Exhibit 10.18


2003 DUCKWALL-ALCO
STORES, INC.                            INCENTIVE STOCK OPTION PLAN

Duckwall-ALCO
Stores, Inc., a corporation organized and existing under the laws of the State of Kansas
(the Company), hereby formulates and adopts, subject to the approval of the holders of
a majority of the issued and outstanding shares of common stock of the Company
(Duckwall-ALCO Common Stock) voting in person or by proxy at a duly constituted meeting
of the stockholders of the Company, an incentive stock option plan for employees of the
Company and its subsidiaries as follows:

1.
Purpose of Plan. The purpose of this Incentive Stock Option Plan (the Plan) is to
encourage the employees of the Company and its subsidiaries to participate in the
ownership of the Company, and to provide additional incentive for such employees to
promote the success of its business through sharing in the future growth of such business.

2.
Effectiveness of Plan. The provisions of this Plan shall become effective on the date the
Plan is adopted by the Board of Directors of the Company (the Board of Directors),
subject to the requirement that the Plan be approved by the holders of a majority of the
shares of Duckwall-ALCO Common Stock voting in person or by proxy at a duly constituted
meeting of the stockholders of the Company to be held within 12 months after the date on
which the Plan is adopted.

3.
Administration. This Plan shall be administered by a stock option committee
(Compensation Committee) which shall be selected by the Board of Directors and which
shall consist of two (2) or more members of the Board of Directors. The Compensation
Committee shall have full power and authority to construe, interpret and administer the
Plan, and may from time to time adopt such rules and regulations for carrying out this
Plan as it may deem proper and in the best interests of the Company. Subject to the
terms, provisions and conditions of the Plan, the Compensation Committee shall have
exclusive authority (i) to select employees to whom options shall be granted (ii) to
determine the number of shares subject to each option, (iii) to determine the time or
times when options will be granted, (iv) to determine the option price of the shares
subject to each option, (v) to determine the time when each option may be exercised, (vi)
to fix such other provisions of each option agreement as the Compensation Committee may
deem necessary or desirable, consistent with the terms of this Plan, and (vii) to
determine all other questions relating to the administration of this Plan. The
interpretation and construction of this Plan by the Compensation Committee shall be
final, conclusive and binding upon all persons.

4.
Eligibility.

| | (a)
      Employees--Options to purchase shares of Duckwall-ALCO Common Stock
      shall be granted under this Plan only to employees of the Company or of
      any of its subsidiary corporations, as that term is defined in Section 424(f)
      of the Internal Revenue Code of 1986, as amended (the Code).
      Employees to whom options may be granted under this Plan will be those employees
      selected by the Compensation Committee from time to time who, in the sole
      discretion of the Compensation Committee, have made material contributions
      in the past, or who are expected to make material contributions in the future,
      to the successful performance of the Company.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
      Stock ownership limitation--No option shall be granted under this
      Plan to any employee of the Company or of a subsidiary corporation who,
      immediately before the option is granted, owns (either directly or by application
      of the rules contained in Section 424(d) of the Code) stock possessing more
      than 10 percent of the total combined voting power of all classes of stock
      of the Company or of any of its subsidiary corporations unless at the time
      of such grant the option price is fixed at not less than 110 percent of
      the fair market value of the stock subject to the option, and the exercise
      of such option is prohibited by its terms after the expiration of five (5)
      years from the date such option is granted.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5.
Shares Subject to the Plan. Options granted under this Plan shall be granted solely with
respect to shares of Duckwall-ALCO Common Stock. Subject to any adjustments made pursuant
to the provisions of Section 13, the aggregate number of shares of Duckwall-ALCO Common
Stock which may be issued upon exercise of the



| |  | 
| |  | 

---



options which will be granted under
this Plan shall not exceed 500,000. With respect to each optionee, no more than 100,000
shares of Duckwall-Alco Common Stock shall become subject to options granted to such
optionee under this Plan in a calendar year.

If
any option granted under this Plan shall expire or terminate for any reason without
having been exercised in full, the unpurchased shares subject to such option shall be
added to the number of shares otherwise available for options which may be granted in
accordance with the terms of this Plan.

The
shares to be delivered upon exercise of the options granted under this Plan shall be made
available, at the discretion of the Board of Directors, from either the authorized but
unissued shares of Duckwall-ALCO Common Stock or any treasury shares of Duckwall-ALCO
Common Stock held by the Company.

6.
Option Agreement. Each option granted under this Plan shall be evidenced by an incentive
stock option agreement, which shall be signed by an officer of the Company and by the
employee to whom the option is granted (the optionee). The terms of said incentive
stock option agreement shall be in accordance with the provisions of this Plan, but it
may include such other provisions as may be approved by the Compensation Committee. The
granting of an option under this Plan shall be deemed to occur on the date on which the
option grant is authorized by the Compensation Committee. Each incentive stock option
agreement shall constitute a binding contract between the Company and the optionee, and
every optionee, upon the execution of an incentive stock option agreement, shall be bound
by the terms and restrictions of this Plan and such incentive stock option agreement.

7.
Option Price. The price at which shares of Duckwall-ALCO Common Stock may be purchased
under an option granted pursuant to this Plan shall be determined by the Compensation
Committee, but in no event shall the price be less than the greater of (a) the par value
thereof, or (b) 100 percent of the fair market value of such shares on the date that the
option is granted. If such shares are then listed on any national securities exchange,
the fair market value shall be the mean between the high and low sales prices, if any, on
the largest such exchange on the date of the grant of the option, or, if none, shall be
determined by taking a weighted average of the means between the highest and lowest sales
on the nearest date before and the nearest date after the date of grant in accordance
with Treasury Regulations Section 25.2512-2. If the shares are not then listed on any
such exchange, the fair market value of such shares shall be the mean between the closing
Bid and the closing Ask prices, if any, as reported on the Nasdaq Stock Market
(whether Nasdaq National Market or Nasdaq SmallCap Market) for the date of the grant of
the option, or, if none, shall be determined by taking a weighted average of the means
between the highest and lowest sales on the nearest date before and the nearest date
after the date of grant in accordance with Treasury Regulations Section 25.2512-2. If the
shares are not then either listed on any such exchange or quoted on Nasdaq Stock Market,
the fair market value shall be the mean between the average of the Bid and the average
of the Ask prices, if any, as reported in the Nasdaq Over-the-Counter Bulletin Board or
other national daily quotation service for the date of the grant of the average of the
means between the highest and lowest sales on the nearest date before and the nearest
date after the date of grant in accordance with Treasury Regulations Section 25.2512-2.
If the fair market value cannot be determined under the preceding three sentences, it
shall be determined in good faith by the Compensation Committee.

8.
Period and Exercise of Option.

| | (a)
      Period--Subject to the provisions of Sections 10 and 11 hereof with
      respect to the death or termination of employment of an optionee, the period
      during which each option granted under this Plan may be exercised shall
      be fixed by the Compensation Committee at the time such option is granted,
      provided that such period shall expire no later than five (5) years from
      the date on which the option is granted. In the event the Company shall
      not be the surviving corporation in any merger, consolidation, or reorganization,
      or in the event of acquisition by another corporation of all or substantially
      all of the assets of the Company, every option outstanding hereunder may
      be assumed (with appropriate changes) by the surviving, continuing, successor
      or purchasing corporation,
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2 | 
| | - | 

---





| | as
the case may be, subject to any          applicable provisions of the Code or replaced
with new options of          comparable value (in accordance with Section 424(a) of the
Code). In          the event (i) that such surviving, continuing, successor or purchasing
         corporation, as the case may be, does not assume or replace the
         outstanding options hereunder, or (ii) of liquidation or dissolution of
         the Company, the Compensation Committee may provide that each optionee
         shall have the right, within a period commencing not more than 30 days
         immediately prior to and ending on the day immediately prior to such
         merger, consolidation, reorganization or acquisition by another
         corporation of all or substantially all of the assets of the Company or
         the liquidation or dissolution of the Company, to exercise the
         optionees outstanding options to the extent of all or any part of the
         aggregate number of shares subject to such option(s). In the event of a
         Change of Control (as defined below) the Compensation Committee may
         accelerate the time at which options granted under this Plan may be
         exercised by the optionee.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For
purposes of this paragraph (a) Change of Control means a change in control of the
Company of a nature that would be required to be reported in response to item 6(e) of
Schedule 14A of Regulation 14A (in effect on the date hereof) promulgated under the
Securities Exchange Act of 1934, as in effect on the date hereof (the Exchange Act);
provided, however, that, without limitation, such a change of control shall be deemed to
have occurred upon the occurrence of any of the following events:

| | (i)
any person (as such term is used in Section          13(d) and 14(d) of the Exchange
Act), other than the Company, becomes,          after the date hereof, the beneficial
owner, directly or indirectly, or          securities of the Company representing 40
percent or more of the total          voting power of the Companys then outstanding
securities (Interested          Shareholder);
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii)
less than a majority of the members of the Board          of Directors of the Company are
persons who were either nominated for          election or selected by (A) members of the
Board of Directors of the          Company who were in office prior to the time any
person became an          Interested Shareholder (the Continuing Directors), or (B) any
         successor to a Continuing Director;
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iii)
the merger or consolidation of the Company with          any other entity, other than a
merger or consolidation which would          result in the voting securities (which term
means any securities which          vote generally in the election of directors) of the
Company outstanding          immediately prior thereto continuing to represent (either by
remaining          outstanding or by being converted into voting securities of the
         surviving entity) at least 80 percent of the total voting power
         represented by the voting securities of the Company or such surviving
         entity outstanding immediately after such merger or consolidation; or
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iv)
the sale or disposition by the Company of all or          substantially all of the
Companys assets.
| | ---------------------------------------------------------------------------------------------------------

| | (b)
      Exercise--Any option granted under this Plan may be exercised by
      the optionee (or by the purchaser acting under Section 11 below) only by
      (i) delivering to the Company written notice of the number of shares with
      respect to which the optionee is exercising his or her option right, (ii)
      paying in full the option price of the purchased shares, and (iii) if the
      shares to be purchased have not been registered under the applicable securities
      laws and if necessary, in the opinion of counsel for the Company to secure
      an exemption from such registration, furnishing to the Company such representation
      or agreement in writing signed by the optionee (or purchaser) as shall be
      necessary in the opinion of such counsel to secure such exemption. Subject
      to the limitations of this Plan and the terms and conditions of the respective
      incentive stock option agreement, each option granted under this Plan shall
      be exercisable in whole or in part at such time or times as the Compensation
      Committee may specify in such incentive stock option agreement.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)
      Payment for shares--Payment for shares of Duckwall-ALCO Common Stock
      purchased pursuant to an option granted under this Plan may be made either
      in cash or in other shares of Duckwall-ALCO Common Stock. In addition, the
      Compensation Committee may permit a Participant to pay for shares of Duckwall-ALCO
      Common Stock purchased pursuant to an option granted under the Plan by irrevocably
      authorizing a third party to sell shares of such stock acquired upon exercise
      of the option and remit to the Company a sufficient portion of the sale
      proceeds to pay the exercise price and any tax withholding resulting from
      such exercise.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3 | 
| | - | 

---





| | (d)
      Delivery of certificates--As soon as practicable after receipt by
      the Company of the notice and representation described in subsection (b),
      and of payment in full of the option price for all of the shares being purchased
      pursuant to an option granted under this Plan, a certificate or certificates
      representing such shares of stock shall be registered in the name of the
      optionee and shall be delivered to the optionee. However, no certificate
      for fractional shares of stock shall be issued by the Company notwithstanding
      any request therefor. Neither any optionee, nor the legal representative,
      legatee or distributee of any optionee, shall be deemed to be a holder of
      any shares of stock subject to an option granted under this Plan unless
      and until the certificate or certificates for such shares have been issued.
      All stock certificates issued upon the exercise of any options granted pursuant
      to this Plan may bear such legend as the Compensation Committee shall deem
      appropriate regarding restrictions upon the transfer or sale of the shares
      evidenced thereby.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e)
      Limitations on exercise--Except as provided in Sections 10 and 11
      hereof, no option granted under this Plan shall be exercised unless the
      optionee is at the time of such exercise employed by the Company or one
      of its subsidiary corporations and shall have been so employed by the Company
      or one of its subsidiary corporations at all times since the date on which
      such option was granted.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9.
Limitation on Options Granted to Individual Employees. The aggregate fair market value
(determined at the time the options are granted) of stock with respect to which incentive
stock options are exercisable for the first time by any individual during any calendar
year under this Plan (and under any other plan or plans of such individuals employer
corporation and any parent or subsidiary corporation or corporations) shall not exceed
$100,000. The limitation provided by the preceding sentence shall be applied by taking
options into account in the order in which they are granted. In the event that the
foregoing results in a portion of an option exceeding the $100,000 limitation, such
portion of the option in excess of the limitation shall be treated as a nonqualified
stock option.

10.
Termination of Employment. If an optionee shall cease to be employed by the Company or
any of its subsidiary corporations for any reason other than death, any option or
unexercised portion thereof granted to him under this Plan which is otherwise exercisable
shall terminate unless it is exercised within thirty (30) days of the date on which such
optionee ceases to be so employed, and in any event no later than the expiration date of
such option as specified in the respective incentive stock option agreement. Nothing in
this Plan or in any incentive stock option agreement shall be construed as an obligation
on the part of the Company or any of its subsidiary corporations to continue the
employment of any employee.

11.
Death of Optionee. In the event of the death of an optionee while he is an employee of
the Company or any of its subsidiary corporations (or within thirty (30) days of the date
on which such optionee ceases to be so employed) any option or unexercised portion
thereof granted to him under this Plan which is otherwise exercisable may be exercised by
the person or persons to whom such optionees rights under the option pass by operation
of the optionees will or the laws of descent and distribution, at any time within a
period of twelve (12) months following the death of the optionee (but in no event later
than the expiration date of the option as specified in the respective incentive stock
option agreement).

12.
Nontransferability of Options. Each option granted under this Plan shall not be
transferable or assignable by the optionee other than by will or the laws of descent and
distribution, and during the lifetime of the optionee may be exercised only by said
optionee.

13.
Adjustment upon Changes in Capitalization. In the event of any change in the capital
structure of the Company, including but not limited to a change resulting from a stock
dividend, stock split, reorganization, merger, consolidation, liquidation, any
combination or exchange of shares, or any other event for which the Compensation
Committee believes an adjustment is appropriate, the number of shares of Duckwall-ALCO
Common Stock subject to this Plan and the number of such shares subject to each option
granted hereunder shall be correspondingly adjusted by the Compensation Committee. The
option price for which shares of Duckwall-ALCO Common Stock may be purchased pursuant to
an option granted under this Plan shall also be adjusted so that there will be no change
in the aggregate purchase price payable upon the exercise of any option.



| | 4 | 
| | - | 

---



14.
Amendment and Termination of Plan. No option shall be granted pursuant to this Plan after
May 22, 2013, on which date this Plan will expire except as to options then outstanding
under the Plan, which options shall remain in effect until they have been exercised or
have expired. The Board of Directors may at any time before such date amend, modify or
terminate the Plan; provided, however, that the Board of Directors may not, without
further approval of the holders of a majority of the issued and outstanding shares of
Duckwall-ALCO Common Stock voting in person or by proxy at a duly constituted meeting of
the stockholders of the Company, (i) increase the maximum number of shares of
Duckwall-ALCO Common Stock as to which options may be granted pursuant to this Plan, (ii)
change the class of employees eligible to be granted options pursuant to the Plan, (iii)
extend the period under this Plan during which options may be granted or exercised, or
(iv) change the provisions of Section 7 hereof with respect to the determination of the
option price, other than to change the manner of determining the fair market value of
shares of Duckwall-ALCO Common Stock to conform with any then applicable provisions of
the Internal Revenue Code or the regulations issued thereunder. No amendment,
modification or termination of this Plan may adversely affect the rights of any optionee
under any then outstanding option granted hereunder without the consent of such optionee.

15.
No Special Employment Rights. Nothing contained in the Plan or in any option granted
under the Plan shall confer upon any option holder any right with respect to the
continuation of his or her employment by the Company (or any subsidiary) or interfere in
any way with the right of the Company (or any subsidiary), subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such employment
or to increase or decrease the compensation of the option holder from the rate in
existence at the time of the grant of an option. Whether an authorized leave of absence,
or absence in military or government service, shall constitute termination of employment
shall be determined by the Board of Directors at the time.

16.
  Governing Law. This Plan and the rights of all persons claiming hereunder shall
  be construed and determined in accordance with the laws of the State of Kansas.



| | 5 | 
| | - | 

---