THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT
OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
ALLIANCE DATA SYSTEMS CORPORATION
10% Subordinated Note
Due October 25, 2005
Registered New York, New York
R-002 January 24, 1996
$20,000,000
ALLIANCE DATA SYSTEMS CORPORATION, a Delaware corporation
(hereinafter called the "Company"), for value received, hereby promises to
pay to LIMITED COMMERCE CORP., a Delaware corporation, or registered assigns,
the principle sum of TWENTY MILLION AND NO/100 Dollars ($20,000,000), on
October 25, 2005, and to pay interest (computed on the basis of a 360-day
year consisting of twelve 30-day months) from the date hereof on the unpaid
principal amount hereof at the rate of 10% per annum, payable semi-annually
in arrears on the first day of July and January of each year (each said day
being an "Interest Payment Date"), commencing on July 1, 1996, until the
principal amount hereof shall have become due and payable, whether at
maturity or by acceleration or otherwise, and thereafter at the rate of 12%
per annum on any overdue principal amount and (to the extent permitted by
applicable law) on any overdue interest until paid.
All payments of principal and interest on this Note shall be in such
coin or currency of the United States of America as at the time of payment
shall be legal tender for payment of public and private debts.
For purposes of this Note, "Business Day" shall mean any day other
than a Saturday, Sunday or a legal holiday under the laws of the State of New
York.
1. NOTES. This Note is one of a duly authorized issue of
Subordinated Notes (herein called the "Notes") made or to be made by the
Company in the aggregate principal amount of $50,000,000, maturing on October
25, 2005 and bearing interest payable at the same rate and on the same dates
as the interest on the principal amount of this Note.
2. TRANSFER, ETC. OF NOTES. The Company shall keep at its office
or agency maintained as provided in paragraph (a) of Section 10 a register in
which the Company shall provide for the registration of Notes and for the
registration of transfer and exchange of Notes. The holder of this Note may,
at its option, and either in person or by duly authorized attorney, surrender
the same for registration of transfer or exchange at the office or agency of
the Company maintained as provided in paragraph (a) of Section 10, and,
without expense to such holder (except for taxes or governmental charges
imposed in connection therewith), receive in exchange therefor a Note or
Notes each in such denomination or denominations as such holder may request,
dated as of the date to which interest has been paid on the Note or Notes so
surrendered for transfer or exchange, for the same aggregate principal amount
as the then unpaid principal amount of the Note or Notes so surrendered for
transfer or exchange, and registered in the name of such person or persons as
may be designated by such holder. Every Note presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or shall be
accompanied by a written instrument of transfer, satisfactory in form to the
Company, duly executed by the holder of such Note or his attorney duly
authorized in writing. Every Note so made and delivered in exchange for this
Note shall in all other respects be in the same form and have the same terms
as this Note. No transfer or exchange of any Note shall be valid unless made
in the foregoing manner at such office or agency.
3. LOSS, THEFT, DESTRUCTION OR MUTILATION OF NOTE. Upon receipt
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note, and, in the case of any such loss, theft or
destruction, upon receipt of an affidavit of loss and indemnity from the
holder hereof reasonably satisfactory to the Company, or, in the case of any
such mutilation, upon surrender and cancellation of this Note, the Company
will make and deliver, in lieu of this Note, a new Note of like tenor and
unpaid principal amount and dated as of the date to which interest has been
paid on this Note.
4. PERSONS DEEMED OWNERS; HOLDERS. The Company may deem and treat
the person in whose name any Note is registered as the owner and holder of
such Note for the purpose of receiving payment of principal of and interest
on such Note and for all other purposes whatsoever, whether or not such Note
shall be overdue. With respect to any Note at any time outstanding, the term
"holder", as used herein, shall be deemed to mean the person in whose name
such Note is registered as aforesaid at such time.
5. PREPAYMENTS.
(a) OPTIONAL PREPAYMENT. Upon notice given as provided in
Section 6 the Company may, at its option, prepay the Notes, as a whole at
any time or in part from
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time to time, in amounts which shall be integral multiples of $100,000, at
the unpaid principal amount thereof so to be prepaid, together with
interest accrued thereon to the date fixed for such prepayment. All
prepayments shall be applied to installments of principal hereof in inverse
order of maturity.
(b) [INTENTIONALLY OMITTED.]
(c) MANDATORY PREPAYMENT UPON PUBLIC OFFERING. If at any time
while any of the Notes shall be outstanding the Company shall consummate a
public offering of equity securities of the Company pursuant to an
effective registration statement under the Securities Act, then upon the
consummation of each such offering the Company shall apply to prepayment of
the Notes, without penalty or premium (up to the amount required to prepay
all the Notes including accrued interest thereon) an amount that, including
principal to be prepaid and accrued interest thereon, is equal to the sum
of (x) one-sixth of the proceeds of such offering to the Corporation (net
of underwriting discounts and commissions), plus (y) the amount (if any) by
which one-sixth of such net proceeds exceeds the amount (if any) which
shall have been applied to redemption of the Company's Preferred Stock, $1
per value, pursuant to the Certificate of Incorporation of the Company by
reason of the consummation of such offering, it being intended that up to
an aggregate one-third of such proceeds shall be available to prepay the
Notes and redeem such Preferred Stock.
6. NOTICE OF PREPAYMENT AND OTHER NOTICES. The Company shall give
written notice of any prepayment of this Note or any portion hereof pursuant
to Section 5 not less than 10 nor more than 60 days prior to the date fixed
for such prepayment. Such notice of prepayment and all other notices to be
given to any holder of this Note shall be given by registered or certified
mail to the person in whose name this Note is registered at its address
designated on the register maintained by the Company on the date of mailing
such notice of prepayment or other notice. Upon notice of prepayment being
given as aforesaid, the Company covenants and agrees that it will prepay, on
the date therein fixed for prepayment, this Note or the portion hereof, as
the case may be, so called for prepayment, at the principal amount thereof so
called for prepayment together with interest accrued thereon to the date
fixed for such prepayment.
7. ALLOCATION OF PREPAYMENT. In the event of any prepayment,
purchase, redemption or retirement of less than all of the outstanding Notes,
the Company will allocate the principal amount so to be prepaid, purchased,
redeemed or retired (but only in units of $100,000) to each Note in
proportion, as nearly as may be, to the aggregate principal amount of all
Notes then outstanding.
8. INTEREST AFTER DATE FIXED FOR PREPAYMENT. If this Note or a
portion hereof is called for prepayment as herein provided, this Note or such
portion shall cease to bear interest on and after the date fixed for such
prepayment unless, upon presentation for the purpose,
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the Company shall fail to pay this Note or such portion, as the case may be,
in which event this Note or such portion, as the case may be, and, so far as
may be lawful, any overdue installment of interest, shall bear interest on
and after the date fixed for such prepayment and until paid at the rate PER
ANNUM provided herein for overdue principal.
9. SURRENDER OF NOTES; NOTATION THEREON. Upon any prepayment of a
portion of the principal amount of this Note, the holder hereof, at its
option, may require the Company to execute and deliver at the expense of the
Company (except for taxes or governmental charges imposed in connection
therewith), upon surrender of this Note, a new Note registered in the name of
such person or persons as may be designated by such holder for the principal
amount of this Note then remaining unpaid, dated as of the date to which
interest has been paid on the principal amount of this Note then remaining
unpaid, or may present this Note to the Company for notation hereon of the
payment of the portion of the principal amount of this Note so prepaid.
10. COVENANTS. The Company covenants and agrees that, so long as
any Note shall be outstanding:
(a) MAINTENANCE OF OFFICE. The Company will maintain an office
or agency in such place in the United States of America as the Company may
designate in writing to the registered holder hereof, where the Notes may
be presented for registration of transfer and for exchange as herein
provided, where notices and demands to or upon the Company in respect of
the Notes may be served and where, at the option of the holders thereof,
the Notes may be presented for payment.
(b) PAYMENT OF TAXES. The Company will promptly pay and
discharge or cause to be paid and discharged, before the same shall become
in default, all lawful taxes and assessments imposed upon the Company or
any subsidiary or upon the income and profits of the Company or any
subsidiary, or upon any property, real, personal or mixed, belonging to
the Company or any subsidiary, or upon any part thereof by the United
States or any State thereof, as well as all lawful claims for labor,
materials and supplies which, if unpaid, would become a lien or charge
upon such property or any part thereof; PROVIDED, HOWEVER, that neither
the Company nor any subsidiary shall be required to pay and discharge or
to cause to be paid and discharged any such tax, assessment, charge,
levy or claim so long as both (x) the Company has set aside adequate
reserves for such tax, assessment, charge, levy or claim and (y)(i) the
Company or a subsidiary shall be contesting the validity thereof in good
faith by appropriate proceedings or (ii) the Company shall, in its good
faith judgment, deem the validity thereof to be questionable and the
party to whom such tax, assessment, charge, levy or claim is allegedly
owed shall not have made written demand for the payment thereof.
(c) CORPORATE EXISTENCE. The Company will do or cause to be
done all things necessary and lawful to preserve and keep in full force and
effect its corporate existence,
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rights and franchises and the corporate existence, rights and franchises
of each of its subsidiaries; PROVIDED, HOWEVER, that nothing in this
paragraph (c) shall prevent the abandonment or termination of any rights
or franchises of the Company, or the liquidation or dissolution of, or a
sale, transfer or disposition (whether through merger, consolidation, sale
or otherwise) of all or any substantial part of the property and assets
of, any subsidiary or the abandonment or termination of the corporate
existence, rights and franchises of any subsidiary if such abandonment,
termination, liquidation, dissolution, sale, transfer or disposition is,
in the good faith business judgment of the Company, in the best interests
of the Company and is not disadvantageous in any material respect to the
holders of the Notes.
(d) MAINTENANCE OF PROPERTY. The Company will at all times
maintain and keep, or cause to be maintained and kept, in good repair,
working order and condition all significant properties of the Company and
its subsidiaries used in the conduct of the business of the Company and
its subsidiaries, and will from time to time make or cause to be made all
needful and proper repairs, renewals, replacements, betterments and
improvements thereto, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times;
PROVIDED, HOWEVER, that nothing in this paragraph (d) shall require (i)
the making of any repair or renewal or (ii) the continuance of the
operation and maintenance of any property or (iii) the retention of any
assets if such action (or inaction) is, in the good faith business
judgment of the Company, in the best interests of the Company (and the
best interests of any subsidiary concerned or affected thereby) and is
not disadvantageous in any material respect to the holders of the Notes.
(e) INSURANCE. The Company will, and will cause each of its
subsidiaries to, (i) keep adequately insured, by financially sound and
reputable insurers, all property of a character usually insured by
corporations engaged in the same or a similar business similarly situated
against loss or damage of the kinds customarily insured against by such
corporations and (ii) carry, with financially sound and reputable insurers,
such other insurance (including, without limitation, liability insurance)
in such amounts as are available at reasonable expense and to the extent
believed necessary in the good faith business judgment of the Company.
(f) KEEPING OF BOOKS. The Company will at all times keep, and
cause each of its subsidiaries to keep, proper books of record and
account in which proper entries will be made of its transactions in
accordance with generally accepted accounting principles consistently
applied.
(g) TRANSACTIONS WITH AFFILIATES. The Company will enter into any
transaction with any director, officer, stockholder, employee or affiliate
of the Company only upon fair and reasonable terms.
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(h) NOTICE OF DEFAULT. If any one or more events which constitute,
or which with notice or lapse of time or both would constitute, an Event
of Default under Section 13 shall occur, or if the holder of any Note
shall demand payment or take any other action permitted upon the
occurrence of any such Event of Default, the Company shall, immediately
after it becomes aware that any such event has occurred or that such
demand has been made or that any such action has been taken, give notice
to all holders of the Notes, specifying the nature of such event of such
demand or action, as the case may be; PROVIDED, HOWEVER, that if such
event, in the good faith judgment of the Company, will be cured within ten
days after the Company has knowledge that such event would, with or
without notice or lapse of time or both, constitute such an Event of
Default, no such notice need be given if such Event of Default shall be
cured within such ten-day period.
11. MODIFICATION BY HOLDERS; WAIVER. The Company may, with the
written consent of the holders of not less than 66 2/3% in principal amount
of the Notes then outstanding, modify the terms and provisions of the Notes
or the rights of the holders of the Notes or the obligations of the Company
thereunder, and the observance by the Company of any term or provision of the
Notes may be waived with the written consent of the holders of not less than
66 2/3% in principal amount of the Notes then outstanding; PROVIDED, HOWEVER,
that no such modification or waiver shall:
(a) change the maturity of any Note or reduce the principal amount
thereof or reduce the rate or extend the time of payment of interest
thereon without the consent of the holder of each Note so affected; or
(b) give any Note any preference over any other Note;
(c) reduce the percentage of Notes, the consent of the holders of
which is required for any such modification; or
(d) amend the provisions of Section 16 hereof without the consent
of the holders of Senior Indebtedness (as hereinafter defined).
Any such modification or waiver shall apply equally to all the
holders of the Notes and shall be binding upon them, upon each future holder
of any Note and upon the Company, whether or not such Note shall have been
marked to indicate such modification or waiver, but any Note issued
thereafter shall bear a notation referring to any such modification or
waiver. Promptly after obtaining the written consent of the holders as herein
provided, the Company shall transmit a copy of such modification or waiver to
all the holders of the Notes at the time outstanding.
12. EVENTS OF DEFAULT. If any one or more of the following events,
herein called Events of Default, shall occur, for any reason whatsoever, and
whether such occurrence
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shall, on the part of the Company or any subsidiary, be voluntary or
involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of a court of competent
jurisdiction or any order, rule or regulation of any administrative or other
governmental authority and such Event of Default shall be continuing:
(a) default shall be made in the payment of the principal of any
Note when and as the same shall become due and payable, whether at
maturity or at a date fixed for prepayment or by acceleration or
otherwise; or
(b) default shall be made in the payment of any installment of
interest on any Note according to its terms when and as the same shall
become due and payable and such default shall continue for a period of
five days; or
(c) default shall be made in the due observance or performance of
any other covenant, condition or agreement on the part of the Company to
be observed or performed pursuant to the terms hereof or of the Securities
Purchase Agreement dated as of January 24, 1996 among the Company and the
several Purchasers named therein (the "Purchase Agreement"), and such
default shall continue for 30 days after written notice thereof,
specifying such default and requesting that the same be remedied, shall
have been given to the Company by the holder or holders of at least 25% of
the principal amount of the Notes then outstanding (the Company to give
forthwith to all other holders of Notes at the time outstanding written
notice of the receipt of such notice specifying the default referred to
therein); or
(d) any representation or warranty made by the Company in the
Purchase Agreement shall prove to have been false or incorrect in any
material respect on the date on or as of which made; or
(e) the entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Company or any subsidiary
in an involuntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or any other applicable federal or state
bankruptcy, insolvency or other similar laws, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Company or any subsidiary or for any substantial part of
any of their property, or ordering the winding-up or liquidation of any of
their affairs and the continuance of any such decree or order unstayed and
in effect for a period of 60 consecutive days; or
(f) the commencement by the Company or any subsidiary of a
voluntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or any other applicable federal or state bankruptcy,
insolvency or other similar laws, or the consent by any of them to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of the
Company or any subsidiary or for any substantial part of their property,
or the making by any of them of any
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assignment for the benefit of creditors, or the failure of the Company
or any subsidiary generally to pay its debts as such debts become due; or
(g) default as defined in any instrument evidencing or under which
the Company or any subsidiary has outstanding at the time any indebtedness
for money borrowed in excess of $50,000 in aggregate principal amount
shall occur and as a result thereof the maturity of any such indebtedness
shall have been accelerated so that the same shall have become due and
payable prior to the date on which the same would otherwise have become
due and payable and such acceleration shall not have been rescinded or
annulled within 30 days; or
(h) final judgment for the payment of money in excess of $50,000
shall be rendered against the Company or a subsidiary and the same shall
remain undischarged for a period of 30 days during which execution shall
not be effectively stayed;
then, the holder or holders of a least 25% in aggregate principal amount of
the Notes at the time outstanding may, at its or their option, by notice to
the Company, declare all the Notes to be, and all the Notes shall thereupon
be and become, forthwith due and payable together with interest accrued
thereon without presentment, demand, protest or further notice of any kind,
all of which are expressly waived to the extent permitted by law.
At any time after any declaration of acceleration as to all of the
Notes has been made as provided in this Section 12, the holders of at least
66 2/3% in principal amount of the Notes then outstanding may, by notice to
the Company, rescind such declaration and its consequences, if (i) the
Company has paid all overdue installments of interest on the Notes and all
principal that has become due otherwise than by such declaration of
acceleration and (ii) all other defaults and Events of Default (other than
nonpayments of principal and interest that have become due solely by reason
of acceleration) shall have been remedied or cured or shall have been waived
pursuant to this paragraph, PROVIDED, HOWEVER, that no such rescission shall
extend to or affect any subsequent default or Event of Default or impair any
right consequent thereon.
13. SUITS FOR ENFORCEMENT. In case any one or more of the Events
of Default specified in Section 12 of this Note shall occur and be
continuing, the holder of this Note may proceed to protect and enforce its
rights by suit in equity, action at law and/or by other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Note or in aid of the exercise of any power granted in this
Note, or may proceed to enforce the payment of this Note or to enforce any
other legal or equitable right of the holder of this Note.
In case of any default under any Note, the Company will pay to the
holder thereof such amounts as shall be sufficient to cover the costs and
expenses of such holder due to said default, including, without limitation,
collection costs and reasonable attorneys' fees, to the extent actually
incurred.
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14. REMEDIES CUMULATIVE. No remedy herein conferred upon the
holder of this Note is intended to be exclusive of any other remedy and each
and every such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity
or by statute or otherwise.
15. REMEDIES NOT WAIVED. No course of dealing between the Company
and the holders of this Note or any delay on the part of the holder hereof in
exercising any rights hereunder shall operate as a waiver of any right of any
holder of this Note.
16. SUBORDINATION. (a) SUBORDINATION. Anything in this Note to the
contrary notwithstanding, the obligation of the Company to pay the principal
of and interest on, this Note, and to discharge all its other obligations
hereunder, shall be subordinate and junior in right of payment to the extent
set forth in the following paragraphs (A), (B) and (C), inclusive, to (i) all
obligations of the Company to banks or other financial institutions for
borrowed money, and (ii) all obligations of the Company to banks or other
financial institutions under guarantees by the Company of obligations of
wholly owned subsidiaries of the Company to banks or other financial
institutions for borrowed money, in each case, whether such obligations are
outstanding at the date of this Note or created or incurred after the date of
this Note but prior to the maturity of this Note. The obligations of the
Company to which this Note is subordinate and junior in right of payment are
sometimes herein referred to as "Senior Indebtedness".
(A) In the event of any insolvency, bankruptcy, liquidation,
reorganization or other similar proceedings, or any receivership
proceedings in connection therewith, relative to the Company or its
creditors or its property, and in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company,
whether or not involving insolvency or bankruptcy proceedings, then
all Senior Indebtedness shall first be paid in full, before any
payment on account of principal or interest is made upon this Note.
(B) In any of the proceedings referred to in paragraph (A)
above, any payment or distribution of any kind or character, whether
in cash, property, stock or obligations which may be payable or
deliverable in respect of this Note shall be paid or delivered
directly to the holders of Senior Indebtedness for application in
payment thereof, unless and until all Senior Indebtedness shall have
been paid in full.
(C) In the event the Company shall default under any Senior
Indebtedness obligation held by any bank or other financial
institution, which default shall continue without cure or waiver, and
the effect of such default is to accelerate the maturity of such
obligation or the holder thereof shall cause such obligation to become
due prior to the stated maturity thereof or the Company shall not pay
such obligation at maturity, the Company will not make, directly or
indirectly, to the
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holder of this Note any payment of any kind of or on account of all
or any part of this Note, and the holder of this Note will not accept
from the Company any payment of any kind of or on account of all or
any part of this Note, unless and until all such Senior Indebtedness
shall have been paid in full; and if, with respect to any such
default, the holder of such Senior Indebtedness obligation shall have
made a demand for payment and commenced an action, suit or other
proceeding against the Company, then the holder of this Note may not
take, demand, receive, sue for, accelerate or commence any remedial
proceedings with respect to any amount payable under this Note during
the pendency of such action, suit or other proceeding. Notwithstanding
the provisions of the immediately preceding sentence, if any such
default shall have continued for 180 days or more, the Company may
make and the holder of this Note may accept from the Company all past
due and current payments of any kind of or on account of this Note,
and such holder may demand, receive, retain, sue for or otherwise seek
enforcement or collection of all amounts payable on account of
principal of or interest on this Note.
Upon request of any holder of Senior Indebtedness, the holder of this
Note will affirm its obligations under this Section 16.
(b) SUBROGATION. Subject to the payment in full of all Senior
Indebtedness as aforesaid, the holder of this Note shall be subrogated
to the rights of the holders of Senior Indebtedness to receive payments or
distributions of any kind or character, whether in cash, property, stock
or obligations, which may be payable or deliverable to the holders of
Senior Indebtedness, until the principal of, and interest on, this Note
shall be paid in full, and, as between the Company, its creditors other
than the holders of Senior Indebtedness, and the holder of this Note, no
such payment or distribution made to the holders of Senior Indebtedness
by virtue of this Section 16 which otherwise would have been made to the
holder of this Note shall be deemed a payment by the Company on account of
the Senior Indebtedness, it being understood that the provisions of this
Section 16 are and are intended solely for the purposes of defining the
relative rights of the holder of this Note, on the one hand, and the
holder of the Senior Indebtedness, on the other hand. Subject to the
rights, if any, under this Section 16 of holders of Senior Indebtedness
to receive cash, property, stock or obligations otherwise payable or
deliverable to the holder of this Note, nothing herein shall either
impair, as between the Company and the holder of this Note, the obligation
of the Company, which is unconditional and absolute, to pay to the holder
hereof the principal hereof and interest hereon in accordance with its
terms and the provisions of this Note or prevent the holder of this Note
from exercising all remedies otherwise permitted by applicable law or upon
default hereunder.
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17. COVENANTS BIND SUCCESSORS AND ASSIGNS. All the covenants,
stipulations, promises and agreements in this Note contained by or on behalf
of the Company shall bind its successors and assigns, whether so expressed or
not.
18. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
19. HEADINGS. The headings of the Sections and paragraphs of this
Note are inserted for convenience only and do not constitute a part of this
Note.
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IN WITNESS WHEREOF, ALLIANCE DATA SYSTEMS CORPORATION has caused
this Note to be signed in its corporate name by one of its officers thereunto
duly authorized and to be dated as of the day and year first above written.
ALLIANCE DATA SYSTEMS CORPORATION
By /s/ [Illegible]
-------------------------------
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