FORM OF NON-EMPLOYEE DIRECTOR NONQUALIFIED STOCK OPTION AGREEMENT UNDER THE ALLIANCE DATA SYSTEMS CORPORATION 2003 LONG-TERM INCENTIVE PLAN

EXHIBIT 10.1

FORM OF NON-EMPLOYEE DIRECTOR NONQUALIFIED STOCK OPTION
AGREEMENT UNDER THE ALLIANCE DATA SYSTEMS
CORPORATION 2003 LONG-TERM INCENTIVE PLAN

     THIS AGREEMENT, made as of [Date], by and between Alliance Data Systems Corporation (the “Company”) and ___, (the “Participant”) who is a non-employee director of the Company or one of its Affiliates.

W I T N E S S E T H:

     WHEREAS, pursuant to the Company’s 2003 Long-Term Incentive Plan (the “Plan”), the Company desires to afford the Participant the opportunity to acquire, or enlarge, his ownership of the Company’s common stock, $0.01 par value per share (“Stock”), so that he may have a direct proprietary interest in the Company’s success.

     WHEREAS, the Company desires to have Participant continue to serve on the Company Board of Directors and to provide Participant with an incentive. NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto hereby agree as follows:

     1. Grant of Option. Subject to the terms and conditions set forth herein and in the Plan, the terms of which are attached as Exhibit A, the Company hereby grants to the Participant, during the period commencing on the date of this Agreement and ending on the close of business on the day of the tenth anniversary of the date hereof (the “Option Term”), the right and option (the “Option”) to purchase from the Company, at a price of $  per share (the “Option Price”), an aggregate of [ ] shares of Stock (the “Option Shares”).

     2. Limitation on Exercise of Option. Subject to the terms and conditions set forth herein and in the Plan, the Option shall vest in the amount and on the date(s) set forth below provided, that, the Participant continues to serve the Company or an Affiliate as a non-employee director during the vesting period.

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