CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS:

On April 25, 2019, a majority of disinterested directors of the board considered and approved an exchange agreement with ValueAct Holdings, L.P. pursuant to which ValueAct Holdings, L.P. exchanged an aggregate of 1,500,000 shares of common stock, par value $0.01 per share, of the company, for an aggregate of 150,000 shares of Series A Non-Voting Convertible Preferred Stock, par value $0.01 per share, of the company. Other than as described above, in the last fiscal year, the company has not entered into any transactions, and as of April 13, 2020, there are no proposed transactions, in which the company was, or is to be, a participant and in which any related person had or is expected to have a direct or indirect material interest.

Our board of directors has adopted a written related party transactions policy, which prohibits us from entering into any “related party transaction” unless the audit committee approves such transaction in accordance with the guidelines set forth in the policy, or the transaction is approved by a majority of disinterested directors of the company. In approving any related party transaction, the audit committee must determine that the transaction is beneficial to the company and the terms of the related party transaction are fair to the company.

For purposes of our related party transactions policy, a related party is: (1) any director, director nominee or executive officer of the company, (2) any five percent or greater stockholder of the company or (3) any immediate family member of any of these persons. A “related party transaction” includes any transaction (including any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness)), or series of related transactions, or any material amendment to any such transaction, in which the company, or any of its subsidiaries, is a participant, the aggregate amount of which exceeds $120,000 and in which the related party has or will have a direct or indirect material interest (other than solely as a result of being a director or a less than 10 percent beneficial owner of another entity). Our related party transactions policy deems the following transactions to be pre-approved and does not require further review: (1) compensation of directors that has been approved in accordance with the compensation committee charter; (2) employment and compensation of an executive officer that has been approved in accordance with the compensation committee charter; (3) a transaction in which the interest of the related party arises solely from the ownership of a class of the company’s equity securities and all holders of that class receive the same benefit on a pro rata basis; (4) transactions involving certain indemnification payments and payments under directors and officers liability insurance policies; (5) a transaction in which the rates or charges involved therein are determined by competitive bids; (6) a transaction that involves services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture, or similar services; and (7) certain company charitable contributions.

At each audit committee meeting, management shall recommend any related party transactions, if applicable, to be entered into by the company. After review, the audit committee shall approve or disapprove such transactions and at each subsequently scheduled meeting, management shall update the audit committee as to any material change to those approved transactions. The audit committee shall establish such guidelines as it determines are necessary or appropriate for management to follow in its dealings with related parties in related party transactions.

All related party transactions of which management is aware are required to be disclosed to the audit committee. If management becomes aware of an existing related party transaction that has not been pre-approved by the audit committee, management is required to promptly notify the chair of the audit committee and such transactions shall be submitted to the audit committee for its review and determination of whether to ratify such transaction. If management, in consultation with the company’s chief executive officer or chief financial officer, determines that it is not practicable to wait until the next audit committee meeting, the chair of the audit committee has the delegated authority during the period between audit committee meetings, to review and determine whether any such transaction should be approved, or ratified, as the case may be. The chair of the audit committee shall report to the audit committee any transactions reviewed by him or her pursuant to this delegated authority at the next audit committee meeting.

POLITICAL CONTRIBUTIONS AND ACTIVITY:

Engagement in political, legislative and regulatory processes can be important to the success of the company. The company has adopted a Political Contributions and Activity Policy that sets forth the ways by which the company and its associates may participate in political, legislative and regulatory processes. All political contributions and activities comply with applicable laws, and we disclose our contributions publicly as required by law. Eligible associates may also voluntarily participate in the political process by supporting the company’s non-partisan political action committee, the Alliance Data Political Action Committee, which is governed by comprehensive federal regulations that require the filing of reports with the Federal Election Commission among other reporting and disclosure requirements. Our general counsel provides compliance and oversight for the company’s political engagements. For further information, please see our Political Contributions and Activity Policy, available on our website at http://www.alliancedata.com.

SUSTAINABILITY AND CORPORATE RESPONSIBILITY:

The nominating & corporate governance committee of our board of directors is responsible for overseeing and advising management on the company's corporate social responsibility and sustainability strategy, policies and programs. Alliance Data recognizes that to grow our business and prosper over time, we must meet the needs and evolving expectations of a broad range of stakeholders, including clients, customers, associates, stockholders, regulators, policy makers and our communities. The nominating & corporate governance committee will continue to work with management to further develop the company’s ESG policies and programs and provide transparent reporting on ESG metrics.

To help demonstrate that we operate ethically and with purpose, our sustainability strategy focuses on the following five areas that are critical to our success:

For 2020, we have identified responsible finance, prudent risk management, solid regulatory compliance and effective corporate governance as critical sustainability priorities, all of which create long-term stockholder value. Our annual Sustainability Reports and information on our initiatives are located on our website at http://www.alliancedata.com.

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PROPOSAL ONE:

election of directors

Our nominating & corporate governance committee evaluated and recommended to our board of directors, and our board of directors has nominated, the following seven individuals, Ralph J. Andretta, Roger H. Ballou, John C. Gerspach, Jr., Rajesh Natarajan, Timothy J. Theriault, Laurie A. Tucker and Sharen J. Turney, for election as a director, each to hold office for a term of one year until the annual meeting of stockholders in 2021 and until his or her respective successor is duly elected and qualified. With the exception of Mr. Gerspach and Mr. Natarajan, each of the director nominees is currently serving as a member of our board of directors. Mr. Gerspach and Mr. Natarajan were recommended to the nominating & corporate governance committee by executive management of the company and a third-party search firm, respectively.

The nominating & corporate governance committee and the board of directors determined that each nominee brings a strong and unique background and set of skills to our board of directors, enhancing, as a whole, our board of directors’ competence and experience in a variety of areas, including executive management and board service, internal controls and corporate governance, financial and accounting acumen, digital technology, data security and privacy, an understanding of industries in which we operate, including financial institutions and related risk management and regulatory compliance, as well as risk assessment and management. Specifically, in nominating these seven directors for election at the 2020 annual meeting of our stockholders, consideration was given to such directors’ past service on our board of directors and its committees, as applicable, and the information illustrated in our skills matrix and discussed in each of such directors’ individual biographies set forth below. Our board of directors recommends that our stockholders vote in favor of each of these director nominees.

SKILLS MATRIX AND DESCRIPTION OF DIRECTOR KNOWLEDGE, SKILLS AND EXPERIENCE:

The matrix below provides information regarding our nominees’ knowledge, skills and experience that are most relevant in light of our company’s business, long-term strategies and risks. Additional description regarding each of these categories is available in the key following this matrix. All of the nominees listed in the matrix currently serve on our company’s board of directors, except Mr. Gerspach and Mr. Natarajan. Our nominees represent a broad range of backgrounds and experience, and each nominee possesses numerous competencies not identified below. The fact that a nominee is not designated as having a particular attribute does not indicate that the nominee does not possess that attribute or would not be able to make a meaningful contribution to the board’s decision-making or oversight in that area. Demographic information regarding our nominees is also included in the matrix.

management and international operations. Our board of directors believes Mr. Gerspach’s expertise, particularly with respect to banking, financial, audit, risk management and global operations, will benefit our business and the board’s overall mix of skills, making him well-qualified for election as a director.

Rajesh Natarajan / Nominating & Corporate Governance Committee • Risk Committee • Age: 50

Mr. Natarajan is a nominee for director. Mr. Natarajan has served as the executive vice president and chief product and technology officer of Ancestry.com since February 2017. He served in senior leadership positions with increasing responsibility in the areas of technology and product development at Intuit, Inc. from 2014 to 2017, including as senior vice president and chief information security and fraud officer, and at PayPal Holdings, Inc. from 2006 to 2014, including as vice president, platform engineering and operations. Prior to that, Mr. Natarajan was employed by Sabre Holdings Corporation, where he served in various management positions with increasing responsibility in the area of technology from 1995 to 2006, to include as an early member of the development team that founded Travelocity.com. Mr. Natarajan holds a Bachelor’s degree in mechanical engineering from Jawaharlal Nehru Technology University in India and a Master’s degree in industrial engineering from Clemson University. Mr. Natarajan’s qualifications include executive experience in roles requiring expertise in information technology, cyber-security, engineering, operations and product development. Our board of directors believes Mr. Natarajan’s expertise, particularly with respect to business operations, technology development, information technology and cyber-security, will benefit our business and the board’s overall mix of skills, making him well-qualified for election as a director.

Timothy J. Theriault / Audit Committee • Compensation Committee • Risk Committee (Chair) • Age: 59

Mr. Theriault has served as a director since October 2016. Mr. Theriault served as an advisor to the chief executive officer of Walgreens Boots Alliance, Inc. from June 2015 until November 2016. Prior to that, he served as executive vice president and global chief information officer of Walgreens Boots Alliance, Inc. from July 2014 to June 2015. He served in senior leadership positions with increasing responsibility at Walgreen Co. from October 2009 to July 2014, including as senior vice president and chief information, innovation and improvement officer. Prior to that, Mr. Theriault was employed by Northern Trust Corporation, where he served in various executive and management positions with increasing responsibility in the area of information technology from May 1991 to October 2009 and July 1982 to October 1989. Mr. Theriault served as director of end user computing and advanced technologies for S. C. Johnson & Son, Inc., from October 1989 to May 1991. He currently serves as a director of Wellmark Blue Cross and Blue Shield. Mr. Theriault previously served as a director of Vitamin Shoppe, Inc. from 2016 until its acquisition in 2019 and of the Depository Trust Clearing Corporation. Mr. Theriault holds a Bachelor’s degree from Illinois State University and completed the Harvard Business School advanced management program. Mr. Theriault brings significant expertise in information technology and cyber-security to our board. Together with his financial sophistication, banking, global operations, risk management and compensation experience gained as a senior executive in the financial services, health care and retail industries and service on public company boards, including as a member of public company audit and compensation committees, Mr. Theriault’s expertise and experience broaden the board’s skill set and enhance its ability to understand and oversee risk, including those associated with information technology, cyber-security and bank regulatory matters. The board of directors believes Mr. Theriault is well-qualified for re-election as a director.

Laurie A. Tucker / Compensation Committee • Nominating & Corporate Governance Committee (Chair) • Age: 63

Ms. Tucker has served as a director since June 2015. Ms. Tucker has served as the founder and chief strategy officer for marketing consultancy firm, Calade Partners LLC since January 2014. Ms. Tucker served as the senior vice president-corporate marketing of FedEx Services, Inc., a subsidiary of FedEx Corporation, a public company engaged in transportation, e-commerce and business services, from 2000 to 2013 and was employed by FedEx in various capacities of increasing experience and responsibilities since 1978. Ms. Tucker currently serves as a director of Forward Air Corporation. Ms. Tucker holds a Bachelor’s degree and an MBA from the University of Memphis. Ms. Tucker’s qualifications include financial and compensation expertise, global operations experience and strong leadership skills developed as a public company board member, including as a member of public company audit, compensation and nominating and corporate governance committees, and as a senior executive serving in various roles at a large multinational public company. These credentials, together with her expertise and experience in e-commerce, retail, technology, customer service and corporate marketing, add significant value to the board of directors and make Ms. Tucker a well-qualified candidate for re-election as a director.

Sharen J. Turney / Compensation Committee (Chair) • Nominating & Corporate Governance Committee • Age: 63

Ms. Turney has served as a director since June 2019. Ms. Turney has served as the chief executive officer of Russia-based jeans brand Gloria Jeans since November 2018 and as a director of Sweden-based designer sock and underwear brand Happy Socks AB since January 2018. She served as president and chief executive officer of Victoria’s Secret, a division of publicly-traded national retailer L Brands, Inc., from July 2006 until February 2016, and as president and chief executive officer of Victoria’s Secret Direct, the brand’s catalogue and e-commerce arm, from May 2000 until July 2006. Prior to that, Ms. Turney served for 10 years in

various executive roles including president and chief executive officer of Neiman Marcus Direct, the direct marketing division of luxury brand retailer Neiman Marcus Group. Ms. Turney served as a director of M/I Homes, Inc. from January 2011 until February 2018, a director of FULLBEAUTY Brands from July 2016 to September 2018 and a director of Nationwide Children’s Hospital, Inc., including as chairman of the board of its Research Institute, from 2012 to 2018. She holds a Bachelor’s degree from the University of Oklahoma and serves on the Baker Retailing Center Industry Advisory Board at Wharton School at the University of Pennsylvania. Ms. Turney has also served as an advisor to several retailers and technology companies. Ms. Turney’s qualifications include executive and/or board-level experience in the retail industry, including as an executive officer of a Fortune 500 fashion retailer, loyalty, marketing and digital/e-commerce expertise, global operations experience, service on public company boards, including as a member of public company compensation and nominating and corporate governance committees, financial expertise and executive leadership at companies operating in industries relevant to our business. Our board of directors believes Ms. Turney’s expertise, particularly with respect to her retail and digital/e-commerce marketing experience, will benefit our business and enhance our understanding of our customers’ businesses, making her well-qualified to serve on our board.

John J. Chesnut and Laura Santillan, and each of them, as proxies, will have full discretion to cast votes for other persons in the event any nominee is unable to serve. Our board of directors has no reason to believe that any nominee will be unable to serve if elected. If a quorum is present, directors are elected by a majority of the votes cast, in person or by proxy. This means that the seven nominees will be elected if they receive more “For” votes than “Against” votes. In accordance with Section 3.3.1 of our bylaws, any nominee who is currently serving as a director and does not receive a majority of votes cast shall immediately tender his or her resignation for consideration by our board of directors. Our board of directors will evaluate whether to accept or reject such resignation, or whether other action should be taken. The board of directors will publicly disclose its decision to accept or reject such resignation and its rationale within 90 days from the date of certification of the director election results.

✔ The board of directors recommends that stockholders vote FOR the election of each of the seven director nominees.

DIRECTORS NOT STANDING FOR RE-ELECTION:

Despite each of Messrs. Anderson’s, Jensen’s and Minicucci’s extensive qualifications and experience, as part of a multi-year board succession plan and as Messrs. Anderson and Jensen exceed the retirement age in our corporate governance guidelines, Messrs. Anderson, Jensen and Minicucci are not standing for re-election at the 2020 annual meeting.

Mr. Anderson co-founded the investment firm Welsh, Carson, Anderson & Stowe, or WCAS, and Mr. Minicucci served in various capacities at WCAS, a founding stockholder of the company that facilitated the initial public offering of our common stock in June 2001. Each of Messrs. Anderson, Jensen and Minicucci has served as a director since our inception or prior to our initial public offering, and the board and management wish to thank them for their significant contributions during their service on the board. Mr. Anderson has served as a director for nearly 24 years, including, most recently, as chair of the compensation committee. Mr. Jensen has served as a director for 19 years, including long-term service as a member of the audit committee. Mr. Minicucci has served as a director for nearly 24 years, including as lead director since 2002 and since 2009 as our only non-executive chair of the board.

EXECUTIVE OFFICERS

COMPENSATION

COMMITTEE REPORT

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement.

This report has been furnished by the current members of the compensation committee.

Bruce K. Anderson, Chair

Roger H. Ballou

Robert A. Minicucci

Sharen J. Turney

COMPENSATION

DISCUSSION AND ANALYSIS

OVERVIEW:

We consider our total executive compensation package integral to our ability to grow and improve our business. In determining appropriate compensation for our executive officers, the compensation committee uses the philosophies and methodologies described in this Compensation Discussion and Analysis. By design, we have tailored, with the guidance of external compensation consultants, a mix of compensation elements appropriate for our business. Our executive compensation program is structured at competitive levels and is designed to reward executive officers when the company achieves above industry-average performance. Our program, however, is also structured to significantly reduce rewards for performance below expectations. In certain instances, additional compensation considerations may be essential to enable the compensation committee to attract and retain the right leaders to guide and execute strategic initiatives in critical periods or challenging business environments. The compensation committee believes that this holistic approach will attract, retain and motivate executive officers with the quality and profile required to successfully lead the company and each of its segments in our highly competitive and evolving industries.

Our compensation programs, practices and policies are reviewed and evaluated on an ongoing basis to address evolving best practices and changing regulatory requirements. We list below some of the more significant best practices we have adopted and the practices we have avoided.

Key Executive Management Changes in 2019

The board of directors implemented a leadership transition in 2019 pursuant to succession planning undertaken in anticipation of the divestiture of our Epsilon® segment, which was completed on July 1, 2019, and additional initiatives designed to simplify the company’s narrative and focus capital on our highest earning and growth assets. The culmination of this leadership transition resulted in the following changes to our named executive officers, or NEOs, for 2019 as described in additional detail below.

CEO Succession.  On June 5, 2019, the board of directors appointed Ms. Miller, who previously led our Card Services segment as president for 8 years, as president, chief executive officer and a director, succeeding Mr. Heffernan, who resigned from those positions. On November 18, 2019, as part of our business transformation, the company announced that Ralph J. Andretta would be appointed president, chief executive officer and a director effective February 3, 2020. On the same date, Ms. Miller resigned from those positions and transitioned to an advisory role with the company through February 16, 2020. Mr. Horn, who transitioned from executive vice president and chief financial officer to executive vice president and vice chairman of the company in June 2019, served as acting chief executive officer during the interim period pending Mr. Andretta’s appointment.

CFO Succession.  Effective June 5, 2019, Mr. King succeeded Mr. Horn as executive vice president and chief financial officer. Prior to this appointment, Mr. King was the chief financial officer for our Card Services segment. In July 2018, Mr. Horn announced his planned retirement in 2019, but has been appointed and continued to serve in various roles through the company’s transformation as described above. Following Mr. Andretta’s appointment in February 2020, Mr. Horn continues to serve as executive vice president and senior advisor with a focus on international operations, operating efficiencies and strategic initiatives.

Other Executive Management Transitions.  On June 5, 2019, Mr. Motes was appointed executive vice president and chief administrative officer while continuing his roles as general counsel and secretary. On July 1, 2019, Mr. Kennedy transitioned to Publicis Groupe S.A. upon completion of the divestiture of our Epsilon segment. On August 9, 2019, the company announced the departure of Mr. Pearson, executive vice president and president, LoyaltyOne®, as a continuing part of the company’s initiatives to improve operational efficiencies within the LoyaltyOne segment. With the departure of the former presidents of each segment, the divestiture of our Epsilon segment and the restructuring of management to integrate the former corporate holding company structure to achieve operational efficiencies across the company, the board of directors selected each of Joseph L. Motes III, Laura Santillan and John J. Chesnut, whose roles each expanded as a result of the integration process, to be named executive officers for 2019.

Objectives of Compensation

The objectives of our executive compensation program are to compete for top executive talent to lead our company and complete strategic initiatives, to retain current executive officers, to reward our executive officers for meeting

our growth and profitability objectives and to align the interests of our executive officers with those of our stockholders. Total direct compensation for our executive officers in 2019 was a combination of three components:

We use each component of compensation to satisfy one or more of our compensation objectives. The compensation committee places a significant portion of the overall target compensation for our executive officers “at risk” in the form of performance-based non-equity incentive compensation and long-term equity incentive compensation, without encouraging excessive or unnecessary risk-taking. According to the survey results provided by our external executive compensation consultant, our target percentage of executive compensation “at risk” for 2019 was consistent with our proxy peer group.

Retention.  We believe that continuity in our executive leadership is critical to long-term success. To encourage executive retention and foster a focus on long-term results, the vast majority of the long-term equity incentive compensation granted to our executive officers is subject to multi-year vesting schedules. In addition, the compensation committee has occasionally granted special retention awards designed to encourage retention of our executive officers. Further details of these compensation practices are included on page 27 under the caption “Elements of Executive Compensation.”

Pay for Performance.  Historically, we have tracked metrics such as revenue growth, income before income taxes, or EBT, growth, adjusted EBITDA growth and core earnings per share, or core EPS, growth. In 2017, we added relative total stockholder return, or rTSR, as a tangible and objective metric to evaluate our performance against the performance of other companies and to align the interests of our NEOs and other executive officers with the interests of our stockholders in creating long-term value. The compensation committee selects target performance measures for performance-based non-equity incentive compensation and long-term equity incentive compensation that it believes are integral to achievement of these and other growth and profitability objectives. This performance-based compensation generally pays out or vests only upon achievement of a threshold performance target. Further details of these compensation practices are included on page 27 under the caption “Elements of Executive Compensation.”

Assessment of Risk in Compensation Program Design.  The compensation committee reviewed the design of our compensation program for both our executive officers and other officers and key contributors who receive performance-based compensation and assessed the potential for our compensation program to encourage excessive risk-taking. The compensation committee considered the following characteristics of our compensation program, among others:

•	a balance of both short- and long-term performance-based incentive compensation;

•	a balance within equity incentive compensation of both time-based restricted stock units and performance-based restricted stock units, some of which may also be subject to further time-based vesting restrictions;

•	the use of multiple performance metrics in incentive compensation, including the use of both consolidated and segment-specific performance measures;

•	the definition of performance metrics at the beginning of the performance period;

•	inclusion of maximum payout limitations under our omnibus incentive plans;

•	stock ownership guidelines applicable to certain key executives;

•	standardized equity grant and forfeiture procedures;

•	ability of the compensation committee to apply negative discretion in determining payouts for incentive compensation; and

•	clawback provisions contained in various executive compensation plans and agreements.

As a result of this review, the compensation committee believes that the design of our compensation program provides multiple, effective safeguards against and does not promote unnecessary or excessive risk-taking that is reasonably likely to have a material adverse effect on Alliance Data.

Prohibitions on Hedging and Pledging of Our Securities.  Our insider trading policies prohibit directors, executive officers and associates, together with certain of their family members and controlled entities, from engaging in hedging transactions with respect to our securities. These prohibited transactions include the use of financial instruments, including prepaid variable forward contracts, equity swaps, collars and exchange funds, that are designed to hedge or offset any decrease in market value of such person’s holdings in our equity securities. Furthermore, our insider trading policies prohibit directors, executive officers and designated associates, together with certain of their family members and controlled entities, from (i) trading in puts, calls or other derivative securities; (ii) engaging in short sales with respect to our securities; (iii) holding our securities in a margin account; and (iv) pledging our securities as collateral for a loan. These policies help to ensure that the interests of our directors, executive officers and associates remain aligned with those of our other stockholders.

Clawback Provisions.  Under the 2015 Omnibus Incentive Plan, 2010 Omnibus Incentive Plan and, if approved, the 2020 Omnibus Incentive Plan, if our financial statements are required to be restated due to errors, omissions, fraud or misconduct, the compensation committee may direct the company to recover all or a portion of any award or any past or future compensation from any participant or former participant with respect to any fiscal year of the company for which financial results are negatively affected by such restatement. Such recoveries will be limited to those participants or former participants who had knowledge or reasonably should have had knowledge of such errors, omissions, fraud or misconduct and failed to take reasonable steps to bring it to the attention of the appropriate individuals, or who personally and knowingly engaged in practices that materially contributed to the restatement. Further, under the 2015 Omnibus Incentive Plan, 2010 Omnibus Incentive Plan, the 2005 Long Term Incentive Plan and, if approved, the 2020 Omnibus Incentive Plan, the compensation committee has the authority to cancel or require repayment of an award in the event a participant or former participant breaches any non-solicitation, non-competition or confidentiality agreement entered into with us.

Alignment with Stockholders.  We believe that our executive officers should maintain at least a minimum position in our common stock so that their interests are aligned with those of our stockholders. Our stock ownership guidelines require our executive officers to maintain an investment position in our common stock equal to a multiple of his or her base salary within five years from the January 1st following the time an executive officer becomes subject to the stock ownership guidelines.

As of April 13, 2020, all current NEOs have holdings that meet or exceed the guidelines, except for Messrs. King and Motes, who have not yet reached their respective guideline compliance date and Mr. Horn, who had notified the company of his intention to retire from his position as executive vice president and chief financial officer in 2019, but has continued his service as part of the company’s leadership transition at the request of the board of directors and has not received a stock award as part of his compensation.

2019 “Say-on-Pay” Advisory Vote on Executive Compensation.  At our 2019 annual meeting of stockholders, stockholders expressed substantial support at 93% approval for the “say-on-pay” advisory vote on the compensation of our NEOs. We believe these results represent strong investor support for our overall compensation philosophy and decisions. The compensation committee evaluated the results of the 2019 “say-on-pay” vote together with the other factors discussed in this Compensation Discussion and Analysis, including the committee’s assessment of retention of executives, alignment of performance targets with growth and profitability objectives and the analysis of pay practices of our proxy peer group, each of which is evaluated in the context of the committee’s fiduciary duty to act as such directors determine is in the best interests of our stockholders. Based on its analysis, the compensation committee did not make any changes to the executive compensation program or policies as a direct result of the 2019 “say-on-pay” advisory vote, but continued its utilization of multiple performance-based metrics, including a metric with a multi-year performance period for 2020. See “Looking Forward: Fiscal Year 2020 Long-Term Incentive Compensation” on page 31.

We currently provide stockholders an annual “say-on-pay” advisory vote on the compensation of our NEOs and will continue to do so through our next stockholder advisory vote regarding the frequency of holding advisory votes on executive compensation, which will be no later than our annual meeting of stockholders in 2023.

Determining Compensation

Role of the Compensation Committee.  The compensation committee reviews and approves the compensation for

our non-CEO executive officers, and, together with the other independent directors, approves the compensation of our chief executive officer. The compensation committee typically sets the total direct compensation for our executive officers immediately prior to the beginning of each year. This timing allows us to consider the performance of the company and each potential recipient in the prior year, as well as expectations for the upcoming year. Performance-based non-equity incentive compensation and long-term equity incentive compensation targets and scales are established and grants are awarded as early as practicable in the year, contingent upon the availability of the prior year’s financial results, in order to maximize the time period over which the applicable performance incentives apply. Consistent with our practice of granting equity-based awards for new hires, promotions and associates that have joined the company as a result of a merger or acquisition on a date certain each month (currently the 15th of each month or the next business day), long-term equity incentive compensation awards for executive officers are made on February 15 (or the next business day) of each year, or such other pre-determined date following release of the company’s earnings for the prior fiscal year as is appropriate. In the event there exists material information that we have not yet disclosed, the compensation committee may delay or defer the grant of any equity-based awards until all disclosures are current. Material changes to pay levels for individuals are typically made only upon a significant change in job responsibilities.

During this year of leadership transition, the compensation committee, or with respect to the CEO, the board of directors, approved compensation levels in late 2019 for those NEOs who were established prior to the leadership transition and for each newly designated NEO at the time of their transition or shortly thereafter. For our new NEOs named in this leadership transition, their compensation, prior to consideration by the compensation committee or the board, remains consistent with our philosophy of compensating all associates on a competitive basis with a mid-market target for all skilled positions in all geographic locations based on relevant peer or industry group data. Some amounts may be higher or lower based on factors such as skill levels, performance, seniority, workload, span of control, retention considerations and institutional knowledge. For additional information on the process for establishing compensation, see “Elements of Executive Compensation” on page 27 and “Competitive Considerations” below.

Role of the Chief Executive Officer.  Typically, our chief executive officer makes compensation recommendations to the compensation committee with respect to our non-CEO executive officers. The compensation committee may accept or adjust the chief executive officer’s recommendations in its sole discretion and also makes a recommendation regarding the chief executive officer’s compensation to the full board of directors. The chief executive officer does not make any recommendations to the compensation committee or to the board of directors relating to performance measures, targets or similar items that affect their own compensation. Moreover, the chief executive officer recuses themself from discussions of their own compensation during board of directors and compensation committee meetings.

Role of the Compensation Consultant.  In 2019, the compensation committee directly engaged the assistance of an external executive compensation consultant, Meridian Compensation Partners, LLC, or Meridian, for their industry knowledge and experience in advising on executive compensation matters. The compensation committee has considered and assessed all relevant factors, including, but not limited to, those set forth in Rule 10C-1(b)(4)(i) through (vi) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that could give rise to a potential conflict of interest with respect to Meridian. Based on this review, we are not aware of any conflict of interest that has been raised by the work performed by Meridian. In particular, Meridian assisted the compensation committee in 2019 with competitive market analysis, peer assessment, consultation and review of compensation policies and practices.

Competitive Considerations

In determining appropriate levels of compensation, the compensation committee considers the competitive market for talent and compensation levels provided by comparable companies to minimize significant differences that could negatively impact our ability to attract and retain exceptional executive officers. As mentioned above, the compensation committee engaged Meridian to, among other things, assist with competitive market analysis and peer assessment. For conducting market review, Meridian formed and surveyed two data sets: a general industry group and a proxy peer group. The general industry group encompasses companies of similar size based on revenue. The proxy peer group consists of public companies that are currently monitored as competitors or are in similar industries and have similar revenue or market cap.

Proxy Peer Group.  Meridian reviewed the compensation practices for the proxy peer group set forth below with whom we compete for business and talent. This approach provides us with a balanced perspective, reflecting industry,

performance and company size considerations as they affect executive pay. Meridian collected, analyzed and presented comprehensive market data, including base salary and target short- and long-term incentive amounts, for each of our executive officers, including our then current NEOs, from both published proxy data and proprietary data sources.

For 2019, the companies comprising the proxy peer group included:

Proxy Peer Group Assessment and Changes for Fiscal Year 2020.  Beginning in May 2019, the compensation committee, with the assistance of Meridian, undertook a comprehensive review of the companies comprising the proxy peer group in anticipation of the divestiture of our Epsilon segment in addition to other completed and potential M&A activity altering the composition of our peers as noted above. In September 2019, the compensation committee was presented a pool of 80 new potential proxy peer companies identified as regional banking peers whose general revenue size ranged from 0.3x to 3.0x of our revenue. At that time, in preparation for determining executive compensation packages for fiscal year 2020, the compensation committee selected a total of 15 proxy peer companies for 2020, including three continuing peer companies from the 2019 proxy peer group and 12 new proxy peer companies as follows:

Market Review.  Market data provides an important benchmark by indicating what an executive could expect to earn at a comparable company and what we might expect to pay if we should have to recruit and compete for outside executive talent. Market data, however, is only one factor that the compensation committee considers in assessing the reasonableness of compensation provided to our NEOs. The compensation committee also considers other relevant factors, including an NEO’s experience, breadth of knowledge, talent supply and demand that may be industry or application specific, cost constraints, internal compensation equity considerations, company performance,

individual performance, expected future contributions, prior compensation and retention risk for each NEO.

Based on publicly available data in December 2018 when the compensation determinations for 2019 were made, our market capitalization was near the 25^th percentile and our annual revenue was near the 75^th percentile for this proxy peer group; our one-year total stockholder return was below the 25^th percentile for this proxy peer group.

When conducting the market review, the compensation committee reviews each component of compensation in relation to certain percentiles of both the proxy peer group and the general industry group surveyed. For our NEOs, base salaries, total cash compensation (base salary plus target performance-based non-equity incentive compensation) and total direct compensation (base salary plus target performance-based non-equity incentive compensation plus target long-term equity incentive compensation) target the 50^th percentile, with some amounts higher or lower based on factors such as skill levels, performance, seniority, workload, span of control, retention considerations and institutional knowledge. We believe compensation at this level, vis-à-vis the proxy peer group and the general industry group companies surveyed, is appropriate given our performance record and the tenure of our executive officers. Actual performance above or below each of the established targets for our performance-based non-equity incentive compensation and long-term equity incentive compensation results in actual compensation that may be higher or lower than the target percentiles.

ELEMENTS OF EXECUTIVE COMPENSATION:

The main elements of our executive compensation program are base salary, an annual performance-based non-equity incentive and a long-term equity incentive, the majority of which is performance-based.

Base Salary

While a large portion of our NEOs and other executive officers’ compensation is contingent upon meeting specified performance targets, we pay our executive officers a base salary as fixed compensation for their time, efforts and commitments throughout the year. To aid in attracting and retaining qualified executive officers, the compensation committee seeks to keep base salary competitive by considering, among other factors, the nature and responsibility of the position and, to the extent available, salary norms for persons in comparable positions at our proxy peer group; the expertise of the individual; and the competitiveness in the market for the executive officer’s services.

Annual Performance-Based Non-Equity Incentive Compensation

For 2019, performance-based non-equity incentive compensation was paid to our NEOs pursuant to the 2015 Omnibus Incentive Plan. The purpose of performance-based non-equity incentive compensation is to provide an incentive to our NEOs and other executive officers to contribute to our annual growth and profitability objectives and to retain such executive officers. The 2015 Omnibus Incentive Plan focuses on matching rewards with results and encourages executive officers to make significant contributions toward our financial results by providing a basic reward for reaching threshold expectations, plus an upside for reaching our aspirational goals.

Terms of Awards.  Each NEO has a target payout amount that approximates a percentage of his or her annualized base salary. Guided by our annual growth and profitability objectives, the payout of performance-based non-equity incentive plan compensation for our NEOs is generally contingent upon meeting segment-specific and/or consolidated targets, which in 2019 were based on revenue and EBT at the consolidated level, as well as segment-specific revenue and EBT. As discussed above, the compensation committee does not believe that the targets set for each of these metrics promotes unnecessary or excessive risk-taking that is reasonably likely to have a material adverse effect on Alliance Data.

The compensation committee set the performance targets for consolidated and segment revenue and EBT related to payout of our performance-based non-equity incentive compensation at the beginning of 2019 based on certain assumptions about our performance and subject to adjustment for certain defined factors. In determining the payout for the performance-based non-equity incentive compensation for 2019, the compensation committee exercised its discretion to adjust both the achievement thresholds for consolidated metrics and our reported consolidated EBT and Card Services EBT for certain factors, including the inclusion of our divested Epsilon segment in discontinued operations and adjustments related to the exclusion of costs incurred related to the divestiture of our Epsilon segment, as well as the extinguishment of debt and restructuring resulting therefrom. Adjusting for these factors did not alter the resultant payout levels for either consolidated EBT or for Card Services EBT. No adjustments were made to reported consolidated revenue or Card Services revenue.

The following tables set forth the individual calculations for the non-equity incentive plan compensation payouts for the 2019 performance year for each of our current NEOs. The non-equity incentive plan compensation for each of Messrs. Horn, Motes and Chesnut and Ms. Santillan was based on the consolidated performance as set forth in the first table below; and Mr. King’s was based on a combination of consolidated and Card Services performance as set forth in the second table below. For each performance target, payout is determined on a fixed scale, ranging from 0% to 25% payout when a minimum from approximately 90% to 96% of the target is met, 100% payout when 100% of the target is met and a maximum 200% payout when the target is exceeded at 120% for each of the metrics set forth in the tables below. Establishing a maximum payout amount under our non-equity incentive plan helps deter excessive risk-taking, while having a minimum payout amount that can be earned at a defined performance threshold encourages goal attainment. No payout is made for performance below the minimum threshold. Further, Messrs. Heffernan, Kennedy and Pearson and Ms. Miller were not eligible to receive any non-equity incentive plan payouts.

The target non-equity incentive plan compensation for each of Charles L. Horn, Timothy P. King, Joseph L. Motes III, Laura Santillan and John J. Chesnut is set forth in the first column of the following table and represents approximately 100%, 75%, 75%, 50% and 50% of their respective base salaries. The actual non-equity incentive plan payouts, prior to the adjustments to such payouts discussed below, are set forth in the final column of the following table.

The compensation committee feels that revenue and EBT performance measures are integral to achievement of our long-term growth and profitability objectives. However, when making awards, the compensation committee has discretion to select from numerous performance measures that were previously approved by our stockholders and may employ those performance measures it deems most appropriate for a given year. The selected performance measures may differ from year to year, and may also include any of the following: revenue, annual return on capital, net earnings, annual earnings per share, annual cash flow provided by operations, funds from operations, funds from operations per share, operating income, before or after tax income, cash available for distribution, cash available for distribution per share, return on equity, return on assets, share price performance, improvements in our attainment of expense levels, implementation or completion of critical projects, improvement in cash flow or (before or after tax) earnings and attainment of strategic business criteria or total stockholder return.

We set applicable revenue and EBT targets relative to our past performance, while continuing to challenge our segments to grow and expand our client base even as we encounter periods of slow economic growth or other macroeconomic challenges. These performance targets are intended to challenge our executive officers and will continue to encourage sustained growth.

The compensation committee may adjust the payout of performance-based non-equity incentive compensation of the executive officers other than the chief executive officer, and the board of directors may adjust the chief executive officer's payout of performance-based non-equity incentive compensation, as well as that of any other executive officer. In determining whether and to what extent any such discretionary adjustments will be made, the compensation committee or board of directors, as applicable, typically considers the value provided by the relevant executive officer, as demonstrated by the challenges addressed and particular expertise required of such executive officer during the fiscal year. For 2019, both the compensation committee and the board of directors, as applicable, made adjustments to the performance-based non-equity incentive compensation for certain of our current named executive officers. For each of Ms. Santillan and Mr. Chesnut, the compensation committee elected to reduce their non-equity incentive plan compensation to zero as they received certain transaction bonuses for their increased responsibilities related to completion of the Epsilon divestiture as well as for their expanded roles and efforts with respect to the restructuring, corporate integration, identification and implementation of operational efficiencies and capital markets transactions in 2019. For Mr. Motes, the compensation committee also elected to reduce his non-equity incentive plan compensation to zero as he received a bonus in December 2019 representative of his efforts with respect to completion of the Epsilon divestiture as well as his promotion to executive vice president, chief administrative officer, general counsel and corporate secretary and leadership during the executive transitions. For Mr. Horn, the board of directors elected to reduce his non-equity incentive plan compensation to zero as he received a bonus in December 2019 to acknowledge his efforts with respect to completion of the Epsilon divestiture as well as the additional responsibilities overseeing the LoyaltyOne business and as acting chief executive officer until Mr. Andretta’s appointment in February 2020.

Long-Term Equity Incentive Compensation

We grant long-term equity incentive awards to encourage retention and foster a focus on long-term results, as well as to align the interests of our NEOs and other executive officers with those of our stockholders. In granting these awards, the compensation committee may establish such restrictions, performance measures and targets as it deems appropriate. Generally, awards of long-term equity incentive compensation pay out only upon attainment of a threshold level of pre-determined performance targets, such as revenue, EBT, adjusted EBITDA, adjusted EBITDA, net, core EPS, or continued employment of an executive officer.

In determining the size of long-term equity incentive awards, the compensation committee generally also considers, among other factors, the value of total direct compensation for comparable positions at our proxy peer group, company and individual performance against strategic plans, the number and value of restricted stock or restricted stock unit awards previously granted, the allocation of overall equity awards attributed to our executive officers relative to all equity awards and the relative proportion of long-term incentives within the total direct compensation mix.

In 2019, we granted long-term equity incentive compensation to the executive officers, including our NEOs, pursuant to our 2015 Omnibus Incentive Plan. As permitted by the plan, the board of directors has delegated its authority under the plan to the compensation committee, except for purposes of awards to the chief executive officer.

Terms of Awards.  After taking into consideration the long-term incentive practices in the marketplace, we believe that an equity mix of performance-based restricted stock units and time-based restricted stock units provides a conservative and balanced approach. The portion granted in time-based restricted stock units is intended to provide not only some stability in our equity program and increase retention, but also to promote direct alignment with stockholders through our executives’ stock holdings. The portion granted in performance-based restricted stock units, whose vesting criteria are tied to selected components of our financial performance, is intended to focus and incentivize our executives to deliver exceptional performance. Performance-based restricted stock unit grants may be subject to both performance criteria and time-based restrictions to vest. For both types of grants, the executive officer must be employed by us at the time of vesting to receive the award.

The 45-day average fair market value of the company’s common stock as quoted on the NYSE as of the date of grant is utilized as the basis for determining the specific number of either time-based or performance-based restricted stock unit awards to be granted.

Awards Granted During 2019.  In 2019, consistent with the objective of placing a significant portion of the overall target compensation for our executive officers “at risk” as discussed above, our board of directors and compensation committee approved equity grants for our NEOs, other than Mr. Horn, consisting of 80% performance-based

restricted stock units and 20% time-based restricted stock units, which were awarded on February 15, 2019. For Messrs. Motes, Heffernan, Kennedy and Pearson and Ms. Miller, performance-based restricted stock units were based on multiple metrics over multiple timeframes, namely 40% subject to 2019 EBT and 40% subject to rTSR for 2019-2020, while performance-based restricted stock units for Messrs. King and Chesnut and Ms. Santillan were subject solely to 2019 EBT. Establishing a maximum payout amount under our long-term equity incentive plan helps deter excessive risk-taking, while having a minimum payout amount that can be earned at a defined performance threshold encourages goal attainment. No payout is made for performance below the minimum threshold.

Performance-based and time-based equity grants for 2019 were made to our NEOs as follows:

The time-based restricted stock units vest over three years, with 33% of the awards vesting in February 2020, and the remaining 33% and 34% scheduled to vest in each of February 2021 and 2022, respectively, provided the executive officer is employed by us at each vesting date. Each of the performance-based restricted stock unit equity awards are also subject to the executive officer’s employment with us at such vesting date.

2019 EBT: The performance-based restricted stock unit equity awards subject to a 2019 EBT performance metric also vest over three years, provided that we meet pre-determined EBT goals for fiscal year 2019. To achieve 25% to 150% of the target award, the compensation committee set the 2019 EBT goal on a fixed scale between $1,100.0 million and $1,424.4 million (prior to classification of our Epsilon segment as a discontinued operation). The 150% achievement threshold approximates a 17.2% growth over our 2018 EBT performance.

2019-2020 rTSR: The performance-based restricted stock unit equity awards subject to a 2019-2020 rTSR performance metric vest in February 2021, provided that we meet a pre-determined rTSR goal for fiscal years 2019 and 2020. To achieve 0% to 175% of the target award, the compensation committee set the 2019-2020 rTSR goal on a fixed scale measured against the companies within the S&P 500 as of January 1, 2019, calculated based on the average trading price of the company and S&P 500 companies over the 30 trading days preceding January 1, 2019 and the 30 days preceding January 1, 2021, where the rTSR meets or exceeds the 25^th to the 100^th percentile.

Performance Measurement for Fiscal Year Ended 2019.  The compensation committee set the performance targets for consolidated EBT related to payout of our performance-based restricted stock units at the beginning of 2019 based on certain assumptions about our performance and subject to adjustment for certain defined factors. For 2019, our reported consolidated EBT was $738.4 million. In determining the payout for the 2019 performance-based restricted stock units whose metric was consolidated EBT, the compensation committee, and the board of directors with respect to the chief executive officer, exercised its discretion to adjust both the achievement thresholds and reported consolidated EBT for certain factors, including the inclusion of the Epsilon segment in discontinued operations and adjustments related to the exclusion of costs incurred related to the divestiture of our Epsilon segment, as well as the extinguishment of debt and restructuring resulting therefrom. Adjusting for these factors resulted in payout at 0% for these 2019 performance-based restricted stock units. For the 30 trading days preceding January 1, 2018 and the 30 days preceding January 1, 2020, our S&P 500 TSR achievement measured below the 25^th percentile, resulting in payout at 0% for these 2018-2019 performance-based restricted stock units. For additional information related to these payouts, please see the “Fiscal Year 2019 Grants of Plan-Based Awards” and “Fiscal Year 2019 Outstanding Equity Awards at Fiscal Year-End” tables on pages 38 and 40, respectively. The payout for the 2019-2020 rTSR performance-based restricted stock units will be determined when the full measurement can occur, after December 31, 2020.

Looking Forward: Fiscal Year 2020 Long-Term Incentive Compensation.

For fiscal year 2020, the compensation committee approved a long-term incentive compensation plan for our executive officers that consists of 80% performance-based restricted stock units and 20% time-based restricted stock units. Specifically, in 2020, performance-based restricted stock units will be based on multiple metrics over multiple timeframes, which differ for the various NEOs as depicted in the graphics above. The high proportion of performance-based awards reflects our pay-for-performance philosophy. The compensation committee believes the combined EBT, rTSR, discretionary and strategic objectives goals for the performance shares can be characterized as challenging to achieve, but attainable with the application of significant skill and effort on the part of our executive officers. The macroeconomic impact of COVID-19 may significantly impact 2020 financial results and measurement of performance-based non-equity incentive compensation and long-term incentive compensation, which the compensation committee and the board of directors will review in the ordinary course in early 2021. The time-based awards encourage retention, and are linked to stockholder value and ownership, which are also important goals of our executive compensation program. The compensation committee plans to continue to review our compensation plans to support our current and long-term business strategy, to continue to align pay with stockholder interests and sustain good governance practices.

Perquisites

With limited exceptions, the compensation committee’s policy is to provide personal benefits and perquisites to our NEOs that are substantially similar to those offered to our other associates at or above the level of vice president. The personal benefits and perquisites that may be available to our NEOs in addition to those available to our other associates include enhanced life insurance, long-term disability benefits, and an annual physical. For additional information about the perquisites given to our NEOs in 2019, see the “Fiscal Year 2019 All Other Compensation” table on page 37.

REASONABILITY OF COMPENSATION:

In determining appropriate compensation levels during the course of 2019, the compensation committee reviewed all forms of executive compensation, including base salary, performance-based non-equity incentive compensation, long-term equity incentive awards, ratios of vested to unvested equity previously granted to our executive officers, realizable amounts from equity previously granted to our executive officers, the company’s contributions to the Alliance Data Systems 401(k) and Retirement Savings Plan and Executive Deferred Compensation Plan and the value of any perquisites received for the 2019 performance year. Based on the challenges presented by the leadership transition, the significant effort and skill required to complete the divestiture of our Epsilon segment and the completion of other strategic initiatives including restructuring, corporate integration and identification and implementation of operational efficiencies in 2019, and other applicable factors and known information, including the market data provided by Meridian, the compensation committee, and the board of directors with respect to the chief executive officer, have each determined that the total 2019 compensation paid to our executive officers was reasonable and not excessive. For 2019, the compensation committee, with the assistance of Meridian, targeted the 50^th percentile of both our proxy peer group and the general industry group surveyed for each of base salary, target total cash compensation (base salary plus target performance-based non-equity incentive compensation) and target total direct compensation (base salary plus target performance-based non-equity incentive compensation plus target long-term equity incentive compensation) for all NEOs, excluding exigent circumstances.

TAX CONSIDERATIONS:

Internal Revenue Code, or IRC, Section 162(m) generally limits the deductibility of certain compensation expenses in

excess of $1.0 million to a “covered employee” in any fiscal year, although, in general, prior to January 1, 2018, certain qualifying performance-based compensation was not subject to the limits on deductibility. For these purposes, prior to January 1, 2018, “covered employees” consisted of our chief executive officer and the three most highly compensated executive officers other than our chief executive officer and our chief financial officer. The compensation committee has considered these requirements and believes that certain grants made under the 2015 Omnibus Incentive Plan meet the requirement that they be “performance-based” and, therefore, compensation paid to our executive officers pursuant to the terms of these plans would generally be exempt from the limitations on deductibility. Among other changes to IRC Section 162(m), the ability to rely on this performance-based exception was generally eliminated, effective as of January 1, 2018, unless such compensation qualifies for transition relief applicable to written binding contracts in place as of November 2, 2017, and the scope of “covered employees” was expanded to include the chief financial officer.

OTHER PLANS OR AGREEMENTS GOVERNING EXECUTIVE COMPENSATION:

Retirement Agreement with Edward J. Heffernan

On June 5, 2019, Edward J. Heffernan resigned as president, chief executive officer and a member of the board of directors and entered into a Retirement Agreement with the company. Pursuant to the Retirement Agreement, Mr. Heffernan received a cash payment in the aggregate amount of $3,256,200 and accelerated vesting of 9,450 restricted stock units originally scheduled to vest in February 2020 in consideration of his broad release of the Company and his agreements not to disparage or disclose confidential information and to provide cooperation as permitted in certain matters. In addition, all other unvested equity awards were forfeited and Mr. Heffernan’s Change in Control Severance Protection Agreement with ADS Alliance Data Systems, Inc. dated December 13, 2016 was canceled.

Executive Transition and Separation Agreement with Melisa A. Miller

On November 18, 2019, Melisa A. Miller resigned as president, chief executive officer and a member of the board of directors and transitioned to an advisory role with the company through February 16, 2020. On December 28, 2019, an Executive Transition and Separation Agreement, or Separation Agreement, between the company, ADS Alliance Data Systems, Inc. and Ms. Miller became effective. In consideration for entering into and not revoking the Separation Agreement prior to December 31, 2019, Ms. Miller received a cash payment of $500,000 less applicable deductions and withholdings.

Pursuant to the Separation Agreement, in consideration for providing the requested transition services, Ms. Miller continued to receive her regular base salary, and was permitted participation in company benefit plans and continued vesting of outstanding equity awards through February 16, 2020, but not participation in the company’s incentive compensation program for fiscal year 2019 or thereafter. Further, all unvested equity awards that did not vest on or before February 16, 2020 were forfeited. In consideration for executing a broad release of the company on February 17, 2020, Ms. Miller received a cash payment of $500,000 less applicable deductions and withholdings.

For a further advisory period from February 17, 2020 through June 16, 2020, Ms. Miller has agreed to continue providing transition services as requested, and the parties agreed that the reasonably anticipated level of transition services shall not exceed levels that would prevent Ms. Miller from having a “separation from service” as defined under IRC Section 409A. As consideration for successful completion of these additional transition services (as determined in good faith by the compensation committee) and in consideration for a broad release of the company and her agreements not to disparage or disclose confidential information and to provide cooperation as permitted in certain matters, Ms. Miller shall receive a cash payment of $1,500,000 within 30 days after August 17, 2020, base salary continuation for the period from February 17, 2020 through November 18, 2021 together with company-provided health and dental insurance benefits; provided, however, that Ms. Miller shall not receive but such salary continuation amounts shall accrue and be paid in one lump sum on the first payroll date following August 17, 2020; and, provided further, that Ms. Miller must pay the entire premium for company-provided benefits during such period subject to reimbursement to be included in such lump sum amount. In the event of Ms. Miller’s death in the period between February 17, 2020 and August 17, 2020, such salary and benefit reimbursement continuation amounts shall be payable in a lump sum on the date that is sixty (60) days following such date of death, while all other amounts set forth in the Separation Agreement shall continue to be paid on their original payment schedule.

Offer Letter to Ralph J. Andretta

Effective February 3, 2020, the board of directors appointed Ralph J. Andretta as president, chief executive officer and a member of the board. The board set Mr. Andretta’s annual base salary at $990,000, prorated from his start date for 2020. Mr. Andretta’s performance-based non-equity incentive plan target payout percentage will be 150% of his

annualized base salary, with 2020 performance measured 20% on strategic and operational objectives established by the board and 80% at the board’s discretion at measurement in early 2021. Mr. Andretta’s long-term equity incentive compensation will be based on an award level of $3,712,500, with (i) 20% granted in time-based restricted stock units vesting 33%/33%/34% on the first, second and third anniversary of the grant date provided that Mr. Andretta remains employed by the Company on such dates and (ii) 80% granted in performance-based restricted stock units, of which 35% are subject to an rTSR performance metric, 10% are subject to certain strategic objectives and the remaining 35% are subject to the board’s discretion, and all of which, if earned, will vest over three years as described above. For Mr. Andretta’s total compensation, the compensation committee targeted the 50^th percentile of CEOs of both our proxy peer group and the general industry group. Further, in recognition of the earned compensation forfeited upon termination of Mr. Andretta’s prior employment, the board approved a make-whole award in the aggregate amount of $5,954,850 to be distributed to Mr. Andretta as follows: a $1,860,000 cash payment in March 2020, a $972,677 cash payment in each of July 2020 and January 2021, a $620,000 grant of time-based restricted stock units vesting over three years as described above and a $1,529,496 grant of time-based restricted stock units vesting over two years, each to be made in February 2020.

Change in Control - Impact on Outstanding Equity

Our equity incentive plans provide that our board of directors may accelerate vesting of stock options and restricted stock or restricted stock units in the event of a change in control. Further, if a participant’s employment or other service is terminated by the company or other surviving entity without cause or the participant resigns for good reason within 12 months after a change in control, all restrictions on any awards held by the participant will lapse and the awards will be immediately and fully vested. Further, stock options will be exercisable until the earlier of the end of the option term or the end of the one year period following such event.

Executive Deferred Compensation Plan

We maintain an Executive Deferred Compensation Plan, which allows our executive officers and certain other highly-compensated associates to maximize their pre-tax savings and company contributions that are otherwise restricted due to tax limitations. The Executive Deferred Compensation Plan allows the participant to contribute:

•	up to 50% of eligible compensation on a pre‑tax basis;

•	any pre-tax 401(k) contributions that would otherwise be returned because of reaching the statutory limit under IRC Section 415; and

•	any retirement savings plan contributions for compensation in excess of the statutory limits.

Contributions made under the Executive Deferred Compensation Plan are unfunded and subject to the claims of our creditors, with participants having the status of an unsecured creditor with respect to our obligation to make benefit payments. For additional information relating to our NEOs’ participation in the Executive Deferred Compensation Plan, please see the “Fiscal Year 2019 Nonqualified Deferred Compensation” table on page 43.

Alliance Data Systems 401(k) and Retirement Savings Plan

The Alliance Data Systems 401(k) and Retirement Savings Plan is a defined contribution plan that is qualified under IRC Section 401(k). Eligible associates can participate in the 401(k) and Retirement Savings Plan immediately upon joining the company and after 180 days of employment begin receiving company matching contributions. The 401(k) and Retirement Savings Plan covers eligible U.S. associates of the company and all of its U.S. subsidiaries. The company matches dollar-for-dollar up to five percent of the associate’s eligible compensation. All company matching contributions are immediately vested.

LoyaltyOne, Co. Group Retirement Savings Plan and LoyaltyOne, Co. Deferred Profit Sharing Plan

We maintain the LoyaltyOne, Co. Group Retirement Savings Plan, or GRSP, which is a group retirement savings plan registered with the Canada Revenue Agency. Eligible associates of LoyaltyOne, Co., one of our wholly-owned subsidiaries in Canada, may contribute to the GRSP on their behalf or on behalf of their spouse, and income earned on these contributions is not taxable to associates until withdrawn from the GRSP. Associate contributions eligible for company match may not exceed the overall maximum allowed by the Income Tax Act (Canada); which amount is set by the Canada Revenue Agency each year.

We also maintain the LoyaltyOne, Co. Deferred Profit Sharing Plan, or DPSP, which is a legal trust registered with the Canada Revenue Agency. Eligible full-time associates of LoyaltyOne, Co. can participate in the GRSP after three months of employment and eligible part-time associates after six months of employment. Based on the eligibility guidelines, the company matches dollar-for-dollar up to five percent of the associate’s eligible compensation. Contributions made

to the DPSP reduce an associate’s maximum contribution amounts to the GRSP under the Income Tax Act (Canada) for the following year. All company matching contributions into the DPSP vest after receipt of one continuous year of DPSP contributions.

LoyaltyOne, Co. Canadian Supplemental Executive Retirement Plan

We maintain the Canadian Supplemental Executive Retirement Plan, which allows executive officers and certain other highly compensated associates of LoyaltyOne, Co. to maximize company contributions that are otherwise restricted due to statutory limitations. All contributions to the Canadian Supplemental Executive Retirement Plan are made by LoyaltyOne, Co. in an amount equal to the maximum employer contributions that would be made to the participant’s DPSP account if the maximum contribution provisions of the Income Tax Act (Canada) were not applicable, less actual employer contributions to the participant’s DPSP account.

Contributions made under the Canadian Supplemental Executive Retirement Plan are unfunded and subject to the claims of our creditors, with participants having the status of an unsecured creditor with respect to our obligation to make benefit payments. A distribution from the Canadian Supplemental Executive Retirement Plan is taxed as ordinary income and is not eligible for any special tax treatment. For additional information relating to our NEOs’ participation in the Canadian Supplemental Executive Retirement Plan, please see the “Fiscal Year 2019 Nonqualified Deferred Compensation” table on page 43.

Indemnification Agreements

We have entered into indemnification agreements with each of our NEOs so that they may serve the company without undue concern for their protection in connection with their services. These agreements provide that we indemnify such persons against certain liabilities that may arise by reason of their status or service as an officer, to advance their expenses incurred as a result of a proceeding as to which they may be indemnified and to cover such persons under any directors’ and officers’ liability insurance policy that we may choose to maintain. These indemnification agreements are intended to provide indemnification rights to the fullest extent permitted by Delaware law and are in addition to any other rights the indemnitee may have under our certificate of incorporation, bylaws and applicable law.

DIRECTOR AND EXECUTIVE

OFFICER COMPENSATION

The following tables and accompanying narratives set forth the compensation paid to our NEOs for the fiscal years ended December 31, 2019, 2018 and 2017: