wilsonstockopagmt.htm


    


    Duckwall-ALCO Stores,
Inc.

    INCENTIVE STOCK OPTION
AGREEMENT

    


    


    THIS AGREEMENT, made and entered into
this 22nd day
of February, 2010 (the "Granting Date"), by and between Duckwall-ALCO Stores,
Inc., a Kansas corporation (the "Company"), and Richard E. Wilson (the
"Optionee").

    


    WITNESSETH:

    


    WHEREAS, on May 22, 2003, the Company
adopted an Incentive Stock Option Plan (the "Plan") pursuant to which the
Company may grant from time to time, on or prior to May 22,
2013, options to purchase shares of common stock of the Company (the "Common
Stock"), to "key employees" of the Company or of any of its subsidiary
corporations, such options to be granted to such of the persons who are eligible
to receive options under the Plan in such amounts and under such form of
agreement as shall be determined by the Compensation Committee pursuant to the
Plan; and

    


    WHEREAS, the Compensation Committee has
determined that the Optionee is a key employee of the Company or of one of its
subsidiary corporations within the meaning of the Plan and that the Optionee
shall be granted an option to purchase shares of Common Stock on the terms and
conditions herein set forth;

    


    NOW, THEREFORE, in consideration of the
mutual promises and covenants herein contained and other good and valuable
consideration paid by the Optionee to the Company, the parties hereto do hereby
agree as follows:

    


    1.           Incorporation
of Plan

    


    All provisions of this contract and
the rights of the Optionee hereunder are subject in all respects to the
provisions of the Plan and the powers of the Compensation Committee and Board of
Directors of the Company therein provided.

    


    2.           Grant
of Option

    


    Pursuant to the authorization of the
Compensation Committee, and subject to the terms, conditions and provisions
contained in the Plan and this Agreement, the Company hereby grants to the
Optionee as a matter of separate inducement and agreement in connection with his
employment, but not in lieu of any salary or other compensation for his
services, the right and option (the "Option") to purchase from the Company, at
the times and on the terms and conditions hereinafter set forth, all or part of
an aggregate of 100,000 shares of Common Stock at the purchase price of $14.34
per share.  Exercises of this Option may be honored by issuing
authorized and unissued shares of Common Stock or, at the election of the
Company, by transferring shares of Common Stock which may at the time be held by
the Company as treasury shares.

    


    3.           Terms
of Option

     

    The Option granted hereunder shall be
exercisable from time to time by the Optionee by the giving of written notice of
exercise to the Company in advance of an exercise date hereinafter set forth,
specifying the number of shares to be purchased, and by payment of the purchase
price therefore by either (i) cash or certified or cashier's bank check to the
order of the Company, or (ii) shares of stock of the Company having a fair
market value equal to the purchase price on the exercise date, subject, however,
to the following restrictions:

    


    (a)           The
Option shall be exercisable within a five (5) year period beginning on the
Granting Date and only in the following maximum amounts:  (i) none
until the expiration of one (1) year from Granting Date  (the waiting
period); (ii) 25% of all shares after one (1) year from Granting Date; (iii) 50%
of all shares after two (2) years from Granting Date; (iv) 75% of all shares
after three (3) years from Granting Date; (v) 100% of all shares after four (4)
years from Granting Date.  This Option shall expire five (5) years
after the Granting Date.  To the extent that the Optionee does not
purchase part or all of the shares of Common Stock to which he is entitled, this
Option shall expire as to such unpurchased shares.

    


    (b)           Notwithstanding
the provisions of subparagraph (a) of paragraph 3 of this Agreement, in the
event the Company shall not be the surviving corporation in any merger,
consolidation, or reorganization, or in the event of the acquisition by another
corporation of all or substantially all of the assets of the Company and if such
surviving, continuing, successor or purchasing corporation does not agree to
assume or replace the Option granted hereunder in accordance with paragraph 7 of
this Agreement, or in the event of the liquidation or dissolution of the
Company, the Option granted hereunder shall become immediately exercisable to
the extent of all of the aggregate number of shares subject to this Option for a
period commencing 30 days immediately prior to and ending on the day immediately
prior to such merger, consolidation, reorganization or acquisition of all or
substantially all of the assets of the Company, or the liquidation or
dissolution of the Company.

    


    (c)           Notwithstanding
the provisions of subparagraph (a) of paragraph 3 of this Agreement, in the
event of a Change of Control of the Company, the Option granted hereunder shall
become immediately exercisable to the extent of all of the aggregate number of
shares subject to this Option.  In the event of a Change of Control,
the Company shall notify the Optionee as soon as practicable of the Optionee's
rights hereunder.  For purposes of this subparagraph (c), a "Change of
Control" shall have the meaning set forth in Section 8(a) of the
Plan.

    


    (d)           The
Option shall be exercisable in the manner set forth above, during the lifetime
of the Optionee only by him and may not be exercisable by him unless at the time
of exercise he is a full-time employee of the Company or of one of its
subsidiary corporations and shall have been continuously so employed since the
Granting Date, or, if the Optionee's employment with the Company or any of its
subsidiary corporations shall have terminated the Option shall be exercisable
only if exercised prior to the expiration of thirty (30) days after the date of
such termination or prior to five (5) years after the Granting Date, whichever
shall first occur, and (except as otherwise provided by subparagraph (b) and
subparagraph (c) of this paragraph 3) only to the extent that the Optionee was
entitled to exercise the Option prior to the date of such
termination.

    


    (e)           The
Option shall be exercisable after the death of the Optionee only if the Optionee
shall at the time of his death have been an employee of the Company and shall
have been continuously employed since the Granting Date, and then (i) only by or
on behalf of such person or persons to whom the Optionee's rights under the
Option shall have been passed by the Optionee's will or by the laws of descent
and distribution, (ii) (except as otherwise provided by subparagraph (b) and
subparagraph (c) of this paragraph 3) only to the extent that the Optionee was
entitled to exercise said Option prior to the date of his death, and (iii) only
if said Option is exercised prior to the expiration of twelve (12) months after
the date of the Optionee's death or prior to five (5) years after the Granting
Date, whichever shall first occur.

    


    (f)           In
the event the job classification and/or duties of the Optionee shall be changed
and such change shall, in the opinion of the Compensation Committee, reflect a
lower job classification and/or a reduction in responsibility or duties of the
Optionee, the Company shall have the right, exercisable by written notice to the
Optionee, within ninety (90) days after such notice, to terminate this Option as
to any and all unpurchased shares.

    


    


    4.           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.

    


    5.           Nonassignability

    


    Except as otherwise herein provided,
the Option herein granted and the rights and privileges conferred hereby shall
not be transferred, assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise) and shall not be subject to execution,
attachment, or similar process.  Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of the Option herein granted, or of any
right or privilege conferred hereby, or upon the levy of any attachment or
similar process upon the rights and privileges conferred hereby, contrary to the
provisions hereof, this Option and the rights and privileges conferred hereby
shall immediately become null and void.

    


    6.           Adjustments
for Stock Dividends, Splits, etc.

    


    In the event that, prior to the
delivery to the Optionee by the Company of all the shares of the Common Stock in
respect of which this Option is hereby granted, the Company shall have effected
any stock dividend, stock split, recapitalization, combination or
reclassification of shares or other similar transaction, then to the extent
necessary to prevent dilution or enlargement of the Optionee's rights
hereunder:

    


    (a)           in
the event that a new increase shall have been effected in the number of
outstanding shares of Common Stock, the number of shares remaining subject to
this Option shall be proportionately increased, and the cash consideration
payable per share shall be proportionately reduced, and

    


    (b)           in
the event that a new reduction shall have been effected in the number of
outstanding shares of Common Stock, the number of shares remaining subject to
this Option shall be proportionately reduced, and the cash consideration payable
per share shall be proportionately increased.

    


    7.           Adjustments
for Mergers, Reorganizations, etc.

    


    Subject to paragraph 3(b) of this
Agreement, if the Company shall become a party to any corporate merger,
consolidation, major acquisition of property for stock, separation,
reorganization or liquidation, the Company shall have power to make arrangements
which shall be binding upon the Optionee for the substitution of a new Option
for this Option, or for the assumption of this Option, provided that such
arrangements shall meet the requirements of Section 424(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or such similar provisions of the
Code as may then be in effect.

    


    8.           Rights
of Optionee

    


    The Optionee shall not be, nor shall
he have any of the rights or privileges of, a stockholder of the Company in
respect of any of the shares issuable upon the exercise of this Option unless
and until certificates representing such shares shall have been issued and
delivered; except that the Company shall supply the Optionee with all financial
information and other reports which the Company furnished its stockholders
during the Option period.

    


    9.           Notice

    


    Any notice required to be given under
the terms of this Agreement shall be addressed to the Company in care of its
secretary at its offices at 401 Cottage Street, Abilene, Kansas 67410-0129, and
any notice to be given to the Optionee shall be addressed to him at the address
given beneath his signature hereto.  Either party hereto may from time
to time change the address to which notices are to be sent to such party by
giving written notice of such change to the other party.  Any notice
hereunder shall be deemed to have been duly given if and when addressed as
aforesaid, registered and deposited, postage and registry fee prepaid, in a post
office regularly maintained by the United States Government.

    


     

    10.           Binding
Effect

    


    This Agreement shall bind, and, except
as specifically provided herein, shall inure to the benefit of the respective
heirs, legal representatives, successors and assigns of the parties
hereto.

    


    11.           Governing
Law

    


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

    


    IN WITNESS WHEREOF, the Company has
caused this Agreement to be executed by its officers thereunto duly authorized
and its corporate seal to be hereunto affixed, and the Optionee has hereunto set
his hand as of the day and year first above written.

    


    
      	 
      	
              Duckwall-ALCO
      Stores, Inc.

            
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	
              (CORPORATE
      SEAL)

            	
              By
      /s/ Donny
      Johnson

               

              Name:  Donny
      Johnson

              Title:    Executive
      Vice President and CFO

            
	 
      	 
      
	 
      	 
      
	 
      	 
      
	
              ATTEST:

               

              /s/ Peggy L. Houser

            	 
      
	 
      	 
      
	 
      	 
      
	 
      	
              /s/ Richard E. Wilson

               

              Address:  Duckwall-Alco
      Stores, Inc.

              401
      Cottage

              Abilene,
      KS  67410

               

              SS
      NO. XXX-XX-XXXX

            
	 
      	 
      


    

    
      	
              CWDOCS
      648244v1