Purchase Agreement

On May 27, 2009, Alliance Data Systems Corporation (the "Company") entered into a purchase agreement (the "Purchase Agreement") under which it agreed to sell $300 million aggregate principal amount of its 4.75% convertible senior notes due 2014 (the "Notes") to certain initial purchasers named therein (collectively, the "Initial Purchasers"). The Purchase Agreement also granted the Initial Purchasers the option to purchase up to an additional $45 million aggregate principal amount of Notes to cover over-allotments. The closing of the Notes occurred on June 2, 2009. The description of the Purchase Agreement herein is qualified in its entirety by reference to the full text of such Purchase Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated by reference herein.

Indenture

The Notes are governed by an indenture dated June 2, 2009 (the "Indenture") between the Company and The Bank of New York Mellon Trust Company, National Association, as trustee (the "Trustee"). Pursuant to the Indenture, interest on the Notes will accrue at a rate of 4.75% per annum on the principal amount from June 2, 2009, payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2009. The Notes will mature on May 15, 2014 (the "Maturity Date"), subject to earlier conversion or repurchase. The Company may not redeem the Notes prior to the Maturity Date.

Conversion Rights

Holders may convert their Notes at their option at any time prior to the close of business on the second scheduled trading day immediately preceding the Maturity Date of the Notes, in equal multiples of $1,000 principal amount, under the following circumstances:

• during any fiscal quarter (and only during such fiscal quarter) after the fiscal quarter ending December 31, 2009, if the last reported sale price of the Company's common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is equal to or more than 130% of the conversion price of the Notes on the last day of such preceding fiscal quarter;

• during the five business-day period after any five consecutive trading-day period, or the measurement period, in which the trading price per $1,000 principal amount of the Notes for each day of that measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate of the Notes on each such day; or

• upon the occurrence of certain specified corporate transactions.

In addition, holders may convert their Notes at their option at any time beginning on January 13, 2014 and ending on the close of business on the second scheduled trading day immediately preceding the Maturity Date, without regard to the foregoing circumstances.

The initial conversion rate for the Notes will be 21.0235 shares of the Company's common stock per $1,000 principal amount of Notes, equivalent to an initial conversion price of approximately $47.57 per share of the Company's common stock (the "Initial Conversion Price"). Such conversion rate will be subject to adjustment in certain events, but will not be adjusted for accrued interest, including any additional interest.

Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company's common stock or a combination thereof at the Company's election (the "Conversion Obligation"). If the Company satisfies its Conversion Obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of the Company's common stock, the amount of cash and shares of the Company's common stock, if any, due upon conversion will be based on a daily conversion value (as described in the Indenture) calculated on a proportionate basis for each trading day in the 40 trading-day cash settlement averaging period (as described in the Indenture).

Upon the occurrence of certain fundamental corporate changes, holders will have the option to require the Company to purchase the Notes or any portion of the principal amount thereof that is equal to $1,000, or an integral multiple of $1,000. In such event, the Company must pay 100% of the principal amount of the Notes to be purchased plus accrued and unpaid interest, including any additional interest. Any Notes purchased by the Company pursuant to the provisions for fundamental change will be paid for in cash.

Events of Default

The Indenture includes customary events of default, including, among other things, payment default, covenant default, conversion default, certain defaults under other indebtedness of the Company or certain of its subsidiaries, the failure to timely satisfy judgments over a certain sum against the Company or certain of its subsidiaries, failure to provide certain notices required by the Indenture and bankruptcy, insolvency or reorganization affecting the Company or certain of its subsidiaries.

Ranking

The Notes will be equal in right of payment with the Company's existing and future unsecured senior debt and senior in right of payment to the Company's debt that is expressly subordinated to the Notes, if any. The Indenture does not limit the amount of debt that the Company or its subsidiaries may incur. The Notes will be structurally subordinated to all debt and other liabilities and commitments (including trade payables and guarantees of the Company's debt) of the Company's subsidiaries, including such subsidiaries' guarantees of the Company's indebtedness under the Company's revolving credit facility, term loan facility and existing senior notes. The Notes will also be effectively junior to the Company's secured debt, if any, to the extent of the value of the assets securing such debt.

No Registration Rights; Additional Interest

The Company will not file a shelf registration statement for the resale of the Notes or any common stock issuable upon conversion of the Notes. As a result, holders may only resell the Notes or common stock issued upon conversion of the Notes, if any, pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and other applicable securities laws.

If, at any time during the six-month period beginning on, and including, the date which is six months after the date of original issuance of the Notes, the Company fails to timely file any document or report that it is required to file with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, as applicable (other than current reports on Form 8-K), or the Notes are not otherwise freely tradable by holders other than affiliates of the . . .

The information provided in Item 1.01 above is incorporated herein by reference.

The Notes and any shares of the Company's common stock issuable in certain circumstances upon conversion of the Notes have not been registered under the Securities Act. The Company offered and sold the Notes to the Initial Purchasers in reliance on the exemption from registration requirements provided by
Section 4(2) of the Securities Act. The Company relied on this exemption from registration requirements in part based on representations made by the Initial Purchasers in the Purchase Agreement. The Initial Purchasers then sold the Notes to qualified institutional buyers pursuant to the exemption from registration requirements provided by Rule 144A under the Securities Act.

The Warrants that the Company sold to the Hedge Counterparties and the underlying shares of the Company's common stock issuable upon exercise of the Warrants have not been registered under the Securities Act or any applicable state securities laws and may not be offered or sold in the United Sates, absent registration or an applicable exemption from registration requirements. The Company offered and sold the Warrants to the Hedge Counterparties in reliance on the exemption from registration requirements provided by Section 4(2) of the Securities Act.

This Current Report on Form 8-K does not constitute an offer to sell nor a solicitation of an offer to buy any security and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful. Additional information pertaining to the Notes and Warrants is set forth in Item 1.01 above and is incorporated herein by reference.

(d) Exhibits

EXHIBIT
NUMBER       DESCRIPTION
 4.1         Indenture, dated June 2, 2009, between Alliance Data Systems
             Corporation and The Bank of New York Mellon Trust Company, National
             Association, as Trustee (including the form of the Company's 4.75%
             Convertible Senior Note due May 15, 2014).


--------------------------------------------------------------------------------
10.1   Purchase Agreement, dated May 27, 2009, between Alliance Data Systems
       Corporation and the several Initial Purchasers party thereto.

10.2   Form of Convertible Note Hedge confirmation, dated May 27, 2009, between
       Alliance Data Systems Corporation and each of J.P. Morgan Securities Inc.,
       as agent for JPMorgan Chase Bank, National Association, Bank of America,
       N.A., and Barclays Capital Inc., as agent for Barclays Bank PLC.

10.3   Form of Warrant confirmation, dated May 27, 2009, between Alliance Data
       Systems Corporation and each of J.P. Morgan Securities Inc., as agent for
       JPMorgan Chase Bank, National Association, London Branch, Bank of America,
       N.A., and Barclays Capital Inc., as agent for Barclays Bank PLC.

10.4   Form of Forward Stock Purchase Transaction, dated May 27, 2009, between
       Alliance Data Systems Corporation and each of Merrill Lynch, Pierce, Fenner
       & Smith Incorporated, as agent for Merrill Lynch International, and
       Barclays Capital Inc., as agent for Barclays Bank PLC.