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                        ALLIANCE DATA SYSTEMS CORPORATION

                      NON-QUALIFIED STOCK OPTION AGREEMENT


                                                    EXAMPLE

Employee/Optionee:

Number of shares of
common stock subject
to this Agreement:

         Pursuant to the Alliance Data Systems Corporation and its
Subsidiaries Stock Option and Restricted Stock Purchase Plan (the "Plan"),
the Board of Directors of Alliance Data Systems Corporation (the "Company")
has granted to you on this date an option (the "Option") to purchase the
number of shares of the Company, a Common Stock, $1.00 par value ("Common
Stock), set forth above. such shares (as the same may be adjusted as
described in Section 12 below) are herein referred to as the "Option Shares".
The Option shall constitute and be treated at all times by you and the
company as a "non-qualified stock option" for Federal income tax purposes and
shall not constitute and shall not be treated as an "incentive stock option"
as defined under Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"). The terms and conditions of the Options are set out
below.

         1.  DATE OF GRANT. The Option is granted to you on __________,
_____(the "Grant Date").

         2.  TERMINATION OF OPTION. Your right to exercise the Option (and to
purchase the Option Shares) shall expire on the ____ anniversary of the Grant
Date or (ii) the date provided in Section 8 below in the event you cease to
be employed by the Company or any subsidiary or parent thereof. Notwithstanding
any provision in the Plan to the contrary, this Option shall terminate FOUR
weeks following the date on which you received this Agreement unless prior to
the end of such two week period you execute and return to the Company both the
Agreement and the Company's Confidentiality and Non-Solicitation Agreement.

         3.  OPTION PRICE. The purchase price to be paid upon the exercise of
the option $1.00 per share (subject to adjustment as provided in Section 12
hereof).

         4.  VESTING PROVISIONS. Except as provided in Section 5 below, you
will not be entitled to exercise the Option (and purchase any Option Shares)
prior to __________, ____. Commencing on __________, ____and on each of the
two anniversaries of such date on which you shall continue to be employed on
a full-time basis by the Company or any subsidiary or parent thereof, you
shall become entitled to

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exercise the Option with respect to 33-1/3% of the Option Shares (rounded to
the nearest whole share) until the option expires and terminates pursuant to
Section 2 hereof.

         5.  ACCELERATED VESTING PROVISIONS.

                  (a) Prior to the beginning of each fiscal year of the
Company, the Board of Directors may establish Actual Operating Income (as
hereinafter defined) goals ("Operating Income Goal") and designated
percentages of outstanding options that will become vested prior to the time
such options would otherwise vest ("Designated Percentage") for achieving
various levels of the Operating Income Goal. If an Operating Income Goal is
satisfied, you will be entitled, effective as of the February 1 which
immediately follows the end of the applicable fiscal year of the Company, to
exercise a percentage of the Option Shares (rounded to the nearest whole
share) equal to the Designated Percentage for the Operating Income Goal
attained, until the Option expires and terminates pursuant to Section 2
hereof, provided the Company is not in material violation of any covenants
contained in, or otherwise in default under, any credit agreement.

                  (b) For the purposes of this Agreement, the following terms
shall have the meanings set forth below:

                  "ACTUAL OPERATING INCOME" shall mean, with respect to any
         fiscal year, Operating Income (as hereinafter defined) for such fiscal
         year as calculated by the Board of Directors of the Company based on
         the audited consolidated financial statements of the Company and its
         subsidiaries for such fiscal year, which financial statements shall be
         conclusive and binding upon the Company and you.

                  "OPERATING INCOME" shall mean, with respect to any
         fiscal year:

                           (i) the net income (calculated (x) before preferred
                  and common stock dividends and (y) exclusive of the effect of
                  any extraordinary or other material nonrecurring gain or loss
                  outside the ordinary course of business) of the Company and
                  its consolidated subsidiaries, determined on a consolidated
                  basis for such period (Consolidated Net Income); plus

                           (ii) to the extent deducted in determining
                  Consolidated Net Income for such period, the aggregate amount
                  of (x) interest charges, whether expended or capitalized,
                  incurred or accrued by the Company and its consolidated
                  subsidiaries during such period, (y) provision for income
                  taxes and (z) amortization and other similar non-cash charges.

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         Notwithstanding the Operating Income Goals established by the Board
of Directors prior to the beginning of a fiscal year of the Company, if at
any time or from time to time after the date hereof the Company or any of its
subsidiaries acquires a business, or substantially all of the assets of a
business, or any assets material to the business of the Company or any of its
subsidiaries are sold, the Board of Directors of the Company shall make such
adjustments to the Operating Income Goals, as the Board of Directors of the
Company in its discretion deems equitable in light of each such acquisition
or sale. Any such determination by the Board of Directors shall be effective
and binding for all purposes of this Agreement.

                  (c) The satisfaction of any and all conditions set forth in
this Section 5 regarding your right to exercise the Option (and purchase any
Option Shares) shall be determined by the Board of Directors of the Company.

                  (d) Notwithstanding anything contained herein to the
contrary, no new rights to exercise the Option with respect to any Option
Shares shall be acquired under this Section 5 after the date on which you
cease to be employed on a full-time basis by the Company or any subsidiary or
parent thereof.

         6.  ADDITIONAL PROVISIONS RELATING TO EXERCISE.

                  (a) Once you become entitled to exercise the Option (and
purchase Option Shares) as provided in Sections 4 and 5 hereof, such right
will continue until the date on which the Option expires and terminates
pursuant to Section 2 hereof.

                  (b) The Board of Directors of the Company, in its sole
discretion, may at any time accelerate the time set forth in Sections 4 and 5
at which the Option may be exercised by you with respect to any Option Shares.

         7.  EXERCISE OF OPTION. To exercise the Option, you must deliver a
completed copy of the attached Option Exercise Form to the address indicated
on the Form, specifying the number of Option shares being purchased as a
result of such exercise, together with payment of the full option price for
the option Shares being purchased. Payment of the option price must be made
in cash, by certified or official bank check, or by such other consideration
as shall be approved by the Board of Directors of the Company.

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         8.  TERMINATION OF EMPLOYMENT.

                  (a) In the event that (i) the Company or any subsidiary or
parent thereof terminates your employment by such entity "for cause" or (ii)
you terminate your employment by such entity for any reason whatsoever (other
than as a result of your death or "disability" (within the meaning of Section
22(e)(3) of the Code)), then the Option may only be exercised within one
month after such termination, and only to the same extent that you were
entitled to exercise the Option on the date your employment was so terminated
and had not previously done so. Notwithstanding anything herein to the
contrary, if the Committee determines, after full consideration of the facts
presented on behalf of the Company and you, that you have been engaged in
disloyalty to the Company or any of its affiliates, including, without
limitation, fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of your employment or service, or you have disclosed
trade secrets or confidential information of the Company or of an affiliate,
any unexercised portion of this Option shall terminate immediately and you
shall forfeit all shares of Common Stock for which the Company has not yet
delivered the share certificates upon refund by the Company of the option
price. The Company may also withhold delivery of share certificates pending
the resolution of any inquiry that could lead to a finding resulting in a
forfeiture.

                  (b) In the event that you cease to be employed on a
full-time basis by the Company or any subsidiary or parent thereof as a
result of the termination of your employment by the Company or any subsidiary
or parent thereof at any time other than "for cause" or as a result of your
death or "disability" (within the meaning of Section 22(e)(3) of the Code),
the Option may only be exercised within six months after the date you cease
to be so employed, and only to the same extent that you were entitled to
exercise the Option on the date you ceased to be so employed by reason of
such termination and had not previously done so.

                  (c) In the event that you cease to be employed on a
full-time basis by the Company or any subsidiary or parent thereof by reason
of a "disability" (within the meaning of Section 22(e)(3) of the Code), the
Option may only be exercised within one year after the date you cease to be
so employed, and only to the same extent that you were entitled to exercise
the Option on the date you ceased to be so employed by reason of such
disability and had not previously done no.

                  (d) In the event that you die while employed by the Company or
any subsidiary or parent thereof (or within a period of one month after ceasing
to be employed by the Company or any subsidiary or parent thereof for any reason
described in Section 8(a) hereof, within a period of three months after ceasing
to be employed by the Company or any subsidiary or parent thereof for any reason
described in Section 8(b) hereof or within a period of one year after ceasing to
be employed by the Company or any subsidiary or parent thereof for any reason
described in Section 8(c) hereof), the Option may only be exercised within one
year after your death. In such event, the Option may be exercised during such
one-year period by the executor or administrator of your


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estate or by any person who shall have acquired the Option through bequest or
inheritance, but only to the same extent that you were entitled to exercise
the option immediately prior to the time of your death and you had not
previously done so.

                  (e) Notwithstanding any provision contained in this Section
8 to the contrary, in no event may the Option be exercised to any extent by
anyone after the tenth anniversary of the Grant Date.

         9.  COMPANY'S RIGHT AND OPTION TO REPURCHASE OPTION SHARES.

                  (a) In the event that you cease to be employed by the
Company or any subsidiary or parent thereof on a full-time basis for any
reason (including, without limitation, as a result of your death, disability,
incapacity, retirement, resignation or dismissal with or without cause) at
any time prior to the date on which an underwritten public offering of the
Company's Common Stock, registered under the Securities Act of 1933, as
amended (the "Securities Act"), has been completed, the Company shall have
the right and Option but not the obligation, to purchase from you (or in the
case of your death, your legal representative) any or all of the Options
Shares (i) held by you on the date you cease to be so employed by the Company
or (ii) purchased by you after such date as permitted by Section 8 above. In
the event that the Company exercises such right and option, the Company shall
pay to you as the purchase price for such option Shares (the "Purchase
Price") an amount per share equal to the fair market value thereof as of the
date you ceased to be employed by the Company or any subsidiary or parent
thereof, such fair market value so be determined by the Board of Directors of
the Company.

                  (b) The Company may exercise the right and option described
in Section 9(a) above by giving you (or, in the case of your death, your
legal representative) a written notice of election to purchase at any time
within 60 days after the date your employment ceases, which notice of
election shall specify the number of Option Shares to be purchased and the
Purchase Price for ouch Option Shares. The closing for the purchase by the
Company of such Option Shares pursuant to the provisions of this Section 9
(the "Purchase Date") will take place at the offices of the Company on the
date specified in such written notice, which date shall be a business day not
later than 60 days after the date such notice is given. At such closing, you
will deliver such Option Shares, duly endorsed for transfer, against payment
in cash of the Purchase Price thereof To the extent the Company chooses not
to exercise its right and option under this Section 9 to purchase any of such
Option Shares, such shares shall thereafter cease to be subject to the
provisions of this Agreement.

         10.  BONA FIDE OFFER TO PURCHASE SHARES. If at any time prior to the
date on which an underwritten public offering of the Company's Common Stock,
registered under the Securities Act of 1933, as amended, has been completed,
("Public Offering") you desire to sell all or any of the Common Stock acquired
by you under this Option ("Plan Shares") and you obtain a bona fide
written offer which you desire to accept (referred to in this Section as the
"Offer") to purchase all, or a portion of your Plan

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Shares, you shall transmit copies of the Offer to the Company within five (5)
business days after your receipt of the Offer. The Offer shall set forth its
date, the proposed price per share of Common Stock, the number of shares of
Common Stock being sold, and the other terms and conditions upon which the
purchase is proposed to be made, as well as the name and address of the
prospective purchaser. Transmittal of the Offer to the Company by you shall
constitute an offer by you to sell all of the Plan Shares which are subject
to the Offer to the Company at a price equal to the cash consideration plus
the fair market value of any non-cash consideration specified in the Offer
for such Common Stock (the "Purchase Price") and upon the other terms set
forth in the Offer, except as hereinafter provided. For a period of sixty
(60) days after the submission of the Offer to the Company, the Company shall
have the option, exercisable by notice to you, to accept your offer as to
all, but not less than all, of the Plan Shares that are the subject of the
Offer. If the Company does not exercise its option to purchase within the
specified 60 day period, or if the Company, in writing, waives the 30 day
period, you may then, and only then, accept the offer from the prospective
purchaser. Any sale of Plan Stock which occurs without complying with the
provisions of this Section 9(c) is null and void.

         11.  REPRESENTATIONS.

                  (a) You represent and warrant to the Company that, upon
exercise of the Option, you will be acquiring the Option Shares for your own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof, and you understand that (i) neither
the Option nor the Option Shares have been registered with the Securities and
Exchange Commission by reason of their issuance in a transaction exempt from
the registration requirements of the Securities Act and (ii) the Option
Shares must be held indefinitely by you unless a subsequent disposition
thereof is registered under said Act or is exempt from such registration. The
stock certificates for any option Shares issued to you will bear the
following legend:

         THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR
         OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER THAT ACT
         O&AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

                  (b) You further represent and warrant that you understand the
Federal, State and local income tax consequences of the granting of the Option
to you, the acquisition of rights to exercise the Option with respect to any
option shares, the exercise of the Option and purchase of Option Shares, and the
subsequent sale or other disposition of any Option Shares. In,
addition, you understand that the Company will be required to withhold Federal,
state or local taxes in respect of any compensation income realized by you upon
exercise of the option granted hereunder. To the extent that the Company is
required to withhold any such taxes, you hereby agree that the Company may
deduct from any payments of any kind otherwise due to you an amount equal to the
total federal, state and local taxes required to be so withheld, or if such
payments are inadequate to

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satisfy such Federal, state and local taxes, or if no such payments are due
or, to become due to you, then you agree to provide the Company with cash
funds or make other arrangements satisfactory to the Company regarding such
payment. It is understood that all matters with respect to the total amount
of taxes to be withhold "in respect of any such compensation income shall be
determined by the Board of Directors in its sole discretion.

         12.  ADJUSTMENTS REORGANIZATION RECLASSIFICATION CONSOLIDATION
MERGER OR SALE.

                  (a) In the event that, after the date hereof, the
outstanding shares of the Company's Common Stock shall be increased or
decreased or changed into or exchanged for a different number or kind of
shares of stock or other securities of the Company or of another corporation
through reorganization, merger or consolidation, recapitalization,
reclassification, stock split, split-up, combination or exchange of shares or
declaration of any dividends payable in Common Stock, the Board of Directors
of the Company shall appropriately adjust the number of shares of Common
Stock (and the option price per share) subject to the unexercised portion of
the Option (to the nearest possible full share), and such adjustment shall be
effective and binding for all purposes of this Agreement and the Plan.

                  (b) If any capital reorganization or reclassification of
the capital stock of the Company or any consolidation or merger of the
Company with another entity, or the sale of all or substantially all its
assets to another entity, shall be effected after the date hereof in such a
way that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then
you shall thereafter have the right to receive, upon the basis and upon the
terms and conditions specified in the Option and in lieu of the Shares of
Common Stock of the Company immediately theretofore receivable upon the
exercise of the option, such shares of stock, securities or assets (including
cash) as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of
such stock immediately theretofore so receivable had such reorganization,
reclassification, consolidation, merger or sale not taken place.

         13.  CONTINUATION OF EMPLOYMENT. Neither the Plan nor the option
shall confer upon you any right to continue in the employ of the Company or
any subsidiary or parent, thereof, or limit in any respect the right of the
Company or any subsidiary or parent thereof to terminate your employment or
other relationship with the Company or any subsidiary or parent thereof, as
the came may be, at any time.

         14.  AMENDMENT. Subject to the provisions of the Plan, the Committee
shall have the right to amend this Option, subject your consent, if such
amendment is not favorable to you; provided, however, that your consent shall
not be required for any amendment made pursuant to Section 5.2(a)(x) or
Section 5.2(b)(x) of the Plan.

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         15.  PLAN DOCUMENTS. This Agreement is qualified in its entirety by
reference to the provisions of the Plan, which are hereby incorporated herein
by reference.

         16.  GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware. If any one or
more provisions of this Agreement shall be found to be illegal or
unenforceable in any respect, the validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby.

         Please acknowledge receipt of this Agreement by signing the enclosed
copy of this Agreement in the space provided below and returning it promptly
to the Secretary of the Company.

                                    ALLIANCE DATA SYSTEMS CORPORATION


                                    By
                                       ------------------------------


Accepted and Agreed:

-----------------------------
     Employee Optionee