Exhibit 10.4

EXECUTION VERSION

May 27, 2009

 

To: Alliance Data Systems Corporation

17655 Waterview Parkway

Dallas, TX 75252

Telephone: (972) 348-5100

Facsimile: (972) 348-5326

Attention: Chief Financial Officer

 

From: [Dealer]

[Address]

 

Re: Forward Stock Purchase Transaction

(Transaction Reference Number:                    )

 

 

Dear Sir / Madam:

The purpose of this letter agreement (this “Confirmation”) is to confirm the
terms and conditions of the Transaction entered into between [Dealer] (“Dealer”)
and Alliance Data Systems Corporation (“Counterparty”) on the Trade Date
specified below (the “Transaction”). This Confirmation constitutes a
“Confirmation” as referred to in the ISDA Master Agreement specified below.

The definitions and provisions contained in the 2006 ISDA Definitions (the “Swap
Definitions”) and the 2002 ISDA Equity Derivatives Definitions (the “Equity
Definitions” and, together with the Swap Definitions, the “Definitions”) in each
case as published by the International Swaps and Derivatives Association, Inc.
(“ISDA”), are incorporated into this Confirmation. In the event of any
inconsistency between the Swap Definitions and the Equity Definitions, the
Equity Definitions shall govern and in the event of any inconsistency between
the Definitions and this Confirmation, this Confirmation shall govern.

1. This Confirmation evidences a complete binding agreement between you and us
as to the terms of the Transaction to which this Confirmation relates. This
Confirmation (notwithstanding anything to the contrary herein) shall supplement,
form a part of, and be subject to, an agreement in the form of the ISDA 2002
Master Agreement (the “Master Agreement”) as if Dealer and Counterparty had
executed an agreement in such form (but without any Schedule except for
elections set forth herein) on the Trade Date. In the event of any inconsistency
between the provisions of the Master Agreement and this Confirmation, this
Confirmation will prevail for the purpose of the Transaction to which this
Confirmation relates. The parties hereby agree that no Transaction other than
the Transaction to which this Confirmation relates shall be governed by the
Master Agreement.

2. The terms of the particular Transaction to which this Confirmation relates
are as follows:

 

General Terms:   

Trade Date:

   May 27, 2009

Effective Date:

   June 2, 2009, subject to cancellation of the Transaction as provided in
Section 8(d) “Offering Contingency,” below.

Seller:

   Dealer

Buyer:

   Counterparty

Shares:

   The shares of common stock, $0.01 par value, of Counterparty (Security
Symbol: “ADS”).

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Number of Shares:

   [            ]1, as reduced from time to time following settlement on each
Settlement Date by the Daily Number of Shares for such Settlement Date.

Daily Number of Shares:

   (a) For any Settlement Date occurring prior to the first day of the
Settlement Period, the number of Shares specified by Dealer in the related
Settlement Notice (as defined below under “Settlement Dates”) and (b) for each
Settlement Date occurring on or after the first day of the Settlement Period,
the Number of Shares as of the first day of the Settlement Period divided by 80,
rounded down to the nearest whole number (with any reduction in the Daily Number
of Shares due to rounding being allocated to the final Settlement Date);
provided that (i) if a Market Disruption Event occurs on any Exchange Business
Day in the Settlement Reference Period, the Calculation Agent may determine that
such Exchange Business Day is a Disrupted Day only in part, in which case the
Calculation Agent will reduce the Daily Number of Shares for the related
Settlement Date and shall designate one or more Settlement Dates at the end of
the Settlement Period as the Settlement Date(s) for the remaining Daily Number
of Shares, (ii) Dealer may increase the Daily Number of Shares on any Settlement
Date during the Settlement Period by delivery of a Settlement Notice specifying
the additional Daily Number of Shares for such Settlement Date to Counterparty,
in which case the Daily Number of Shares for each remaining Settlement Date
shall be reduced on a pro rata basis and (iii) the aggregate of the Daily Number
of Shares for all Settlement Dates shall equal the initial Number of Shares; and
provided further that, if the final Settlement Date has not occurred pursuant to
the preceding proviso as of the Final Disruption Date, then, subject to Section
8(f) hereof, the Final Disruption Date shall be considered the final Settlement
Date. “Final Disruption Date” means December 16, 2014.

Forward Price:

   $40.31

Prepayment:

   Applicable

Prepayment Amount:

   $[            ]2 (The Forward Price multiplied by the initial Number of
Shares).

Prepayment Date:

   The Effective Date; provided that no cancellation of this Transaction has
occurred as provided in Section 8(d) “Offering Contingency.”

Variable Obligation:

   Not Applicable

Exchange:

   The New York Stock Exchange

Related Exchange(s):

   All Exchanges

Calculation Agent:

   Dealer. Following any determination or calculation by the Calculation Agent
hereunder, the Calculation Agent will use

 

1

For Merrill Lynch International (“MLI”), insert 1,472,600. For Barclays Bank PLC
(“Barclays”), insert 384,800.

2

For MLI, insert 59,360,506. For Barclays, insert 15,511,288.

 

2

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   its reasonable best efforts to provide to Counterparty by e-mail promptly
following such determination or calculation (but in any event no later than
three Exchange Business Days after any request by Counterparty) a report (in a
commonly used file format for the storage and manipulation of financial data
without disclosing Dealer’s proprietary models) displaying in reasonable detail
the basis for such determination or calculation, as the case may be. Settlement
Terms:   

Physical Settlement:

   Applicable. In lieu of Section 9.2(a)(iii) of the Equity Definitions, Dealer
will deliver to Counterparty the Daily Number of Shares for the related
Settlement Date on such Settlement Date. Section 9.11 of the Equity Definitions
shall be amended by excluding any representations therein relating to
restrictions, obligations, limitations or requirements under applicable
securities laws arising as a result of the fact that Counterparty is the Issuer
of the Shares.

Settlement Dates:

   (a) Any Clearance System Business Day designated by Dealer as a Settlement
Date following the Effective Date in a written notice (a “Settlement Notice”)
that is delivered to Counterparty, specifying the Daily Number of Shares for
such Settlement Date and (b) each Clearance System Business Day that is one
Settlement Cycle following each Exchange Business Day in the Settlement
Reference Period that is not a Disrupted Day in full (clause (b), the
“Settlement Period”).

Settlement Reference Period:

   The period beginning with, and including August 13, 2014 (or, if such date is
not an Exchange Business Day, the next following Exchange Business Day) and
ending with, and including the 79 Exchange Business Day thereafter; provided
that the Settlement Reference Period shall be extended by one Exchange Business
Day for each Exchange Business Day therein that is a Disrupted Day (in whole or
in part).

Market Disruption Event:

  

Section 6.3(a) of the Equity Definitions is hereby amended by deleting the words
“during the one hour period that ends at the relevant Valuation Time, Latest
Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case
may be,” in clause (ii) thereof.

 

Section 6.3(d) of the Equity Definitions is hereby amended by deleting the
remainder of the provision following the term “Scheduled Closing Time” in the
fourth line thereof.

Dividends:   

Dividend Payment:

   In lieu of Section 9.2(a)(iii) of the Equity Definitions, Dealer will pay to
Counterparty the relevant Dividend Amount on each Dividend Payment Date.

Dividend Amount:

   (a) 100% of any cash dividend or distribution per Share declared by the
Issuer to holders of record of a Share on any record date occurring during the
period from, and including, the Effective Date to, but excluding, the final
Settlement Date, multiplied by (b) the Number of Shares on such record date
(after giving effect to any reduction on such record date, if such record date
is a Settlement Date).

 

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Dividend Payment Date:

   Each date on which the relevant Dividend Amount is paid or distributed by the
Issuer to shareholders of record. Share Adjustments:   

Method of Adjustment:

   Calculation Agent Adjustment; provided that, for any dividend or distribution
of the type described in Sections 11.2(e)(i) or 11.2(e)(ii)(A) of the Equity
Definitions, the Calculation Agent shall make a proportional adjustment to the
Number of Shares to reflect such dividend or distribution. Extraordinary Events:
   Consequences of Merger Events:    If any portion of the Transaction shall be
cancelled pursuant to Section 12.2(b) of the Equity Definitions (each such
portion, a “Merger Cancelled Portion”) and Dealer would owe Counterparty a
payment as a result thereof, such Merger Cancelled Portion shall be settled in
accordance with Section 8(i) hereof.

Share-for-Share:

   Alternative Obligation

Share-for-Other:

   Cancellation and Payment on that portion of the Other Consideration that
consists of cash; Alternative Obligation on the remainder of the Other
Consideration.

Share-for-Combined:

  

Cancellation and Payment, unless at least 90% of the consideration, excluding
cash payments for fractional shares, in such Merger Event consists of “publicly
traded securities,” in which case Component Adjustment shall apply.

 

“Publicly traded securities” means shares of common stock, depositary receipts
or other certificates representing common equity interests, in each case, that
are traded on a U.S. national securities exchange or that will be so traded when
issued or exchanged in connection with the Merger Event.

Tender Offer:    Not Applicable Nationalization or Insolvency:    Cancellation
and Payment Delisting:    Not Applicable Determining Party for Merger Events and
Nationalization or Insolvency:    Dealer Additional Disruption Events:   

Change in Law:

   Applicable

Failure to Deliver:

   Applicable if and only if Dealer has reasonable grounds to believe that the
Shares to be delivered can either be borrowed or otherwise acquired when the
delivery is due.

 

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Hedging Disruption:

   Not Applicable

Increased Cost of Hedging:

   Not Applicable

Determining Party:

   For all Additional Disruption Events, Dealer Non-Reliance:    Applicable
Agreements and Acknowledgments Regarding Hedging Activities:    Applicable
Additional Acknowledgments:    Applicable

3. Account Details:

 

  (a) Account for payments to Counterparty: To be provided by Counterparty.

Account for delivery of Shares to Counterparty: To be provided by Counterparty.

 

  (b) Account for payments to Dealer:

[            ]

Account for delivery of Shares from Dealer: [        ]

4. Offices:

The Office of Counterparty for the Transaction is: Inapplicable, Counterparty is
not a Multibranch Party.

The Office of Dealer for the Transaction is:

 

[Dealer]   [Address]   Attention:   [            ] Facsimile:   [            ]
Telephone:   [            ]

5. Notices: For purposes of this Confirmation:

 

  (a) Address for notices or communications to Counterparty:

 

To:    Alliance Data Systems Corporation    17655 Waterview Parkway    Dallas,
TX 75252 Attn:    Chief Financial Officer Telephone:    (972) 348-5100
Facsimile:    (972) 348-5326

 

  (b) Address for notices or communications to Dealer:

 

To:    [Dealer]    [Address] Attention:    [            ] Tel:    [            ]
Fax:    [            ]

 

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6. Representations, Warranties and Agreements.

Counterparty represents and warrants to, and agrees with, Dealer, on the date
hereof, that:

(a) Disclosure. Counterparty is not aware of any material nonpublic information
regarding Counterparty or the Shares, and all reports and other documents filed
by Counterparty with the Securities and Exchange Commission (the “SEC”) pursuant
to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) when
considered as a whole (with the more recent such reports and documents deemed to
amend inconsistent statements contained in any earlier such reports and
documents), do not contain any untrue statement of a material fact or any
omission of a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading.

(b) No Manipulation. Counterparty is not entering into this Confirmation to
create actual or apparent trading activity in the Shares (or any security
convertible into or exchangeable for Shares) or to manipulate the price of the
Shares (or any security convertible into or exchangeable for Shares).

(c) Regulation M. Transactions in the Shares are not prohibited by Regulation M
under the Exchange Act (“Regulation M”) as a result of such transactions meeting
the requirements of the exceptions set forth in Sections 101(b)(10) and
102(b)(7) of Regulation M, and Counterparty shall not engage in any
“distribution,” as such term is defined in Regulation M, other than a
distribution as to which the exceptions set forth in sections 101(b)(10) and
102(b)(7) of Regulation M are available, until the Effective Date.

(d) Board Authorization. Counterparty shall deliver to Dealer a certified copy
of the resolution of Counterparty’s board of directors (or a duly authorized
committee thereof) authorizing the Transaction on or prior to the Trade Date.

(e) Solvency. As of the date hereof, Counterparty is not “insolvent” (as such
term is defined under Section 101(32) of the Bankruptcy Code (Title 11 of the
United States Code) (the “Bankruptcy Code”) and Counterparty would be able to
purchase the Number of Shares in compliance with the laws of Counterparty’s
jurisdiction of incorporation.

(f) Required Filings. Counterparty has made, and will use its best efforts to
make, all filings required to be made by it with the SEC, any securities
exchange or any other regulatory body with respect to the Transaction
contemplated hereby.

(g) Accounting. Without limiting the generality of Section 13.1 of the Equity
Definitions, Counterparty acknowledges that Dealer is not making any
representations or warranties with respect to the treatment of the Transaction
under FASB Statements 128, 133, 149 (each as amended) or 150, EITF Issue No.
00-19, 01-6, 03-6 or 07-5 (or any successor issue statements) or under FASB’s
Liabilities & Equity Project.

(h) Investment Company Act. Counterparty is not and, after giving effect to the
transactions contemplated in this Confirmation, will not be required to register
as an “investment company” as such term is defined in the Investment Company Act
of 1940, as amended.

(i) Deposit Insurance; No Guarantee. Counterparty understands that no
obligations of Dealer to it hereunder will be entitled to the benefit of deposit
insurance and that such obligations will not be guaranteed by any Affiliate of
Dealer other than Merrill Lynch & Co., Inc. or any governmental agency.

Each of Dealer and Counterparty represents and warrants to, and agrees with, the
other party, on the date hereof, that it is an “eligible contract participant”,
as such term is defined in Section 1a(12) of the Commodity Exchange Act, as
amended.

7. Matters Relating to Agent.

[Insert Appropriate Agent Language.]

8. Other Provisions.

(a) Opinions. Counterparty shall deliver to Dealer an opinion of counsel, dated
as of the Effective Date and reasonably acceptable to Dealer in form and
substance, with respect to the matters set forth in Section 3(a) of the Master
Agreement; provided that such opinion of counsel may contain customary
exceptions and qualifications, including without limitation exceptions or
qualifications relating to indemnification provisions.

 

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(b) Repurchase Notices. Counterparty shall, at least 10 Scheduled Trading Days
prior to effecting any repurchase of Shares or consummating or otherwise
executing or engaging in any transaction or event, other than a stock split or
stock dividend (a “Adjustment Event”), that would lead to an increase in the
Number of Shares, give Dealer a written notice of such repurchase or Adjustment
Event (a “Repurchase Notice”) if, following such repurchase or Adjustment Event,
the Notice Percentage as determined on the date of such Repurchase Notice is
(i) greater than [    ]%3 and (ii) in the case of any Repurchase Notice other
than the first Repurchase Notice, greater by 0.5% or more than the Notice
Percentage included in the immediately preceding Repurchase Notice. The “Notice
Percentage” as of any day is the fraction, expressed as a percentage, the
numerator of which is the sum of (x) the Number of Shares for the Transaction
and (y) the Number of Shares for [            ]4, and the denominator of which
is the number of Shares outstanding on such day. In the event that Counterparty
fails to provide Dealer with a Repurchase Notice on the day and in the manner
specified in this Section 8(b) then Counterparty agrees to indemnify and hold
harmless Dealer, its affiliates and their respective directors, officers,
employees, agents and controlling persons (Dealer and each such person being an
“Indemnified Party”) from and against any and all losses, claims, damages and
liabilities (or actions in respect thereof), joint or several, to which such
Indemnified Party may become subject under applicable securities laws, including
without limitation, Section 16 of the Exchange Act, relating to or arising out
of such failure. If for any reason the foregoing indemnification is unavailable
to any Indemnified Party or insufficient to hold harmless any Indemnified Party,
then Counterparty shall contribute, to the maximum extent permitted by law, to
the amount paid or payable by the Indemnified Party as a result of such loss,
claim, damage or liability. In addition, Counterparty will reimburse any
Indemnified Party for all expenses (including reasonable counsel fees and
expenses) as they are incurred (after notice to Counterparty) in connection with
the investigation of, preparation for or defense or settlement of any pending or
threatened claim or any action, suit or proceeding arising therefrom, whether or
not such Indemnified Party is a party thereto and whether or not such claim,
action, suit or proceeding is initiated or brought by or on behalf of
Counterparty. This indemnity shall survive the completion of the Transaction
contemplated by this Confirmation and any assignment and delegation of the
Transaction made pursuant to this Confirmation or the Agreement shall inure to
the benefit of any permitted assignee of Dealer.

(c) [Reserved]

(d) Offering Contingency. If the offering by Counterparty of $300,000,000
aggregate principal amount of 4.75% convertible notes due 2014 does not close on
or prior to June 2, 2009 (or such later date as Counterparty and Dealer shall
have agreed which in no event shall be later than June 16, 2009), then the
Transaction shall be terminated and cancelled with no payments (including, for
the avoidance of doubt, any early termination payment) or performance being due
by either party.

(e) Transfer or Assignment. Dealer may transfer any of its rights or obligations
under the Transaction only with the prior written consent of Counterparty;
provided that Counterparty may not unreasonably withhold or delay such consent,
it being understood that it is not unreasonable to withhold or delay such
consent if, among other reasons, Dealer does not comply with the Transfer
Requirements (as defined below). Counterparty may transfer its rights and
obligations under the Transaction without the consent of Dealer so long as it
complies with the Transfer Requirements.

“Transfer Requirements” means, with respect to the party transferring its rights
or obligations under the Transaction (such party, the “Transferring Party” and
the other party, the “Non-Transferring Party”), (i) the Transferring Party shall
deliver opinions and documents reasonably satisfactory to Non-Transferring Party
in connection with such assignment; (ii) such assignment shall be effected on
terms reasonably satisfactory to the Non-Transferring Party with respect to any
legal and regulatory requirements relevant to the Non-Transferring Party;
(iii) the Non-Transferring Party shall not, as a result of such assignment, be
required to pay the transferee on any payment date an amount under
Section 2(d)(i)(4) of the Agreement greater than the amount that the
Non-Transferring Party would have been required to pay to the Transferring Party
in the absence of such transfer and

 

3 For MLI, insert 17.7. For Barclays, insert 4.5.

4 For MLI, insert “each of the Convertible Bond Hedge Transaction between
Counterparty and Bank of America, N.A. dated June 23, 2008 and the Convertible
Bond Hedge Transaction between Counterparty and Bank of America, N.A. dated the
date hereof”.

For Barclays, insert “the Convertible Bond Hedge Transaction between
Counterparty and Dealer dated the date hereof”.

 

7

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assignment; (iv) no Event of Default, Potential Event of Default or Termination
Event shall occur as a result of such assignment; (v) without limiting the
generality of clause (iii), the Transferring Party shall cause the transferee to
make such Payee Tax Representations and to provide such tax documentation as may
be reasonably requested by the Non-Transferring Party to permit the
Non-Transferring Party to determine that results described in clauses (iii) and
(iv) will not occur upon or after such transfer and assignment; and (vi) the
Transferring Party shall be responsible for the Non-Transferring Party’s
reasonable out-of-pocket costs and expenses, including reasonable fees of
counsel, incurred in connection with such transfer and assignment. The
definition of Transfer Requirements shall also include the following
requirements in the case of a transfer by Counterparty: (i) Alliance Data
Systems Corporation (or any successor obligor) shall continue to be obligated
with respect to “Repurchase Notices” above; (ii) such assignment shall be made
to a U.S. person (as defined in the Internal Revenue Code of 1986, as amended)
and (iii) if Dealer reasonably requests, the transferee shall agree not to hedge
its exposure to the Transaction, or to hedge such exposure only pursuant to an
effective registration of Alliance Data Systems Corporation (or any successor
obligor) or otherwise in compliance with applicable securities laws in a manner
that, in the reasonable judgment of Dealer, will not expose Dealer to material
risks under applicable securities laws

(f) Right to Extend. Dealer may postpone any Settlement Date or extend the
Settlement Reference Period, in which event the Calculation Agent shall make
appropriate adjustments to the Number of Shares and the Daily Number of Shares
with respect to any affected Settlement Date, if Dealer determines, in its
commercially reasonable discretion, that such postponement or extension is
reasonably necessary or appropriate to preserve Dealer’s hedging or hedge unwind
activity hereunder in light of existing liquidity conditions or to enable Dealer
to effect purchases of Shares in connection with its hedging, hedge unwind or
settlement activity hereunder, in each case in a manner that would, if Dealer
were the Issuer or an affiliated purchaser of the Issuer (as defined in Rule
10b-18 under the Exchange Act), be in compliance with applicable legal,
regulatory or self-regulatory requirements, or with related policies and
procedures applicable to Dealer.

(g) Payments on Early Termination. For the purpose of Section 6(e) of the Master
Agreement, payments by Dealer in respect of this Transaction shall be limited to
the delivery of the Number of Shares (determined as of the Early Termination
Date); provided that, notwithstanding Section 6(d)(ii) of the Master Agreement,
such share delivery by Dealer in respect of any Early Termination Date will
occur as soon as reasonably practicable, as determined by Dealer in its good
faith judgment, based on what Dealer determines is reasonably necessary or
appropriate in order to preserve Dealer’s hedging or hedge unwind activity
hereunder in light of existing liquidity conditions or to enable Dealer to
effect purchases of Shares in connection with its hedging, hedge unwind or
settlement activity hereunder in a manner that would, if Dealer were the Issuer
or an affiliated purchaser of the Issuer (as defined in Rule 10b-18 under the
Exchange Act), be in compliance with applicable legal, regulatory or
self-regulatory requirements, or with related policies and procedures applicable
to Dealer.

(h) Securities Contract, Swap Agreement. The parties hereto intend for: (a) the
Transaction to be a “securities contract” and a “swap agreement” as defined in
the Bankruptcy Code, and the parties hereto to be entitled to the protections
afforded by, among other Sections, Sections 362(b)(6), 362(b)(17), 546(e),
546(g), 555 and 560 of the Bankruptcy Code; (b) a party’s right to liquidate the
Transaction and to exercise any other remedies upon the occurrence of any Event
of Default, Early Termination Event, Extraordinary Event or Additional
Disruption Event under this Confirmation with respect to the other party to
constitute a “contractual right” as described in the Bankruptcy Code; and
(c) each payment and delivery of cash, securities or other property hereunder to
constitute a “margin payment” or “settlement payment” and a “transfer” as
defined in the Bankruptcy Code.

(i) Settlement of Merger Cancelled Portions. With respect to any Merger
Cancelled Portion, if Dealer would owe any amount to Counterparty pursuant to
Section 12.2(b) and 12.7(c) of the Equity Definitions (a “Payment Obligation”)
in respect of such Merger Cancelled Portion, Dealer shall satisfy such Payment
Obligation by the Merger Cancellation Alternative. The following provisions
shall apply on the Scheduled Trading Day immediately following the relevant
Merger Date:

 

Merger Cancellation Alternative:    Applicable and means that Dealer shall
deliver to Counterparty the Merger Cancellation Delivery Property on the date on
which the Payment Obligation would otherwise be due pursuant to Section 12.7 of
the Equity Definitions, or such later date as the Calculation Agent may
reasonably determine, in satisfaction of the Payment Obligation.

 

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Merger Cancellation Delivery Property:    A number of Merger Cancellation
Delivery Units, as calculated by the Calculation Agent, equal to the Payment
Obligation divided by the Merger Cancellation Unit Price. The Calculation Agent
shall adjust the Merger Cancellation Delivery Property by replacing any
fractional portion of a security therein with an amount of cash equal to the
value of such fractional security based on the values used to calculate the
Merger Cancellation Unit Price. Merger Cancellation Unit Price:    The value of
property contained in one Merger Cancellation Delivery Unit, as determined by
the Calculation Agent in its discretion by commercially reasonable means and
notified by the Calculation Agent to Dealer at the time of notification of the
Payment Obligation. Merger Cancellation Delivery Unit:    A unit consisting of
the number or amount of each type of property received by a holder of one Share
(without consideration of any requirement to pay cash or other consideration in
lieu of fractional amounts of any securities) in the related Merger Event with
respect to the Merger Cancelled Portion of the Transaction. If such Merger Event
involves a choice of consideration to be received by holders, such holder shall
be deemed to have elected to receive the maximum possible amount of cash.
Failure to Deliver:    Applicable Other applicable provisions:    The provisions
of Sections 9.8, 9.9, 9.10, 9.11 (as modified in “Physical Settlement” above)
and 9.12 of the Equity Definitions will be applicable as if “Physical
Settlement” applied to the Merger Cancelled Portion, except that all references
to “Shares” shall be read as references to “Merger Cancellation Delivery Units.”

(j) No Collateral, Netting or Setoff. Notwithstanding any provision of the
Master Agreement, or any other agreement between the parties to the contrary, no
collateral is transferred in connection with this Transaction. Obligations under
this Transaction shall not be netted, recouped or set off (including pursuant to
Section 6 of the Master Agreement) against any other obligations of the parties,
whether arising under the Master Agreement, this Confirmation, under any other
agreement between the parties hereto, by operation of law or otherwise, and no
other obligations of the parties shall be netted, recouped or set off (including
pursuant to Section 6 of the Master Agreement) against obligations under this
Transaction, whether arising under the Master Agreement, under this
Confirmation, under any other agreement between the parties hereto, by operation
of law or otherwise, and each party hereby waives any such right of setoff,
netting or recoupment.

(k) Status of Claims in Bankruptcy. Dealer acknowledges and agrees that this
Confirmation is not intended to convey to Dealer rights against Counterparty
with respect to the Transaction that are senior to the claims of common
stockholders of Counterparty in any U.S. bankruptcy proceedings of Counterparty;
provided that nothing herein shall limit or shall be deemed to limit Dealer’s
right to pursue remedies in the event of a breach by Counterparty of its
obligations and agreements with respect to the Transaction; provided, further,
that nothing herein shall limit or shall be deemed to limit Dealer’s rights in
respect of any transactions other than the Transaction.

(l) Governing Law; Jurisdiction. THIS CONFIRMATION SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK. THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH ALL
MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN, AND
ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.

(m) Waiver of Jury Trial. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING RELATING TO THIS TRANSACTION. EACH PARTY (I) CERTIFIES THAT
NO REPRESENTATIVE, AGENT OR ATTORNEY OF EITHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN

 

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THE EVENT OF SUCH A SUIT, ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO
ENTER INTO THIS TRANSACTION, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS PROVIDED HEREIN.

(n) [            ]5

(o) Taxation: [            ]6

[Signatures to follow on separate page]

 

 

5

For MLI, insert: “Credit Support Document and Provider: The Guarantee of ML&Co.
in the form attached hereto as Exhibit A shall be a Credit Support Document and
ML&Co. shall be a Credit Support Provider, in each case with respect to Dealer.”

For Barclays, insert: “Regulatory Provisions. Dealer is regulated by the
Financial Services Authority. Dealer is not a member of the Securities Investor
Protection Corporation. The time of dealing for the Transaction will be
confirmed by Dealer upon written request by Counterparty. The Agent will furnish
to Counterparty upon written request a statement as to the source and amount of
any remuneration received or to be received by the Agent in connection with the
Transaction.”

6 For MLI, insert: “Dealer represents to Counterparty that (i) it is a resident
of the United Kingdom within the meaning of the income tax treaty between the
United States and the United Kingdom, (ii) that it is eligible for the benefits
of the income tax treaty between the United States and the United Kingdom, and
(iii) upon reasonable request by Counterparty, Dealer will provide a validly
executed IRS Form W-8BEN (or relevant successor form) certifying that it is a
resident of the United Kingdom and that it is eligible for the benefits of the
income tax treaty between the United States and the United Kingdom.”

For Barclays, insert: “Dealer represents that (i) with respect to payments made
to Dealer which are not effectively connected to the US: it is fully eligible
for the benefits of the “Business Profits” , the “Interest” provision or the
“Other Income” provision (if any) of the Double Tax Treaty between the UK and
the US with respect to any payment described in such provisions and received or
to be received by it in connection with this Agreement and no such payment is
attributable to a trade or business carried on by it through a permanent
establishment in the US; and (ii) with respect to payments made to Dealer which
are effectively connected to the US: each payment received or to be received by
it in connection with this Agreement will be effectively connected with its
conduct of a trade or business in the US. Prior to Counterparty making any such
payment to Dealer, Dealer will provide a validly executed IRS Form W-8ECI (or
relevant successor form) certifying that the payment to be received by it is
effectively connected with its conduct of a trade or business in the US, and
upon reasonable request by Counterparty, Dealer will provide a validly executed
IRS Form W-8BEN (or relevant successor form) certifying that it is a resident of
the United Kingdom and that it is eligible for the benefits of the income tax
treaty between the United States and the United Kingdom. For the purpose of
Section 3(f) of this Agreement, Dealer may elect to report each payment received
or to be received by Dealer in respect of the Transaction, for purposes of
information reporting under Section 1.1461-1(c)(2)(i)(J) of the United States
Treasury Regulations, as effectively connected with Dealer’s conduct of a trade
or business in the United States.”

 

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Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.

 

Yours sincerely,

[DEALER]

By:

 

 

Name:

 

Title:

 

Confirmed as of the date first

above written:

 

ALLIANCE DATA SYSTEMS CORPORATION By:  

 

Name:   Edward J. Heffernan Title:   President and Chief Executive Officer

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Exhibit A7

GUARANTEE OF MERRILL LYNCH & CO., INC.

FOR VALUE RECEIVED, receipt of which is hereby acknowledged, MERRILL LYNCH &
CO., INC., a corporation duly organized and existing under the laws of the State
of Delaware (“ML & Co.”), hereby unconditionally guarantees to Alliance Data
Systems Corporation (the “Company”), the due and punctual payment of any and all
amounts payable by Merrill Lynch International, a company organized under the
laws of England and Wales (“ML”), under the terms of the Confirmation of Forward
Stock Purchase Transaction between the Company and ML (ML as Seller), dated
May 27, 2009 (the “Confirmation”), including, in case of default, interest on
any amount due, when and as the same shall become due and payable, whether on
the scheduled payment dates, at maturity, upon declaration of termination or
otherwise, according to the terms thereof. In case of the failure of ML
punctually to make any such payment, ML & Co. hereby agrees to make such
payment, or cause such payment to be made, promptly upon demand made by the
Company to ML & Co.; provided, however, that delay by the Company in giving such
demand shall in no event affect ML & Co.’s obligations under this Guarantee.
This Guarantee shall remain in full force and effect or shall be reinstated (as
the case may be) if at any time any payment guaranteed hereunder, in whole or in
part, is rescinded or must otherwise be returned by the Company upon the
insolvency, bankruptcy or reorganization of ML or otherwise, all as though such
payment had not been made.

ML & Co. hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Confirmation;
the absence of any action to enforce the same; any waiver or consent by the
Company concerning any provisions thereof; the rendering of any judgment against
ML or any action to enforce the same; or any other circumstances that might
otherwise constitute a legal or equitable discharge of a guarantor or a defense
of a guarantor. ML covenants that this guarantee will not be discharged except
by complete payment of the amounts payable under the Confirmation. This
Guarantee shall continue to be effective if ML merges or consolidates with or
into another entity, loses its separate legal identity or ceases to exist.

ML & Co. hereby waives diligence; presentment; protest; notice of protest,
acceleration, and dishonor; filing of claims with a court in the event of
insolvency or bankruptcy of ML; all demands whatsoever, except as noted in the
first paragraph hereof; and any right to require a proceeding first against ML.

ML & Co. hereby certifies and warrants that this Guarantee constitutes the valid
obligation of ML & Co. and complies with all applicable laws.

This Guarantee shall be governed by, and construed in accordance with, the laws
of the State of New York.

This Guarantee may be terminated at any time by notice by ML & Co. to the
Company given in accordance with the notice provisions of the Confirmation,
effective upon receipt of such notice by the Company or such later date as may
be specified in such notice; provided, however, that this Guarantee shall
continue in full force and effect with respect to any obligation of ML under the
Confirmation.

This Guarantee becomes effective concurrent with the effectiveness of the
Confirmation, according to its terms.

 

7 Insert Exhibit A for MLI.

 

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IN WITNESS WHEREOF, ML & Co. has caused this Guarantee to be executed in its
corporate name by its duly authorized representative.

 

MERRILL LYNCH & CO., INC.

By

 

 

Name:

 

Title:

 

Date:

 

 

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