Document:

MEMORANDUM OF UNDERSTANDING
                          ---------------------------

      This Memorandum between Duckwall-ALCO Stores, Inc., (the "Company"), a
Kansas Corporation, and BRUCE DALE, ("Dale"), an individual, is to the
following force and effect:

     1. The Company agrees to employ Dale as President and Chief Executive
Officer of the Company commencing March 28, 2005.

     2. The base compensation to be paid by the Company to Dale is Three Hundred
Twenty-Five Thousand Dollars ($325,000.00) payable in equal monthly
installments.

     3. Dale shall be entitled to all benefits currently provided and available
to other executives of the Company.

     4. Dale will receive options to purchase One Hundred Thousand (100,000)
shares of Company stock according to the terms and conditions of the Company's
2003 incentive Stock Option Plan.

     5. Within thirty (30) days from the date of this Memorandum, Dale and the
Company's Compensation Committee will negotiate a mutually agreeable Bonus Plan
that will be incorporated into Dale's employment agreement.

     6. The Company will pay to Dale an amount not to exceed Sixty-Six Thousand
Dollars ($66,000.00) as reimbursement for any real estate commission incurred by
Dale in the sale of his residence in Bloomfield Hills, Michigan, said sum to be
paid within ten (10) days after Dale's commission obligation is incurred.

     7. Within thirty (30) days from the date of this Memorandum Dale and the
Company shall enter into an Employment Agreement substantially in the form of
the Employment Agreement of the Company's current President and Chief Executive
Officer. A copy of that agreement has been provided to Dale. The initial term of
the Employment Agreement will be for two (2) years, and the agreement will
contain "evergreen" provisions.

      DATED THIS MARCH 15, 2005

                               /s/ Bruce Dale
                               -----------------------------------
                               Bruce Dale

                               Duckwall-ALCO Stores, Inc.
                               by  /s/ Dennis A. Mullin
                                   -------------------------------
                                   Dennis A. MullinTermination of Quota Share Agreement with National

Exhibit
10.9 

Termination
Agreement and Release

Between

Coast
National Insurance Company ("Coast National")

and

Security
National Insurance Company ("Security National")

and

Bristol
West Insurance Company ("Bristol West")

and

Bristol
West Casualty Insurance Company ("Bristol West Casualty")

and

National
Union Fire Insurance Company of Pittsburgh, PA ("Subscribing
Reinsurer")

WHEREAS,
Coast National, Security National, Bristol West and Bristol West Casualty
(together the "Company") and the Subscribing Reinsurer entered into an Interest
and Liabilities Agreement with an effective date of January 1, 2002 (the
"I&L") whereby the Subscribing Reinsurer took a 50% share in the interests
and liabilities of the "Reinsurer" as set forth in a Quota Share Reinsurance
Agreement issued to Company with an effective date of January 1, 2002 and any
amendments thereto (the "Contract");

WHEREAS,
the Company commuted the Contract on a cut-off basis effective January 1,
2005.

WHEREAS,
the Company and the Subscribing Reinsurer wish to fully and finally settle all
obligations and liabilities under the I&L Agreement and the Contract (the
I&L Agreement and the Contract attached hereto as Exhibit A);

NOW,
THEREFORE, IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES HERETO
THAT:

	1.	
      TheSubscribing
      Reinsurer shall pay to Coast National, on behalf of the Company, the sum
      of Ninety Eight Million, Three Hundred Seventy Seven Thousand, Eight
      Hundred Ninety Two Dollars ($98,377,892), such amount being equal to the
      profit commission in accordance with Article IX of the Contract. Such
      payment shall be made by the Subscribing Reinsurer to Coast National no
      later than January 21, 2005, in accordance with the letter agreement dated
      July 23, 2004 and attached hereto as Exhibit
B.

	2.	The Company shall accept the sum set forth in
      Paragraph 1 above as the total amount due in full and final settlement of
      any and all amounts due from the Subscribing Reinsurer to the Company
      under the I&L Agreement and the Contract.

 

	3.	
      Effective
      upon the receipt of payment set forth in Paragraph 1 above, the Company
      does hereby on behalf of itself, its successors and assigns, release and
      discharge the Subscribing Reinsurer, its past, present and future
      directors, officers, employees consultants, attorneys, agents,
      administrators, successors, assigns, parents, affiliates, subsidiaries and
      receivers from any and all past, present and future claims, causes, causes
      of action, liabilities and obligations arising under or related directly
      or indirectly to the I&L Agreement and the Contract, whether known or
      unknown, reported or unreported, and whether currently existing or arising
      in the future, including but not limited to: any and all past, present and
      future payment obligations, adjustments, setoffs, actions, omissions,
      causes of action, suits, debts, sums of money, accounts, demands,
      covenants, controversies, bonds, bills, promises, damages, judgments,
      claims, costs, expenses, losses representations and warranties whatsoever
      related directly or indirectly to the I&L Agreement and the Contract;
      it being the intention of the parties that this Agreement shall operate as
      a full and final settlement of the Subscribing Reinsurer's past, current
      and future liabilities to the Company related to the I&L Agreement and
      the Contract. The Company acknowledges the aforementioned payment as a
      complete accord, satisfaction, settlement and commutation of all the
      Subscribing Reinsurer's liabilities and obligations under the I&L
      Agreement and the Contract and agrees to indemnify and hold the
      Subscribing Reinsurer harmless from and against any and all liabilities,
      costs, damages and expenses, including without limitation, attorney's
      fees, incurred in connection with any and all claims or actions against
      the Company or the Subscribing Reinsurer, or either of their successors or
      assigns, arising out of or related to the I&L Agreement and the
      Contract.

 

	4.	
      Effective
      on the same date on which the Company shall release and discharge the
      Subscribing Reinsurer as provided in Paragraph 3 of this Agreement, the
      Subscribing Reinsurer does hereby, on behalf of itself, its successors and
      assigns release and discharge the Company, its past, present and future
      directors, officers, employees, consultants, attorneys, agents,
      administrators, successors, assigns, parents, affiliated, subsidiaries and
      receivers from any and all past, present and future claims, causes, causes
      of action, liabilities and obligations arising under or related directly
      to the I&L Agreement and the Contract, whether known or unknown,
      reported or unreported, and whether currently existing or arising in the
      future, including but not limited to: any and all past, present and future
      payment obligations, adjustments, setoffs, actions, omissions, causes of
      action, suits, debts, sums of money, accounts, demands, covenants,
      controversies, bonds, bills, promises, damages, judgments, claims, costs,
      expenses, losses representations and warranties whatsoever related
      directly or indirectly to the I&L Agreement and the Contract; it being
      the intention of the parties that this Agreement shall operate as a full
      and final settlement of the Company's past, current and future liabilities
      to the Subscribing Reinsurer under the I&L Agreement and the
      Contract.

 

	5.	
      The
      rights, duties and obligations set forth herein shall inure to the benefit
      of and be binding upon any and all predecessors, affiliated, officers,
      directors, employees, parents, subsidiaries, stockholders, receivers and
      assigns of the parties hereto.

 

	6.	
      The
      parties hereto expressly warrant and represent that the execution of this
      Agreement is fully authorized by each of them; that the person or persons
      executing this document have the necessary and appropriate authority to do
      so; that there are no pending agreements, transactions, or negotiations to
      which any of them are a party that would render this agreement or any part
      hereof, void, voidable, or unenforceable. Each of the Company and the
      Subscribing Reinsurance agrees to execute and deliver all such other
      documents and agreements and to take such other action as may be
      reasonably necessary or desirable to effectuate the purpose and intent of
      this Agreement.

 

	7.	
      This
      Agreement contains the entire agreement between the parties as respects
      its subject matter. This Agreement shall neither be modified nor amended,
      nor any of its provisions waived, except by a written agreement signed by
      the parties hereto.

 

	8.	
      This
      Agreement shall be interpreted and governed by the laws of New
      York.

 

	9.	
      In
      the event that the Company shall become legally obligated under any law or
      legal process to repay the Subscribing Reinsurer or any successor in
      interest to the Subscribing Reinsurer all or any portion of the payment
      hereunder, then such debt shall be reinstated under the I&L Agreement
      and the Contract, and this Agreement shall be null and void from the
      inception, and the parties shall be free to pursue any and all remedies
      available to them.

 

	10.	Any party to this Agreement signing on behalf
      of any affiliates or subsidiaries represents and warrants that it has the
      authority to do so and by such signing binds such other affiliates or
      subsidiaries to this Agreement.

 

 

	
      For
      and on behalf of
	
      For
      and on behalf of 

	
      National
      Union Fire Insurance
	
      Coast
      National Insurance Company

	
      Company
      of Pittsburgh, PA
	 
	 	 
	
      /s/ 
      Robert J. Coords
	/s/ Jeffrey John
      Dailey
	
      Name:Robert
      J. Coords
	
      Name:
      Jeffrey John Dailey

	
      Title:
      Attorney-in-Fact
	
      Title:
      President

	
      Date:
      January 12, 2005
	
      Date:
      January 10, 2005

	 	 
	 	 
	 	 
	
      For
      and on behalf of 
	
      For
      and on behalf of

	
      Security
      National Insurance Company
	
      Bristol
      West Insurance Company

	 	 
	
      /s/
      Simon John Noonan
	
      /s/ Jeffrey John Dailey

	
      Name:
      Simon John Noonan
	
      Name:
      Jeffrey John Dailey

	
      Title:
      President
	
      Title:
      Vice President

	
      Date:
      January 10, 2005
	
      Date:
      January 10, 2005

For and
on behalf of

Bristol
West Casualty Insurance Company

/s/
Jeffrey John Dailey

Name:
Jeffrey John Dailey

Title:
Vice President

Date:
January 10, 2005

 

 

Exhibit A
(incorporated by reference to Exhibit 10.2 of Registrant's Registration
Statement (File No. 333-111259) on Form S-1

 

 

Exhibit
B

	 	
      AIG
      Reinsurance Advisors, Inc

	 	
      70
      Pine Street

	 	
      New
      York, NY 10270

	 	
      Telephone:
      (212) 770-7709

	 	
      Facsimile:
      212) 785-0599

	 	 
	 	 
	 	 
	 	
      July
      23, 2004

Alexis
Oster

Bristol
West Insurance Group

6150 Oak
Tree Boulevard, Suite 400

Independence,
OH 44131

Dear
Alexis:

Reference
is made to the Quota Reinsurance Agreement effective as of January 1, 2002, by
and among Coast National Insurance Company, Security National Insurance Company
Bristol West Insurance Company, Bristol West Casualty Insurance Company and
National Union Fire Insurance Company of Pittsburgh, Pa., as amended to the date
hereof (the "Quota Share Agreement"). Capitalized terms used herein without
definition shall have the same meanings herein as set forth in the Quota Share
Agreement.

Notwithstanding
any provision in Article IX of the Quota Share Agreement to the contrary,
National Union Fire Insurance Company of Pittsburgh, Pa. hereby agrees to pay to
the Company the Profit Commission described in such Article IX not later than
January 21, 2005, provided that the parties to the Quota Share Agreement have
executed a commutation agreement in form and substance acceptable to such
parties, and all conditions to effectiveness set forth therein have been
satisfied, on or before January 7, 2005; provided, further, that any such
commutation agreement shall be deemed effective as of January 1,
2005.

The
execution, delivery and performance of this letter agreement shall not, except
as expressly provided herein, constitute a waiver of any provision of, or
operate as a waiver of any right, power or remedy of National Union Fire
Insurance Company of Pittsburgh, Pa. under the Quota Share
Agreement.

 

 

NATIONAL
UNION FIRE INSURANCE

COMPANY
OF PITTSBURGH, PA.

Robert J.
Coords

Attorney-In-Fact

S/O/F

COAST
NATIONAL INSURANCE COMPANY

Alexis S.
Oster

Corporate
Counsel

S/O/F

SECURITY
NATIONAL INSURANCE COMPANY

Alexis S.
Oster

Corporate
Counsel

S/O/F

BRISTOL
WEST INSURANCE COMPANY

Alexis S.
Oster

Corporate
Counsel

S/O/F

BRISTOL
WEST CASUALTY INSURANCE COMPANY

Alexis S.
Oster

Corporate
Counsel

S/O/F

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