Document:

Exhibit 4.2

MARSHALL & ILSLEY CORPORATION

2005 EXECUTIVE DEFERRED COMPENSATION PLAN

as amended as of August 19, 2010

ARTICLE I

Establishment of Plan and Purpose

1.01.  Establishment of Plan.  Marshall & Ilsley Corporation has established the 

2005 Marshall & Ilsley Executive Deferred Compensation Plan, effective as of December 16, 2004 (the “Plan”).

1.02.  Purpose of Plan.  The Plan shall permit a select group of senior management and highly compensated employees to enhance the security of themselves and their beneficiaries following the termination of their employment with the Companies (as defined herein) by deferring until that time a portion of the compensation which may otherwise be payable to them at an earlier date (including the deferral of receipt of restricted stock).  By allowing key management employees to participate in the Plan, the Company expects the Plan to benefit it in attracting and retaining the most capable individuals to fill its executive positions in the Companies.

The parties intend that the arrangements described herein be unfunded for purposes of Title I in the Employee Retirement Income Security Act as amended from time to time.

ARTICLE II

Definitions and Construction

As used herein, the following words shall have the following meanings:

2.01.  Definitions.

(a)

Accounts. The accounts (including the sub-accounts) maintained for each Participant pursuant to Article V, below.

(b)

Administrator.  The person or persons selected pursuant to Article VIII below to control and manage the operation and administration of the Plan.

(c)

Affiliate.  Any corporation or other entity which directly or indirectly controls, is controlled by, or under common control with, the referenced entity.  Control means the ability to elect a majority of the Board of Directors of the corporation or other entity, or if there is no Board of Directors, a majority of the body which governs the entity.

(d)

Beneficiaries.  Those persons designated by a Participant to receive benefits hereunder or, failing such a designation, the spouse or, if none, the Estate of a Participant.

(e)

Change in Control.  Change in Control shall have the same meaning as in the Marshall & Ilsley Corporation 2010 Equity Incentive Plan.

(f)

Code.  The Internal Revenue Code of 1986, as amended.

(g)

Committee.  The Compensation and Human Resources Committee of the Board of Directors of the Company.

(h)

Common Stock.  The authorized and issued or unissued $1.00 par value common stock of the Company.

(i)

Companies.  Prior to the Separation Transaction, Marshall & Ilsley Corporation and any subsidiary thereof.  After the Separation Transaction, the publicly-traded corporation with the name Marshall & Ilsley Corporation, and all entities that are Affiliates thereof.

(j)

Company.  Prior to the Separation Transaction, Marshall & Ilsley Corporation, a Wisconsin corporation, or a successor thereof.  After the Separation Transaction, the “Company” means the publicly-traded corporation with the name Marshall & Ilsley Corporation.

(k)

Company Contributions.  The amount contributed or credited by the Company to the account of the Participant pursuant to Section 4.05 hereof.

(l)

Compensation.  The total of the Participant’s base salary, commissions, bonuses, and incentive pay which shall include amounts deferred by the Participant under this Plan or any other employee benefit plan of the Company.  In all cases, Compensation shall include only compensation paid while an employee is a Participant in the Plan.  Compensation shall not include any severance or salary continuation payments.

(m)

Deferral Election.  The election by a Participant, from time to time, to defer Compensation or Restricted Shares in accordance with the provisions of this Plan.  Forms of Deferral Elections, which can be changed from time to time at the discretion of the Administrator (so long as such change(s) are in conformity with the requirements of Section 409A of the Code and the regulations promulgated thereunder), are attached hereto as Exhibit B.

(n)

Distribution Election.  The election by a Participant, from time to time, to choose the method of distribution of his deferrals, and any deemed investment increases or decreases attributable thereto.  The methods of distribution contained in the forms of Distribution Election can be changed from time to time at the discretion of the Administrator, so long as such change(s) are in conformity with the requirements of Section 409A of the Code and the regulations promulgated thereunder.  The current form is attached hereto as Exhibit D.

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(o)

Disability.  A Participant shall be considered to be suffering from a Disability if the Participant is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, either (i) receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Participant’s employer or (ii) unable to engage in any substantial gainful activity.

(p)

Employee.  An employee of any one or more of the Companies.

(q)

Employment.  Employment with any one or more of the Companies.

(r)

Fair Market Value.  The closing sale price of the Common Stock and/or the Fidelity Stock, as the context requires, on the New York Stock Exchange as reported in the Midwest Edition of the Wall Street Journal for the applicable date; provided that, if no sales of Common Stock or Fidelity Stock were made on said exchange on that date, “Fair Market Value” shall mean the closing sale price of the Common Stock or Fidelity Stock, as applicable, as reported for the next succeeding day on which sales of Common Stock or Fidelity Stock are made on said exchange, or, failing any such sales, such other market price as the Committee may determine in conformity with pertinent law and regulations of the Treasury Department.

(s)

Fidelity.  Fidelity National Information Services, Inc., the successor by merger to Metavante.

(t)

Fidelity Stock.  The class of common stock of Fidelity traded on the New York Stock Exchange, which is the class of common stock received in exchange for Metavante Stock in the merger of these entities.

(u)

Investment Election.  The election by the Participant, from time to time, which designates the Participant’s investment choices.

(v)

Metavante.  After the Separation Transaction, the publicly-traded parent of the group of companies that includes the Company’s former subsidiary, Metavante Corporation.

(w)

Metavante Stock.  The class of common stock of Metavante that was traded on the New York Stock Exchange.

(x)

Participants.  Such senior management and highly compensated Employees whom the Administrator has identified as eligible to defer Compensation hereunder and who elect to participate by deferring Compensation.

(y)

Plan.  The Marshall & Ilsley Corporation 2005 Executive Deferred Compensation Plan, as stated herein and as amended from time to time.

(z)

Plan Year.  The period beginning on January 1, 2005 and ending on December 31, 2005, and each 12-month period ending on each subsequent December 31.

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(aa)

Restricted Shares.  An award of stock under a plan of the Company, which may contain transferability or forfeiture provisions (including a requirement of future services), all as set forth in an award agreement.

(bb)

Restricted Stock Units.  Units held in a Participant’s Account B which are received upon surrender of Restricted Shares or directly as a grant from the Company, and which have transferability or forfeiture provisions (which may include a requirement of future services).  Each Restricted Stock Unit represents one share of Common Stock, or one share of Fidelity Stock if the Restricted Stock Unit was previously a Restricted Stock Unit for Metavante Stock received as a result of the Separation Transaction, which became a Restricted Stock Unit for Fidelity Stock after the merger of Metavante with and into Fidelity.

(cc)

Retirement.  As to each Participant, the termination of his employment on or after attaining age 55, other than by reason of death or Disability, with at least 10 years of Service.

(dd)

Separation Transaction.  The transaction whereby Metavante and the Company become separate publicly-traded companies.

(ee)

Service.  As to each Participant, the period during which he has been employed by one or more of the Companies, including such period of time that he was employed by a predecessor in interest to one of the Companies.

(ff)  Termination of Employment.  For all purposes of this Plan, the determination of whether a Participant’s employment has terminated will be made in accordance with Treas. Reg. §1.409A-1(h) promulgated under Section 409A of the Code.

(gg)  Trust.  The Company’s Deferred Compensation Trust III.

(hh)

Unforeseeable Emergency.  A severe financial hardship to a Participant resulting from an illness or accident of the Participant, the Participant’s spouse, the Participant’s beneficiary, or the Participant’s dependent (as defined in Section 152 of the Code, without regard to Section 152(b)(1), (b)(2), and (d)(1)(B) of the Code) of the Participant, loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, not as a result of a natural disaster), or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

2.02.  Construction.   The laws of the State of Wisconsin, as amended from time to time, without giving effect to their conflict of laws provisions, shall govern the construction and application of this Agreement, unless Employee Retirement Income Security Act  (“ERISA”) supersedes Wisconsin law.  Words used in the masculine gender shall include the feminine and words used in the singular shall include the plural, as appropriate.  The words “hereof,” “herein,” “hereunder” and other similar compounds of the word “here” shall refer to the entire Agreement, not to a particular section.  All references to statutory sections shall include the section so identified as amended from time to time or any other statute of similar import.  If any provisions of the Internal Revenue Code, ERISA or other statutes or regulations render any provisions of 

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this Plan unenforceable, such provision shall be of no force and effect only to the minimum extent required by such law.

ARTICLE III

Eligibility

3.01.  Conditions of Eligibility.  The Administrator shall, from time to time, specify the senior management and highly compensated Employees eligible to participate herein.  Eligibility to participate in the Plan for one Plan Year does not guarantee eligibility for a subsequent Plan Year.

3.02.  Commencement of Participation.  An individual identified as eligible to participate in the Plan for that Plan Year shall commence participation, by either (a) electing a deferral of Compensation, (b) surrendering Restricted Shares for Restricted Stock Units, on the applicable form provided by the Administrator, or (c) receiving an award of Restricted Stock Units, in accordance with the procedures established by this Plan and the Administrator.

3.03.  Termination of Participation.  An individual’s right to (a) defer Compensation or (b) surrender Restricted Shares for Restricted Stock Units hereunder shall cease as of the earlier of (i) a Participant’s Termination of Employment or (ii) failure of the Administrator to designate him or her as an Employee eligible to participate herein.

ARTICLE IV

Deferrals and Company Contributions

4.01.  Amount and Manner of Deferral of Compensation.  A Participant must sign and return the Deferral Election, substantially in the form of Exhibit B hereto, to the Company, no later than the date specified by the Company, indicating the amount or percentage of the Participant’s salary or other Compensation for such Plan Year which he elects to defer hereunder, which election shall become irrevocable on December 31st of the immediately preceding Plan Year.  A Participant may defer (i) any portion not to exceed eighty percent (80%) of his base salary or (ii) up to 100% of his incentive or (iii) both, provided, however, that (a) the Participant may not defer less than $5,000 in a Plan Year and (b) the Participant’s Deferral Election for a Plan Year shall relate to Compensation earned by him during such Plan Year whether or not paid during that Plan Year.

If a Participant elects to defer a portion of his salary, the Company shall reduce the Participant’s regular salary by an equal amount in each pay period during the Plan Year of deferral.  If a Participant elects to defer all or a portion of his incentive, the Company shall reduce each such Compensation payment by the percentage or dollar amount elected by the Participant.

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4.02.  Amount and Manner of Deferral of Compensation for Participants Who Commence Participation in the Plan after the Beginning of a Plan Year.  If an Employee becomes eligible to participate in the Plan after the beginning of a Plan Year because he is newly hired by the Companies, or because he receives a promotion which results in him becoming eligible to participate in the Plan, the Employee must make his or her initial Deferral Election and Distribution Election no later than 30 days after the Employee first becomes eligible to participate in the Plan.  Such Deferral Election may apply only to compensation paid for services to be performed after the election.  In the case of an incentive or bonus payment, only that portion of the incentive or bonus payment that relates to services performed after the date of the election may be deferred.  Notwithstanding the foregoing, if an Employee initially becomes a Participant solely because of company contributions credited to the SERP Account, as defined below in Section 4.05 hereof, the Distribution Election for the initial year such amounts are credited can be made no later than the first 30 days after such year.  If no such Distribution Election is made, the default rules shall apply.

4.03.  Amount and Manner of Deferral of Restricted Shares.  A Participant may elect to defer an award of Restricted Shares by returning an Election to Convert Restricted Shares Into Restricted Units, substantially in the form of Exhibit C hereto, to the Company, no later than the date specified by the Company, containing the information requested.  Such Election shall become irrevocable as regards awards of Restricted Shares in a Plan Year on December 31st of the immediately preceding Plan Year, or, if a later deferral election is allowed pursuant to Section 409A of the Code, upon the Company’s receipt of the election.  Any Election which elects to defer all future grants of Restricted Shares shall become irrevocable as to awards of Restricted Shares in a Plan Year on December 31st of the immediately preceding Plan Year.

4.04.  Cessation of Deferral Election.  In the event of an Unforeseeable Emergency, a Participant may request in writing that deferrals of Compensation elected by that Participant hereunder cease for the then current Plan Year.  If the Administrator determines that such an Unforeseeable Emergency exists, the deferrals of Compensation for such Plan Year shall cease as to the Participant.  If the Administrator determines that no such emergency exists, the deferrals shall continue as originally elected.  If a Participant’s election deferral is cancelled for a Plan Year due to an Unforeseeable Emergency, the Participant may not resume deferrals of Compensation hereunder (if otherwise eligible therefor) until the Plan Year following the Plan Year in which such cessation occurred.

4.05. Other Contributions.  In the event that deferrals made by a Participant pursuant to this Plan cause a reduction in the contributions by the Company for the benefit of that Participant to any other qualified or nonqualified retirement plan maintained by the Company, and such reduction is not contributed or credited to any other nonqualified retirement plan, the Company shall credit to the Participant’s account under this Plan an amount equal to such net reductions in benefits.  If, as a result of limitations contained in Sections 401(a)(17) and/or 415 of the Code, or as a result of amounts deferred under the Plan, the contributions made to the profit sharing component of the retirement program of the Company on behalf of a person eligible to participate in the Plan are reduced, the Company shall credit an amount equal to such reduction to an account established for such person (the “SERP Account”).  The SERP Account shall be a separate bookkeeping account and shall vest as determined under the profit sharing component 

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of the retirement program of the Company, taking into account service prior to the date hereof.  Aside from the vesting requirement, the SERP Account shall be treated for all purposes of the Plan in the same manner as the Participant’s Account A, including division into sub-accounts consistent with the Distribution Election made for the Plan Year to which the Company contribution relates.  In addition, to the extent any amounts owing to a Participant under any incentive compensation plan are in excess of amounts which would be deductible by the Company under Section 162(m) of the Code (excluding for this purpose any amount governed by Section 162(m)(5) of the Code) and the applicable Plan or the Committee requires that such excess amounts be deferred, such amounts shall be credited to the relevant sub-account of Participant's Account A or Account B, as provided below in Section 5.01, consistent with the Distribution Election for such Plan Year.

ARTICLE V

Accounts and Sub-Accounts

5.01.  Establishment of Accounts; Sub-Accounts.  Only for the purpose of measuring payments due Participants hereunder, the Company shall maintain on behalf of each Participant two Accounts:  Account A and Account B, which shall each be divided into four sub-accounts reflecting the four distribution options available for cash and Common Stock distributions as set forth in the Distribution Election.  If the Company increases the number of distribution options available, the number of sub-accounts shall likewise be increased.  All amounts deferred pursuant to Section 4.03 shall be credited to the relevant sub-accounts of Account B, which shall be denominated in shares of Common Stock or Fidelity Stock.

5.02.  Nature of Accounts; Sub-Accounts.  The Accounts and sub-accounts hereunder, and assets, if any, acquired by the Company or Trust to measure a Participant’s benefits hereunder, shall not constitute or be treated for any reason as a trust for, property of or a security interest for the benefit of, a Participant, his Beneficiaries or any other person.  The Participant and the Company acknowledge that the Plan constitutes a promise by the Company to pay benefits to the Participants or their Beneficiaries, that Participants’ rights hereunder (by electing to defer Compensation or Restricted Stock Units hereunder) are limited to those of general unsecured creditors of the Company and that the establishment of the Plan, acquisition of assets to measure Participant’s benefits hereunder or deferral of all or any portion of a Participants’ Compensation, or Restricted Stock Units hereunder does not prevent any property of the Company or the Trust from being subject to the right of all the Company’s creditors.  The Company shall contribute all contributions hereunder to the Trust, which conforms in all material respects to the terms of the Internal Revenue Service’s model trust, as described in Revenue Procedure 92-64.

5.03.  Maintenance of Account A.

a.

Accounts shall be reconciled on a monthly or more frequent basis, at the Company’s election.  The Company shall increase the relevant sub-account of Account A of each Participant by (i) the amount, if any, of his Compensation deferred during any relevant period based on the Distribution Election for such Plan Year which is allocated to Account A 

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investments, (ii) the amount, if any, contributed by the Company pursuant to Section 4.05 hereof during the relevant period which is allocated to Account A investments and (iii) any income or gains resulting as if the sub-account, computed in accordance with subsection b, below, were invested pursuant to the timely-filed Investment Election in effect for such time period and decrease each Participant’s sub-account by (iv) any withdrawals, distributions or allocations from Account A to Account B from the relevant sub-account of Account A during any relevant period and (v) any losses resulting as if the sub-account, computed in accordance with subsection b, below, were invested pursuant to the timely-filed Investment Election in effect for such relevant period.

b.

For purposes of computing the investment return on any sub-account of Account A for any relevant period, the principal balance as of any day in any relevant period shall equal the balance as of the end of the immediately preceding day.

5.04.  Maintenance of Account B.

a.

Accounts shall be reconciled on a monthly or more frequent basis.  The Company shall increase the relevant sub-account of Account B of each Participant by (i) the amount, if any, of the Restricted Stock Units deferred by, or granted to, the Participant, (ii) any shares of Common Stock deemed purchased pursuant to Sections 5.05(b) or 5.06(b) (hereafter referred to as “Credited Shares”), and (iii) to the extent Credited Shares or shares of Fidelity Stock are held on the record date for any dividend, a number of additional shares of Common Stock or Fidelity Stock resulting from the reinvestment of dividends on a common investment date, which will typically be any of the first five business days after the payment of the dividend, determined in the sole discretion of an independent brokerage agent.  Dividends shall be assigned to the sub-account which contains the shares of Common Stock or Fidelity Stock generating the applicable dividends.  The Company shall decrease each Participant’s sub-account of Account B by (iv) any withdrawals or distributions from such sub-account of Account B during the relevant period, (v) any Restricted Stock Units which fail to vest or become transferable because the Participant forfeits the Restricted Stock Units and (vi) any shares of Fidelity Stock deemed sold pursuant to Section 5.06(b) or (c).  Consistent with the treatment of Restricted Shares, any dividends credited as regards Restricted Stock Units shall not be forfeited, even if the Participant later forfeits the Restricted Stock Units.

b.

In the event of any distribution with respect to Common Stock or Fidelity Stock other than a cash dividend, such as a stock split, stock dividend or similar transaction, the relevant sub-account of the Participant’s Account B shall be credited with a number of additional shares or other consideration as determined by the Committee in its sole discretion.  Account B will be denominated in whole and fractional shares.  In clarification of the foregoing, upon the occurrence of the Separation Transaction, a Participant’s Account B held both Common Stock and Metavante Stock determined as if the Participant were a shareholder of the Company for the number of shares in his Account B (including Restricted Stock Units) immediately prior to the Separation Transaction.  Upon the occurrence of the merger of Metavante with and into Fidelity, the relevant sub-account of a Participant’s Account B was credited with the appropriate number of shares of Fidelity Stock that the Participant would have received if he had held the Metavante Stock directly.

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c.

In the event of a Change in Control or a Change in Control of any other corporation whose stock is held in Account B, the relevant sub-account of a Participant’s Account B shall be credited with the same amount and type of consideration which a shareholder of the Company or such other corporation would have received holding the same number of shares of Common Stock or other corporation’s stock as are held in the relevant sub-account of a Participant’s Account B at the time of the payment of the consideration.  If there is a shareholder election as to the type of consideration received in a Change in Control, the relevant sub-accounts of a Participant’s Account B will be credited with consideration assuming that the Participant elected the maximum amount of stock which is available to electing shareholders, adjusted for any proration required because of over-subscription.  Notwithstanding the foregoing, if cash is received in connection with a Change in Control, such cash will be credited to the relevant sub-accounts of Account A which have the same distribution options as the sub-accounts of Account B in which the applicable shares of Common Stock deemed converted to cash were previously held.

5.05.  Investment Elections for Account A.

a.

A Participant may file an Investment Election setting forth his investment preferences used to value his Account A.  The initial investment options available to Participants are (i) the Moody’s A Long-Term Corporate Bond Rate (the “Moody’s Option”) adjusted annually to equal the average yield for the month of September of the previous year and (ii) the total return of the Vanguard Institutional Index Fund (VINIX) for the applicable period (the “VINIX Option”).  All investment elections must be in increments of 10%.  If a Participant does not file an Investment Election, the Participant will be deemed to have elected the Moody’s Option.

b.

Starting with the Investment Election effective for the last business day of November, 2009 and continuing for all future Investment Elections, a Participant may elect to invest deferrals in Common Stock or transfer all or part of his amounts in the various sub-accounts of Account A into the sub-accounts for the same respective distribution options in Account B constructively holding Common Stock.  Amounts invested in, or transferred from Account A to, Account B may never be transferred to Account A, unless cash is received in a Change in Control, in which event it will automatically be transferred to Account A.  Subject to compliance with Section 5.05(c) hereof, the dollar amounts invested in Account B will be deemed invested in Common Stock on such date on or after the last business day of the applicable month as is practicable based on the purchase by the Trust of Common Stock on such date, which shares of Common Stock will then be credited to the applicable sub-account of Account B denominated in Common Stock.  Any transaction costs incurred by the Trust will reduce the proceeds available to be deemed invested in Common Stock.

c.

The Participant may change his investment preferences monthly, no later than 3 PM Central Time on the last business day of an applicable month.  Notwithstanding the foregoing, if the Participant is subject to the Company’s insider trading policy, an Investment Election under Section 5.05(b) can only be made when the trading window is open, and will become irrevocable as to investments in Common Stock when the trading window closes, even if it is prior to the due date for the election.

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d.

A Participant’s Account A shall reflect only the performance of the Moody’s Option or the VINIX Option, as applicable, and the Participant shall have no property right or security interest in the actual assets held by the Trust to provide for the payment of benefits under this Plan.  If a Participant does not file an Investment Election, the Participant will be deemed to have elected the Moody’s Option.

5.06  Investment Elections for Account B after the Separation Transaction and the Merger of Metavante and Fidelity.

a.

After the Separation Transaction, the sub-accounts of Account B of a Participant were credited with both Common Stock and Metavante Stock.  After the merger of Metavante with and into Fidelity, the sub-accounts of Account B of a Participant that previously held Metavante Stock were credited with Fidelity Stock in accordance with Section 5.04(b).

b.

The Participant may constructively sell any or all vested shares of Fidelity Stock by making a new Investment Election, no later than 3 PM Central Time on the last business day of such month, setting forth the number of shares to be sold.  The number of shares of Common Stock deemed purchased by the Trust will equal the actual number of shares of Common Stock that were purchased with the proceeds recognized from the sale of such Fidelity Stock on or after the last business day of the applicable month, which shares of Common Stock will then be credited to the applicable sub-account of Account B which previously held the Fidelity shares that were sold.  Any transaction costs incurred by the Trust will reduce the proceeds available to be deemed invested in Common Stock.

c.

A Participant may constructively sell any or all Restricted Stock Units of Fidelity Stock by making a new Investment Election, no later than 3 PM Central Time on the last business day of such month, setting forth the number of shares underlying the Restricted Stock Units to be sold.  The number of shares of Common Stock deemed purchased will equal the actual number of shares of Common Stock that were purchased by the Trust with the proceeds recognized from the sale of such Fidelity Stock on or after the last business day of the applicable month, which shares of Common Stock will then be credited to the applicable sub-account of Account B which previously held the shares of Fidelity Stock that were deemed sold.  Any transaction costs incurred by the Trust will reduce the proceeds available to be deemed invested in Common Stock.  Any restrictions governing the Restricted Stock Units of Fidelity Stock sold will govern the shares of Common Stock deemed purchased with the proceeds of the deemed sale of such Fidelity Stock.

d.

A Participant’s Account B shall reflect only the performance of Common Stock and Fidelity Stock, if any, which is held in such Account B, and the Participant shall have no property right or security interest in actual shares of Common Stock or Fidelity Stock held by the Trust to provide for the payment of benefits under this Plan. 

5.07.  Change of Accounts.  Once amounts have been allocated to the relevant sub-accounts of Account B, these amounts must remain in the referenced sub-accounts of Account B until such amounts are distributed to the Participant pursuant to Article VII hereof.  

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Notwithstanding the foregoing, if cash is received in connection with a Change in Control, such cash will be automatically credited to the applicable sub-account of Account A which has the same distribution period as the sub-account of Account B from which the cash was transferred.  Upon a Change in Control, the Company, the Administrator or any successor thereto, may not change the investment choices available to Participants hereunder without the consent of a majority of the holders of Account balances under the Plan.

ARTICLE VI

Vesting

Subject to the vesting provisions contained in Section 4.05, above, and the rights of the Company’s creditors as set forth in Section 5.02, above, the Account of a Participant, including all earnings accrued thereto, shall at all times be fully vested.  Notwithstanding the foregoing, Restricted Stock Units will not become vested until all forfeiture provisions (including any requirement for future services) have been met.  If such forfeiture provisions are not met, the Restricted Stock Units shall be forfeited and shall be subtracted from the applicable Account.

ARTICLE VII

Distributions

7.01.  Distributions After Termination of Employment.  Except as otherwise expressly provided herein, all distributions of the Accounts shall be made in accordance with the Distribution Elections which relate to deferrals made for each Plan Year.  A Participant may make separate Deferral Elections for the sub-accounts of Account A and Account B.  Distributions from the sub-accounts of Account A shall be in cash and distributions from the sub-accounts of Account B shall be in Common Stock, except that distributions shall be of Fidelity Stock to the extent the amounts in the relevant sub-accounts of Account B are denominated in shares of Fidelity Stock.

Distribution Elections are irrevocable, and may not be modified, unless allowed under Section 409A of the Code, any guidance promulgated thereunder, or any successor thereto.  If a Participant does not timely file a form of Distribution Election, he will be deemed to have elected payment in a lump sum option set forth in the form of Distribution Election.  If a Participant files only one Distribution Election for any Plan Year, it will be deemed to cover both Account A and Account B, unless the Participant otherwise designates.

Notwithstanding anything in this Plan or a Distribution Election contained to the contrary, no distribution hereunder shall be made earlier than the first day after the six-month anniversary of a Participant’s Termination of Employment (or the next regularly-scheduled payroll date thereafter), other than in the case of Termination of Employment because of death or Disability.  If the deductibility of such amounts by the Company would be limited by Section 162(m) of the Code (excluding for this purpose any amount governed by Section 162(m)(5) of the Code), such distribution shall occur on the later of (a) the first business day of 

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the calendar year after the calendar year in which the Participant’s employment terminated (or the next regularly-scheduled payroll date thereafter), or (b) the first day after the six-month anniversary of a Participant’s Termination of Employment (or the next regularly-scheduled payroll date thereafter).  If a Distribution Election would otherwise provide for an earlier distribution date for all or any portion of the Account balances, such amounts that would otherwise have been distributed at an earlier date shall be distributed in a lump sum on the first date on which distributions are allowable under this paragraph.

Notwithstanding anything in this Plan or a Distribution Election contained to the contrary, if Restricted Stock Units in a Participant’s Account B are not vested or transferable when a Termination of Employment occurs, and if they otherwise could vest or become transferable thereafter if the applicable restrictions are met, such Restricted Stock Units shall not be distributed to the Participant until the vesting or transferability restrictions are satisfied, and then shall be distributed over the remaining period of the Distribution Election, or if there is no remaining period, in a lump sum within thirty days after they vest or become transferable, subject to the restrictions in the preceding paragraph.

7.02.  Upon Death.

a.

Upon a Participant’s death, any balance remaining in his Accounts shall be paid by the Company in accordance with his Distribution Elections except that such payments shall be made to the Beneficiary or Beneficiaries specified by the Participant or, if none, to his surviving spouse or, if none, to his Estate.  Each Participant may designate a Beneficiary or Beneficiaries to receive the unpaid balance of his Accounts upon his death and may revoke or modify such designation at any time and from time to time by submitting to the Administrator a Beneficiary Designation substantially in the form attached hereto as Exhibit E or on such other beneficiary designation form as may be provided to the Participant by the Company from time to time.

b.

If a Participant’s death occurs prior to the payment of any amounts to him hereunder, other than payments for Unforeseeable Emergencies, the Participant’s Beneficiaries shall receive payments in accordance with Section 7.01 hereof.

c.

If a Participant designates multiple Beneficiaries as either primary or contingent Beneficiaries, and one of the contingent Beneficiaries has predeceased the Participant, the deceased Beneficiary’s share shall go to the Beneficiary’s Estate.  For example, if a Participant designates his spouse as the sole primary beneficiary and his three children as equal contingent beneficiaries, and if the spouse and one child predecease the Participant, the two children would each get one-third of the distributions from the Accounts and the predeceased child’s one-third share would go to his Estate.  The spouse’s Estate would be entitled to nothing.

d.

If a Beneficiary survives a Participant but dies prior to receipt of the entire amount in the Accounts due him, the Company shall make payments to the Estate of the Beneficiary in accordance with the Distribution Elections.  For example, if the Participant’s spouse is his primary Beneficiary and his three children are his contingent Beneficiaries, and if the spouse survives the Participant such that she is receiving distributions pursuant to the terms of this Plan, but dies prior to the receipt of all distributions to which she is entitled, any

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remaining distributions shall be paid to the spouse’s Estate and not to the contingent beneficiaries.

7.03  Unforeseeable Emergencies.  In the event of an Unforeseeable Emergency either before or after the commencement of payments hereunder, a Participant or Beneficiary may request in writing that all or any portion of the benefits due him under the Accounts be paid prior to the normal time for payment of such amount.  The Administrator shall, in its reasonable judgment, determine whether there is an Unforeseeable Emergency, and if so, shall distribute amounts which do not exceed the amounts reasonably necessary to satisfy the emergency need, plus amounts necessary to pay income taxes reasonably anticipated as a result of the distribution.  In determining the amounts, the Administrator shall take into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship), and by cancellation of the Participant’s Deferral Election as provided for in Section 4.04 hereof.  The Administrator shall use its reasonable discretion to determine when the payments shall be made and shall immediately reduce the balance in the recipient’s Accounts by the amount of such payment.

7.04.  Upon a Change in Control.  Notwithstanding anything contained herein or in the Distribution Elections, a Participant’s Accounts shall be distributed in a lump sum after the termination of the Participant’s employment, but only if such Termination of Employment occurs when, or within a year after, a Change in Control takes place.  Such distributions shall be made on the first day after the six-month anniversary of a Participant’s Termination of Employment (or the next regularly-scheduled payroll date thereafter), unless the Termination of Employment is due to death or Disability, in which event the distribution shall be made no later than forty-five days after Termination of Employment.  Notwithstanding the foregoing, if the deductibility of such amounts by the Company would be limited by Section 162(m) of the Code (excluding for this purpose any amount governed by Section 162(m)(5) of the Code), such distribution shall occur on the later of (a) the first business day of the calendar year after the calendar year in which the Participant’s employment terminated (or the next regularly-scheduled payroll date thereafter), or (b) the first day after the six-month anniversary of a Participant’s Termination of Employment (or the next regularly-scheduled payroll date thereafter).

ARTICLE VIII

Administration of the Plan

8.01.  Appointment of Separate Administrator.  The Committee shall, in writing, appoint a separate Administrator.  Any person including, but not limited to, an Employee, shall be eligible to serve as Administrator.  Two or more persons may form a committee to serve as Administrator.  Persons serving as Administrator may resign by written notice to the Committee and the Committee may appoint or remove such persons.  An Administrator consisting of more than one person shall act by a majority of its members at the time in office.  An Administrator consisting of more than one person may authorize any one or more of its members to execute any document or documents on behalf of the Administrator, in which event the Administrator shall notify the Committee of the member or members so designated.  The Committee shall accept and 

13

rely upon any document executed by such member or members as written revocation of such designation.  No person serving as Administrator shall vote or decide upon any matter relating solely to himself or solely to any of his rights or benefits pursuant to the Plan.

8.02.  Powers and Duties.  The Administrator shall administer the Plan in accordance with its terms.  The Administrator shall have full and complete authority and control with respect to Plan operations and administration unless the Administrator allocates and delegates such authority or control pursuant to the procedures set forth below.  Any decisions of the Administrator or its delegate shall be final and binding upon all persons dealing with the Plan or claiming any benefit under the Plan.  The Administrator shall have all powers which are necessary to manage and control Plan operations and administration including, but not limited to, the following:

a.

To employ such accountants, counsel or other persons as it deems necessary or desirable in connection with Plan administration.  The Company shall bear the costs of such services and other administrative expenses.

b.

To designate in writing persons other than the Administrator to perform any of its powers and duties hereunder.

c.

The discretionary authority to construe and interpret the Plan, including the power to construe disputed provisions.  

d.

To resolve all questions arising in the administration, interpretation and application of the Plan including, but not limited to, questions as to the eligibility or the right of any person to a benefit.

e.

To adopt such rules, regulations, forms and procedures from time to time as it deems advisable and appropriate in the proper administration of the Plan.

f.

To prescribe procedures to be followed by any person in applying for distributions pursuant to the Plan and to designate the forms or documents, evidence and such other information as the Administrator may reasonably deem necessary, desirable or convenient to support an application for such distribution.

8.03.  Records and Notices.  The Administrator shall maintain all books of accounts, records and other data as may be necessary for proper plan administration.

8.04.  Compensation and Expenses.  The expenses incurred by the Administrator in the proper administration of the Plan shall be paid by the Company.  An Administrator who is an Employee shall not receive any additional fee or compensation for services rendered as an Administrator.

8.05.  Limitation of Authority.  The Administrator shall not add to, subtract from or modify any of the terms of the Plan, change or add to any benefits prescribed by the Plan, or waive or fail to apply any Plan requirement for benefit eligibility.

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8.06  Claims Procedures.  A Participant shall be entitled to make a request for any benefits to which the Participant believes he or she may be entitled.  Any such request must be made in writing, and it should be made to the Company.

A request for benefits will be considered a claim, and it will be subject to a full and fair review.  If a Participant’s claim is wholly or partially denied, the Company shall furnish the Participant or the Participant’s beneficiary (the “Claimant”) or the Claimant’s authorized representative with a written or electronic notice of the denial within a reasonable period of time (generally, 90 days after the Company receives the claim or 180 days, if the Company determines that special circumstances require an extension of time for processing the claim and furnishes written notice of the extension to the Claimant or the Claimant’s authorized representative before the initial 90-day period ends), which sets forth, in an understandable manner, the following information:

a.

The specific reason(s) for the denial of the claim;

b.

Reference to the specific provisions of the Plan on which the denial is based;

c.

A description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why that material or information is necessary; and

d.

A description of the review procedures and the time limits applicable to those procedures, including a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following a denial on review.

The Company’s written extension notice must indicate the special circumstances requiring an extension of time for processing the claim and the date by which the Company expects to render its decision on the claim.

The Claimant or the Claimant’s authorized representative may appeal the Company’s decision denying the claim within 60 days after the Claimant or the Claimant’s authorized representative receives the notice denying the claim.  The Claimant or the Claimant’s authorized representative may submit to the Company written comments, documents, records and other information relating to the claim.  The Claimant or the Claimant’s authorized representative shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim.  The Company’s review of the claim and of its denial of the claim shall take into account all comments, documents, records and other information submitted by the Claimant or the Claimant’s authorized representative relating to the claim, without regard to whether these materials were submitted or considered during the initial decision on the claim.

The Company’s decision on the appeal of a denied claim shall be made within a reasonable period of time (generally 60 days after the Company receives the claim or 

15

120 days if the Company determines that special circumstances require an extension of time for processing the claim and furnishes written notice of the extension to the Claimant or the Claimant’s authorized representative before the initial 60-day period ends indicating the special circumstances requiring extension of time and the date by which the Company expects to render its decision on the claim).  The Company will furnish the Claimant or the Claimant’s authorized representative with written or electronic notice of its decision on appeal.  In the case of a decision on appeal upholding the Company’s initial denial of the claim, the Company’s notice of its decision on appeal shall set forth, in an understandable manner, the following information:

a.

The specific reason(s) for the decision on appeal; 

b.

Reference to the specific provisions in the Plan on which the decision on appeal is based; 

c.

A statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits; and

d.

A statement describing any voluntary appeal procedures (including voluntary arbitration or any other form of dispute resolution) offered and the Claimant’s right to obtain information sufficient to make an informed judgment about whether to submit a benefit dispute to the voluntary level of appeal, and a statement of the Claimant’s right to bring an action under ERISA Section 502(a).

ARTICLE IX

General Provisions

9.01.  Assignment and Rights of Participant.  No Participant or Beneficiary may sell, assign, transfer encumber or otherwise dispose of the right to receive payments hereunder.  A Participant’s rights to benefit payments under the Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of a Participant or a Beneficiary.  No Participant or any other person shall have any interest in any fund or in any specific asset or assets of the Company by reason of any amounts credited to any Account hereunder, nor any right to exercise any of the rights or privileges of a stockholder with respect to any securities hypothetically credited to a Participant’s Account B under the Plan, nor any right to receive any distributions under the Plan except as and to the extent expressly provided in the Plan.

9.02.  Employment Not Guaranteed by Plan.  The establishment of this Plan and the designation of an Employee as a Participant, shall not give any Participant the right to continued Employment or limit the right of the Company to dismiss or impose penalties upon the Participant or modify the terms of Employment of any Participant.

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9.03.  Termination and Amendment.  The Board of Directors of the Company may at any time terminate, suspend, alter or amend this Plan so long as such actions do not contravene the requirements of Section 409A of the Code.  No Participant or any other person shall have any right, title, interest or claim against the Company, its directors, officers or employees for any amounts, except that (i) the Participant shall be fully vested in his Accounts hereunder as of the date on which the Plan is terminated or suspended, except as to any unvested Restricted Stock Units, (ii) no amendment shall eliminate the crediting of an investment return on the sub-accounts of Account A prior to the complete distribution thereof or provide for a distribution method which accelerates the timing of distributions hereunder without the consent of a Participant and (iii) subsequent to a Change in Control, unless a majority of the holders of Account balances agree to the contrary, the Company or the Administrator may not alter (a) the choice of investments in the Investment Election as in effect immediately before the Change in Control and the frequency with which such elections may be made and (b) the payment options contained in the Distribution Elections as in effect immediately before the Change in Control.  Notwithstanding the foregoing, the Board of Directors of the Company may make any amendment necessary in order to avoid penalties under Section 409A of the Code, even if such amendments are detrimental to Participants.

9.04.  Notice.  Any and all notices, designations or reports provided for herein shall be in writing and delivered personally, by certified mail, return receipt requested, or by electronic means.  Physical deliveries shall be addressed, in the case of the Company, to the Corporate Secretary at 770 North Water Street, Milwaukee, Wisconsin  53202 and, in the case of a Participant or Beneficiary, to his home address as shown on the records of the Company.  The addresses referenced herein may be changed by a notice delivered in accordance with the requirement of this Section 9.04.

9.05.  Limitation on Liability.  In no event shall the Company, Administrator or any employee, officer or director of the Company incur any liability for any act or failure to act unless such act or failure to act constitutes a lack of good faith, willful misconduct or gross negligence with respect to the Plan or the trust established in connection with the Plan.

9.06.  Indemnification.  The Company shall indemnify the Administrator and any employee, officer or director of the Company against all liabilities arising by reason of any act or failure to act unless such act or failure to act is due to such person’s own gross negligence or willful misconduct or lack of good faith in the performance of his duties to the Plan or the trust established pursuant to the Plan.  Such indemnification shall include, but not be limited to, expenses reasonably incurred in the defense of any claim, including reasonable attorney and legal fees, and amounts paid in any settlement or compromise; provided, however, that indemnification shall not occur to the extent that it is not permitted by applicable law.  Indemnification shall not be deemed the exclusive remedy of any person entitled to indemnification pursuant to this section.  The indemnification provided hereunder shall continue as to a person who has ceased acting as a director, officer, member, agent or employee of the Administrator or as an officer, director or employee of the Company and such person’s rights shall inure to the benefit of his heirs and representatives.

17

9.07.  Headings.  All articles and section headings in this Plan are intended merely for convenience and shall in no way be deemed to modify or supplement the actual terms and provisions stated thereunder.

9.08.  Severability.  Any provision of this Plan prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof.  The illegal or invalid provisions shall be fully severable and this Plan shall be construed and enforced as if the illegal or invalid provisions had never been inserted in this Plan.

9.09.  Amendments to Conform Plan with Section 409A Guidance.  Subsequent to the initial approval of this Plan by the Committee and Board of Directors of the Company, the Department of the Treasury issued guidance under Section 409A of the Code (the “Guidance”).  The Guidance provides that the following previous deferrals are subject to the rules contained in Section 409A of the Code: (a) deferrals of 2004 incentives (given the Company’s discretion as to the amount of the incentives) and (b) Restricted Stock Units contained in the Company’s Amended and Restated Executive Deferred Compensation Plan as of January 15, 2004 (the “Original Plan”), that are not vested as of December 31, 2004.  The Company’s intention in adopting the Plan was that all deferred compensation subject to Section 409A would be contained in this Plan, and all deferred compensation not subject to Section 409A would be in the Original Plan.  Thus, notwithstanding anything contained to the contrary in the Original Plan, this Plan or any Participants elections in connection with the Original Plan or this Plan, (i) deferrals of 2004 incentives and (ii) Restricted Stock Units contained in the Original Plan which are not vested as of December 31, 2004 will be reflected in Accounts A and B, respectively, of this Plan, and the Distribution Election(s) that govern such deferral(s) will be those made for those respective Accounts for 2005 deferrals, unless the Company specifically allows the individual to make a different Distribution Election in accordance with the Guidance.  In addition, to the extent the Guidance, or any future guidance, would provide that deferrals prior to January 1, 2005 are subject to Section 409A of the Code, such deferrals shall be reflected in this Plan, and not the Original Plan.  The applicability of Distribution Elections and other matters to deferrals prior to January 1, 2005 which are reflected in this Plan shall be determined by the Administrator, in its sole discretion, so as to comply with the requirements of Section 409A of the Code.

9.10.  Compliance with Section 409A of the Code.  This Plan shall be interpreted and administered in compliance with the requirements of Section 409A of the Code and any guidance promulgated thereunder, including the final regulations.  Any ambiguous language shall be interpreted in a manner which makes it compliant with Section 409A of the Code and the applicable guidance.

18empagmt.htm

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into effective as of 20th day of September, 2010, by and between Duckwall-ALCO Stores, Inc., a Kansas corporation (the "Company"), and Wayne Peterson, an individual.

 

W I T N E S S E T H:

 

WHEREAS, the Company desires to employ Wayne Peterson as the Company's Senior Vice President and Chief Financial Officer (hereinafter the “Employee”) on the terms and conditions set forth herein;

 

NOW, THEREFORE, the Company and the Employee, each intending to be legally bound, hereby mutually covenant and agree as follows:

 

SECTION 1.

DEFINITIONS

 

The following terms used in this Agreement shall have the meanings set forth below:

 

"Base Salary" shall mean the amount set forth in Section 3(a).

 

"Board" shall mean the board of directors of the Company.

 

"Cause" shall mean (i) the Employee's material violation of any of Sections 2(c), 4(a),4(b) or 4(c) of this Agreement; (ii) the Employee engaging in conduct which is fraudulent or illegal with respect to the Company or any of its subsidiaries; (iii) the Employee’s gross negligence in the performance or nonperformance of his duties or responsibilities hereunder; (iv) the Employee's engagement in misconduct which is materially injurious or materially damaging to the Company or any of its subsidiaries or the reputation of the Company or any of its subsidiaries; (v) the Employee's conviction of, or plea of nolo contendere to, a felony; (vi) failure to cooperate with regulatory or legal proceedings; or (vii) material breach of Company policy; (viii) Employee’s unauthorized use or disclosure of confidential or proprietary information, or related materials, or the violation of any of the terms of the Company’s standard confidentiality policies and procedures; (ix) Employee’s violation of the Company’s policies on discrimination, harassment or substance abuse.

 

"Competitor" shall have the meaning set forth in Section 4(b).

 

"Confidential Information" shall have the meaning set forth in Section 4(c).

 

"Change of Control" shall mean a change in control of a nature as set forth in the Duckwall-ALCO Stores, Inc. Incentives Stock Option Plan of 2003, or as may be amended ("ISO Plan").

 

"Disability" shall mean Employee's permanent disability or incapacity as determined in accordance with the Company's disability insurance policy, if such a policy is then in effect, or if no such policy is then in effect, such permanent disability or incapacity shall be determined by the Company in its good faith judgment based upon inability to perform the essential functions of his position, with reasonable accommodation by the Company, for a period in excess of 180 days during any period of 365 calendar days. Employee’s employment will terminate automatically on Employee’s death.  If Employee dies before Employee’s employment starts, all of the provisions of this Agreement will also terminate and there will be no liability of any kind under this Agreement.

 

"Earned Obligations" shall mean, as of the date of Termination of Employment, the sum of (A) the Employee's aggregate Base Salary through such date to the extent not theretofore paid, plus (B) all vacation pay, expense reimbursements and other cash entitlements earned by the Employee hereunder as of such date to the extent not theretofore paid.

 

"Good Reason" means any of the following:

 

(a)        Any material diminution in Employee’s Salary, other than any such reduction agreed to by Employee in writing.

 

(b)        Any material diminution in Employee’s authority, duties or responsibilities.

 

(c)        Any other action or inaction that constitutes a material breach by the Company of this Agreement.

 

(d)        The Company has a Change in Control.

 

(e)        The Company’s placing Employee on paid leave for up to 90 consecutive days while it is determining whether there is a basis to terminate Employee’s employment for Cause will not constitute Good Reason.

 

(f)        To terminate Employee’s employment “for Good Reason”, Employee must give the Company a Termination Notice detailing why Employee believes a Good Reason event has occurred and such notice must be provided to the Company within ninety (90) days of the initial occurrence of such alleged Good Reason event.  The Company shall then have thirty (30) days after its receipt of written notice to cure the item cited in the written notice. “Good Reason” will not have formally occurred with respect to the event in question, unless and until the cure period has expired and the item remains uncured. At the end of the cure period, if the Company has not cured the basis for the Good Reason termination, Employee’s obligation to serve the Company, and the Company’s obligation to employ Employee under the terms of this Agreement, shall terminate simultaneously.

  

  

 

"Person" shall mean an individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, other entity or governmental or other agency or political subdivision thereof.

 

"Termination of Employment" shall mean (i) the Employee's death or Disability, (ii) termination by the Company of the Employee's employment for Cause or without Cause, (iii) resignation by the Employee from the employ of the Company, (iv) retirement of the Employee.

 

SECTION 2.

EMPLOYMENT AND TERM

 

(a) Employment. The Company hereby offers to employ the Employee as Employee of the Company, and the Employee hereby accepts such employment.

 

(b) Employment Period.  The Employee’s employment under this Agreement will begin on September 20, 2010 and will thereafter govern Employee’s employment with the Company until the effective date of termination of Employee’s employment, the “Employment Period”.  During the Employment Period, the Employee will be an “at-will” employee of the Company.

 

(c) Duties. The Employee shall have all powers, duties and responsibilities commensurate with his position as set forth in Section 2 hereof or as may be assigned by the Company from time to time (provided any such powers, duties and responsibilities assigned by the Company are commensurate with such position). The Employee shall devote substantially all of his business time, attention and energies to the performance of his duties hereunder. Notwithstanding the foregoing, nothing in this Agreement shall restrict the Employee from managing his personal investments, personal business affairs and other personal matters, or serving on civic or charitable boards or committees, provided that none of such activities interferes with the performance of his duties and responsibilities hereunder or conflicts or competes with the interests of the Company or its subsidiaries. The Employee shall not serve on the Board of Directors or similar governing body of any for-profit Person without the consent of the Company, which consents will not be unreasonably withheld.   The Employee shall report to the President of the Company.

 

SECTION 3.

COMPENSATION AND BENEFITS

 

(a) Base Salary. For services performed by the Employee for the Company and its subsidiaries pursuant to this Agreement, the Company shall pay the Employee an initial Base Salary of Two Hundred Forty Thousand Dollars ($240,000.00) per year, payable in accordance with the Company's regular payroll practices and subject to annual review by the Company to consider increases.

  (b)  Bonus.  The Employee shall be entitled to participate in any Bonus Plan that the Compensation Committee and Board of Directors of the Company may from time to time adopt.  Such Plans may be based upon the Company’s achievement of certain financial objectives tied to the enhancing of shareholder value and return on equity.  The Employee acknowledges that on the date of the execution of this Employment Agreement, the Compensation Committee and the Board of Directors of the Company have not adopted a Bonus Plan for Fiscal 2011.The Company, at its sole discretion may pay, or not pay any other bonus as it determines. Employee agrees to reimburse the Company and/or have the Company offset any payments due to Employee to the extent that any bonuses are paid on financial information which is later determined to be materially overstated and results in any financial restatement, which would have lessened the amount paid to Employee.

 

(c) Additional Benefits. The Employee shall be eligible for such fringe benefits, if any, by way of insurance, hospitalization, vacations and bonus programs normally provided to other members of the executive management of the Company generally and such additional benefits as may be from time to time agreed upon in writing between the Employee and the Company.

 

(d) Business Expenses.  Employee will be reimbursed for all reasonable business expenses incurred by Employee in performing Employee’s responsibilities under the Employment Agreement in accordance with Company policies.  It is understood as CFO, those expenses necessary to provide Employee with 24/7 connection and access to perform Employee’s duties from home will be included as reasonable business expenses.  If any business expense is taxable, reimbursement will not be paid later than December 31 of the year which the expense is incurred.

 

 (e)  Relocation Expenses.  The Company will pay an amount not to exceed Fifty Thousand and NO/100 Dollars ($50,000.00) in an aggregate amount for the following relocation expenses (collectively “Relocation Expenses”):

 

       (1) Moving expenses for moving Employee’s furniture and personal possessions from Roanoke, Texas to Kansas.

 

(2) Necessary hotel, rental car or other similar expenses as Employee deems necessary for Employee and Employee’s spouse to secure permanent housing.  Any amounts Employee deems necessary for temporary housing

 

(3)  Real estate commissions and closing costs associated with selling Employee’s residence located in Roanoke, Texas.

 

(4)  The Relocation Expenses shall all be grossed up for necessary taxes.  Employee shall be reimbursed the Relocation Expenses pursuant to the Company’s normal reimbursement policies.  Employee may use the Relocation Expenses in any combination of the types and amounts of expenses set forth herein. Employee acknowledges and agrees that on the Termination of Employment with the Company, any unpaid or not yet incurred Relocation Expenses shall be forfeited by Employee and not be owed by the Company.

 

(f)  Subject to the approval and authorization by the Compensation Committee of the Board of Directors of the Company, Employee will be granted options to purchase 25,000 shares of the company’s common stock as provided in the Company’s 2003 Incentive Stock Option Plan (as amended).  The exercise price will be the closing sale price of the Company’s Common Stock on the NASDAQ Global Market on the date of the grant.

(g)  Employee will be entitled to four (4) weeks of paid annual vacation during Employee’s employment.

 

  

  

  

 

	
  

	
SECTION 4.

	
  

	
COVENANTS

 

 (a) Non-Interference. For a period ending on the second anniversary of the Termination of Employment of the Employee, the Employee agrees to refrain from, directly, indirectly or as an agent on behalf of or in conjunction with any Person, (i) soliciting or encouraging any Employee of the Company or its subsidiaries who is employed in an executive, managerial, administrative or professional capacity or who possesses Confidential Information (as defined below), to leave the employment of the Company or its subsidiaries or (ii) soliciting any customer of the Company or any of its subsidiaries on behalf of any Competitor.

 

(b) Noncompetition. For a period ending on the second anniversary of the Termination of Employment of the Employee, the Employee will not, either directly or indirectly, own, manage, operate, join or control or participate (or serve as a consultant or in a similar position) in the ownership, management operation or control of, any business, entity, firm, partnership, corporation or other Person, whether, private, governmental or quasi-governmental ("Competitor"), other than the Company and its subsidiaries, which is engaged, directly or indirectly, in any state where the Company has a retail establishment, including (i) the business of the development, design, production, supply, sale or distribution of small variety or discount retail stores or (ii) any other business engaged in or being developed by the Company or its subsidiaries in which the Employee has played a material role in the acquisition, development or management of such business; provided, however, that the Employee will not be deemed to engage in any of the businesses of any publicly traded corporation solely by reason of his ownership of less than 2% of the outstanding stock of such Person or by serving as a director on the board of directors of a customer or supplier of the Company at the request of the Company.

 

(c) Nondisclosure of Confidential Information.

 

(l) Company Information. In the performance of his duties, the Employee has

previously had, and may be expected in the future to have, access to Company proprietary information, technical data, trade secrets or know-how, including, but not limited to, research, product plans, products, methods, strategies, services, customer lists, prospective customer lists, customer records, telephone lists and all other information with respect to customers (including, but not limited to, customers of the Company on whom he called or with whom he became acquainted during the term of his employment), documents, notes, working papers, records, systems, contracts, agreements, market data and related information, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering information, hardware configuration information, marketing plans, finances, pricing and credit documents and policies, service development techniques or plans, business acquisition plans, new personnel acquisition plans or other business information presently owned or at any time hereafter developed by the Company or its subsidiaries, agents or consultants or used presently or at any time hereafter in the course of the business of the Company and its subsidiaries, that are not otherwise part of the public domain (collectively, the "Company Information"). All such Company Information is considered secret and has been and/or will be disclosed to the Employee in confidence, and the Employee acknowledges that, as a consequence of his employment and position with the Company and its subsidiaries, the Employee will have access to and become acquainted with Company Information. Except in the performance of his duties to the Company or its subsidiaries, the Employee shall not, during the Term and at all times thereafter, directly or indirectly for any reason whatsoever, disclose or use any such Company Information. All records, files, drawings, documents, equipment and other tangible items, wherever located, relating in any way to or containing Company Information, which the Employee has prepared, used or encountered or shall in the future prepare, use or encounter, shall be and remain the Company's sole and exclusive property and shall be included in the Company Information. Upon termination of this Agreement, or whenever requested by the Company, the Employee shall promptly deliver to the Company any and all of the Company Information and copies thereof, not previously delivered to the Company or its subsidiaries, that may be in the possession or under the control of the Employee. The foregoing restrictions shall not apply to the use, divulgence, disclosure or grant of access to Confidential Information to the extent, but only to the extent, (i) expressly permitted or required pursuant to any other written agreement between or among the Employee and the Company (and/or any of its subsidiaries), (ii) such Company Information which has become publicly known and made generally available through no wrongful act of the Employee or of others who were under confidentiality obligations as to the item or items involved, (iii) the Employee's general skills and education, and know-how of broad application known to the Employee or independently developed by the Employee prior to the Employee's employment by the Company or (iv) the Employee is required to disclose Company Information by or to any court of competent jurisdiction or any governmental or quasi-governmental agency, authority or instrumentality of competent jurisdiction, provided, that the Employee shall, prior to any such disclosure, immediately notify the Company of such requirement and provided further, that the Company shall have the right, at its expense, to object to such disclosures and to seek confidential treatment of any Company Information to be so disclosed on such terms as it shall determine.

 

 

(2) Third Party Information.  In the performance of his duties, the Employee has previously had, and may be expected in the future to have, access to confidential or proprietary information with respect to third parties which is subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes (the "Third Party Information"). Except in the performance of his duties to the Company or its subsidiaries, the Employee shall not, during the Term and at all times thereafter, directly or indirectly for any reason whatsoever, disclose or use any such Third Party Information.

 

(d) Enforcement.

 

(1) The Employee acknowledges that violation of any of the covenants and agreements set forth in this Section 4 would cause the Company or any of its subsidiaries irreparable damage for which the Company or any of its subsidiaries cannot be reasonably compensated in damages in an action at law, and therefore in the event of any breach by the Employee of this Section 4, the Company or its subsidiaries shall be entitled to make application to a court of competent jurisdiction for equitable relief by way of injunction or otherwise (without being required to post a bond). Employee agrees to pay all of the Company's court costs and attorneys' fees incurred in enforcing its rights under this Section 4 and all other obligations of Employee under this Employment Agreement. This provision shall not, however, be construed as a waiver of any of the rights which the Company or its subsidiaries may have for damages under this Agreement or otherwise, and all of the Company's and its subsidiaries' rights and remedies shall be unrestricted. This Section 4 shall survive termination of this Agreement or Termination of Employment for any reason whatsoever.

 

(2) If any of the provisions of this Agreement shall otherwise contravene or be invalid under the laws of any state or other jurisdiction where it is applicable but for such contravention or invalidity, such contravention or invalidity shall not invalidate all of the provisions of this Agreement, but rather the Agreement shall be reformed and construed, insofar as the laws of that state or jurisdiction are concerned, as not containing the provision or provisions, but only to the extent that they are contravening or are invalid under the laws of that state or jurisdiction, and the rights and obligations created hereby shall be reformed and construed and enforced accordingly. In particular, if any of the covenants or agreements set forth in Section 4, or any part thereof, is held to be unenforceable because of the duration of such provision or the area covered thereby, or otherwise, the parties hereby expressly agree that the court making such determination shall have the power to reduce the duration and/or the areas of such provision or otherwise limit any such provision, and, in its reduced form, such provision shall then be enforceable. The parties intend that each covenant set forth in this Section 4 shall be deemed to be a series of separate covenants, one for each and every county and political subdivision to which it is applicable.

 

(3) The Employee understands that the provisions of this Section 4 may limit his ability to earn a livelihood in a business similar to the business of the Company and its subsidiaries but nevertheless agrees and hereby acknowledges that such provisions do not impose a greater restraint than is necessary to protect the goodwill or other business interests of the Company and its subsidiaries and the consideration provided under this Agreement, including, without limitation, any amounts or benefits provided hereunder, is sufficient to compensate the Employee for the restrictions contained in this Section 4. In consideration of the foregoing and in light of the Employee's education, skills and abilities, the Employee agrees that he will not assert, and it should not be considered, that any provisions of this Section 4 prevented him from earning a living or otherwise are void, voidable or unenforceable or should be voided or held unenforceable.

(4)  Each of the covenants of this Section 4 is given by the Employee as part of the consideration for this Agreement and as an inducement to the Company to enter into this Agreement and accept the obligations hereunder.

  

  

  

 

SECTION 5.

TERMINATIONS

 

(a) Termination of Agreement. At the Termination of Employment, Sections 4(c), 4(d) and 5(c) will survive, and Sections 4(a) and 4(b) will survive only to the extent set forth in this Section 5.

 

            (b) Procedures Applicable to Termination of Employment. The Employee may resign upon notice to the Company. The Employee must, however, give at least thirty (30) days advance notice of his resignation. The Company may notify the Employee that his employment is terminated, with or without Cause, or for Disability and in such case the date of Termination of Employment will be the date such notice is given.

 

(c) Obligations of the Company and the Employee Upon Termination of Employment.

 

(1) Termination In the Event of Death or Disability.

 

(A)           In the event of the Employee's death or Disability, the Company shall pay to the Employee or the Employee's heirs, estate or legal representatives, as the case may be, the following:

 

(i) all Earned Obligations in a lump sum within thirty (30) days after the date of Termination of Employment; and

 

(ii) any benefits earned by the Employee as of the date of Termination of Employment under all qualified and non qualified retirement, pension, profit sharing and similar plans of the Company to such extent, in such manner and at such time as are provided under the terms of such plans and arrangements.

 

(B)           In the event of Termination of Employment as a result of the Employee's Disability, the Company shall keep in force existing health and dental benefits for the Employee and his dependents for a period of twelve (12) months from the date of Termination of Employment on the basis in effect at the time of such Termination of Employment.

 

(C)           In the event of Termination of Employment as a result of the Employee's Disability, the Employee agrees that the covenants made by the Employee set forth in Sections 4(a) and 4(b) of this Agreement will remain in effect for the period specified therein.

 

(2) Termination Without Cause or for Good Reason.

 

(A)           In the event that the Company terminates the Employee's employment without Cause or the Employee terminates his employment for Good Reason (but excluding Termination of Employment by reason of the Employee's death or Disability), the Company shall pay to the Employee the following:

 

(iii) all Earned Obligations in a lump sum within thirty (30) days after the date of Termination of Employment;

 

(iv) any benefits earned by the Employee as of the date of Termination of Employment under all qualified and nonqualified retirement, pension, profit sharing and similar plans of  the Company to such extent, in such manner and at such time as are provided under the terms of such plans and arrangements;

 

(v) the Company shall pay to the Employee, subject to applicable withholding, one additional year of Base Salary paid in accordance with the Company's regular payroll practices; and

 

(vi) the Company shall continue all benefits coverage of the Employee and his dependents provided under the Company's benefit plans or policies (or under other benefit plans or policies that provide substantially equivalent coverage) for a period of ninety (90) days following Termination of Employment.

 

(B)           If the Employee obtains other employment that would cause Employee to violate Section 4(b) were it then in effect during the period the Company remains obligated to compensate Employee as set forth in this Section 5, the Employee shall promptly notify the Company thereof and of the aggregate gross compensation payable to Employee in respect of such other employment, and the Company shall have the right to deduct, dollar for dollar, from the amount payable by the Company to Employee the gross aggregate amount of compensation Employee receives from such other employment.

 

(C)           The Employee agrees that the covenants made by the Employee set forth in Sections 4(a) and 4(b) of this Agreement will remain in effect for the period specified therein.

 

(3) Other Terminations.

 

(A)           In the event of Termination of Employment for any other reason

(including a termination for Cause or resignation), the Company shall pay to the Employee the following:

 

(vii)           all Earned Obligations in a lump sum within thirty (30) days after the date of Termination of Employment; and

 

(viii) any benefits earned by the Employee as of the date of Termination of Employment under all qualified and nonqualified retirement, pension, profit sharing and similar plans of the Company to such extent, in such manner and at such time as are provided under the terms of such plans and arrangements.

 

(B)           The Employee agrees that the covenants made by the Employee set forth in Sections 4(a) and 4(b) of this Agreement will remain in effect for the periods specified therein.

 

(4) Exclusivity. The amounts payable to the Employee pursuant to Sections 5(c), as the case may be, shall be the Employee's sole remedy in the event of the Termination of Employment of the Employee, and the Employee waives any and all rights to pursue any other remedy at law or in equity; provided, however, that this shall not constitute a waiver of any rights provided under any federal, state or local laws or regulations relating to discrimination in employment and provided, further, that nothing in this Section 5(c) or elsewhere in this Agreement is intended to limit the Employee's rights under Company Plans or applicable law which by their terms survive the applicable Termination of Employment.

  

  

  

 

SECTION 6.

EMPLOYEE REPRESENTATIONS

(a)  Employee represents that he is free to enter into this Agreement and that he has no outstanding agreements which would prohibit him from the execution of this Agreement and carrying out the responsibilities delegated herein.

 

SECTION 7.

MISCELLANEOUS

 

(a) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the heirs and representatives of the Employee and the successors and assigns of the Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of assets or stock, liquidation, or otherwise), by agreement in form and substance reasonably satisfactory to the Employee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform this Agreement if no such succession had taken place. Regardless of whether such agreement is executed, this Agreement shall be binding upon any successor of the Company in accordance with the operation of law, and such successor shall be deemed to be the "Company" for purposes of this Agreement.

 

(b) Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed within the continental United States by first class certified mail, return receipt requested, postage prepaid, addressed as follows:

 

	  	
(1) if to the President or the Company, to:

 

Duckwall-ALCO Stores, Inc.

401 Cottage Street

Abilene, KS  67410

Attention:  President

 

	  	
(2) if to the Employee to:

 

Wayne Peterson

Duckwall-Alco Stores, Inc.

401 Cottage Street

Abilene, KS  67410

 

 

Any such address may be changed by written notice sent to the other party at the last recorded address of that party.

 

(c) Tax Withholding. The Company shall provide for the withholding of any taxes required to be withheld under federal, state and local law (other than the employer's portion of such taxes) with respect to any payment in cash and/or other property made by or on behalf of the Company to or for the benefit of the Employee under this Agreement or otherwise. The Company may, at its option: (i) withhold such taxes from any cash payments owing from the Company to the Employee or (ii) make other satisfactory arrangements with the Employee to satisfy such withholding obligations.

 

(d)  No Assignment; No Third-Party Beneficiaries.  Except as otherwise expressly provided in Section 6.1 herein, this Agreement is not assignable by any party, and no payment to be made hereunder shall be subject to alienation, sale, transfer, assignment, pledge, encumbrance or other charge.  No person shall be, or deemed to be, a third-party beneficiary of this Agreement.

 

(e) Execution in Counterparts.  This Agreement may be executed by the parties hereto in one or more counterparts, each of which shall be deemed to be an original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on anyone counterpart.

 

(f)  Governing Law: Jurisdiction:  The validity of this Agreement and the interpretation and performance of all its terms shall be governed by and construed in accordance with the laws of the State of Kansas, without regard to the choice of law rules thereof.  Each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any federal court sitting the District of Kansas in the event any dispute that the parties fail to resolve arises out of this Agreement, (b) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (c) agrees that it shall not bring any action relating to this Agreement in any court other than courts set forth above.  In any such proceeding, the parties agree to accept service of process by mail at the addresses herein provided for notice.

 

(g)  Headings.  The headings in this Agreement are for convenience of reference only and shall not be construed as part of this Agreement or to limit or otherwise affect the meaning hereof.

 

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written.

 

	  	
DUCKWALL-ALCO STORES, INC.

 

By:  _______________________________

        Richard E. Wilson, CEO/President

 

 

       _______________________________

       Wayne Peterson

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