2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 348 COMPENSATION DISCUSSION AND ANALYSIS Standard Elements of Compensation: The compensation for our NEOs is balanced to provide a mix of cash and long-term incentive awards and focused on both annual and long-term performance to ensure that executives are held accountable for, and rewarded for, achievement of both annual and long-term financial and strategic objectives. Element of Compensation Form and Objective Fiscal 2017 Information Alignment to Strategic Plan Base Salary • Delivered in cash. • Provides a baseline compensation level that delivers cash income to each NEO, and reflects his or her job responsibilities, experience, and contribution to the Company. • Our NEOs did not receive an increase to base salary during 2017. • Base salaries set at competitive market levels that enable us to attract and retain qualified, high caliber executive officers to lead and implement our strategy. Annual Incentive Bonus • Delivered in cash. • Provides an opportunity for additional income to NEOs if pre-established annual performance goals are attained, which focuses our NEO’s on key annual objectives. • For Fiscal 2017, the annual incentive bonus was based upon the Company achieving Adjusted EBIT (1) at a pre-determined threshold, which was ultimately not achieved. • Annually, performance metrics and goals are established by the Compensation Committee that align to our strategic plan. • The selection of Adjusted EBIT (1) as the performance measure for Fiscal 2017 reflects a continued focus on profitable growth. Annual Long-Term Incentive Awards • Delivered in PSUs, RSUs and stock options. • Align our NEO’s financial interests closely with those of our stockholders. • Link compensation to the achievement of multi-year financial goals. • PSUs represent 50% of the annual equity grant target values and vest between threshold and stretch level only to the extent that the pre-established, three-year performance goals are met. If performance falls below the threshold, the award is forfeited in full. • RSUs represent 25% of the annual equity grant target value and vest ratably over three years from grant based on continued service. • Stock options represent 25% of the annual equity grant target value, vest ratably over three years from the grant date and provide realizable compensation only to the extent that our share price appreciates. • Aligns NEO compensation with our longer-term performance objectives and changes in stockholder value over time. (1) Adjusted EBIT is defined as earnings from continuing operations before interest and taxes and excludes (1) any accruals for restructuring programs, including lease buyout charges related to store closures and/or (2) asset impairment charges, as determined by the Compensation Committee. 36 | AMERICAN EAGLE OUTFITTERS, INC.