any of the rights, privileges or obligations hereunder shall be assignable by any of the parties without the other parties' prior written consent; provided, however, that Seller may not withhold its consent to any assignment of this Agreement or Buyer's rights and obligations hereunder by Buyer to any entity controlled by or under common control with the Buyer. Nothing contained in this Agreement, express or implied, shall or is intended to confer on any person or entity other than the parties hereto and their successors in interest, any rights or remedies under or by reason of this Agreement unless so stated expressly to the contrary.

        IN WITNESS WHEREOF, each of the parties hereto has executed and delivered this Agreement as of the day and year first above written.

SELLER:

SCHOTTENSTEIN STORES CORPORATION

 By: /s/ Jeffrey Swanson

  BUYER;

BLUE STAR IMPORTS, L.P.

 By: BSI IMPORTS CO., LLC, general partner

 By: /s/ Dale E. Clifton

LIST OF EXHIBITS

Description	Designation
Assignment and Assumption Agreement	A
Bill of Sale and Assignment	B
Employment Practices and Shared Services Agreement	C

LIST OF SCHEDULES

Description	Designation
List of Assumed Contracts	1
List of Permits and Licenses	2
List of Personal Property	3
List of Software	4
Purchase Price Allocation	5
List of Jurisdictions	6
Material Adverse Changes	7
Intellectual Property	8
Taxes, Duties and Tariffs	9
Schedule of Litigation	10
Key Employees	11
List of Inventory	12
Insurance Policies	13
List of Books and Records being delivered to Buyer	14

ASSIGNMENT AND ASSUMPTION AGREEMENT

        This Assignment and Assumption Agreement (this "Agreement") is made as of this 10th day of March, 2000, effective as of the 31st day of January, 2000, by and between SCHOTTENSTEIN STORES CORPORATION, a Delaware corporation ("Assignor"), and BLUE STAR IMPORTS, L.P., a Pennsylvania limited partnership ("Assignee"), pursuant to that certain Purchase and Sale Agreement (the "Purchase Agreement") of even date herewith made by and between Assignor and Assignee. Capitalized terms used but not defined herein are used as defined in the Purchase Agreement.

ASSIGNMENT AND ASSUMPTION AGREEMENT

        This Assignment and Assumption Agreement (this "Agreement") is made as of this 10th day of March, 2000, effective as of the 31st day of January, 2000, by and between SCHOTTENSTEIN STORES CORPORATION, a Delaware corporation ("Assignor"), and BLUE STAR IMPORTS, L.P., a Pennsylvania limited partnership ("Assignee"), pursuant to that certain Purchase and Sale Agreement (the "Purchase Agreement") of even date herewith made by and between Assignor and Assignee. Capitalized terms used but not defined herein are used as defined in the Purchase Agreement.

        For and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, as of the date hereof, (i) Assignor does hereby transfer and assign to Assignee all of Assignor's right, title and interest in and to the Assumed Contracts (provided that where Assignor is required to continue to be a party to such contracts or where Assignor will continue to require or perform services under such contracts, Assignor shall use its best efforts to add Assignee as an additional party, rather than the sole transferee, of such contracts), the Permits and Licenses, and the Prepaid Expenses, (ii) Assignee does hereby accept such transfer and assignment, and (iii) Assignee does hereby (a) undertake and assume all of the Assumed Liabilities and (b) disclaims any liability or obligation under the Excluded Liabilities.

        Without in any way affecting any of Assignee's or Assignor's respective obligations under the Purchase Agreement, Assignee and Assignor each hereby specifically confirm to the other their indemnification obligations under and pursuant to the Purchase Agreement.

        Each party hereto agrees, at any time and from time to time, upon the request of the other party, to forthwith execute and deliver such instruments of assignment, release, endorsement, direction and authorization as will be sufficient, requisite or advisable, in the reasonable opinion of Assignor, Assignee or their respective counsel, to effect the assignment hereunder, but the parties specifically agree that this instrument and these presents are intended to and shall be, and the same hereby are, declared to be sufficient in all respects to, and the same do hereby, effect the assignment hereunder.

        Assignor acknowledges and agrees that, with respect to any Assumed Contracts, which are, in their nature, by law, by their terms or otherwise, nonassignable, or which contain a covenant against assignment, this instrument shall, notwithstanding anything elsewhere herein contained, be construed as an assignment to Assignee of the equitable interest in the same insofar as is legally permissible without violation of law or breach of the terms or condition thereof, with the right in Assignee or its successors and assigns (i) to have said claims, contracts, commitments or other agreement, if any, held in trust by Assignor so as to enable Assignee or its successors and assigns to use and enjoy the full benefit thereof, (ii) to have transferred to Assignee or its successors or assigns any and all such property or rights which shall become assignable as soon as the same shall become assignable, and (iii) to take and have taken any action which may be taken without violation of law and without any breach as aforesaid which is necessary or appropriate to make such contract, property or rights assignable. Assignor agrees that in any instance in which nonassignability of any such contract, property or rights may be removed by the consent of any party or parties, Assignor will use its best efforts to obtain the consent of all such parties to the assignment of the property or rights in question to Assignee. If such a consent is not obtained, or if an attempted assignment would be ineffective or would affect Assignor's rights so that Assignee or its successors and assigns in fact would not receive such contract, property or rights, Assignor will cooperate with Assignee or its successors and assigns on any reasonable arrangement, not contrary to law, designed to provide for Assignee or its successors and assigns the benefit under any such Assumed Contracts and enforcement thereof, and for the benefit of Assignee or its successors and assigns, of any and all rights of Assignor against any party thereto arising out of breach or cancellation by such party or otherwise.

        Nothing in this Agreement shall preclude or prohibit Assignee from contesting in good faith the legality, validity or enforceability of any debt, liability, obligation under any Assumed Contract, provided that the foregoing shall not affect the legality, validity or enforceability of the terms and provisions of this Agreement.

       This Agreement shall be binding upon and inure to the benefit of Assignor and Assignee and their respective heirs, successors and assigns.

        IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment and Assumption of Agreements effective as of January 31, 2000.

ATTEST:	ASSIGNOR: Schottenstein Stores Corporation, a Delaware corporation
By: /s/ Tod Friedman  ATTEST:	By: /s/ Jeffrey Swanson ASSIGNEE: Blue Star Imports, L.P., a Pennsylvania limited partnership By:  BSI Imports Company, LLC, a        Delaware limited liability company and its sole General Partner
By: /s/ William P. Tait	By: /s/ Dale E. Clifton

BILL OF SALE AND ASSIGNMENT

        This Bill of Sale and Assignment (this "Instrument") is made this 10th day of March, 2000, effective as of the 31st day of January, 2000, by SCHOTTENSTEIN STORES CORPORATION, a Delaware corporation ("Assignor"), in favor of BLUE STAR IMPORTS, L.P., a Pennsylvania limited partnership ("Assignee"), pursuant to that certain Purchase and Sale Agreement (the "Purchase Agreement") of even date herewith made by and between Assignor and Assignee. Capitalized terms used but not defined herein are used as defined in the Purchase Agreement.

        For and in consideration of the sum of Ten and No/100 ($10.00) Dollars cash in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, Assignor does hereby transfer and assign the Personal Property to Assignee and Assignee does hereby accept such assignment and transfer.

        Assignor warrants that it is the owner of the Personal Property and that its right, title and interest in and to the Personal Property is hereby transferred and assigned to Assignee free and clear of all liens, security interests and encumbrances.

        Assignee hereby agrees to perform, execute and/or deliver, or cause to be performed, executed and/or delivered, any and all such further acts and assurances as Assignee may reasonably require to perfect Assignee's interest in the Personal Property hereby transferred, but Assignee and Assignor agree that this Instrument and these presents shall be, and the same hereby are, declared to be sufficient in all respects to, and the same do hereby, effect the transfer and assignment made hereunder.

        This Bill of Sale and Assignment shall be binding upon and inure to the benefit of Assignor and Assignee, and their respective successors and assigns.

        IN WITNESS WHEREOF, Assignor has duly executed and delivered this Bill of Sale and Assignment, and Assignee has accepted this Bill of Sale and Assignment, effective as of the 31^st day of January, 2000.

            ASSIGNOR:
SCHOTTENSTEIN STORES CORPORATION, a Delaware
          corporation

By: /s/ Jeffrey Swanson
Name:
Title:  President

[signatures continued on following page]

ASSIGNEE
BLUE STAR IMPORTS, L.P., a
Pennsylvania limited partnership        

By:   BSI Imports Company, LLC, a
        Delaware limited liability
company and its sole General Partner     

By: /s/ Dale E. Clifton
      Name: Dale E. Clifton
      Title: VP, Controller, and Chief Accounting
      Office

EMPLOYMENT PRACTICES AND SHARED SERVICES AGREEMENT

        THIS AGREEMENT is dated as of the 10th day of March, 2000, effective as of January 31, 2000, between SCHOTTENSTEIN STORES CORPORATION, a Delaware corporation, ( "Schottenstein") and BLUE STAR IMPORTS, L.P., a Pennsylvania Limited Partnership ("Blue Star").

R E C I T A L

        A.         Blue Star and Schottenstein have entered into a Purchase and Sale Agreement effective as of January 31, 2000 ("Purchase Agreement") whereby Blue Star is purchasing the Purchased Assets and the Business of Value City Imports, a division of Schottenstein, relating to the importation of the AEO Merchandise (as such capitalized terms are defined in the Purchase Agreement). All capitalized terms not otherwise defined herein shall have the meaning given to such terms in the Purchase Agreement.

        B.         Blue Star desires to receive, on a transitional basis, certain services currently provided by Schottenstein for the Purchased Assets and the Business on the terms and conditions contained herein.

        C.         Schottenstein is willing to provide, on a transitional basis, at reasonable times and upon reasonable prior notice, certain services currently provided by Schottenstein for the Purchased Assets and the Business on the terms and conditions contained herein.

        D.         In connection with its acquisition of the Purchased Assets and the Business from Schottenstein, Blue Star has hired certain employees, Guy Bradford and Hank Shechtman (the "Blue Star Employees "), who formerly were employed by Schottenstein.

        E.         Schottenstein desires to receive, on a transitional basis, certain services to be provided by the Blue Star Employees in connection with the importation of merchandise for Value City Department Stores and Value City Furniture stores, on the terms and conditions contained herein.

        F.         Blue Star is willing to provide, on a transitional basis, at reasonable times and upon reasonable prior notice, the services of the Blue Star Employees to assist Schottenstein in connection with its importation of merchandise, on the terms and conditions contained herein.

        NOW THEREFORE, for good and valuable consideration, the sufficiency of which is hereby acknowledged, and intending to be legally bound, the parties agree that the transitional services shall be provided in accordance with the following:

        1.         Supply of Services.

                 a.         Schottenstein shall, upon the request of Blue Star, supply to Blue Star the services (at the cost) as described in Attachment A hereto (the "Defined Services) according to the terms of this Agreement. In addition, to the extent Blue Star needs services historically provided by Schottenstein in addition to the Defined Services, the parties agree to amend Attachment A to add such services (the "New Services"). The New Services and the Defined Services are collectively referred to as the "Services". Schottenstein shall furnish Blue Star with such current merchandise in transit, orders and other reports and documents that it has normally produced with respect to its provision of the Services. All Services provided hereunder shall be performed in compliance with all applicable laws and regulations and in substantially the same manner as historically performed by Schottenstein and as revised from time to time by Schottenstein consistent with the methods used for the importation of Schottenstein's own merchandise. Blue Star may, at its discretion, decrease or discontinue any of the Services to be provided hereunder. The parties hereto also agree that Blue Star shall have no obligation to order any Services whatsoever. Schottenstein shall provide Blue Star with reasonable access to its facility and the Purchased Assets. During the Transition Period and the Extended Term, Blue Star may elect to remove the Purchased Assets from the Facility for the purpose of relocating such assets to facilities owned or operated by Blue Star or its affiliates.

                 b.         Blue Star shall, upon the request of Schottenstein, supply to Schottenstein, at reasonable times, the services of the Blue Star Employees (and any other current employee of Blue Star who had previously worked for Schottenstein in connection with the importation of its merchandise and its customs compliance program) in order to assist Schottenstein in connection with the importation of merchandise and customs compliance program for Schottenstein and its affiliated entities (the "Blue Star Employees' Services"). The Blue Star Employees' Services shall be performed in compliance with all applicable laws and regulations, and in substantially the same manner as historically performed by the Blue Star Employees, and as revised from time to time by Blue Star consistent with past practice. The Blue Star Employees' Services shall be the same services as have historically been provided to Schottenstein by such employees prior to the Closing, and shall also include reasonable training of any of Schottenstein's remaining or newly hired employee(s). Schottenstein shall use its best efforts to hire, as soon as is reasonably practical, its own employee(s) to perform the services that are now being provided to it by the Blue Star Employees hereunder. The Blue Star Employees' Services shall be provided to Schottenstein in accordance with the terms of this Agreement and at the costs as set forth on Attachment B hereto.

                 c.         Schottenstein hereby perpetually and irrevocably licenses or sublicenses, as the case may be, to Blue Star and its affiliates (on a non-exclusive basis) the Software and Intellectual Property used or useful in connection with the ownership and/or operation of the Business. The license and/or sublicense granted by Schottenstein to Blue Star and its affiliates herein shall be considered a fully paid license and/or sublicense, and no license fee, royalty or other fee shall be due for the privilege of exercising the rights licensed or sublicensed herein. Schottenstein shall maintain the Software in an operating condition and will timely and fully pay all charged license or sublicense fees and maintenance fees necessary to enable Blue Star and its affiliates to fully access, use, and enter and retrieve data in connection with the Software. Schottenstein shall make available to Blue Star and its affiliates all Software and all currently existing and future associated technical information regarding the Software which might be reasonably necessary, useful or helpful to Blue Star and its affiliates in the exercise of the rights licensed, sublicensed or otherwise granted. There shall be no fees or other charges associated with providing the documents and materials contemplated by this Subparagraph c.         

        2.          Term.

        This Agreement shall commence upon the date hereof and continue in effect for a term of one year (the "Transition Period") ending on (the "Original Termination Date") January 31, 2001, subject to extension in accordance with this Section 2. Either party may, at its option and by notice given to the other party at least 30 days prior to the Original Termination Date (and 30 days prior to the expiration of the initial 3 month extension period, if applicable), extend such term of this Agreement, for a total of up to two additional periods of three months each (the "Extended Term").

        3.         Termination.

                 a.         Blue Star may terminate this Agreement as to any one or more Services at any time upon 10 days' prior written notice. Blue Star shall not terminate this Agreement during the Transition Period and the Extended Term with respect to its obligation to make available the Blue Star Employees and provide the Blue Star Employees' Services to Schottenstein except in the event that Schottenstein fails to make any payment due hereunder within five (5) days after delivery of written notice by Blue Star, or if Schottenstein breaches any nonmonetary obligation hereunder and such breach is not cured within thirty (30) days after delivery of written notice by Blue Star unless Schottenstein has undertaken a course of action reasonably calculated to cure such nonmonetary breach and continuously pursues the same until cured.

                 b.         Schottenstein may terminate this Agreement as to its use of the Blue Star Employees or the providing of any of the Blue Star Employees' Services at any time upon 10 days' prior written notice. Schottenstein shall not terminate this Agreement during the Transition Period and the Extended Term for any Service except in the event that Blue Star fails to make any payment due hereunder within five (5) days after delivery of written notice by Schottenstein, or if Blue Star breaches any nonmonetary obligation hereunder and such breach is not cured within thirty (30) days after delivery of written notice by Schottenstein unless Blue Star has undertaken a course of action reasonably calculated to cure such nonmonetary breach and continuously pursues the same until cured.

        4.          Price.

                 a.         The price for each Defined Service shall be its cost as described on Attachment A hereto. The price for each New Service shall be set forth on Attachment A and shall be calculated by Schottenstein and agreed to by Blue Star in the same manner as the cost (with no corporate overhead charges) for each Defined Service was calculated for this Agreement.

                 b.         The price for each Blue Star Employee and the Blue Star Employees' Services shall be as described on Attachment B hereto. If Schottenstein desires to utilize any additional employees of Blue Star, the price for each additional employee shall be calculated by Blue Star and agreed to by Schottenstein in the same manner as the cost for the Blue Star Employees was calculated for this Agreement. To the extent that a cost for a particular service included in the Blue Star Employees' Services is not specifically listed on Attachment B, the cost to be charged by Blue Star shall be its actual cost (with no corporate overhead charges) for such service.

        5.         Past Practice.

        Schottenstein has been supplying importation services to the American Eagle Outfitters, parent of Blue Star, for several years. To the extent that questions arise as to the nature of a particular Service or a Blue Star Employees' Service, the manner in which Services or Blue Star Employees' Service are to be provided, or any responsibilities of Schottenstein or Blue Star hereunder, the parties shall be guided by past reasonable practices of Schottenstein or American Eagle Outfitters.

        6.         Invoicing and Payment.

                 a.         Schottenstein shall invoice Blue Star monthly for the Services supplied hereunder. Schottenstein may use one or more invoices. Payment shall be due 30 days after the invoice(s) are sent. The provisions of this Section 6 shall survive the termination of this Agreement.

                 b.         Blue Star shall invoice Schottenstein monthly for the Blue Star Employees and Blue Star Employees' Services supplied hereunder. Blue Star may use one or more invoices. Payment shall be due 30 days after the invoice(s) are sent. The provisions of this Section 6 shall survive the termination of this Agreement.

        7.         Right to Audit.

        For purposes of verifying the accuracy of charges for the Services supplied hereunder and to verify the proper performance of the Services by Schottenstein and its affiliates and assignees hereunder, Blue Star shall be entitled, prior or subsequent to any payment of charges hereunder, to have access at all reasonable times during normal business hours at the Facility, to the Books and Records of Schottenstein (and its affiliates providing the Services) relating to the Division hereunder as may be reasonably related to such inquiry, all at Blue Star's sole expense. Blue Star shall maintain the confidentiality of information supplied to it in the course of performing such audit and shall not disclose such information to persons who do not have a need to know. Schottenstein shall have the right to audit the charges for the Blue Star Employees and Blue Star Employees' Services in accordance with the same terms and conditions which govern Blue Star's right to audit as set forth hereinabove.

        8.         Independent Contractor Status.

        a.         Schottenstein shall be an independent contract with respect to the Services. Blue Star shall be an independent contractor with respect to the Blue Star Employees' Services. Each party shall be responsible for its own employees, and employees of each party shall not be deemed to have an employment relationship with the other party. Upon Buyer's request, Schottenstein shall use its best efforts to make available to Blue Star the Schottenstein employees engaged in the Business (regardless of whether or not Blue Star shall have extended offers of employment to such persons) to provide reasonable assistance in the training of Blue Star's employees to enable such employees to operate and utilize the Purchased Assets and to deliver Services of a quality at least similar to the quality of such Services as were provided by Schottenstein with such Purchased Assets and the Business. Blue Star shall have, for a period of ninety (90) days following the Closing, the right to extend offers of employment to, and hire, those of Schottenstein's employees as listed on Attachment C attached hereto who are presently engaged in providing the Services with respect to the Business, and Schottenstein will not engage in conduct or actions (including, but not limited to, the offering of additional incentives or compensation to such employees) with the intention or for the purpose of deterring such employees from accepting offers from Blue Star. Schottenstein further agrees that it will not, for a period of two years following the date of the Closing, solicit, offer to hire, or rehire any employees whom Blue Star hires to assist Blue Star in the operation of the Business. Blue Star further agrees that it will not, for a period of two years following the date of the Closing, solicit, or offer to hire any employees of Schottenstein who are not listed on Attachment C to assist Blue Star in the operation of the Business. This Paragraph 8 shall survive the expiration or earlier termination of this Agreement.

        b.         Blue Star shall be solely responsible for all liabilities, demands, damages, costs and expenses (including reasonable attorney's fees), and shall indemnify, defend and hold harmless the Schottenstein and its affiliates and their respective officers and directors, shareholders and representatives, from and against all liabilities, claims, demands, damages, costs and expenses (including reasonable attorney fees) arising from the conduct, actions, inactions or omissions of the Blue Star Employees (and not caused by Schottenstein, its employees or contractors) in connection with the Blue Star Employees' Services hereunder.

        c.         Schottenstein shall be solely responsible for all liabilities, demands, damages, costs and expenses (including reasonable attorney's fees), and shall indemnify, defend and hold harmless Blue Star and its affiliates and their respective officers and directors, shareholders and representatives, from and against all liabilities, claims, demands, damages, costs and expenses (including reasonable attorney fees) arising from the conduct, actions, inactions or omissions of Schottenstein (and not caused by Blue Star, its employees or contractors) in connection with the Services hereunder.

        9.         Negotiation of Contracts.

                 a.         For a period of five (5) years following the Closing Date, Schottenstein agrees, upon request of the Blue Star, to use its best efforts to negotiate any number or all freight, shipping and transportation rates in combination with Blue Star for the importation of similar merchandise by Schottenstein and its affiliates, including but not limited to Value City Department Stores (so as to take full advantage of all volume and other discounts available by combining Schottenstein's importation volume with Blue Star's importation volume). Schottenstein will advise Blue Star of all scheduled negotiation sessions. Blue Star may or may not choose to have a representative present at the negotiations. . Schottenstein will make available the use of the negotiated contracted rates to Blue Star. Blue Star shall have the right to accept or decline those contracted rates. If Blue Star accepts those contracted rates, Schottenstein may charge a mutually agreed upon fee. Schottenstein and Blue Star shall split equally the reasonable out-of-pocket costs incurred by Mort Love (as shown on Attachment A) in the negotiation of such freight, transportation and shipping contracts. The provisions of this Section 9 shall survive the expiration or termination of this Agreement.

        10.         Assignment and Delegation.

                 a.         This Agreement and any rights pursuant hereto to utilize the Blue Star Employees shall be assignable by Schottenstein to (i) any of its business units, subsidiaries or affiliates without the consent of Blue Star, or (ii) any third party entity which acquires, is acquired by, merges or otherwise consolidates with, purchases or otherwise acquires a majority of shares or other interests, or acquires a portion of the assets or business of, Schottenstein, or any of their subsidiaries or affiliates, without the consent of Blue Star. Any other assignment or transfer of this Agreement shall require the prior written consent of Blue Star, which consent shall not be unreasonably withheld. Schottenstein shall have the right to delegate its duties to perform Services hereunder to any of its business units, subsidiaries or affiliates without the prior consent of Blue Star. In no event shall any such delegation of duties hereunder release Schottenstein from liability to Blue Star for the performance of the Services provided hereunder.

                 b.         Blue Star may assign or delegate all or a portion of this Agreement to (i) any parent, subsidiaries or affiliated entities of Blue Star or American Eagle Outfitters, Inc., or (ii) any third party entity which acquires, is acquired by, merges or otherwise consolidates with, purchases or otherwise acquires a majority of shares or other interests, or acquires a portion of the assets or business of, Blue Star or American Eagle Outfitters, Inc. or any of their subsidiaries or affiliates, without the consent of Schottenstein.

        11.         Force Majeure.

        Neither Schottenstein nor Blue Star shall be liable for any failure to perform hereunder arising from causes or events beyond the reasonable control and without the fault or negligence of the party failing to perform including, without limitation, labor disputes of any kind. If it appears to either party that an event is likely to occur which would interfere with such party's performance hereunder, such party shall notify the other party immediately of the event and of its likely duration. In the event of such failure, the obligation of the party shall be suspended until the cause of such suspension shall have been removed.

        12.         Governing Law.

        This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to conflicts of law principles.

        13.         Notices.

        Any notice, request, consent, approval, waiver and other communication to a party hereunder shall be in writing and shall be deemed duly given when sent by first class mail, postage prepaid, or delivered by hand, or by telex or facsimile transmission to such party. Unless changed by written notice to the other hereunder, all notices shall be addressed sent to the address shown below:

As to Blue Star Imports, L.P.:

         Blue Star Imports, L.P.
        150 Thorn Hill Drive
        Warrendale, PA 15086
        Attention of George Kolber

As to Schottenstein Stores Corporation:

        Schottenstein Stores Corporation
        1800 Moler Road
        Columbus, OH 43207
        Attention of Jeffrey Swanson

        14.         Dispute Resolution.

                 a.        In the event of any dispute arising in connection with this Agreement, the parties shall endeavor to resolve such dispute amicable by discussion and mutual accord. Such discussions shall include face-to-face meetings at senior managerial levels of Blue Star and Schottenstein. In the event that the parties are unable to mutually resolve such dispute within thirty (30) days after the initial face to face meeting referred to above, then either party may submit any unresolved controversy or claim arising out of or relating to this contract, or the breach thereof, to be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, in Pittsburgh, Pennsylvania, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The parties shall split equally the cost of the arbitrators. Any award rendered by the Arbitrator(s) may include compensatory damages and costs but under no circumstances shall either party be liable for nor shall the arbitrator(s) award any incidental, consequential or special (including punitive or multiple) damages.

                 b.         Notwithstanding anything herein to the contrary, the existence of a dispute (other than payment of the price) shall not reduce the obligation of Schottenstein to continue to provide Services (or the obligation of Blue Star to make available the Blue Star Employees or to provide the Blue Star Employees' Services) hereunder during the pendency of the dispute resolution procedure, or following the resolution of such dispute, unless the resolution of the dispute contains a finding of a material default by Blue Star or Schottenstein as the case may be; provided, however, the foregoing shall in no way limit the amount of damages or type of relief (whether monetary or injunctive) to which Blue Star or Schottenstein is entitled under law or the provisions of this Agreement.

        15.         Integration.

        This Agreement supersedes all prior negotiations, commitments and writings pertaining to the subject matter hereof. Except as otherwise provided in this Agreement, this Agreement may be amended only by a written instrument duly executed by both Schottenstein and Blue Star.

        16.         Waiver.

        Any waiver at any time, by either Schottenstein or Blue Star, of its rights with respect to the other party to this Agreement, or with respect to any other matter arising in connection with this Agreement, shall not be considered waived with respect to any subsequent default or matter.

        17.         No Third Party Beneficiaries.

        Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any person other than the parties and their respective successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third persons to a party to this Agreement, nor shall any provision hereof give any third persons any right or subrogation or action against any party to this Agreement.

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.

BLUE STAR IMPORTS, L.P. By: BSI Imports Co., LLC       General Partner	SCHOTTENSTEIN STORES CORPORATION
By /s/ Dale E. Clifton	By /s/ Jeffrey Swanson

Attachment A

The Price of each Defined Service will be equal to the total expense recorded on Division's books in each month during the term of the Agreement for the Defined Services listed below multiplied by a Percent Allocation determined according to the methods described below.

For purposes of this Schedule, the following terms have the meanings assigned to them below:

1. Headcount Allocation Percentage shall be the percentage of time worked that each employee devotes to Blue Star Imports Matters;
2. Payroll Allocation Expense shall be an employee's Headcount Allocation Percentage times his annualized earnings.

Blue Star may audit the calculations used to determine the Percent Allocations at any time upon reasonable notice to Schottenstein. The parties agree to use the Percent Allocations listed below; however, either party may request a change to a Percent Allocation for any Defined Service at any time, and the parties agree to negotiate in good faith to determine whether a change in any of the percentages is required. In the event that the parties cannot agree on whether a change to a Percent Allocation is required, or as to the amount of any such change, then the disagreement will be resolved in accordance with the provisions for Dispute Resolution as set forth in Paragraph 14 of the Agreement.

Defined Service	Percent Allocation	Method
Payroll and Related Expenses	35.86%	Equal to the total of all Payroll Allocation Expenses divided by Value City Imports total annualized earnings.
Classification Fees	60.90%	Equal to the number of entries processed for BSI as a % of total entries processed by VCI
Data Processing	60.90%	Equal to the number of entries processed for BSI as a % of total entries processed by VCI
Delivery	60.90%	Equal to the number of entries processed for BSI as a % of total entries processed by VCI
Depreciation (See Note 1 Below)		See Note 1 Below
Dues & Subscriptions, Fees & Licenses	37.84%	Equal to the total of all Headcount Allocation Percentages divided by Value City Imports total headcount.
Equipment Rental	37.84%	Equal to the total of all Headcount Allocation Percentages divided by Value City Imports total headcount.

Office Supplies

37.84%  

Equal to the total of all Headcount Allocation Percentages divided by Value City Imports total headcount.

Defined Service	Percent Allocation	Method
Outside Services (brokers)		Based on actual direct expenses related to the Business
Professional fees		Based on actual direct expenses related to the Business
Rent	37.84%	Equal to the total of all Headcount Allocation Percentages divided by Value City Imports total headcount.
Repairs & Maint.	37.84%	Equal to the total of all Headcount Allocation Percentages divided by Value City Imports total headcount.
Taxes - Personal Property (Exclusive of PPT on Software)	60.90%	Equal to the number of entries processed for BSI as a % of total entries processed by VCI
Telephone	37.84%	Equal to the total of all Headcount Allocation Percentages divided by Value City Imports total headcount.
Travel		Based on actual direct expenses related to the Business
Other		Based on actual direct expenses related to the Business

Note 1: Calculation of Monthly Depreciation Charge to Blue Star
Total Depreciation/Month (Division)	14,260.00
CFP Software Related	(10,510.00)
Automobile Depreciation	(278.00)
Estimate for GB/HS Hdware Depr.	(63.00)
Net Depreciation/Month (Division)	3,409.00
Total of all Headcount Allocation Percentages divided by Value City Imports total headcount	37.84%
Initial Monthly Allocation of Depreciation to Blue Star	1,289.97

Schedule B

Allocation of costs for Shared Services provided by Blue Star Imports as it relates to the importation business of Schottenstein Stores Corporation or its affiliates:

Costs	Method of Allocations
Salaries	Salaries will be allocated based upon time spent on services provided to Schottenstein Stores Corporation or its affiliates, with the exception of Guy Bradford. Initially Guy Bradford wages will be allocated based upon the number of custom entries related to Schottenstein Stores Corporation or its affiliates. On a monthly or quarterly basis Guy Bradford's allocation will be reviewed as his duties change.
Other costs	Based on actual expenses related to services provided to Schottenstein Stores Corporation or its affiliates.

EX-21 3 SUBSIDIARIES OF THE REGISTRANT

Exhibit 21

Subsidiaries

American Eagle Outfitters, Inc. has the following wholly owned subsidiaries:

AE Stores Company, a Delaware corporation
AEO International Corp., a Delaware corporation*
AEH Holding Company, a Delaware C-corporation*
Retail Commerce Company, a Nevada corporation*
Retail Royalty Company, a Nevada corporation*
Prophecy Co., an Ohio corporation*
Eagle Trading Company, a Mexican corporation
BSI Imports Company, LLC, a Delaware limited liability company*
Blue Star Imports, Ltd., a Delaware C-corporation*
Blue Star Imports, L.P., a Pennsylvania limited partnership*


*denotes second or third tier subsidiary owned by AE Stores Company

EX-23 4 CONSENT OF ERNST & YOUNG LLP

Exhibit 23

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statements (Forms S-8) pertaining to the American Eagle Outfitters, Inc. Employee Stock Purchase Plan (Registration No. 333-3278), the American Eagle Outfitters, Inc. 1994 Restricted Stock Plan (Registration No. 33-79358), the American Eagle Outfitters, Inc. 1994 Stock Option Plan (Registration Nos. 333-44759, 333-79358, and 333-12661), and the American Eagle Outfitters, Inc. Stock Fund of American Eagle Outfitters, Inc. Profit Sharing and 401(k) Plan (Registration No. 33-84796), and the American Eagle Outfitters, Inc. Registration Statement (Form S-3) (Registration No. 333-68875) of our report dated February 24, 2000 (except for Note 12, as to which the date is March 6, 2000), with respect to the consolidated financial statements of American Eagle Outfitters, Inc. included in the Annual Report (Form 10-K) for the year ended January 29, 2000.

Pittsburgh, Pennsylvania
April 10, 2000

EX-24 5 POWER OF ATTORNEY
Exhibit 24
Power of Attorney
Each director and/or officer of American Eagle Outfitters, Inc. (The "Corporation") whose signature appears below hereby appoints Laura Weil or Dale E. Clifton as his or her attorneys or any of them individually as his or her attorney, to sign, in his or her name and behalf and in any and all capacities stated below, and to cause to be filed with the Securities and Exchange Commission (the "Commission"), the Corporation's Annual Report on Form 10-K (the "Form 10-K") for the year ended January 30, 1999, and likewise to sign and file with the Commission any and all amendments to the Form 10-K, and the Corporation hereby appoints such persons as its attorneys-in-fact and each of them as its attorney-in-fact with like authority to sign and file the Form 10-K and any amendments thereto granting to each such attorney-in-fact full power of substitution and revocation, and hereby ratifying all that any such attorney-in-fact or his substitute may do by virtue hereof.
           IN WITNESS WHEREOF, we have hereunto set our hands as of April 12, 2000.

Signature	Title
/s/     Jay L. Schottenstein      Jay L. Schottenstein	Chairman and Chief Executive Officer (Principal Executive Officer)
/s/     Saul Schottenstein         Saul Schottenstein	Vice Chairman and Director
/s/     George Kolber        George Kolber	Vice Chairman, Chief Operating Officer and Director
/s/     Roger S. Markfield      Roger S. Markfield	President, Chief Merchandising Officer and Director
/s/     Laura Weil           Laura Weil	Executive Vice President and Chief Financial Officer (Principal Financial Officer)
/s/     Dale E. Clifton      Dale E. Clifton	Vice President, Controller, and Chief Accounting Officer (Principal Accounting Officer)
/s/     Ari Deshe  Ari Deshe	Director
/s/     Jon P. Diamond    Jon P. Diamond	Director
/s/     Martin P. Doolan Martin P. Doolan	Director
/s/     Gilbert W. Harrison       Gilbert W. Harrison	Director
/s/     Michael G. Jesselson     Michael G. Jesselson	Director
/s/     Thomas R. Ketteler       Thomas R. Ketteler	Director
/s/     John L. Marakas       John L. Marakas	Director
/s/     David W. Thompson        David W. Thompson	Director
/s/     Gerald E. Wedren       Gerald E. Wedren	Director

EX-27 6 FINANCIAL DATA SCHEDULE
<ARTICLE> 5 <PERIOD-TYPE> 12-MOS <FISCAL-YEAR-END> JAN-29-2000 <PERIOD-START> JAN-31-1999 <PERIOD-END> JAN-29-2000 <CASH> 76,581 <SECURITIES> 91,911 <RECEIVABLES> 13,471 <ALLOWANCES> 0 <INVENTORY> 60,375 <CURRENT-ASSETS> 262,562 <PP&E> 122,561 <DEPRECIATION> 37,635 <TOTAL-ASSETS> 354,628 <CURRENT-LIABILITIES> 88,425 <BONDS> 0 <PREFERRED-MANDATORY> 0 <PREFERRED> 0 <COMMON> 467 <OTHER-SE> 264,034 <TOTAL-LIABILITY-AND-EQUITY> 354,628 <SALES> 832,104 <TOTAL-REVENUES> 832,104 <CGS> 475,596 <TOTAL-COSTS> 475,596 <OTHER-EXPENSES> 206,994 <LOSS-PROVISION> 0 <INTEREST-EXPENSE> 160 <INCOME-PRETAX> 149,354 <INCOME-TAX> 58,694 <INCOME-CONTINUING> 90,660 <DISCONTINUED> 0 <EXTRAORDINARY> 0 <CHANGES> 0 <NET-INCOME> 90,660 <EPS-BASIC> 1.96 <EPS-DILUTED> 1.86
-----END PRIVACY-ENHANCED MESSAGE-----

EX-21

Exhibit 21

Subsidiaries

American Eagle Outfitters, Inc. has the following wholly owned subsidiaries:

AE Stores Company, a Delaware corporation
AEO International Corp., a Delaware corporation*
AEH Holding Company, a Delaware C-corporation*
Retail Commerce Company, a Nevada corporation*
Retail Royalty Company, a Nevada corporation*
Prophecy Co., an Ohio corporation*
Eagle Trading Company, a Mexican corporation
BSI Imports Company, LLC, a Delaware limited liability company*
Blue Star Imports, Ltd., a Delaware C-corporation*
Blue Star Imports, L.P., a Pennsylvania limited partnership*


*denotes second or third tier subsidiary owned by AE Stores Company

EX-23 4 CONSENT OF ERNST & YOUNG LLP

Exhibit 23

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statements (Forms S-8) pertaining to the American Eagle Outfitters, Inc. Employee Stock Purchase Plan (Registration No. 333-3278), the American Eagle Outfitters, Inc. 1994 Restricted Stock Plan (Registration No. 33-79358), the American Eagle Outfitters, Inc. 1994 Stock Option Plan (Registration Nos. 333-44759, 333-79358, and 333-12661), and the American Eagle Outfitters, Inc. Stock Fund of American Eagle Outfitters, Inc. Profit Sharing and 401(k) Plan (Registration No. 33-84796), and the American Eagle Outfitters, Inc. Registration Statement (Form S-3) (Registration No. 333-68875) of our report dated February 24, 2000 (except for Note 12, as to which the date is March 6, 2000), with respect to the consolidated financial statements of American Eagle Outfitters, Inc. included in the Annual Report (Form 10-K) for the year ended January 29, 2000.

Pittsburgh, Pennsylvania
April 10, 2000

EX-24 5 POWER OF ATTORNEY
Exhibit 24
Power of Attorney
Each director and/or officer of American Eagle Outfitters, Inc. (The "Corporation") whose signature appears below hereby appoints Laura Weil or Dale E. Clifton as his or her attorneys or any of them individually as his or her attorney, to sign, in his or her name and behalf and in any and all capacities stated below, and to cause to be filed with the Securities and Exchange Commission (the "Commission"), the Corporation's Annual Report on Form 10-K (the "Form 10-K") for the year ended January 30, 1999, and likewise to sign and file with the Commission any and all amendments to the Form 10-K, and the Corporation hereby appoints such persons as its attorneys-in-fact and each of them as its attorney-in-fact with like authority to sign and file the Form 10-K and any amendments thereto granting to each such attorney-in-fact full power of substitution and revocation, and hereby ratifying all that any such attorney-in-fact or his substitute may do by virtue hereof.
           IN WITNESS WHEREOF, we have hereunto set our hands as of April 12, 2000.

Signature	Title
/s/     Jay L. Schottenstein      Jay L. Schottenstein	Chairman and Chief Executive Officer (Principal Executive Officer)
/s/     Saul Schottenstein         Saul Schottenstein	Vice Chairman and Director
/s/     George Kolber        George Kolber	Vice Chairman, Chief Operating Officer and Director
/s/     Roger S. Markfield      Roger S. Markfield	President, Chief Merchandising Officer and Director
/s/     Laura Weil           Laura Weil	Executive Vice President and Chief Financial Officer (Principal Financial Officer)
/s/     Dale E. Clifton      Dale E. Clifton	Vice President, Controller, and Chief Accounting Officer (Principal Accounting Officer)
/s/     Ari Deshe  Ari Deshe	Director
/s/     Jon P. Diamond    Jon P. Diamond	Director
/s/     Martin P. Doolan Martin P. Doolan	Director
/s/     Gilbert W. Harrison       Gilbert W. Harrison	Director
/s/     Michael G. Jesselson     Michael G. Jesselson	Director
/s/     Thomas R. Ketteler       Thomas R. Ketteler	Director
/s/     John L. Marakas       John L. Marakas	Director
/s/     David W. Thompson        David W. Thompson	Director
/s/     Gerald E. Wedren       Gerald E. Wedren	Director

EX-27 6 FINANCIAL DATA SCHEDULE
<ARTICLE> 5 <PERIOD-TYPE> 12-MOS <FISCAL-YEAR-END> JAN-29-2000 <PERIOD-START> JAN-31-1999 <PERIOD-END> JAN-29-2000 <CASH> 76,581 <SECURITIES> 91,911 <RECEIVABLES> 13,471 <ALLOWANCES> 0 <INVENTORY> 60,375 <CURRENT-ASSETS> 262,562 <PP&E> 122,561 <DEPRECIATION> 37,635 <TOTAL-ASSETS> 354,628 <CURRENT-LIABILITIES> 88,425 <BONDS> 0 <PREFERRED-MANDATORY> 0 <PREFERRED> 0 <COMMON> 467 <OTHER-SE> 264,034 <TOTAL-LIABILITY-AND-EQUITY> 354,628 <SALES> 832,104 <TOTAL-REVENUES> 832,104 <CGS> 475,596 <TOTAL-COSTS> 475,596 <OTHER-EXPENSES> 206,994 <LOSS-PROVISION> 0 <INTEREST-EXPENSE> 160 <INCOME-PRETAX> 149,354 <INCOME-TAX> 58,694 <INCOME-CONTINUING> 90,660 <DISCONTINUED> 0 <EXTRAORDINARY> 0 <CHANGES> 0 <NET-INCOME> 90,660 <EPS-BASIC> 1.96 <EPS-DILUTED> 1.86
-----END PRIVACY-ENHANCED MESSAGE-----

EX-23

Exhibit 23

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statements (Forms S-8) pertaining to the American Eagle Outfitters, Inc. Employee Stock Purchase Plan (Registration No. 333-3278), the American Eagle Outfitters, Inc. 1994 Restricted Stock Plan (Registration No. 33-79358), the American Eagle Outfitters, Inc. 1994 Stock Option Plan (Registration Nos. 333-44759, 333-79358, and 333-12661), and the American Eagle Outfitters, Inc. Stock Fund of American Eagle Outfitters, Inc. Profit Sharing and 401(k) Plan (Registration No. 33-84796), and the American Eagle Outfitters, Inc. Registration Statement (Form S-3) (Registration No. 333-68875) of our report dated February 24, 2000 (except for Note 12, as to which the date is March 6, 2000), with respect to the consolidated financial statements of American Eagle Outfitters, Inc. included in the Annual Report (Form 10-K) for the year ended January 29, 2000.

Pittsburgh, Pennsylvania
April 10, 2000

EX-24

Exhibit 24

Power of Attorney

Each director and/or officer of American Eagle Outfitters, Inc. (The "Corporation") whose signature appears below hereby appoints Laura Weil or Dale E. Clifton as his or her attorneys or any of them individually as his or her attorney, to sign, in his or her name and behalf and in any and all capacities stated below, and to cause to be filed with the Securities and Exchange Commission (the "Commission"), the Corporation's Annual Report on Form 10-K (the "Form 10-K") for the year ended January 30, 1999, and likewise to sign and file with the Commission any and all amendments to the Form 10-K, and the Corporation hereby appoints such persons as its attorneys-in-fact and each of them as its attorney-in-fact with like authority to sign and file the Form 10-K and any amendments thereto granting to each such attorney-in-fact full power of substitution and revocation, and hereby ratifying all that any such attorney-in-fact or his substitute may do by virtue hereof.

           IN WITNESS WHEREOF, we have hereunto set our hands as of April 12, 2000.

Signature	Title
/s/     Jay L. Schottenstein      Jay L. Schottenstein	Chairman and Chief Executive Officer (Principal Executive Officer)
/s/     Saul Schottenstein         Saul Schottenstein	Vice Chairman and Director
/s/     George Kolber        George Kolber	Vice Chairman, Chief Operating Officer and Director
/s/     Roger S. Markfield      Roger S. Markfield	President, Chief Merchandising Officer and Director
/s/     Laura Weil           Laura Weil	Executive Vice President and Chief Financial Officer (Principal Financial Officer)
/s/     Dale E. Clifton      Dale E. Clifton	Vice President, Controller, and Chief Accounting Officer (Principal Accounting Officer)
/s/     Ari Deshe  Ari Deshe	Director
/s/     Jon P. Diamond    Jon P. Diamond	Director
/s/     Martin P. Doolan Martin P. Doolan	Director
/s/     Gilbert W. Harrison       Gilbert W. Harrison	Director
/s/     Michael G. Jesselson     Michael G. Jesselson	Director
/s/     Thomas R. Ketteler       Thomas R. Ketteler	Director
/s/     John L. Marakas       John L. Marakas	Director
/s/     David W. Thompson        David W. Thompson	Director
/s/     Gerald E. Wedren       Gerald E. Wedren	Director

EX-27

 



<ARTICLE> 5

                             
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          JAN-29-2000
<PERIOD-START>                             JAN-31-1999
<PERIOD-END>                               JAN-29-2000
<CASH>                                          76,581
<SECURITIES>                                    91,911
<RECEIVABLES>                                   13,471
<ALLOWANCES>                                         0
<INVENTORY>                                     60,375
<CURRENT-ASSETS>                               262,562
<PP&E>                                         122,561
<DEPRECIATION>                                  37,635
<TOTAL-ASSETS>                                 354,628
<CURRENT-LIABILITIES>                           88,425
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                           467
<OTHER-SE>                                     264,034
<TOTAL-LIABILITY-AND-EQUITY>                   354,628
<SALES>                                        832,104
<TOTAL-REVENUES>                               832,104
<CGS>                                          475,596
<TOTAL-COSTS>                                  475,596
<OTHER-EXPENSES>                               206,994
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 160
<INCOME-PRETAX>                                149,354
<INCOME-TAX>                                    58,694
<INCOME-CONTINUING>                             90,660
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    90,660
<EPS-BASIC>                                       1.96
<EPS-DILUTED>                                     1.86