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             ALLIANCE DATA SYSTEMS CORPORATION AND ITS SUBSIDIARIES
                          EMPLOYEE STOCK PURCHASE PLAN

         The following constitute the provisions of the Alliance Data Systems
Corporation and its Subsidiaries Employee Stock Purchase Plan.

         1.       PURPOSE. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company. It is the intention of the Company to have the
Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the
Code. The provisions of the Plan shall, accordingly, be construed so as to
extend and limit participation in a manner consistent with the requirement of
that section of the Code.

         2.       DEFINITIONS.

                  (a)      "BOARD" means the Board of Directors of the Company.

                  (b)      "CODE" means the Internal Revenue Code of 1986, as
amended.

                  (c)      "COMMON STOCK" means the Common Stock of the Company.

                  (d)      "COMPANY" means Alliance Data Systems Corporation, a
Delaware corporation.

                  (e)      "COMPENSATION" means an Employee's compensation
received by an Employee from the Company or a Designated Subsidiary. By way
of illustration, but not limitation, Compensation means the regular wages,
(i.e. base pay) overtime, commissions, and cash incentives paid to an
Employee but excludes disability pay, workers compensation, severance pay,
service related cash awards, any amounts which constitute tax gross ups of
taxable amounts, and income realized as a result of participation in any
stock option, stock purchase, or similar plan of the Company or any
Designated Subsidiary.

                  (f)      "CONTRIBUTIONS" means all amounts credited to the
account of a participant pursuant to the Plan.

                  (g)      "CORPORATE TRANSACTION" means a sale of all or
substantially all of the Company's assets, or a merger, consolidation or
other capital reorganization of the Company with or into another corporation.

                  (h)      "DESIGNATED SUBSIDIARIES" means the Subsidiaries
that have been designated by the Board from time to time in its sole
discretion as eligible to participate in the Plan; provided however that the
Board shall only have the discretion to designate Subsidiaries if the
issuance of options to such Subsidiary's Employees pursuant to the Plan would
not cause the Company to incur adverse accounting charges.

                  (i)      "EMPLOYEE" means any person, including an Officer,
who is an Employee of the Company and its Designated Subsidiaries for tax
purposes.

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                  (j)      "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.

                  (k)      "OFFERING DATE" means the first business day of each
Offering Period of the Plan.

                  (l)      "OFFERING PERIOD" means a period of three (3)
months commencing on the first trading day of each calendar quarter. The
first Offering Period for the Plan shall be established by the Executive Vice
President and Chief Administrative Officer, provided that it will be no
earlier than the Effective Date of the Plan.

                  (m)      "OFFICER" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and rules and
regulations promulgated thereunder.

                  (n)      "PLAN" means the Alliance Data Systems Corporation
and its Subsidiaries Employee Stock Purchase Plan.

                  (o)      "PURCHASE DATE" means the last trading day of each
Offering Period of the Plan.

                  (p)      "PURCHASE PRICE" means with respect to an Offering
Period an amount equal to 85% of the Fair Market Value (as defined in Section
7(b) below) of a Share of Common Stock on the Offering Date or on the
Purchase Date, whichever, is lower; provided, however, that in the event (i)
of any stockholder-approved increase in the number of Shares available for
issuance under the Plan, and (ii) all or a portion of such additional Shares
are to be issued with respect to the Offering Period that is underway at the
time of such increase ("ADDITIONAL SHARES"), and (iii) the Fair Market Value
of a Share of Common Stock on the date of such increase (the "APPROVAL DATE
FAIR MARKET VALUE") is higher than the Fair Market Value on the Offering Date
for any such Offering Period, then in such instance the Purchase Price with
respect to Additional Shares shall be 85% of the Approval Date Fair Market
Value or the Fair Market Value of a Share of Common Stock on the Purchase
Date, whichever is lower.

                  (q)      "SHARE" means a share of Common Stock, as adjusted in
accordance with Section 19 of the Plan.

                  (r)      "SUBSIDIARY" means a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the
Company or a Subsidiary, whether or not such corporation now exists or is
hereafter organized or acquired by the Company or a Subsidiary.

         3.       ELIGIBILITY.

                  (a)      Any person who is an Employee as of the Offering
Date of a given Offering Period shall be eligible to participate in such
Offering Period under the Plan, subject to the requirements of Section 5(a)
and the limitations imposed by Section 423(b) of the Code.

                  (b)      Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) if
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d)

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of the Code) would own capital stock of the Company and/or hold outstanding
options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or of
any subsidiary of the Company, or (ii) if such option would permit his or her
rights to purchase stock under all employee stock purchase plans (described
in Section 423 of the Code) of the Company and its Subsidiaries to accrue at
a rate that exceeds Twenty-Five Thousand Dollars ($25,000) of the Fair Market
Value (as defined in Section 7(b) below) of such stock (determined at the
time such option is granted) for each calendar year in which such option is
outstanding at any time.

         4.       OFFERING PERIODS. The Plan shall be implemented by a series
of Offering Periods of three (3) months' duration, with new Offering Periods
commencing on or about January 1, April 1, July 1, and October 1 of each year
(or at such other time or times as may be determined by the Board of
Directors). The Plan shall continue until terminated in accordance with
Section 19 hereof. The Board of Directors of the Company shall have the power
to change the duration and/or the frequency of Offering Periods with respect
to future offerings without stockholder approval if such change is announced
at least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected.

         5.       PARTICIPATION.

                  (a)      An eligible Employee may become a participant in
the Plan by completing a subscription agreement and any other required
documents ("Enrollment Documents") provided by the Company and submitting
them to the Company's Human Resources Department or a stock brokerage or
other firm designated by the Company ("Designated Broker") prior to the
applicable Offering Date, unless a later time for submission of the
Enrollment Documents is set by the Board for all eligible Employees with
respect to a given Offering Period. The Enrollment Documents and their
submission may be electronic, as directed by the Company. The Enrollment
Documents shall set forth the percentage or dollar amount of the
participant's Compensation (subject to Section 6(a) below) to be paid as
Contributions pursuant to the Plan.

                  (b)      Payroll deductions shall commence on the first
payroll following the Offering Date and shall end on the last payroll paid on
or prior to the Purchase Date of the Offering Period to which the Enrollment
Documents are applicable, unless sooner terminated by the participant as
provided in Section 10.

         6.       METHOD OF PAYMENT CONTRIBUTIONS.

                  (a)      A participant shall elect to have payroll
deductions made on each payday during the Offering Period in:

                           i.    an amount not less than one percent (1%) and
not more than one hundred percent (100%) in whole percentages or

                           ii.   a specified dollar amount in five-dollar
increments of such participant's Compensation on each payday during the
Offering Period. All payroll deductions made by a participant shall be
credited to his or her account under the Plan. A participant may not make any
additional payments into such account.

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                  (b)      A participant may elect to discontinue his or her
participation in the Plan as provided in Section 10 during an Offering
Period, or increase or decrease the rate or amount of his or her
Contributions with respect to the next Offering Period by completing and
filing with the Company new Enrollment Documents authorizing a change in the
payroll rate. An increase or decrease (other than a discontinuance) in the
rate or amount of a participant's contribution shall be effective at the
beginning of the next Offering Period. The new Enrollment Documents for
increasing or decreasing (other than a discontinuance) must be completed and
received by 4:00 p.m. Eastern Time on the 20th of the month prior to the
Offering Period. If the election is not timely filed, the election will
become effective as of the beginning of the next Offering Period. A
discontinuance of contributions will be effective as soon as practicable
after the election for discontinuance is received. The Committee will
establish procedures for these elections.

                  (c)      Notwithstanding the foregoing, to the extent
necessary to comply with Section 423(b)(8) of the Code and Section 3(b)
herein, an Employee's payroll deductions may be decreased during any Offering
Period scheduled to end during the current calendar year to 0%.

                  (d)      Whenever an Employee's payroll contributions
deductions have been discontinued, to recommence participation in any
subsequent Offering Periods the Employee must complete and file new
Enrollment Documents with the Company as previously defined. The Employee's
recommencement of participation will be effective as of the beginning of the
Offering Period which begins after the Enrollment Documents are received by
the Company in accordance with procedures previously established.

         7.       GRANT OF OPTION.

                  (a)      On the Offering Date of each Offering Period each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Purchase Date a number of Shares of the Company's
Common Stock determined by dividing such Employee's Contributions accumulated
prior to such Purchase Date and retained in the participant's account as of
the Purchase Date by the applicable Purchase Price; subject to any adjustment
pursuant to Section 18 below, and provided further that such purchase shall
be subject to the limitations set forth in Sections 3(b) and 12.

                  (b)      The fair market value of the Company's Common
Stock on a given date (the "FAIR MARKET VALUE") shall be determined by the
Board in its discretion based on the closing sales price of Common Stock for
such date (or, in the event that the Common Stock is not traded on such date,
on the immediately preceding trading date), as reported by the New York Stock
Exchange (NYSE) or, if such price is not reported, the mean of the bid and
asked prices per share of the Common Stock as reported by NYSE or, in the
event the Common Stock is listed on a stock exchange, the Fair Market Value
per share shall be the closing sales price on such exchange on such date (or,
in the event that the Common Stock is not traded on such date on the
immediately preceding trading date), as reported in THE WALL STREET JOURNAL.

         8.       EXERCISE OF OPTION. Unless a participant withdraws from the
Plan as provided in Section 10, his or her option for the purchase of Shares
will be exercised automatically on each Purchase Date of an Offering Period
and the maximum number of Shares subject to the option

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will be purchased at the applicable Purchase Price with the accumulated
Contributions in his or her account. Fractional Shares shall be issued, as
necessary. The Shares purchased upon exercise of an option hereunder shall be
deemed to be transferred to the participant on the Purchase Date. During his
or her lifetime, a participant's option to purchase Shares hereunder is
exercisable only by him or her.

         9.       DELIVERY. As promptly as practicable after a Purchase Date
the number of Shares purchased by each participant upon exercise of his or
her option shall be deposited into an account established in the
participant's name with the Designated Broker. Any payroll deductions
accumulated in a participant's account that are not applied toward the
purchase of Shares on a Purchase Date due to limitations imposed by the Plan
shall be returned to the participant.

         10.      TERMINATION OF EMPLOYMENT.

                  (a)      Upon termination of the participant status as an
Employee prior to the Purchase Date of an Offering Period for any reason,
whether voluntary or involuntary, including retirement or death, the
Contributions credited to his or her account will be refunded to the Employee
through normal payroll processing.

                  (b)      A participant's withdrawal from an offering will
not have any effect upon his or her eligibility to participate in a
succeeding offering or in any similar plan that may hereafter be adopted by
the Company.

         11.      INTEREST. No interest shall accrue on the Contributions of
a participant in the Plan.

         12.      STOCK.

                  (a)      Subject to adjustment as provided in Section 18,
the maximum number of Shares that shall be made available for sale under the
Plan shall be 1,500,000 Shares. If the Board determines that, on a given
Purchase Date, the number of shares with respect to which options are to be
exercised may exceed (1) the number of shares of Common Stock that were
available for sale under the Plan on the Offering Date of the applicable
Offering Period, or (2) the number of shares available for sale under the
Plan on such Purchase Date, the Company shall make a pro rata allocation of
the Shares of Common Stock available for purchase on such Offering Date or
Purchase Date, as applicable, in as uniform a manner as shall be practicable
and as it shall determine in its sole discretion to be equitable among all
participants exercising options to purchase Common Stock on such Purchase
Date, and continue the Plan as then in effect, or that the Company shall make
a pro rata allocation of the Shares available for purchase on such Offering
Date or Purchase Date, as applicable, in as uniform a manner as shall be
practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Purchase Date, and terminate the Plan pursuant to Section 19 below. The
Company may make a pro rata allocation of the Shares available on the
Offering Date of any applicable Offering Period pursuant to the preceding
sentence, notwithstanding any authorization of additional Shares for issuance
under the Plan by the Company's stockholders subsequent to such Offering Date.

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                  (b) The participant shall have no interest or voting right in
Shares covered by his or her option until such option has been exercised.

                  (c) Shares to be delivered to a participant under the Plan
will be registered in the name of the participant or in the name of the
participant and his or her spouse.

         13. ADMINISTRATION. The Board, or a committee named by the Board, shall
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan to interpret the Plan and to make all
other determinations necessary or advisable for the administration of the Plan.

         14. DESIGNATION OF BENEFICIARY.

             (a) A participant may designate a beneficiary who is to receive
any Shares and cash, if any, from the participant's account under the Plan in
the event of such participant's death subsequent to the end of an Offering
Period but prior to delivery to him or her of such Shares and cash. In
addition, a participant may designate a beneficiary who is to receive any
shares from the participant's account under the Plan in the event of such
participant's death prior to the Purchase Date of an Offering Period. If a
participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
Beneficiary designations under this Section 14(a) shall be made as directed
by the Human Resources Department of the Company, which may require electronic
submission of the required documentation with the Designation Broker.

             (b) Such designation of beneficiary may be changed by the
participant and his or her spouse if any) at any time by submission of the
required notice which required notice may be electronic. In the event of the
death of a participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such participant's death the Company
shall deliver such Shares and/or cash to the executor or administrator of the
estate of the participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its discretion, may
deliver such Shares and/or cash to the spouse or to any one or more dependents
or relatives of the participant, or if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may designate.

         15. TRANSFERABILITY. Neither Contributions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
Shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 14) by the participant. Any such attempt
at assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 10.

         16. USE OF FUNDS. All Contributions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such Contributions.

         17. REPORTS. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be provided to participating
Employees by the Company or the


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Designated Broker at least annually, which statements will set forth the
amounts of Contributions, the per Share Purchase Price, the number of Shares
purchased and the remaining cash balance, if any.

         18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION CORPORATE TRANSACTIONS.

             (a)   ADJUSTMENT. Subject to any required action by the
stockholders of the Company, the number of Shares covered by each option under
the Plan that has not yet been exercised, the number of Shares that have been
authorized for issuance under the Plan but have not yet been placed under option
(collectively, the "RESERVES"), the maximum number of Shares of Common Stock
that may be purchased by a participant in an Offering Period, the number of
Shares of Common Stock set forth in Section 12(a)(i) above, and the price per
Share of Common Stock covered by each option under the Plan that has not yet
been exercised, shall be proportionately adjusted for any increase or decrease
in the number of issued Shares resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock
(including any such change in the number of Shares of Common Stock effected in
connection with a change in domicile of the Company), or any other increase or
decrease in the number of Shares effected without receipt of consideration by
the Company; provided however that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares subject to an option.

             (b)   CORPORATE TRANSACTION. In the event of a dissolution or
liquidation of the Company, any Offering Period then in progress will terminate
immediately prior to the consummation of such action, unless otherwise provided
by the Board. In the event of a Corporate Transaction, each option outstanding
under the Plan shall be assumed or an equivalent option shall be substituted by
the successor corporation or a parent or Subsidiary of such successor
corporation. In the event that the successor corporation refuses to assume or
substitute for outstanding options, each Offering Period then in progress shall
be shortened and a new Purchase Date shall be set (the "NEW PURCHASE DATE"), as
of which date any Offering Period then in progress will terminate. The New
Purchase Date shall be on or before the date of consummation of the transaction
and the Board shall notify each participant in writing, at least ten (10) days
prior to the New Purchase Date, that the Purchase Date for his or her option has
been changed to the New Purchase Date and that his or her option will be
exercised automatically on the New Purchase Date, unless prior to such date he
or she has withdrawn from the Offering Period as provided in Section 10. For
purposes of this Section 18, an option granted under the Plan shall be deemed to
be assumed, without limitation, if, at the time of issuance of the stock or
other consideration upon a Corporate Transaction, each holder of an option under
the Plan would be entitled to receive upon exercise of the option the same
number and kind of shares of stock or the same amount of property, cash or
securities as such holder would have been entitled to receive upon the
occurrence of the transaction if the holder had been, immediately prior to the
transaction, the holder of the number of Shares of Common Stock covered by the
option at such time (after giving effect to any adjustments in the number of
Shares covered by the option as provided for in this Section 18); provided
however that if the consideration


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received in the transaction is not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the
Board may, with the consent of the successor corporation, provide for the
consideration to be received upon exercise of the option to be solely common
stock of the successor corporation or its parent equal in Fair Market Value
to the per Share consideration received by holders of Common Stock in the
transaction.

         The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per Share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights,
offerings or other increases or reductions of Shares of its outstanding Common
Stock, and in the event of the Company's being consolidated with or merged into
any other corporation.

         19.   AMENDMENT OR TERMINATION.

               (a) The Board may at any time and for any reason terminate or
amend the Plan. Except as provided in Section 18, no such termination of the
Plan may affect options previously granted, provided that the Plan or an
Offering Period may be terminated by the Board on a Purchase Date or by the
Board's setting a new Purchase Date with respect to an Offering Period then in
progress if the Board determines that termination of the Plan and/or the
Offering Period is in the best interests of the Company and the stockholders or
if continuation of the Plan and/or the Offering Period would cause the Company
to incur adverse accounting charges as a result of a change after the effective
date of the Plan in the generally accepted accounting rules applicable to the
Plan. Except as provided in Section 18 and in this Section 19, no amendment to
the Plan shall make any change in any option previously granted that adversely
affects the rights of any participant. In addition, to the extent necessary to
comply with Rule 16b-3 under the Exchange Act, or under Section 423 of the Code
(or any successor rule or provision or any applicable law or regulation), the
Company shall obtain stockholder approval in such a manner and to such a degree
as so required.

               (b) Without stockholder consent and without regard to whether
any participant rights may be considered to have been adversely affected, the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable that
are consistent with the Plan.

         20.   NOTICES. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.


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         21.   CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such Shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and
regulations promulgated thereunder, applicable state securities laws and the
requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.

         As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.

         22.   TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective
upon approval by the Company's Board of Directors. It shall continue in
effect for a term of ten (10) years unless sooner terminated under Section 19.

         23.   ADDITIONAL RESTRICTIONS OF RULE 16b-3. The terms and
conditions of options granted hereunder to, and the purchase of Shares by,
persons subject to Section 16 of the Exchange Act shall comply with the
applicable provisions of Rule 16b-3. This Plan shall be deemed to contain,
and such options shall contain, and the Shares issued upon exercise thereof
shall be subject to, such additional conditions and restrictions as may be
required by Rule 16b-3 to qualify for the maximum exemption from Section 16
of the Exchange Act with respect to Plan transactions.


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