Document:

exv10w28

 

Exhibit 10.28

Confidential – For Internal Use Only

Do Not Distribute Outside of Alliance Data

ALLIANCE DATA

2006 Incentive Compensation Plan

(As Amended and Restated Effective January 1, 2006)

Effective January 1 – December 31, 2006

 

 

Confidential — For Internal Use Only

Do Not Distribute Outside of Alliance Data

Table of Contents

	 	 	 	 	 
	Plan Philosophy
	 	 	3	 
	 
	 	 	 	 
	Effective Date
	 	 	3	 
	 
	 	 	 	 
	Eligibility
	 	 	3	 
	 
	 	 	 	 
	Base Compensation Used in Calculating IC Payout
	 	 	4	 
	 
	 	 	 	 
	Determining IC Targets
	 	 	4	 
	 
	 	 	 	 
	IC Components
	 	 	4	 
	 
	 	 	 	 
	Standard Weightings Chart for IC Components
	 	 	6	 
	 
	 	 	 	 
	Determining Payment Calculations
	 	 	7	 
	 
	 	 	 	 
	Timing of Payment
	 	 	7	 
	 
	 	 	 	 
	Status Changes That May Affect IC Targets and Payouts
	 	 	8	 
	 
	 	 	 	 
	Other Terms and Conditions
	 	 	9	 
	 
	 	 	 	 
	Attachment A — Performance/Payout Table
	 	 	A-1	 
	 
	 	 	 	 
	Attachment B — Individual Expectations Performance/Payout Table
	 	 	B-1	 

			
	 	 	 
	Effective January 1 — December 31, 2006
	 	2

 

 

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Plan Philosophy 

The intent of the Alliance Data Incentive Compensation (“IC”) Plan (“Plan”) is to:

	•	 	Provide IC to round out an eligible associate’s total compensation package in order to attract and retain high
performing associates;
	 
	•	 	Improve organizational performance by driving financial and individual performance and increasing Associate
Satisfaction;
	 
	•	 	Improve the alignment between strategic imperatives and initiatives with the Alliance Data Scorecard; and
	 
	•	 	Provide an opportunity for associates to share in the success they help create.

Participation in this Plan reflects the importance of an associate’s position and the impact that
the associate’s performance can have on the success of the Company.

Effective Date 

The Plan Year is January 1, 2006 through December 31, 2006.

Eligibility

Subject to the provisions of this Plan, Associates are eligible to receive IC under this Plan
if they are:

	•	 	Employed by Alliance Data Systems Corporation or any of its subsidiaries (collectively, the “Company”) and are either
(a) a member of the Alliance Data Senior Leadership Team, as defined by the title Director through Senior Vice
President, or (b) in an Exempt position that is designated by the Senior Director of Corporate Compensation as IC
eligible (currently jobs in pay bands K-Q);
	 
	•	 	Employed or promoted into an IC eligible position by the Company before October 1, 2006;
	 
	•	 	On active status on the date of the award distribution or are eligible under the guidelines for retirement, disability
or leave of absence; and
	 
	•	 	Designated by supervisor as having an Incentive Compensation target as a component of their overall pay package.

In the case of part-time associates in one of the specified pay grades or pay bands listed above,
they must be working a schedule equal to a minimum of 25 hours per week in order to be eligible for
this IC Plan.

Associates are not eligible if they:

	•	 	Do not meet the eligibility requirements listed above;
	 
	•	 	Are participating in a sales commission or other incentive plan, unless approved by the appropriate Executive Vice
President of a Line of Business (“LOB”) or of a Business Support Group (“BSG”) and confirmed by the LOB/BSG Human
Resources Executive and the Senior Director of Corporate Compensation;
	 
	•	 	Are temporary or on-call associates or contractors;

			
	 	 	 
	Effective January 1 — December 31, 2006
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	•	 	Are hired on or after October 1, 2006 or are promoted into an IC eligible pay grade/pay band on or after October 1,
2006; or
	 
	•	 	Are on a documented performance improvement plan as of the date of award distribution.

Being eligible for the IC Plan does not mean associates automatically participate in the program.
The associate’s manager, with appropriate approvals, must specifically designate that incentive
compensation is a component of the associate’s overall pay package.

Base Compensation Used in Calculating IC Payout

Annualized base pay as of October 1, 2006 will be used as part of the IC calculation. The IC
target percentage(s) will be applied to October 1, 2006 base salary for purposes of calculating the
dollar target amount.

Determining IC Targets

Each participant has an IC target. IC targets are determined by the participant’s manager
using the guidelines established by the Senior Director of Corporate Compensation in the following
table:

	 	 	 
	Band Level 	 	IC Target
	(Senior Vice President) Q

	 	0% - 45%
	(Vice President)P

	 	0% - 35%
	(Director/Senior Director) O

	 	0% - 25%
	M & N

	 	0% - 15%
	K & L

	 	0% - 10%

IC targets are set in 5% increments. When determining the appropriate target, the
following are considered:

	•	 	The associate’s anticipated contribution to the organization’s success; and
	 
	•	 	Targeted total compensation package that is competitive with similar positions in the appropriate labor market or
industry.

IC targets will be set at the beginning of the Plan year or at time of hire. If the IC target
percentage changes, the manager will explain how the target will be prorated for payout purposes
(if appropriate) and whether or not the performance expectations and weightings will change for the
current Plan year.

IC Components

All performance goals should be established and communicated to the participant at the
beginning of the Plan year or as soon as feasible after becoming a participant in the Plan. The
degrees to which these performance goals are accomplished have an impact on the actual incentive
earned from the Plan.

Alliance Data Revenue and EBITDA Targets: The Revenue and Earnings Before Interest, Taxes,
Depreciation and Amortization (“EBITDA”) targets generally make up 25%-75% of a participant’s IC
payment

			
	 	 	 
	Effective January 1 — December 31, 2006
	 	4

 

 

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(see Standard Weightings Chart below). LOBs are not required to have an Alliance Data
Revenue or EBITDA component if they utilize LOB Revenue and EBITDA targets.

LOB Revenue and EBITDA Targets: There are a number of financial measures that can be used to
determine success for a particular area or individual. The appropriate Executive Vice President,
along with the LOB Human Resources Executive and the Senior Director of Corporate Compensation will
determine if sub-measures will be used for a particular LOB or a particular individual. However,
it is intended that the Board of Directors approve the achievement of LOB Revenue and EBITDA for
payout purposes.

Associate Satisfaction Index: The annual administration of the Associate Survey and the
tracking of data (i.e., improvement expectations) are designed to motivate ongoing attention to
issues that affect quality of client service, as well as the development and retention of
associates. The Associate Satisfaction Index (“ASI”) is a component of the Associate Survey
process. The ASI component is designed to recognize and incent critical non-financial
organizational factors that contribute to sustainable business performance and provide a
competitive advantage in recruiting, developing and retaining high performing associates. Targets
are set at the beginning of each year along with a payout schedule.

Individual Expectations: Participants may have a portion of their IC payments based upon the
achievement of individual expectations or team strategic imperatives (or action steps to accomplish
the strategic imperatives) as determined between the participant and his or her manager.
Achievement must fall into one of three (3) categories: accomplishments fall below expectations;
fully meets and/or exceeds the requirements; or has achieved/contributed well beyond expectations.
The percentage of payout will be 80%, 100% or 110% depending on the level of achievement. If
performance/accomplishments fall below 80% achievement, no payout will be made for the Individual
Expectation component.

Associate performance is defined as obtaining the needed results of the job and living the Company
values. The associate’s manager will focus on the following factors to determine whether and to
what extent the associate met his/her yearly goals for purposes of IC:

	 	•	 	Results - To what extent were results at, above, or below expectations and/or standards?
	 
	 	•	 	Values - To what extent did the associate demonstrate/live the values?

Differentiation of performance is considered within three broad levels. Performance toward
objectives and manager’s expectations within each category can be defined by meeting some or all of
the specified characteristics below:

	 	•	 	Accomplishments fall below expectations: associate completes 80 – 95% of individual
objectives and expectations. Associate falls short of completing all of the objectives
that are important to business strategy. Quality of work is less than expected and/or
work falls short of productivity, financial or schedule expectations.
	 
	 	•	 	Fully meets and/or exceeds the requirements: associate completes up to 110% of
objectives or at least 95% of objectives with extenuating circumstances. The associate’s
completed objectives are closely tied to business strategy and success. The associate’s
work is of sufficient quality and meets productivity, financial and schedule
expectations.

			
	 	 	 
	Effective January 1 — December 31, 2006
	 	5

 

 

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	 	•	 	Achieved/contributed well beyond expectations: associate completes more objectives
than committed to in all cases. Completed objectives are most important to business
strategy. Work
exceeds all quality requirements and performed more efficiently, cheaply and/or quickly
than expected.

Less than 80% completion of individual objectives is below minimum level of performance and no IC
payout will be made for the Individual Expectation component.

Standard Weightings Chart for IC Components

IC objectives are weighted to drive financial and individual performance and increase
Associate Satisfaction. LOBs have the ability to use specific components that closely reflect
Alliance Data Scorecard measurements. Standard weightings have been established, however,
LOBs/BSGs may adjust the standard weightings and adjust the standard components to include
measurable financial drivers, such as bad debt or specific client revenue goals, with review and
approval by the appropriate Executive Vice President, along with the LOB/BSG Human Resources
Executive and the Senior Director of Corporate Compensation. All measures that deviate from the
standard financial measures must be objective and quantifiable.

The participant’s band/job level as of October 1, 2006 will be used to determine the overall
weightings. The standard components and weightings are listed in the chart below. In certain
cases, LOBs/BSGs may use discretion to determine the overall weightings with the approval of the
associate’s supervisor and the LOB/BSGs Human Resources Executive.

Approved changes to the standard components and weightings should be communicated to associates as
soon as feasible after the beginning of the plan year.

2006 IC Plan

Standard Components and Weightings

	 	 	 	 	 	 	 	 	 
	 	 	 	 	Senior	 	Exempts with	 	All
	 	 	 	 	Leadership	 	Direct Supervisory	 	Other
	 	 	 	 	Team1	 	Responsibility	 	Exempts2
	LOB	 	 
	 	 	 	 	 	 
	 	 	LOB EBITDA
	 	50%	 	25%	 	25%
	 	 	LOB Revenue
	 	25%	 	25%	 	25%
	 	 	Associate Satisfaction3
	 	25%	 	25%	 	0%
	 	 	Individual Expectations4
	 	0%	 	25%	 	50%
	 	 	 
	 	 	 	 	 	 
	BSG	 	 
	 	 	 	 	 	 
	 	 	Alliance Data EBITDA
	 	50%	 	25%	 	25%
	 	 	Alliance Data Revenue
	 	25%	 	25%	 	25%
	 	 	Associate Satisfaction3
	 	25%	 	25%	 	0%
	 	 	Individual Expectations4
	 	0%	 	25%	 	50%

 

			
	1	 	The LOB/BSG executive has some flexibility to establish targets that are
important for the success of his or her respective area. The Individual Expectations weighting
should not be used for SLT members unless it is used to drive financial performance. Any changes
to the standard components, weightings or payout tables should be sent to the Senior Director of
Corporate Compensation for approval by the appropriate Executive Vice President, along with the
LOB/BSG Human Resources Executive.

			
	 	 	 
	Effective January 1 — December 31, 2006
	 	6

 

 

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	2	 	The LOB/BSG executive has some flexibility in reassigning weightings with approval
from the Senior Director of Corporate Compensation.
	 
	3	 	Some participants, such as National Account Managers (“NAMs”), may have more emphasis
on client relationships than Associate Satisfaction. LOB/BSG executives can determine how they
want to distribute the weightings for these positions.
	 
	4	 	Eligible exempt associates below the Director level should have Individual
Expectations that support strategic imperatives ensuring the success of their LOB/BSG and the
Company.

Determining Payment Calculations

Payment calculations are determined as provided below. With proper approval from the Senior
Director of Corporate Compensation, the appropriate Executive Vice President, and the LOB Human
Resources Executive, LOBs may provide for an alternate payout table for specific LOB measures
except for LOB Revenue or EBTIDA. LOB Revenue and EBITDA must follow the table specified in
Attachment B. A minimum of 100% achievement must be met for LOB Revenue and EBTIDA before any
other measures will payout over 100%.

Attachment A: Performance/Payout Table for Revenue, EBITDA, Associate Satisfaction and other
measures as approved.

     Identifies the relationship between level of performance and the percentage to be paid for the
achievement of the Alliance Data Revenue & Alliance Data EBITDA, LOB Revenue & LOB EBITDA, and ASI.
A minimum of 80% must be achieved for any payment to be received; performance of 120% or greater
receives the maximum payment of 150%. Percentages are rounded to the nearer whole number.

     For BSGs, both the Alliance Data EBITDA and Alliance Data Revenue targets must be
achieved at 100% or greater in order for ASI to be paid above 100% of target. For LOBs, both the
LOB EBITDA and LOB Revenue targets must be achieved at 100% or greater in order for ASI and
any LOB specific financial measures to be paid above 100% of target.

Attachment B: Performance/Payout Table for Individual Expectations

     Identifies the relationship between level of performance and the percentage to be paid for the
achievement of Individual Expectations. A minimum of 80% accomplishment of standard objectives
must be achieved for any payment to be received.

     For BSGs, both the Alliance Data EBITDA and Revenue targets must be achieved at 100%
or greater in order for Individual Expectations to be paid above 100% of target. For LOBs, both
the LOB EBITDA and LOB Revenue targets must be achieved at 100% or greater in order for
Individual Expectations to be paid above 100% of target.

Timing of Payment

IC earned for the 2006 Plan year is paid in the first quarter of the following year. A
participant must be actively employed on the date payment is made to receive his or her award. Any
participant who is on an approved leave

			
	 	 	 
	Effective January 1 — December 31, 2006
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of absence or disability leave but is still on active status will receive his or her payment even
if he or she is not actively at work on the date payment is made.

Status Changes That May Affect IC Targets and Payout

Status changes can affect the amount of incentive a participant receives. Status changes
include:

	•	 	Transfers;
	 
	•	 	New Hires;
	 
	•	 	IC Target Changes;
	 
	•	 	Leaves of Absence; and
	 
	•	 	Terminations.

Transfers: The LOB or BSG a participant is assigned to as of October 1, 2006 will be used to
determine any payments dependent upon LOB/BSG level of performance (see Standard Weightings Chart).
Year-end performance for the LOB/BSG will be used to calculate the incentive amount to be paid for
this component. No prorating will be done for the amount of time spent in another LOB/BSG or in a
different IC eligible grade over the Plan year without prior approval of the appropriate Executive
Vice President, along with the LOB/BSG Human Resources Executive and the Senior Director of
Corporate Compensation.

For the ASI component, leaders who have moved or transferred during the course of the year, and who
could therefore have their compensation tied to different reporting groups, will be reviewed as
follows:

	•	 	Determine where the associate spent the most time during the action planning cycle;
	 
	•	 	Assess where the associate had the greatest opportunity to influence Associate Satisfaction; and
	 
	•	 	Before the end of December, the appropriate HR Executive will make a report recommendation to the Senior Director of
Corporate Compensation, to be approved by the appropriate Executive Vice President, along with the LOB/BSG Human
Resources Executive.

New Hires: For associates hired between January 1 and September 30, 2006 into an IC eligible
position, the base salary as of October 1, 2006 will be used to calculate the IC dollar target.
The dollar target will be prorated as follows:

	 	 	 	 	 
	Hired Between These Dates	 	Prorated Amount
	January 1 – March 31
	 	 	100	%
	April 1 – June 30
	 	 	75	%
	July 1 – September 30
	 	 	50	%
	October 1 – December 31
	 	No IC

For example, if an associate is hired on March 12, the IC dollar target will not be prorated. If
an associate is hired on July 4, then the IC dollar target will be prorated by 50%.

IC Target Changes: For current Company associates, if there is a promotion or a grade level change
during the Plan year but before October 1 which results in either (a) an associate becoming newly
IC eligible or (b) a

			
	 	 	 
	Effective January 1 — December 31, 2006
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change in IC target, the IC target will be prorated according to the chart below depending on the
associate’s IC eligible effective date. Note: changes in IC targets after October 1, 2006 will not
be used to calculate IC payout for the 2006 Plan year.

	 	 	 	 	 
	 	 	Prorated Amount For
	IC Eligible Effective Date Between These Dates 	 	Old/New IC % Target
	January 1 – March 31
	 	 	0% / 100	%
	April 1 – June 30
	 	 	25% / 75	%
	July 1 – September 30
	 	 	50% / 50	%
	October 1 – December 31
	 	 	100% / 0	%

The base salary as of October 1 will be used to calculate the dollar target, even if there is a
corresponding change in base salary at the time of the promotion or IC target change. For example,
a grade level change in April results in an IC target change from 5% to 10% and a base salary
change from $35,000 to $40,000. The base salary on October 1 is $40,000, so that is the salary
used in the calculation. The IC dollar target is then calculated using the following formula:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	10/01 Base	 	IC	 	Target	 	Prorate	 	Subtotal
	Old
	 	$	40,000	 	 	 	5	%	 	$	2,000	 	 	 	25	%	 	$	500	 
	New
	 	$	40,000	 	 	 	10	%	 	$	4,000	 	 	 	75	%	 	$	3,000	 
	TOTAL
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	3,500	 

The participant’s manager should communicate to the participant the new weightings of financial and
Individual Expectations (if applicable).

Leaves of Absence: If a participant takes a leave of absence in excess of twelve (12) weeks, either
paid or unpaid, during the Plan year, he or she will receive a prorated award. Leaves of absence
under twelve (12) weeks are not prorated. For any part of a week that a participant is on a leave
of absence over twelve (12) weeks, the IC payment will be prorated by one week. For instance, if a
participant is on leave for 12 weeks and 2 days, he or she will receive 51/52nds of the normal IC
payout. If a participant is on leave for 13 weeks and 2 days, then he or she will receive 50/52nds
of the normal IC payout and so on.

Terminations: If a participant terminates his or her position voluntarily or involuntarily during
the Plan year, he or she will not be eligible for an IC payment because he or she would not
be on active status on the date of the award distribution. If a participant retires, becomes
disabled or dies during the Plan year, he or she may be eligible for a prorated award at the
discretion of the appropriate Executive Vice President, along with the LOB/BSG Human Resources
Executive and the Senior Director of Corporate Compensation. In the event of death, any incentive
award is made to the beneficiary named in the Company-paid life insurance program.

     Other Terms and Conditions

	•	 	All decisions by the Company will be final in the
interpretation and administration of the Plan and shall lie
within the Company’s sole and absolute discretion. Decisions
shall be final, conclusive and binding on all parties
concerned.

			
	 	 	 
	Effective January 1 — December 31, 2006
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	•	 	This Plan does not constitute a contract for the
participant’s continued employment with the Company. All
Company associates are employed “at-will” which means either
the Company or the associate may terminate the employment
relationship at any time with or without cause.
	 
	•	 	Participant’s rights under the Plan may not be assigned or
transferred in any way, except as otherwise set forth herein.
	 
	•	 	The Alliance Data 2006 Incentive Compensation Plan may be
amended, modified, suspended or terminated by the Company at
any time, without prior consent by or prior notice to
associates. The Company at its sole discretion may change
objectives at any time without prior consent by or prior
notice to associates.
	 
	•	 	The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make
other segregation of assets to assure the payment of the
amounts under the Plan. Rights to the payment of amounts
under the Plan shall be no greater than the rights of the
Company’s general creditors.
	 
	•	 	Texas state law governs the validity, construction,
interpretation, administration and effect of the Plan and the
substantive laws, but not the choice of law rules of the
State of Texas, shall govern rights relating to the Plan.
	 
	•	 	Generally, all applicable employment and tax deductions plus
401(k) contribution deferrals will be withheld from the IC
payout.
	 
	•	 	No associate has the right nor is guaranteed the right to
participate in the Plan by virtue of being an associate or
fulfilling any specific position with the Company. Selection
for participation in the Plan is solely within the discretion
of the Company. The Company may offer participation in the
Plan to additional associates or terminate the participation
of any participant in the Plan at any time during the Plan
Year.
	 
	•	 	Revenues and earnings classified as “windfalls” or business
losses may or may not be excluded in whole or in part from
the calculation of Revenue and EBITDA at the discretion of
the Company.
	 
	•	 	Notice to participate in the Plan shall not impair or limit
the Company’s rights to transfer, promote or demote Plan
participants to other jobs or to terminate their employment,
nor shall it create any claim or right to receive any payment
under the Plan or any right to be retained in the employ of
the Company.
	 
	•	 	The Plan is established for the current fiscal year. There
shall be no obligation on the part of the Company to continue
the Plan in the same or modified form for any future years.
	 
	•	 	In the event that a participant has a dispute concerning the
administration of this Plan, it shall first be submitted in
writing to the Senior Director of Corporate Compensation. In
the event that the Senior Director of Corporate Compensation
does not provide a response satisfactory to the participant
within 30 business days, the participant may submit the
dispute in writing within five business days thereafter to
the EVP, Human Resources, whose decision regarding the
dispute shall be final and binding on each participant or
person claiming under the Plan.

			
	 	 	 
	Effective January 1 — December 31, 2006
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	•	 	The Plan is effective January 1, 2006, and supersedes and
replaces all previous IC Plans. All such previous plans,
unless earlier terminated, are terminated at midnight,
December 31, 2005. If not renewed by the Company, this Plan
will automatically terminate on December 31, 2006.
	 
	•	 	In the event an eligible associate’s performance falls below
satisfactory standards during the Plan year, the associate
may receive a reduced IC payment, at the discretion of the
Company, regardless of the performance results of the
Company, LOB, BSG or the ASI results (if applicable).
	 
	•	 	The Company, at its sole discretion, may adjust or modify the
methodology for calculating IC payments, the eligibility for
receiving IC payments, and the actual amount of IC payments.
All adjustments or modifications must be approved by the EVP,
Human Resources, the appropriate Executive Vice President,
the LOB/BSG Human Resources Executive and the Senior Director
of Corporate Compensation.

			
	 	 	 
	Effective January 1 — December 31, 2006
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Attachment A

PERFORMANCE/PAYOUT TABLE

FOR REVENUE, EBITDA, ASSOCIATE SATISFACTION

	 	 	 	 	 	 	 	 	 	 	 
	 	 	% of Objective(s)	 	%	 	 
	 	 	Achieved*	 	Payout*	 	 
	 

	 	79% or less
	 	 	0	%	 	 
	80% is the threshold for performance
achievements to result in a payout.à

	 	 	80	%	 	 	65	%	 	 
	 

	 	 	81	%	 	 	67	%	 	 
	 

	 	 	82	%	 	 	69	%	 	 
	 

	 	 	83	%	 	 	70	%	 	 
	 

	 	 	84	%	 	 	72	%	 	 
	 

	 	 	85	%	 	 	74	%	 	 
	 

	 	 	86	%	 	 	76	%	 	 
	 

	 	 	87	%	 	 	77	%	 	 
	 

	 	 	88	%	 	 	79	%	 	 
	 

	 	 	89	%	 	 	81	%	 	 
	 

	 	 	90	%	 	 	83	%	 	 
	 

	 	 	91	%	 	 	84	%	 	 
	 

	 	 	92	%	 	 	86	%	 	 
	 

	 	 	93	%	 	 	88	%	 	 
	 

	 	 	94	%	 	 	89	%	 	 
	 

	 	 	95	%	 	 	91	%	 	 
	 

	 	 	96	%	 	 	93	%	 	 
	 

	 	 	97	%	 	 	95	%	 	 
	 

	 	 	98	%	 	 	96	%	 	 
	 

	 	 	99	%	 	 	98	%	 	 
	 

	 	 	100	%	 	 	100	%	 	ß100% is the target for performance achievements to receive 100% payout.
	 

	 	 	101	%	 	 	102.5	%	 	 
	 

	 	 	102	%	 	 	105.0	%	 	 
	 

	 	 	103	%	 	 	107.5	%	 	 
	 

	 	 	104	%	 	 	110.0	%	 	 
	 

	 	 	105	%	 	 	112.5	%	 	 
	 

	 	 	106	%	 	 	115.0	%	 	 
	 

	 	 	107	%	 	 	117.5	%	 	 
	 

	 	 	108	%	 	 	120.0	%	 	 
	 

	 	 	109	%	 	 	122.5	%	 	 
	 

	 	 	110	%	 	 	125.0	%	 	 
	 

	 	 	111	%	 	 	127.5	%	 	 
	 

	 	 	112	%	 	 	130.0	%	 	 
	 

	 	 	113	%	 	 	132.5	%	 	 
	 

	 	 	114	%	 	 	135.0	%	 	 
	 

	 	 	115	%	 	 	137.5	%	 	 
	 

	 	 	116	%	 	 	140.0	%	 	 
	 

	 	 	117	%	 	 	142.5	%	 	 
	 

	 	 	118	%	 	 	145.0	%	 	 
	 

	 	 	119	%	 	 	147.5	%	 	 
	 

	 	120% or greater
	 	 	150.0	%	 	ß150% is the maximum payout level.

For business support groups, both Alliance Data EBITDA and Alliance Data Revenue targets
must be achieved at 100% or greater in order for ASI to be paid above 100% of target. For lines of
business, both LOB EBITDA and LOB Revenue targets must be achieved at 100% or greater in
order for ASI or any LOB specific measure to be paid above 100% of target.

			
	 	 	 
	Effective January 1 — December 31, 2006
	 	A-1

 

 

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Attachment B

PERFORMANCE/PAYOUT TABLE

FOR INDIVIDUAL EXPECTATIONS

	 	 	 	 	 	 	 	 	 
	 	 	% of Objective(s)	 	%	 	 
	 	 	Achieved*	 	Payout*	 	 
	 

	 	Below Minimum
	 	 	0	%	 	 
	80% performance is the threshold for
performance achievements to result in
a payout. à

	 	Accomplishments fall below expectations
	 	 	80	%	 	 
	 

	 	Fully meets and/or exceeds the requirements
	 	 	100	%	 	ßFully meets and/or exceeds the
requirements is the target for
performance achievements to receive 100%
	110% is the maximum payout level. à

	 	Has achieved/contributed well beyond expectations
	 	 	110	%	 	 

For business support groups, both Alliance Data EBITDA and Alliance Data Revenue targets
must be achieved at 100% or greater in order for Individual Expectations to be paid above 100% of
target. For lines of business, both LOB EBITDA and LOB Revenue targets must be achieved at
100% or greater in order for Individual Expectations to be paid above 100% of target.

			
	 	 	 
	Effective January 1 — December 31, 2006
	 	B-1

 

 

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ALLIANCE DATA

2006 Incentive Compensation Plan

for Retail and Alliance Data

Consolidated

(As Amended and Restated Effective January 1, 2006)

Effective January 1 — December 31, 2006

 

 

Confidential
— For Internal Use Only

 Do Not Distribute Outside of Alliance Data

Table of Contents

	 	 	 	 	 
	Plan Philosophy

	 	 	3	 
	 
	 	 	 	 
	Effective Date

	 	 	3	 
	 
	 	 	 	 
	Eligibility

	 	 	3	 
	 
	 	 	 	 
	Base Compensation Used in Calculating IC Payout

	 	 	4	 
	 
	 	 	 	 
	Determining IC Targets

	 	 	4	 
	 
	 	 	 	 
	IC Components

	 	 	4	 
	 
	 	 	 	 
	Standard Weightings Chart for IC Components

	 	 	6	 
	 
	 	 	 	 
	Determining Payment Calculations

	 	 	7	 
	 
	 	 	 	 
	Timing of Payment

	 	 	8	 
	 
	 	 	 	 
	Status Changes That May Affect IC Targets and Payouts

	 	 	8	 
	 
	 	 	 	 
	Other Terms and Conditions

	 	 	10	 
	 
	 	 	 	 
	Attachment A — Revenue and EBITDA Performance/Payout Table

	 	 	A-1	 
	 
	 	 	 	 
	Attachment B — Associate Satisfaction and LOB Specific Measures Performance/Payout Table

	 	 	B-1	 
	 
	 	 	 	 
	Attachment B — Individual Expectations Performance/Payout Table

	 	 	C-1	 
	 
	 	 	 	 

			
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Plan Philosophy

The intent of the Alliance Data Incentive Compensation (“IC”) Plan (“Plan”) is to:

	•	 	Provide IC to round out an eligible associate’s total compensation package in order to
attract and retain high performing associates;

	•	 	Improve organizational performance by driving financial and individual performance and
increasing Associate Satisfaction;

	•	 	Improve the alignment between strategic imperatives and initiatives with the Alliance Data
Scorecard; and
	 
	•	 	Provide an opportunity for associates to share in the success they help create.

Participation in this Plan reflects the importance of an associate’s position and the impact that
the associate’s performance can have on the success of the Company.

Effective Date

The Plan Year is January 1, 2006 through December 31, 2006.

Eligibility

Subject to the provisions of this Plan, Associates are eligible to receive IC under this Plan if
they are:

	•	 	Employed by Alliance Data Systems Corporation or any of its subsidiaries (collectively, the
“Company”) and are either (a) a member of the Alliance Data Senior Leadership Team, as defined by the title
Director through Senior Vice President, or (b) in an Exempt position that is designated by the Senior
Director of Corporate Compensation as IC eligible (currently jobs in pay bands K-Q);

	•	 	Employed or promoted into an IC eligible position by the Company before October 1, 2006;

	•	 	On active status on the date of the award distribution or are eligible under the guidelines
for retirement, disability or leave of absence; and

	•	 	Designated by supervisor as having an Incentive Compensation target as a component of their
overall pay package.

In the case of part-time associates in one of the specified pay grades listed above, they must be
working a schedule equal to a minimum of 25 hours per week in order to be eligible for this IC
Plan.

Associates are not eligible if they:

	•	 	Do not meet the eligibility requirements listed above;

	•	 	Are participating in a sales commission or other incentive plan, unless approved by the
appropriate Executive Vice President of a Line of Business (“LOB”) or of a Business Support Group (“BSG”)
and confirmed by the LOB/BSG Human Resources Executive and the Senior Director of Corporate
Compensation;

	•	 	Are temporary or on-call associates or contractors;
	 

			
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	•	 	Are hired on or after October 1, 2006 or are promoted into an IC eligible pay grade on or after October 1,
2006; or

	•	 	Are on a documented performance improvement plan as of the date of award distribution.

Being eligible for the IC Plan does not mean associates automatically participate in the program.
The associate’s manager, with appropriate approvals, must specifically designate that incentive
compensation is a component of the associate’s overall pay package.

Base Compensation Used in Calculating IC Payout

Annualized base pay as of October 1, 2006 will be used as part of the IC calculation. The
IC target percentage(s) will be applied to October 1, 2006 base salary for purposes of calculating
the dollar target amount.

Determining IC Targets

Each participant has an IC target. IC targets are determined by the participant’s manager
using the guidelines established by the Senior Director of Corporate Compensation in the following
table:

	 	 	 
	Band Level	 	IC Target
	(Senior Vice President)Q
	 	0% - 45%
	(Vice President)P
	 	0% - 35%
	(Director/Senior Director)O
	 	0% - 25%
	M & N
	 	0% - 15%
	K & L
	 	0% - 10%

IC targets
are set in 5% increments. When determining the appropriate target, the following are considered:

	•	 	The associate’s anticipated contribution to the organization’s success; and

	•	 	Targeted total compensation package that is competitive with similar positions in the appropriate labor
market or industry.

IC targets will be set at the beginning of the Plan year or at time of hire. If the IC target
percentage changes, the manager will explain how the target will be prorated for payout purposes
(if appropriate) and whether or not the performance expectations and weightings will change for
the current Plan year.

IC Components

All performance goals should be established and communicated to the participant at the
beginning of the Plan year or as soon as feasible after becoming a participant in the Plan. The
degrees to which these performance goals are accomplished have an impact on the actual incentive
earned from the Plan.

Alliance Data Revenue and EBITDA Targets: The Revenue and Earnings Before Interest, Taxes,
Depreciation and Amortization (“EBITDA”) targets generally make up 25%-75% of a participant’s IC
payment

			
	 
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(see Standard Weightings Chart below). LOBs are not required to have an Alliance Data
Revenue or EBITDA component if they utilize LOB Revenue and EBITDA targets.

LOB Revenue and EBITDA Targets: There are a number of financial measures that can be used to
determine success for a particular area or individual. The appropriate Executive Vice President,
along with the LOB Human Resources Executive and the Senior Director of Corporate Compensation
will determine if sub-measures will be used for a particular LOB or a particular individual.
However, it is intended that the Board of Directors approve the achievement of LOB Revenue and
EBITDA for payout purposes.

Associate Satisfaction Index: The annual administration of the Associate Survey and the tracking
of data (i.e., improvement expectations) are designed to motivate ongoing attention to issues that
affect quality of client service, as well as the development and retention of associates. The
Associate Satisfaction Index (“ASI”) is a component of the Associate Survey process. The ASI
component is designed to recognize and incent critical non-financial organizational factors that
contribute to sustainable business performance and provide a competitive advantage in recruiting,
developing and retaining high performing associates. Targets are set at the beginning of each year
along with a payout schedule.

Individual Expectations: Participants may have a portion of their IC payments based upon the
achievement of individual expectations or team strategic imperatives (or action steps to accomplish
the strategic imperatives) as determined between the participant and his or her manager.
Achievement must fall into one of three (3) categories: accomplishments fall below expectations;
fully meets and/or exceeds the requirements; or has achieved/contributed well beyond expectations.
The percentage of payout will be 80%, 100% or 110% depending on the level of achievement. If
performance/accomplishments fall below 80% achievement, no payout will be made for the Individual
Expectation component.

Associate performance is defined as obtaining the needed results of the job and living the Company
values. The associate’s manager will focus on the following factors to determine whether and to
what extent the associate met his/her yearly goals for purposes of IC:

	 	•	 	Results - To what extent were results at, above, or below expectations and/or standards?
	 
	 	•	 	Values - To what extent did the associate demonstrate/live the values?

Differentiation of performance is considered within three broad levels. Performance toward
objectives and manager’s expectations within each category can be defined by meeting some or all of
the specified characteristics below:

	 	•	 	Accomplishments fall below expectations: associate completes 80 — 95% of
individual objectives and expectations. Associate falls short of completing all of the objectives that are
important to business strategy. Quality of work is less than expected and/or work falls short of
productivity, financial or schedule expectations.
	 
	 	•	 	Fully meets and/or exceeds the requirements: associate completes up to 110% of
objectives or at least 95% of objectives with extenuating circumstances. The associate’s completed
objectives are closely tied to business strategy and success. The associate’s work is of sufficient
quality and meets productivity, financial and schedule expectations.
	 

			
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	 	•	 	Achieved/contributed well beyond expectations: associate completes more objectives
than committed to in all cases. Completed objectives are most important to business
strategy. Work exceeds all quality requirements and performed more efficiently, cheaply
and/or quickly than expected.

Less than 80% completion of individual objectives is below minimum level of performance and no IC
payout will be made for the Individual Expectation component.

Standard Weightings Chart for IC Components

IC objectives are weighted to drive financial and individual performance and increase
Associate Satisfaction. LOBs have the ability to use specific components that closely reflect
Alliance Data Scorecard measurements. Standard weightings have been established, however,
LOBs/BSGs may adjust the standard weightings and adjust the standard components to include
measurable financial drivers, such as bad debt or specific client revenue goals, with review and
approval by the appropriate Executive Vice President, along with the LOB/BSG Human Resources
Executive and the Senior Director of Corporate Compensation. All measures that deviate from the
standard financial measures must be objective and quantifiable.

The participant’s band/job level as of October 1, 2006 will be used to determine the overall
weightings. The standard components and weightings are listed in the chart below. In certain
cases, LOBs/BSGs may use discretion to determine the overall weightings with the approval of the
associate’s supervisor and the LOB/BSGs Human Resources Executive.

Approved changes to the standard components and weightings should be communicated to associates as
soon as feasible after the beginning of the plan year.

2006 IC Plan

Standard Components and Weightings

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Senior	 	Exempts with	 	All
	 	 	 	 	 	 	Leadership	 	Direct Supervisory	 	Other
	 	 	 	 	 	 	Team1 	 	Responsibility	 	Exempts2
	LOB
	 	 	 	 	 	 	 	 
	 
	 	LOB EBITDA	 	50%	 	25%	 	25%
	 
	 	LOB Revenue	 	25%	 	25%	 	25%
	 	 	Associate Satisfaction3     	 	25%	 	25%	 	0%
	 
	 	Individual Expectations4     	 	0%	 	25%	 	50%
	 
	BSG
	 	 	 	 	 	 	 	 
	 
	 	Alliance Data EBITDA	 	50%	 	25%	 	25%
	 
	 	Alliance Data Revenue	 	25%	 	25%	 	25%
	 
	 	Associate Satisfaction3     	 	25%	 	25%	 	0%
	 
	 	Individual Expectations4     	 	0%	 	25%	 	50%

 

1 The LOB/BSG executive has some flexibility to establish targets that are
important for the success of his or her respective area. The Individual Expectations weighting
should not be used for SLT members unless it is used to drive financial performance. Any changes to
the standard components, weightings or payout tables should be sent to the Senior Director of
Corporate Compensation for approval by the appropriate Executive Vice President, along with the
LOB/BSG Human Resources Executive.

			
	 
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2 The LOB/BSG executive has some flexibility in reassigning weightings with
approval from the Senior Director of Corporate Compensation.

3 Some participants, such as National Account Managers (“NAMs”), may have more emphasis
on client relationships than Associate Satisfaction. LOB/BSG executives can determine how they want to
distribute the weightings for these positions.

4 Eligible exempt associates below the Director level should have Individual
Expectations that support strategic imperatives ensuring the success of their LOB/BSG and the Company.

Determining Payment Calculations

Payment calculations are determined as provided below. With proper approval from the Senior
Director of Corporate Compensation, the appropriate Executive Vice President, and the LOB Human
Resources Executive, LOBs may provide for an alternate payout table for specific LOB measures
except for LOB Revenue or EBTIDA. LOB Revenue and EBITDA must follow the table specified in
Attachment B. A minimum of 100% achievement must be met for LOB Revenue and EBTIDA before any
other measures will payout over 100%.

Attachment A: Performance/Payout Table for Revenue and EBITDA

     This table identifies the relationship between level of performance and the percentage to be
paid for the achievement of the Alliance Data Revenue, Alliance Data EBITDA, LOB Revenue and LOB
EBITDA. A minimum of 90% must be achieved for any payment to be received; performance of 110% or
greater receives the maximum payment of 150%. Percentages are rounded to the nearer whole number.

Attachment B: Performance/Payout Table for Associate Satisfaction and other measures as approved

     This table identifies the relationship between level of performance and percentage to be paid
for the achievement of associate satisfaction and any other LOB specific financial measures as
approved. For BSGs, both the Alliance Data EBITDA and Alliance Data Revenue targets must
be achieved at 100% or greater in order for ASI to be paid above 100% of target. For LOBs, both
the LOB EBITDA and LOB Revenue targets must be achieved at 100% or greater in order for
ASI and any LOB specific financial measures to be paid above 100% of target.

Attachment C: Performance/Payout Table for Individual Expectations

     This table identifies the relationship between level of performance and the percentage to be
paid for the achievement of Individual Expectations. A minimum of 80% accomplishment of standard
objectives must be achieved for any payment to be received.

     For BSGs, both the Alliance Data EBITDA and Alliance Data Revenue targets must be
achieved at 100% or greater in order for Individual Expectations to be paid above 100% of target.
For LOBs, both the LOB EBITDA and LOB Revenue targets must be achieved at 100% or greater
in order for Individual Expectations to be paid above 100% of target.

			
	 
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Timing of Payment

IC earned for the 2006 Plan year is paid in the first quarter of the following year. A
participant must be actively employed on the date payment is made to receive his or her award. Any
participant who is on an approved leave of absence or disability leave but is still on active
status will receive his or her payment even if he or she is not actively at work on the date
payment is made.

Status Changes That May Affect IC Targets and Payout

Status changes can affect the amount of incentive a participant receives. Status changes include:

	•	 	Transfers;

	•	 	New Hires;

	•	 	IC Target Changes;

	•	 	Leaves of Absence; and

	•	 	Terminations.

Transfers: The LOB or BSG a participant is assigned to as of October 1, 2006 will be used to
determine any payments dependent upon LOB/BSG level of performance (see Standard Weightings
Chart). Year-end performance for the LOB/BSG will be used to calculate the incentive amount to be
paid for this component. No prorating will be done for the amount of time spent in another LOB/BSG
or in a different IC eligible grade over the Plan year without prior approval of the appropriate
Executive Vice President, along with the LOB/BSG Human Resources Executive and the Senior Director
of Corporate Compensation.

For the ASI component, leaders who have moved or transferred during the course of the year, and
who could therefore have their compensation tied to different reporting groups, will be reviewed
as follows:

	•	 	Determine where the associate spent the most time during the action planning cycle;

	•	 	Assess where the associate had the greatest opportunity to influence Associate Satisfaction; and

	•	 	Before the end of December, the appropriate HR Executive will make a report recommendation to the Senior Director of Corporate Compensation, to be approved by the appropriate Executive Vice
President, along with the LOB/BSG Human Resources Executive.

New Hires: For associates hired between January 1 and September 30, 2006 into an IC eligible
position, the base salary as of October 1, 2006 will be used to calculate the IC dollar target. The
dollar target will be prorated as follows:

	 	 	 
	Hired Between These Dates	 	prorated Amount
	January 1 - March 31
	 	100%
	April 1 - June 30
	 	75%
	July 1 - September 30
	 	50%
	October 1 - December 31
	 	No IC

			
	 
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For example, if an associate is hired on March 12, the IC dollar target will not be
prorated. If an associate is hired on July 4, then the IC dollar target will be prorated by 50%.

IC Target Changes: For current Company associates, if there is a promotion or a grade level change
during the Plan year but before October 1 which results in either (a) an associate becoming newly
IC eligible or (b) a change in IC target, the IC target will be prorated according to the chart
below depending on the associate’s IC eligible effective date. Note: changes in IC targets after
October 1, 2006 will not be used to calculate IC payout for the 2006 Plan year.

	 	 	 
	IC Eligible Effective Date	 	Prorated Amount For
	Between These Dates	 	Old/New IC % Target
	January 1 - March 31
	 	0% / 100%
	April 1 - June 30
	 	25% / 75%
	July 1 - September 30
	 	50% / 50%
	October 1 - December 31
	 	100% / 0%

The base salary as of October 1 will be used to calculate the dollar target, even if there
is a corresponding change in base salary at the time of the promotion or IC target change. For
example, a grade level change in April results in an IC target change from 5% to 10% and a base
salary change from $35,000 to $40,000. The base salary on October 1 is $40,000, so that is the
salary used in the calculation. The IC dollar target is then calculated using the following
formula:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	10/01 Base	 	 	IC	 	Target	 	 	Prorate	 	Subtotal	 
	   Old
	 	$	40,000	 	 	5%	 	$	2,000	 	 	25%	 	$	500	 
	   New
	 	$	40,000	 	 	10%	 	$	4,000	 	 	75%	 	$	3,000	 
	TOTAL
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	3,500	 

The participant’s manager should communicate to the participant the new weightings of
financial and Individual Expectations (if applicable).

Leaves of Absence: If a participant takes a leave of absence in excess of twelve (12) weeks,
either paid or unpaid, during the Plan year, he or she will receive a prorated award. Leaves of
absence under twelve (12) weeks are not prorated. For any part of a week that a participant is on
a leave of absence over twelve (12) weeks, the IC payment will be prorated by one week. For
instance, if a participant is on leave for 12 weeks and 2 days, he or she will receive 51/52nds of
the normal IC payout. If a participant is on leave for 13 weeks and 2 days, then he or she will
receive 50/52nds of the normal IC payout and so on.

Terminations: If a participant terminates his or her position voluntarily or involuntarily during
the Plan year, he or she will not be eligible for an IC payment because he or she would not
be on active status on the date of the award distribution. If a participant retires, becomes
disabled or dies during the Plan year, he or she may be eligible for a prorated award at the
discretion of the appropriate Executive Vice President, along with the LOB/BSG Human Resources
Executive and the Senior Director of Corporate Compensation. In the event of death, any incentive
award is made to the beneficiary named in the Company-paid life insurance program.

			
	 
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Other Terms and Conditions

	•	 	All decisions by the Company will be final in the interpretation and administration of the
Plan and shall lie within the Company’s sole and absolute discretion. Decisions shall be final, conclusive and
binding on all parties concerned.

	•	 	This Plan does not constitute a contract for the participant’s continued employment with the
Company. All Company associates are employed “at-will” which means either the Company or the associate may terminate
the employment relationship at any time with or without cause.

	•	 	Participant’s rights under the Plan may not be assigned or transferred in any way, except as otherwise set
forth herein.

	•	 	The Alliance Data 2006 Incentive Compensation Plan may be amended, modified, suspended or
terminated by the Company at any time, without prior consent by or prior notice to associates. The Company
at its sole discretion may change objectives at any time without prior consent by or prior notice to
associates.

	•	 	The Plan shall be unfunded. The Company shall not be required to establish any special or
separate fund or to make other segregation of assets to assure the payment of the amounts under the Plan. Rights to the
payment of amounts under the Plan shall be no greater than the rights of the Company’s general creditors.

	•	 	Texas state law governs the validity, construction, interpretation, administration and effect of the Plan and
the substantive laws, but not the choice of law rules of the State of Texas, shall govern rights
relating to the Plan.

	•	 	Generally, all applicable employment and tax deductions plus 401(k) contribution deferrals
will be withheld from the IC payout.

	•	 	No associate has the right nor is guaranteed the right to participate in the Plan by virtue
of being an associate or fulfilling any specific position with the Company. Selection for participation in the Plan is
solely within the discretion of the Company. The Company may offer participation in the Plan to additional
associates or terminate the participation of any participant in the
Plan at any time during the Plan Year.

	•	 	Revenues and earnings classified as “windfalls” or business losses may or may not be excluded
in whole or in part from the calculation of Revenue and EBITDA at the discretion of the Company.

	•	 	Notice to participate in the Plan shall not impair or limit the Company’s rights to transfer, promote or
demote Plan participants to other jobs or to terminate their employment, nor shall it create any claim or right
to receive any payment under the Plan or any right to be retained in the employ of the Company.

	•	 	The Plan is established for the current fiscal year. There shall be no obligation on the part of the Company to continue the Plan in the same or modified form for any future years.

			
	 
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	•	 	In the event that a participant has a dispute concerning the administration of this Plan,
it shall first be submitted in writing to the Senior Director of Corporate Compensation. In the event that the Senior Director
of Corporate Compensation does not provide a response satisfactory to the participant within 30 business
days, the participant may submit the dispute in writing within five business days thereafter to the EVP,
Human Resources, whose decision regarding the dispute shall be final and binding on each participant or
person claiming under the Plan.

	•	 	The Plan is effective January 1, 2006, and supersedes and replaces all
previous IC Plans. All such previous
plans, unless earlier terminated, are terminated at midnight, December 31, 2005. If not renewed by the
Company, this Plan will automatically terminate on December 31, 2006.

	•	 	In the event an eligible associate’s performance falls below satisfactory
standards during the Plan year, the
associate may receive a reduced IC payment, at the discretion of the Company, regardless of the
performance results of the Company, LOB, BSG or the ASI results (if applicable).

	•	 	The Company, at its sole discretion, may adjust or modify the methodology for
calculating IC payments, the eligibility for receiving IC payments, and the actual amount of IC payments. All adjustments
or modifications must be approved by the EVP, Human Resources, the appropriate Executive Vice
President, the LOB/BSG Human Resources Executive and the Senior Director of Corporate Compensation.

			
	 
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Attachment A

PERFORMANCE/PAYOUT TABLE

FOR REVENUE and EBITDA

	 	 	 	 	 	 	 
	 	 	% of Objective(s)	 	%	 	 
	 	 	Achieved*	 	Payout*	 	 
	 
	 	89% or less	 	       0%	 	 
	90%
is the threshold for performance
achievements to result in a payout. à
	 	90%	 	      65%	 	 
	 
	 	91%	 	   68.5%	 	 
	 
	 	92%	 	     72%	 	 
	 
	 	93%	 	   75.5%	 	 
	 
	 	94%	 	     79%	 	 
	 
	 	95%	 	  82.5%	 	 
	 
	 	96%	 	    86%	 	 
	 
	 	97%	 	 89.5%	 	 
	 
	 	98%	 	   93%	 	 
	 
	 	99%	 	96.5%	 	 
	 
	 	100%	 	100%	 	ß
100% is the target for performance
achievements to receive 100% payout.
	 
	 	101%	 	105%	 	 
	 
	 	102%	 	110%	 	 
	 
	 	103%	 	115%	 	 
	 
	 	104%	 	120%	 	 
	 
	 	105%	 	125%	 	 
	 
	 	106%	 	130%	 	 
	 
	 	107%	 	135%	 	 
	 
	 	108%	 	140%	 	 
	 
	 	109%	 	145%	 	 
	 
	 	110% or greater	 	150%	 	ß 150% is the maximum payout level.

	 		
	Effective January 1 — December 31, 2006
	 	A-1

 

 

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Attachment B

PERFORMANCE/PAYOUT TABLE
 FOR ASSOCIATE SATISFACTION and LOB SPECIFIC
MEASURES

	 	 	 	 	 	 	 
	 	 	% of Objective(s)	 	%	 	 
	 	 	Achieved*	 	Payout*	 	 
	 
	 	79% or less	 	    0%	 	 
	80% is the threshold for performance achievements to result in a payout. à
	 	80%	 	  65%	 	 
	 
	 	81%	 	  67%	 	 
	 
	 	82%	 	  69%	 	 
	 
	 	83%	 	  70%	 	 
	 
	 	84%	 	  72%	 	 
	 
	 	85%	 	  74%	 	 
	 
	 	86%	 	  76%	 	 
	 
	 	87%	 	  77%	 	 
	 
	 	88%	 	  79%	 	 
	 
	 	89%	 	  81%	 	 
	 
	 	90%	 	  83%	 	 
	 
	 	91%	 	  84%	 	 
	 
	 	92%	 	  86%	 	 
	 
	 	93%	 	  88%	 	 
	 
	 	94%	 	  89%	 	 
	 
	 	95%	 	  91%	 	 
	 
	 	96%	 	  93%	 	 
	 
	 	97%	 	  95%	 	 
	 
	 	98%	 	  96%	 	 
	 
	 	99%	 	  98%	 	 
	 
	 	100%	 	100%	 	ß 100% is the target for performance achievements to receive 100% payout.
	 
	 	101%	 	102.5%	 	 
	 
	 	102%	 	105.0%	 	 
	 
	 	103%	 	107.5%	 	 
	 
	 	104%	 	110.0%	 	 
	 
	 	105%	 	112.5%	 	 
	 
	 	106%	 	115.0%	 	 
	 
	 	107%	 	117.5%	 	 
	 
	 	108%	 	120.0%	 	 
	 
	 	109%	 	122.5%	 	 
	 
	 	110%	 	125.0%	 	 
	 
	 	111%	 	127.5%	 	 
	 
	 	112%	 	130.0%	 	 
	 
	 	113%	 	132.5%	 	 
	 
	 	114%	 	135.0%	 	 
	 
	 	115%	 	137.5%	 	 
	 
	 	116%	 	140.0%	 	 
	 
	 	117%	 	142.5%	 	 
	 
	 	118%	 	145.0%	 	 
	 
	 	119%	 	147.5%	 	 
	 
	 	120% or greater	 	150.0%	 	ß 150% is the maximum payout level.

For business support groups, both Alliance Data EBITDA and Alliance Data Revenue
targets must be achieved at 100% or greater in order for ASI to be paid above 100% of target.
For lines of business, both LOB EBITDA and LOB Revenue targets must be achieved at 100% or
greater in order for ASI or any LOB specific measure to be paid above 100% of target.

		 	
	Effective January 1 — December 31, 2006
	 	B-1

 

 

Confidential — For Internal Use Only

Do Not Distribute Outside of Alliance Data

Attachment C

PERFORMANCE/PAYOUT TABLE FOR
INDIVIDUAL EXPECTATIONS

	 	 	 	 	 	 	 
	 	 	% or Objective(s)	 	%	 	 
	 	 	Achieved*	 	Payout*	 	 
	 
	 	Below Minimum	 	0%	 	 
	80% performance is the threshold
for performance
	 	Accomplishments fall	 	 	 	 
	achievements to
result in a payout.à
	 	below expectations	 	80%	 	 
	 
	 	Fully meets and/or	 	 	 	ß Fully  meets and/or exceeds the
	 
	 	exceeds the	 	 	 	requirements is the target for performance
	 
	 	requirements	 	100%	 	 achievements to receive 100%
	 
	 	Has	 	 	 	 
	 
	 	achieved/contributed	 	 	 	 
	110% is the maximum payout level.à
	 	well beyond	 	 	 	 
	 
	 	expectations	 	110%	 	 

For business support groups, both Alliance Data EBITDA and Alliance Data
Revenue targets must be achieved at 100% or greater in order for Individual Expectations to
be paid above 100% of target. For lines of business, both LOB EBITDA and LOB Revenue
targets must be achieved at 100% or greater in order for Individual Expectations to be paid
above 100% of target.

			 
	Effective January 1 — December 31, 2006
	 	C-1exv10w1

 

Exhibit 10.1

Amendment to Employment Agreement

     This Amendment to Employment Agreement, effective as of                     , 2006, between Imation
Corp., a Delaware corporation (the “Company”) and Bruce A. Henderson (the “Executive”).

     WHEREAS, the Company and the Executive entered into an Employment Agreement as of the
13th day of May, 2004 (the “Agreement”); and

     WHEREAS, the Company and the Executive desire to amend the Agreement in the manner set forth
below.

     NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy are hereby
acknowledged, the Company and the Executive hereby agree to amend the Agreement as follows:

     1. Section 5(a) of the Agreement is hereby amended in its entirety to read as follows:

          (a) Definitions. For the purposes of this Agreement:

     “Affiliate” shall have the meaning given in Rule 405 promulgated under
the Securities Act of 1933, as amended.

     “Change of Control” means any one of the following events:

          (i) the consummation of a transaction or series of related transactions in
which a person, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than
the Company or a subsidiary of the Company, or any employee benefit plan of the
Company or a subsidiary of the Company, acquires beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the
Company’s then outstanding shares of common stock or the combined voting power of
the Company’s then outstanding voting securities (other than in connection with a
Business Combination in which clauses (1), (2) and (3) of paragraph (a)(iii) apply);
or

          (ii) individuals who, as of the Effective Date hereof, constitute the Board of
Directors of the Company (the “Incumbent Board”) cease for any reason to constitute
at least a majority of the Board of Directors of the Company; provided, however,
that any individual becoming a director subsequent to the Effective Date hereof
whose election, or nomination for election by the Company’s stockholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board (other than a nomination of an individual whose initial assumption
of office is in connection with a solicitation with respect to the election or removal of directors of the Company in
opposition to the solicitation by the Board of Directors of the Company) shall be
deemed to be a member of the Incumbent Board; or

 

 

          (iii) the consummation of a reorganization, merger, statutory share exchange,
consolidation or similar transaction involving the Company, a sale or other
disposition in a transaction or series of related transactions of all or
substantially all of the Company’s assets or the issuance by the Company of its
stock in connection with the acquisition of assets or stock of another entity (each,
a “Business Combination”) in each case unless, following such Business Combination,
(1) all or substantially all of the individuals and entities that were the
beneficial owners of the Company’s outstanding common stock and the Company’s
outstanding voting securities immediately prior to such Business Combination
beneficially own immediately after the transaction or transactions, directly or
indirectly, more than 50% of the then outstanding shares of common stock and more
than 50% of the combined voting power of the then outstanding voting securities (or
comparable equity interests) of the entity resulting from such Business Combination
(including an entity that, as a result of such transaction, owns the Company or all
or substantially all of the Company’s assets either directly or through one of more
subsidiaries) in substantially the same proportions as their ownership of the
Company’s common stock and voting securities immediately prior to such Business
Combination, (2) no person, entity or group (other than a direct or indirect parent
entity of the Company that, after giving effect to the Business Combination,
beneficially owns 100% of the outstanding voting securities (or comparable equity
interests) of the entity resulting from the Business Combination) beneficially owns,
directly or indirectly, 35% or more of the outstanding shares of common stock or the
combined voting power of the then outstanding voting securities (or comparable
equity interests) of the entity resulting from such Business Combination and (3) at
least a majority of the members of the board of directors (or similar governing
body) of the entity resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement or of the
action of the Board of Directors of the Company providing for such Business
Combination; or

          (iv) approval by the stockholders of the dissolution of the Company.

     “Change of Control Amount” shall mean, except as set forth in the next
sentence, an amount equal to the sum of (i) two times the total annual Base Compensation of
the Executive that is in effect immediately prior to a Change of Control plus (ii) two times
the average of the Executive’s Cash Incentive Compensation payment (if any) for the two
years prior to a Change of Control, or, if the Executive has been employed by the Company
for less than two years, two times the amount of the Executive’s last Cash Incentive
Compensation payment (if any) by the Company. Notwithstanding the foregoing sentence, if
(x) a Change of Control has occurred during the Employment Term, (y) the Executive’s
employment with the Company terminates more than one year after the Change of

2

 

Control but within two years after the Change of Control (whether
or not the Employment Term or this Agreement is otherwise deemed to have terminated pursuant
to Section 2), and (z) the Executive is otherwise entitled to a Change of Control
Benefit pursuant to Section 5(b), the Change of Control Amount shall mean
(i) one times the total annual Base Compensation of the Executive that is in effect
immediately prior to the Change of Control plus (ii) one times the average of the
Executive’s Cash Incentive Compensation payment (if any) for the two years prior to the
Change of Control, or, if the Executive has been employed by the Company for less than two
years, one times the amount of the Executive’s last Cash Incentive Compensation payment (if
any) by the Company.

     2. Section 5(b) of the Agreement is hereby amended in its entirety to read as follows:

               (b) Change of Control Benefit. If (i) a Change of Control has occurred during the
Employment Term and (ii) within two years thereafter (whether or not the Employment Term or this
Agreement is otherwise deemed to have terminated pursuant to Section 2), the Executive’s
employment with the Company terminates for any reason other than (1) termination by the Company for
Cause or (2) termination by the Executive for other than Company Breach, then the Company shall pay
to the Executive within thirty (30) days of such termination a lump sum equal to the Change of
Control Amount. The receipt of such Change of Control Amount shall be in lieu of any right of
payment that the Executive may have in connection with such termination of employment, whether
pursuant to this Agreement or otherwise. If any payment made to the Executive pursuant to this
Section 5(b) with respect to a Change of Control that occurs prior to the one-year
anniversary of the Effective Date, either alone or together with other payments or benefits, either
cash or non-cash, that the Executive has the right to receive from the Company, including without
limitation accelerated vesting or payment of any deferred compensation, options, stock appreciation
rights or any benefits payable to (or for the benefit of) the Executive under any plan for the
benefit of employees, would constitute an “excess parachute payment” (as defined in Section 280G of
the Internal Revenue Code of 1986, as amended (the “Code”)), then such payment or other
benefit shall be reduced so that the aggregate present value of all payments and benefits, either
cash or non-cash, to (or for the benefit of) the Executive which are contingent on the Change of
Control (as defined in Code Section 280G(b)(2)(A)) is One Dollar ($1.00) less than the amount which
the Executive could receive without being considered to have received any parachute payment (the
amount of this reduction is referred to herein as the “Excess Amount”). The determination
of the amount of any reduction required by this Section 5(b) shall be made by an accountant
selected by the Company, and such determination shall be conclusive and binding on the parties
hereto. Notwithstanding the foregoing provisions, if it is established, pursuant to a final
determination of a court or an Internal Revenue Service proceeding which has been finally and
conclusively resolved, that an Excess Amount was received by the Executive from the Company, then
the Executive shall repay the Excess Amount to the Company promptly after written demand from the
Company is received by the Executive.

3

 

     3. A new Section 5(e) is hereby added to the Agreement to read as follows:

          (e) Conformance with Section 409A of the Code. This Agreement is intended to satisfy
the requirements of Section 409A(a)(2), (3) and (4) of the Code (including current and future
guidance issued by the Department of Treasury or Internal Revenue Service). To the extent that any
provision of this Agreement fails to satisfy those requirements, the provision shall automatically
be modified in a manner that, in the good-faith opinion of the Company, brings the provisions into
compliance with those requirements while preserving as closely as possible the original intent of
the provision and this Agreement. Such modifications may include, but are not necessarily limited
to, providing that if the Executive is a “specified employee” under Section 409A(a)(2)(B) of the
Code, then any payment under this Agreement that is treated as deferred compensation under Section
409A of the Code shall be deferred for six months following termination of the Executive’s
employment with the Company (without interest or earnings).

     The Company and the Executive have caused this Amendment to be signed and delivered on the
date set forth above.

	 	 	 
	IMATION CORP.
	 
	 	 
	By:
	 	 
	 

	 	 
	Name:
	 	 
	 

	 	 
	Title:
	 	 
	 

	 	 
	 
	 	 
	EXECUTIVE
	 
	 	 
	 

4

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