EXHIBIT 10.2

EARNOUT AGREEMENT

             THIS EARNOUT AGREEMENT (this “Agreement”), dated as of September 1,
2001 (the “Closing Date”), is made by and between ADS MB Corporation, a Delaware
corporation (“Buyer”) and Mail Box Capital Corporation, a Delaware corporation
(“Seller”).  Buyer and Seller are sometimes collectively referred to as the
“Parties,” and individually referred to as a “Party.”

RECITALS

             A.         Buyer, Alliance Data Systems Corporation, a Delaware
corporation (the “Parent”) and Seller, among others, are a party to that certain
Asset Purchase Agreement, dated as of the date hereof (the “Purchase
Agreement”), pursuant to which Buyer has agreed to purchase and assume and
Seller has agreed to sell and assign all of the Assets and Assumed Liabilities
(as defined in the Purchase Agreement) of Seller.

             B.          The Purchase Agreement provides for, among other
things, the execution and delivery of this Agreement in order to establish the
terms and conditions of the earnout portion of the purchase price specified in
the Purchase Agreement.

             C.          Capitalized terms used in this Agreement but not
defined herein shall have the meanings set forth in the Purchase Agreement.

STATEMENT OF AGREEMENT

             NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties set forth in this
Agreement and for other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:

ARTICLE I.
DEFINITIONS

             Section 1.1       Definitions.  The terms defined in this Article I
will have the meanings specified below for all purposes of this Agreement:

             “Agreement” has the meaning set forth in the first paragraph.

             “Books and Records” means the books and records maintained for or
related to the Buyer, as the case may be, including all accounting records,
computerized records and storage media and the software used in connection
therewith.

             “Calculation Statement” has the meaning set forth in Section
2.3(a).

             “Closing Date” has the meaning set forth in the first paragraph.

             “Earnout Period” means the consecutive twelve (12) month period
beginning on January 1, 2002 and ending on December 31, 2002.

             “EBITDA” means, with respect to a particular period, the
consolidated net income of the Buyer before any deduction for interest, income
taxes, depreciation or amortization.  EBITDA will be determined on a
consolidated basis for the Buyer in accordance with GAAP, consistently applied
as to the Buyer, prepared from the applicable accounts as reflected on the Books
and Records after making all year-end adjustments, modified as set forth on
Exhibit A attached hereto.

             “Financial Statements” has the meaning set forth in Section 2.3(a).

             “GAAP” means generally accepted accounting principles in effect in
the United States of America as of the date the Financial Statements are
prepared.

             “Objection Notice” has the meaning set forth in Section 2.4(b).

             “Parties” and “Party” has the meaning set forth in the first
paragraph.

             “Purchase Agreement” will have the meaning set forth in the
Recitals.

             “Representatives” means, such entity’s directors, employees,
officers, agents, accountants, attorneys and shareholders.

             Section 1.2       Accounting Terms.  Except as otherwise provided
in this Agreement, all accounting terms defined in this Agreement, whether
defined herein or otherwise, will be construed in accordance with GAAP.

             Section 1.3       Articles, Sections and Exhibits.  Except as
specifically stated otherwise, references to Articles, Sections and Exhibits
refer to the Articles, Sections and Schedules of this Agreement.

             Section 1.4       Drafting.  Neither this Agreement nor any
provision set forth in this Agreement will be interpreted in favor of or against
any Party because such Party or its legal counsel drafted this Agreement or such
provision.  No prior draft of this Agreement or any provision set forth in this
Agreement will be used when interpreting this Agreement or its provisions.

             Section 1.5       Headings.  Article and section headings are used
in this Agreement only as a matter of convenience and will not have any effect
upon the construction or interpretation of this Agreement.

             Section 1.6       Include.  The term “include” or any derivative of
such term does not mean that the items following such term are the only types of
such items.

             Section 1.7       Plural and Singular Words.  Whenever the plural
form of a word is used in this Agreement, that word will include the singular
form of that word.  Whenever the singular form of a word is used in this
Agreement, that word will include the plural form of that word.

             Section 1.8       Pronouns.  Whenever a pronoun of a particular
gender is used in this Agreement, if appropriate that pronoun also will refer to
the other gender and the neuter.  Whenever a neuter pronoun is used in this
Agreement, if appropriate that pronoun also will refer to the masculine and
feminine gender.

ARTICLE II.
EARNOUT PAYMENTS

             Section 2.1       Earnout Payments.  As a component of the Final
Purchase Price, Buyer will pay to Seller the Earnout Amount (as defined below)
within ten (10) Business Days after the date on which such Earnout Amount is
deemed final in accordance with Section 2.4(c).  Buyer will make such payments
by wire transfer of immediately available funds to the bank account(s) set forth
on a notice given by Seller to Buyer on the date that the Earnout Amount is
deemed final in accordance with Section 2.4(c).  Buyer acknowledges that Seller
has entered into an Agreement with William Blair Mezzanine Capital Fund II, L.P.
(“Blair”), dated as of the date hereof, which sets forth certain understandings
between Seller and Blair with respect to the priority of payments by the Seller
of the Earnout Amount (the “Blair Letter”).

             Section 2.2       Earnout Amount.  The Earnout Amount shall be
equal to (a) actual EBITDA for the Earnout Period multiplied by six, minus (b)
the Up-Front Purchase Price; provided, however, (i) if actual EBITDA for the
four months ended December 31, 2001 (the period is hereinafter referred to as
the “2001 Period,” and the amount is hereinafter referred to as the “2001
EBITDA”) is less than $1,900,000, the Earnout Amount shall be reduced by an
amount equal to six multiplied by the amount by which 2001 EBITDA is less than
$1,900,000 or (ii) if 2001 EBITDA is greater than $2,500,000, the Earnout Amount
shall be increased by an amount equal to six multiplied by the amount by which
2001 EBITDA is greater than $2,500,000.  Notwithstanding the foregoing, the
Earnout Amount shall not exceed $60,000,000 less the Up-Front Purchase Price. 
By way of example only, Exhibit B attached hereto, sets forth example
calculations for four scenarios.

             Section 2.3       Calculation of 2001 EBITDA.

             (a)         Preparation of the Calculation Statement.  As soon as
reasonably practicable, but not later than 90 calendar days after the end of the
2001 Period, Buyer will deliver to Seller (i) the audited balance sheet of Buyer
as of the end of such period and the statement of operations and cash flows of
Buyer for the period ended on such date, prepared in accordance with GAAP
consistently applied as to the Buyer, with the exception of footnotes thereto
(the “2001 Financial Statements”), and (ii) a statement setting forth in
reasonable detail the computation of 2001 EBITDA for the 2001 Period, including
identification of all excluded items and adjustments and all necessary back up
calculations (the work papers showing such calculation, the “2001 Calculation
Statement”).

             (b)        Review of the 2001 Financial Statements and the 2001
Calculation Statement.  As soon as practicable, but not later than 25 calendar
days after receipt of the 2001 Financial Statements and the 2001 Calculation
Statement, Seller will inform Buyer in writing of any objection it has to the
2001 Financial Statements or the 2001 Calculation Statement, which objection, if
any, will set forth in reasonable detail Seller’s objections and the basis for
those objections (an “Objection Notice”).  If Seller so objects and the Parties
do not resolve such objections on a mutually agreeable basis within 120 calendar
days after the end of the 2001 Period, then the disagreement will be resolved as
soon as practicable thereafter, but not later than 150 calendar days after the
end of the 2001 Period, by an accounting firm of national reputation, which
accounting firm will be selected jointly by Buyer on the one hand and Seller on
the other hand and in no event may such accounting firm resolve the objection in
a manner that would result in 2001 EBITDA being greater or lesser in the
aggregate than such amounts originally proposed by Buyer and Seller.  The
Parties acknowledge that the scope of such accounting firm’s work will be
limited to resolving the objections set forth in the Objection Notice.  The
decision of such accounting firm, which shall be set forth in writing, shall be
final and binding upon the Parties, and may be entered as a final judgment in
any court of proper jurisdiction.

             (c)         Calculation Deemed Final.  The 2001 Financial
Statements, the 2001 Calculation Statement (as both or either may be adjusted,
if applicable, by the agreement of the Parties or the decision of the accounting
firm) and 2001 EBITDA based thereon will be deemed final upon the earlier to
occur of (i) the agreement of the Parties, (ii) the decision of the accounting
firm, or (iii) the failure of Seller to deliver an Objection Notice to Buyer
within 25 calendar days after receipt by Seller of the 2001 Financial Statements
and the 2001 Calculation Statement.  The finally determined 2001 EBITDA shall be
the amount used in the final calculation of the Earnout Amount as set forth in
Section 2.2.

             Section 2.4       Calculation of Earnout Payments.

             (a)         Preparation of the 2002 Calculation Statement.  As soon
as reasonably practicable, but not later than 90 calendar days after the end of
the Earnout Period, Buyer will deliver to Seller (i) the audited balance sheet
of Buyer as of the end of such period and the statement of operations and cash
flows of Buyer for the period ended on such date, prepared in accordance with
GAAP consistently applied as to the Buyer, with the exception of footnotes
thereto (the “2002 Financial Statements”), (ii) a calculation of the Earnout
Amount in the manner provided in Section 2.2, based on the 2002 Financial
Statements and the final amount of 2001 EBITDA, along with a statement setting
forth in reasonable detail the computation of EBITDA for the Earnout Period,
including identification of all excluded items and adjustments and all necessary
back up calculations (the work papers showing such calculation, the “2002
Calculation Statement”) and (iii) by wire transfer of immediately available
funds an amount equal to half of the amount shown as owing to Seller in the
Calculation Statement.

             (b)        Review of the 2002 Financial Statements and the 2002
Calculation Statement.  As soon as practicable, but not later than 25 calendar
days after receipt of the 2002 Financial Statements and the 2002 Calculation
Statement, Seller will inform Buyer in writing of any objection it has to the
2002 Financial Statements or the 2002 Calculation Statement, which objection, if
any, will set forth in reasonable detail Seller’s objections and the basis for
those objections.  If Seller so objects and the Parties do not resolve such
objections on a mutually agreeable basis within 120 calendar days after the end
of the Earnout Period, then the disagreement will be resolved as soon as
practicable thereafter, but not later than 150 calendar days after the end of
the Earnout Period, by an accounting firm of national reputation, which
accounting firm will be selected jointly by Buyer on the one hand and Seller on
the other hand and in no event may such accounting firm resolve the objection in
a manner that would result in the Earnout Amount being greater or lesser in the
aggregate than the amounts originally proposed by Buyer and Seller.  The Parties
acknowledge that the scope of such accounting firm’s work will be limited to
resolving the objections set forth in the Objection Notice.  The decision of
such accounting firm, which shall be set forth in writing, shall be final and
binding upon the Parties, and may be entered as a final judgment in any court of
proper jurisdiction.

             (c)         Calculation Deemed Final; Payment.  The 2002 Financial
Statements, the 2002 Calculation Statement (as both or either may be adjusted,
if applicable, by the agreement of the Parties or the decision of the accounting
firm) and the Earnout Amount based thereon will be deemed final upon the earlier
to occur of (i) the agreement of the Parties, (ii) the decision of the
accounting firm, or (iii) the failure of Seller to deliver an Objection Notice
to Buyer within 25 calendar days after receipt by Seller of the 2002 Financial
Statements and the 2002 Calculation Statement.  The Buyer shall pay to Seller
the balance of the finally determined Earnout Amount, after deducting amounts
already paid to Seller pursuant to Section 2.4(a) and subject to Section 2.6,
within ten (10) Business Days of the 2002 Financial Statements, the 2002
Calculation Statement and the Earnout Amount becoming final pursuant to this
Section 2.4(c).

             Section 2.5       Fees and Expenses.  Each Party will bear the
fees, costs and expenses of its own accountants, and will share equally in the
fees, costs and expenses of the accounting firm selected by the Parties to
resolve any disagreements regarding any Objection Notice.

             Section 2.6       Right to Set-off.  Buyer shall have the right to
withhold and set-off against the Earnout Amount any amount owed or subject to
final resolution of any dispute arising out of or relating to the Purchase
Agreement to Buyer and/or Parent by Seller.

             Section 2.7       Access to Books and Records.  Each of Buyer and
Seller will permit the other’s representatives reasonable access to the Books
and Records (and shall permit such persons to examine and photocopy such Books
and Records at such person’s expense to the extent reasonably requested by such
person) necessary to perform any analysis such party deems necessary in order to
calculate the 2001 EBITDA and/or the Earnout Amount; provided, however, that any
such access or investigation shall be conducted by Seller and Seller’s
Representatives in such a manner as not to unreasonably interfere with the
operation of the business of the Buyer.

 

ARTICLE III.
OPERATION OF THE
BUSINESS; OTHER AGREEMENTS

             Section 3.1       Operation of the Business.

             (a)         The Buyer agrees that during the Earnout Period, for so
long as Buyer achieves at least 70% of the business plan of the Seller at the
Closing Date attached hereto as Exhibit C (the “Business Plan”) as of March 31,
2002, June 30, 2002 and September 30, 2002, Buyer shall not, without the written
consent of Seller:

             (i)          acquire the stock or assets of any other businesses;

             (ii)         sell or dispose of the stock or assets of the Buyer,
other than in the ordinary course of business;

             (iii)        engage in any unrelated line of business in which the
Seller is not engaged at the Closing;

 

             (v)        open any additional offices, manufacturing plants or
other facilities;

             (vi)       effect any change of more than 10% in the number of
employees or the total payroll of the Seller at the Closing, other than in the
ordinary course of business; and

             (vii)      discontinue any line of business in which the Seller is
engaged at the Closing.

             (b)        The Buyer agrees that during the Earnout Period, for so
long as Buyer achieves at least 70% of the Business Plan as of March 31, 2002,
June 30, 2002 and September 30, 2002:

             (i)          Buyer will remain a separate corporation rather than a
division of Parent and that substantially all of the assets of Buyer will
continue to be owned by Buyer, except such assets as may be disposed in the
ordinary course of business;

             (ii)         Buyer will operate the business acquired from the
Seller in the ordinary course consistent with the Business Plan;

             (iii)        Buyer will ensure that Buyer is sufficiently
capitalized and has sufficient working capital to operate the business acquired
from the Seller in the ordinary course consistent with the Business Plan and
assuming capital expenditures do not exceed $500,000 during the Earnout Period;
and

             (iv)       any purchases or sales of goods or services or any other
transactions between Buyer on the one hand and Parent or any of its other
subsidiaries or affiliates on the other, will be on terms no less favorable to
Buyer than would be obtainable by it in any arms-length transaction with an
unaffiliated third party.

             (c)         For purposes of this Section 3.1, Kenneth W. Murphy,
Robert Meador, John Erickson and Charles Buchanan (the “Consent Panel”) shall
have all requisite power and authority to bind the Seller, subject to any
contractual restrictions of the Seller contained in the Blair Letter.  The size
and composition of the Consent Panel shall not be changed in any fashion during
the Earnout Period.

             (d)        During the Earnout Period, Buyer may Terminate with
Cause any Designated Individual; provided, however, Buyer shall not, during the
Earnout Period, Terminate Without Cause any Designated Individual.  For purposes
of this Section 3.2(d): “Designated Individual” means each of Kenneth W. Murphy,
Charles Buchanan, Robert Meador, Earl Johnson and Stacy Riffe; “Terminate
Without Cause” means the termination of an individual’s employment with the
Buyer or the reduction of his or her salary, benefits or responsibilities (other
than as provided in the final sentence of this Section 3.1(d)) for any reason
other than Voluntary Termination or Termination With Cause; “Termination With
Cause” means the termination of an individual’s employment due to (i)
misappropriation of funds or property of the Buyer or any of its affiliates or
such individual’s admission or conviction of fraud or embezzlement against the
Buyer or any of its affiliates (including a plea of nolo contendere), (ii) the
conviction of or entry of a plea of nolo contendere by such individual for any
felony or any misdemeanor involving moral turpitude, or (iii) any action by such
individual which is intended to result in substantial enrichment of such
individual at the expense of the Buyer or any of its affiliates or any willful
gross misconduct which has an adverse impact on the business, reputation or
standing of the Buyer in the community, including, without limitation, acts
related to moral turpitude and acts prohibited by the Buyer’s or the Parent’s
policy on ethics; “Voluntary Termination” means an individual’s voluntary
termination of his or her employment hereunder for any reason.  Notwithstanding
the foregoing, Buyer may reduce the responsibilities (but not the salary or
benefits) of any Designated Individual if Buyer fails to achieve at least 70% of
the Business Plan as of March 31, 2002, June 30, 2002 and September 30, 2002.

             Section 3.2       Sale or Discontinuation.  If the business of the
Parent shall be sold as an entirety (either by sale of capital stock or assets,
a merger or otherwise) to an unaffiliated third party (the “Acquiror”) at any
time from the Closing Date through the Earnout Period, the Parent shall cause
the Acquiror to assume the obligations of the Buyer and the Parent under this
Agreement.  Upon satisfaction of such obligation, the Buyer and the Parent shall
not have any further liability to Seller under this Agreement.

ARTICLE IV.
MISCELLANEOUS

             Section 4.1       Amendment and Modification.  Subject to
applicable law, this Agreement may be amended, modified or supplemented only by
written agreement of the Parties with respect to any of the terms contained
herein.

             Section 4.2       Waiver of Compliance; Consents.  Except as
otherwise provided in this Agreement, any failure of any of the Parties to
comply with any obligation, covenant, agreement or condition herein may be
waived by the Party or Parties entitled to the benefits thereof only by a
written instrument signed by the Party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.  Whenever this Agreement requires
or permits consent by or on behalf of any Party hereto, such consent shall be
given in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 4.2.

             Section 4.3       Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or mailed by registered or certified mail (return receipt requested), postage
prepaid, to the Parties at the following addresses (or at such other address for
a Party as shall be specified by like notice; provided, however, that notices of
a change of address shall be effective only upon receipt thereof):

            

(a) if to Buyer or Parent:       Alliance Data Systems Corporation   17655
Waterview Parkway   Dallas, Texas  75292   Attention:        General Counsel

 

  with a copy to:       Akin, Gump, Strauss, Hauer & Feld L.L.P.   1700 Pacific
Avenue   Suite 1700   Dallas, Texas  75201   Attention:        Alex Frutos

 

 

(b) if to Seller:       Mail Box Capital Corporation   3700 Pipestone   Dallas,
Texas  75212   Attention:        Kenneth W. Murphy

 

  with a copy to       Jenkens & Gilchrist, P.C.   1445 Ross Ave.   Suite 3200  
Dallas, Texas  75202   Attention:  L. Steven Leshin

 

(c) if to Blair:       William Blair Mezzanine Capital Fund II, L.P.   222 West
Adams Street   Chicago, Illinois 60606   Attention:        Terrance M. Shipp &
David M. Jones

 

(d) with a copy to:  Winston & Strawn       35 West Wacker Drive   Chicago,
Illinois  60601   Attn:  Laurence R. Bronska, Esq.   Telecopy:  (312) 558-5700

             Section 4.4       GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF TEXAS (REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE
GOVERN UNDER APPLICABLE TEXAS PRINCIPLES OF CONFLICTS OF LAW) AS TO ALL MATTERS,
INCLUDING BUT NOT LIMITED TO MATTERS OF VALIDITY, CONSTRUCTION, EFFECT,
PERFORMANCE AND REMEDIES.  All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in a Texas state or
federal court sitting in the City of Dallas, and the Parties hereto hereby
irrevocably submit to the exclusive jurisdiction of such courts in any such
action or proceeding and irrevocably waive the defense of an inconvenient forum
to the maintenance of any such action or proceeding.

             Section 4.5       Assignment.  This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the Parties
hereto and their respective successors and permitted assigns.  Except as
provided in Section 3.2 hereof, neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by any Party hereto without
the prior written consent of the other Parties; provided, however, that Buyer
may assign this Agreement in whole or in part to any of its affiliates without
the consent of Seller; provided, further, Buyer acknowledges and agrees that any
such assignment shall not relieve or release Buyer from its agreements and
obligations hereunder, all of which shall survive such assignment.

             Section 4.6       Counterparts.  This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

             Section 4.7       Entire Agreement.  This Agreement, the Purchase
Agreement (including the Exhibits and Disclosure Schedules thereto and the
documents, certificates and instruments referred to therein) and that certain
Confidentiality Agreement by and between Parent and Seller dated March 26, 2001
(the “Confidentiality Agreement”) embody the entire agreement and understanding
of the parties hereto in respect of the transactions contemplated by this
Agreement.  There are no restrictions, promises, representations, warranties,
covenants or undertakings, other than those expressly set forth or referred to
herein.  This Agreement supersedes all prior agreements and understandings,
other than the Purchase Agreement and the Confidentiality Agreement, between the
Parties with respect to such transactions.

             Section 4.8       Severability.  If any term or other provision of
this Agreement is determined to be invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any Party.  Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the Parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the greatest
extent possible.

             Section 4.9       No Third Party Beneficiary.  Nothing herein,
expressed or implied, is intended or shall be construed to confer upon or give
to any person, firm, corporation or legal entity, other than the Parties hereto
and their respective successors and permitted assigns, any right, remedy, or
other benefit under or by reason of this Agreement or any documents executed in
connection with this Agreement.  Buyer acknowledges that Seller has entered into
an Agreement with Blair, dated as of the date hereof, which sets forth certain
understandings between Seller and Blair with respect to the priority of payments
by the Seller of the Earnout Amount.

             Section 4.10     Representation by Legal Counsel.  Each Party is a
sophisticated party that was advised by experienced legal counsel and other
advisors in the negotiation and preparation of this Agreement.

[SIGNATURE PAGE FOLLOWS]

 

                           IN WITNESS WHEREOF, each Party has caused this
Agreement to be signed by its duly authorized officers as of the date first
above written.

BUYER: ADS MB CORPORATION       By:

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  Name:   Title:         SELLER: MAIL BOX CAPITAL CORPORATION       By:

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  Name:   Title: