SEPARATION AGREEMENT AND GENERAL RELEASE OF CLAIMS

SEPARATION AGREEMENT AND GENERAL RELEASE OF CLAIMS

This Separation Agreement and General Release of Claims (hereinafter “ Agreement ”) is entered into by and between Dwayne Tucker (hereinafter “ Executive ”) and ADS Alliance Data Systems, Inc (“ Alliance Data ”).

WHEREAS , effective September 30, 2009 (“ Termination Date ”) , Executive’s employment at Alliance Data will terminate;

WHEREAS , Executive and Alliance Data desire to compromise, settle and forever resolve and dispose of all differences and potential claims and controversies between them and to insure that certain post-employment Protective Covenants (defined below) are honored; and

WHEREAS, all words used in this Agreement will have their plain meaning in ordinary English; and

WHEREAS , this Agreement shall become effective following the expiration of the Revocation Period (as defined below) (the “ Effective Date ”).

NOW, THEREFORE , in consideration of the foregoing promises and other good and sufficient consideration contained hereinafter, the parties agree as follows:

I. SEPARATION PAYMENTS

Executive shall be paid an amount that, in conjunction with the other benefits described in this Agreement, is intended to satisfy any and all applicable statutory obligations as well as provide consideration for this Agreement. The Separation Payments described below shall be based on a reduced base salary that is $300,000.00 per year (“ Reduced Base Salary ”). The payments described below will supersede any and all other entitlements under law or that may be described in any and all other agreements executed prior to this date between Executive and Alliance Data as it relates to an amount due and owing upon termination, including but not limited to severance pay and any amount associated with post-termination restrictions.

A.  Release Payment . Payments totaling an amount equal to twenty (20) weeks of Executive’s Reduced Base Salary, (less applicable taxes and withholdings) shall be made in consideration of the release and waiver of claims provided for in Article III and Executive’s agreement not to contest the Protective Covenants in Article IV (the “ Release Payment ” ). The Release Payment amount shall be divided into ten (10) substantially equal bi-weekly installment payments paid on regular payroll dates commencing on the first payroll date after the expiration of the later of the Revocation Period referred to in Article III(F) or the Termination Date;

B.  Protective Covenants Payment . Payments totaling an amount equal to Fifty-Eight (58) weeks of Executive’s Reduced Base Salary (less applicable taxes and withholdings) shall be paid in consideration of the agreements and promises made by Executive in Article IV (the “ Protective Covenants Payment ” ) and his ongoing compliance with those promises. The Protective Covenants Payment will be divided into twenty-nine (29) substantially equal bi-weekly installment payments paid on regular payroll dates commencing on the first payroll date after the Release Payment has been paid in full.

Collectively, the seventy-eight (78) week period comprised of the twenty (20) week period during which the Release Payment is made and the fifty-eight (58) week period during which the Protective Covenants Payment is made are referred to herein as the “ Payment Period ”.

C.  2009 Incentive Compensation . In further consideration for Executive entering into this Agreement, Alliance Data agrees to pay to Executive incentive compensation with respect to the 2009 fiscal year in an amount equal to that which Executive would have received had he been employed on the date such incentive compensation is ultimately paid to other executives; provided, however, that such amount shall not exceed $351,000.00. Such payment, less required withholdings, will be made on or before February 28, 2010.

D.  2010 Incentive Compensation . In further consideration for Executive entering into this Agreement, Alliance Data agrees to pay to Executive incentive compensation with respect to the 2010 fiscal year in an amount equal to that which Executive would have received had he been employed on the date such incentive compensation is ultimately paid to other executives (based on a target IC of 100% of the Reduced Base Salary of $300,000); provided, however, that such amount shall not exceed $300,000.00. Such payment, less required withholdings, will be made on or before February 28, 2011.

Executive agrees that if Executive is rehired in an officer role by Alliance Data prior to the expiration of the Payment Period or prior to the payment of any payment under Article I (B), (C), and (D) hereunder being made to Executive, Alliance Data shall have no further obligation to pay Executive under this Agreement under Article I (B), (C) and (D). The Release Payments shall continue to be made regardless of the date of rehire, unless rehire occurs prior to the expiration of the Revocation Period.

E.  Excise Taxes . In the event it shall be determined that any payment made pursuant to the terms of this Agreement (a “ Payment”) , is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code or any interest or penalties with respect to such excise tax (such excise tax, together with such interest and penalties, are collectively referred to as the “Excise Tax" ), then the Executive shall be entitled to receive an additional payment ( a “Gross- Up Payment”) in an amount such that after payment by the Executive of the Excise Tax, including any income tax (whether federal, state, or local), employment tax or Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. Alliance Data shall, within thirty (30) days of receipt of a written request and appropriate documentation from Executive, pay the Gross-Up Payment to Executive. Notwithstanding the foregoing, Executive’s right to any Gross-Up Payment is contingent on Alliance Data’s receipt of a written request and appropriate documentation from Executive no less than 30 days before the last day of the calendar year next following the calendar year in which Executive remits the related taxes to the applicable taxing authority. Should Alliance Data or its successor so request, Executive will appeal the taxing authority’s decision, provided that if Executive incurs legal fees or expenses in doing so, Alliance Data or its successor will promptly reimburse Executive for all such fees upon receipt of appropriate documentation from Executive. The Company shall in any event pay any such reimbursement no later than the last day of the calendar year next following the calendar year in which the taxes that are the subject of such contest are remitted to the applicable taxing authority, or where as a result of the audit or contest no taxes are remitted, the end of the calendar year next following the calendar year in which the audit is completed or there is a final and non-appealable settlement or other resolution of the contest.

F.  Short-Term Deferral Exception . Articles I and II and this Agreement will be administered and interpreted to maximize the short-term deferral exception to Section 409A of the Internal Revenue Code, and Executive is not permitted to designate, directly or indirectly, the taxable year of any payment made under this Agreement. The right to a series of installment payments under this Agreement will be treated as a right to a series of separate payments. Any installment payment under this Agreement that is paid during the short-term deferral period (as defined in Treas. Reg. Sec. 1.409A-1(b)(4)) will be treated as a short-term deferral and not aggregated with other plans or payments. Payment dates provided for in this Agreement are deemed to incorporate the grace periods provided by Treas. Reg. Sec. 1.409A-3(d).

II. BENEFITS

A.  Payment of Wages and Paid Time Off . Alliance Data shall pay to Executive in full all wages or other compensation, all accrued and unused vacation and all un-reimbursed business expenses for the period through and including the Termination Date. Alliance Data and Executive further agree that as of the Termination Date, Executive will not accrue any further vacation time or pay or other benefits for which Executive was eligible or previously entitled, except for those benefits expressly continued as set forth in this Agreement.

B.  Continuation of Benefits . Commencing on the Termination Date, Alliance Data agrees to further continue Executive’s health insurance benefits through the end of the Payment Period or until he is re-employed in a full-time capacity with benefits comparable to those in which Executive participates as of the date hereof (“ Health Insurance Benefit Continuation ”). Alliance Data and Executive shall pay their respective share of the premiums for the health insurance coverage selected by, and in effect for, Executive during the Health Insurance Benefit Continuation period. After the expiration of the Health Insurance Benefit Continuation period, Alliance Data will no longer provide health insurance benefits, including executive benefits for Executive.

C .  Equity .

1.  Stock Options .

(a)  Vested . Alliance Data agrees that Executive’s options to acquire shares of Alliance Data Systems Corporation (“ ADSC ”) common stock (“ Options ”) which are or shall become vested on or prior to the Termination Date shall be exercisable until ninety (90) days after the expiration of the Payment Period.

(b)  Unvested . Alliance Data agrees that the 4,245 Options identified as SOP053YG239134 granted on 2/21/2007 shall continue to vest during the Payment Period and shall be exercisable until ninety (90) days after the expiration of the Payment Period.

2.  Time-Based Restricted Stock Units (“ TBRSU ”) . Alliance Data agrees that the 1,805 TBRSU’s identified as RSU053YG239134 granted on 2/21/2007 and the 32,858 TBRSU’s identified as TBRSUUS0839566 granted on 2/21/2008 will continue to vest during the Payment Period pursuant to the terms of each applicable restricted stock unit agreement.

3.  2008 Performance-Based Restricted Stock Units . Executive agrees and acknowledges that the 40,160 performance-based restricted stock units identified as PBRSUUS0839566 granted on 4/28/2008 shall be forfeited as of the Termination Date.

4.  2009 Performance-Based Restricted Stock Units . Alliance Data agrees to vest 6,600 of the 20,000 performance-based restricted stock units identified as PBRSUUS09339867 on 2/23/2010 provided the performance criteria associated with such units are met and Executive agrees that the remaining 13,400 PBRSU’s shall be forfeited and canceled as of the Termination Date.

D.  Special Retention Award . Alliance Data agrees to vest 2,427 restricted stock units of the remaining 4,853 Special Retention Award identified as RSU07PBSA39134 on February 21, 2010 and Executive agrees that the remaining 2,426 restricted stock units shall be forfeited and canceled as of the Termination Date. Alliance Data further agrees to pay Executive $150,000 of the $300,000 cash portion of the Special Retention Award originally made on 2/21/2007 and Executive agrees that the remaining $150,000 cash portion of such Special Retention Award shall be forfeited. Such payment, less required withholdings, shall be paid no later than February 28, 2010.

E.  Stock Transactions . Executive acknowledges and agrees that because of his status as a Section 16 officer of ADSC, he is required for a period of six (6) months after he was no longer deemed to be a Section 16 officer to file Securities and Exchange Commission (“ SEC ”) Forms 4 and 5 to report stock transactions related to ADSC, including, but not limited to, sales and purchases of ADSC common stock and derivative securities, and the exercise of employee stock options (“ Stock Transactions ”). Therefore, to enable timely filing of these forms with the SEC, which ADSC does on Executive’s behalf, and also to enable ADSC to prepare and make other disclosures to the SEC related to Executive’s Stock Transactions, Executive agrees to report any such Stock Transaction made by him to Alan M. Utay, ADSC’s General Counsel, as soon as possible, but no later than 12:00 Noon Central Time on the day following the day such Stock Transaction is executed, or provide a legal opinion that such Stock Transaction is not a reportable event requiring the filing of a Form 4 or 5 or other disclosure. Executive agrees to execute and forward to ADSC the No Filing Due Statement attached hereto as Exhibit A, or to provide to ADSC all necessary details to file a Form 5, for receipt no later than January 11 of the year following such Stock Transaction.

F.  Termination of Other Agreements . The parties agree that as of the Termination Date, the Change in Control Severance Protection Agreement entered into by and between Alliance Data and Executive on September 25, 2003, as amended by the Joint Amendment to Agreements Providing for Compensation or Benefits upon Involuntary Severance from Employment entered into by and between Executive and Alliance Data on December 31, 2008 (as amended, the “ Change in Control Agreement ”) and the Offer Letter Dated June 10, 1999 as amended by the Joint Amendment to Agreements Providing for Compensation or Benefits upon Involuntary Severance from Employment, shall terminate and be of no further force and effect (together with the Change in Control Agreement, the “ Executive Agreements ”).

III. COVENANT NOT TO SUE AND RELEASE OF CLAIMS

A.  Covenant Not to Sue . Executive agrees not to file any charges, claims, suits, or complaints against Alliance Data with any federal, state, provincial or local governmental agency, or in any court of law, with respect to his employment with, or separation of employment from, Alliance Data, with respect to any matters whatsoever, which occurred prior to or on the Termination Date, whether known or unknown to Executive at the time of execution of this Agreement, with the exceptions of: (a) any claims the law precludes him from waiving by agreement, including an action challenging the validity of Executive’s release of claims under the Age Discrimination in Employment Act, 29 U.S.C. §621, et seq . (“ ADEA ”); (b) any claim that Alliance Data breached its commitments under this Agreement; (c) any claims with respect to any vested right Executive may have under any employee pension or welfare benefit plan of Alliance Data, or (d) any rights Executive has to indemnification under the bylaws or articles of Alliance Data existing as of the Effective Date or by contract. Items (b), (c), and (d) immediately above shall be excepted from the release in Article III (B) below.

B.  Release of Claims . Executive acquits, releases and forever discharges Alliance Data, and its predecessors, successors, parent entities, subsidiaries, affiliates, or related companies, its and their attorneys, officers, directors, employees, former employees, agents, insurers, and assigns (collectively the “ Released Parties ”), jointly and severally, from all, and in all manner of, actions and causes of action, suits, debts, claims and demands whatsoever, in law or in equity, which he ever had, may now have or may hereafter have with respect to his employment with, or separation of employment from, Alliance Data, and with respect to any other matter whatsoever. This release includes, but is not limited to, claims relating to or arising out of the Sarbanes-Oxley Act; any claims alleging retaliation and/or whistleblower claims; any and all claims relative to agreements to sponsor for immigrant or non-immigrant positions; any claims for unpaid or withheld wages, the Executive Agreements, severance pay, benefits, incentive compensation, stock options, restricted stock units, restricted stock awards, special awards, commissions and/or other compensation of any kind; or any other claim, regardless of the forum in which it might be brought, if any, which Executive has, might have, or might claim to have against the Released Parties, or any of them individually, for any and all injuries, harm, damages, penalties, costs, losses, expenses, attorneys’ fees, and/or liability or other detriment, if any, whenever incurred, or suffered by Executive as a result of any and all acts, omissions, or events by the Released Parties, collectively or individually, through the date Executive executes this Agreement. It is expressly agreed and understood by Executive that this Agreement and General Release includes, without limitation, any and all claims, actions, demands, and causes of action, if any, arising from or in any way connected with the employment relationship between Executive and Alliance Data and the termination thereof, including any claim of discrimination, retaliation, harassment, failure to accommodate, wrongful termination, breach of contract, negligence, libel, slander, wrongful discharge, promissory estoppel, tortious conduct, bonus claims of any nature and kind whatsoever, any vacation pay entitlement claims, and demands for damages, including any disability claims, loss of benefit claims, indemnity, costs, interest, loss or injury of every nature and kind whatsoever and howsoever arising, and/or any claims that this Agreement was procured by fraud or signed under duress or coercion so as to make the Agreement not binding, including all claims that were or could have been brought by Executive. Furthermore, Executive asserts that he has been paid all wages as required by law; he does not have a workplace injury or workers compensation claim pending and has not suffered any injury that could be the basis for such claim; and he has been given the required amount of notice under Ontario law prior to his being terminated.

C.  Laws Included in Release . Executive agrees that, subject to the exceptions set forth in Article III (A) of this Agreement, his covenants and releases, as set forth in this Agreement, include a waiver of any and all rights or remedies which he ever had, may now have, or may hereafter have against Alliance Data, in tort or in contract, or under any present or future federal, local or other statute or law, including, but not limited to, the following laws: statutory or common laws of the State of Texas, or any political subdivision of the State of Texas; the Texas and United States Constitutions; the Texas Payday Law; the Texas Commission on Human Rights Act; the National Labor Relations Act, 29 U.S.C. §151, et seq.; Title VII of the 1964 Civil Rights Act, 42 U.S.C. §2000e, et seq.; the 1866 Civil Rights Act, 42 U.S.C. §1981; the Civil Rights Act of 1991, P.L. 102-166; the Americans With Disabilities Act, 42 U.S.C. §12101, et seq.; the Occupational Safety & Health Act of 1970, 29 U.S.C. §553, et seq.; the Fair Labor Standards Act of 1938, 29 U.S.C. §201, et seq.; the Family & Medical Leave Act of 1993, 29 U.S.C. §2601, et seq.; the ADEA and the Older Workers Benefit Protection Act, 29 U.S.C. §621, et seq., 29 U.S.C. §621, et seq.; the Equal Pay Act, 29 U.S.C. §206(d); the Employee Retirement Income Security Act of 1974, 29 U.S.C., §1001, et seq.; Texas’s Workers’ Compensation Law; the Immigration Reform Control Act; the Occupational Safety and Health Act; the Worker Adjustment and Retraining Notification Act; the Consolidated Omnibus Budget Reconciliation Act of 1986, 29 U.S.C. §1161, et seq.; any and all Texas common law claims, including, but not limited to, any violation of Texas public policy, invasion of privacy, breach of contract and promissory estoppel.

D.  Waiver of Unknown Claims . Executive intends that this Agreement shall bar each and every claim, demand and cause of action hereinabove specified, whether known or unknown to him at the time of execution of this Agreement. As a result, Executive acknowledges that he might, in the future, discover claims or facts in addition to or different from those w