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DUCKWALL ALCO STORES, INC.
NON-QUALIFIED
STOCK OPTION PLAN
FOR NON-MANAGEMENT DIRECTORS
May 23, 2006
DUCKWALL ALCO STORES, INC.
NON-QUALIFIED STOCK OPTION PLAN FOR
DIRECTORS
TABLE OF CONTENTS
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Article I. Establishment, Purpose and Effective Date
of Plan
1.1 Establishment
1.2 Purpose
1.3 Effective
Date
Article II. Definitions
2.1 Definitions
Article III. Eligibility and
Participation
Article IV. Administration
Article V. Stock Subject To Plan
5.1 Number
5.2 Unused
Stock
5.3 Adjustment
in Capitalization
Article VI. Duration of Plan
Article VII. Terms of Options
7.1 Grant
of Options
7.2 Stock
Option Agreement
7.3 Exercise
Price
7.4 Duration
of Options
7.5 Vesting
of Options
7.6 Nontransferability
of Options
7.7 Restriction
on Stock Transferability
7.8 Exercise
of Options
7.9 Purchase
for Investment
Article VIII. Cessation As Director
Article IX. Amendment, Modification and Termination
of Plan
Article X. Tax Withholding
Article XI. Unfunded Plan
Article XII. No Right To Remain A
Director
Article XIII. Requirement of Law
13.1 Requirement of
Law
13.2 Governing
Law
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DUCKWALL ALCO STORES, INC.
NON-QUALIFIED STOCK OPTION PLAN FOR
NON-MANAGEMENT DIRECTORS
Article I.
Establishment, Purpose and Effective Date of
Plan
Duckwall ALCO Stores, Inc., a Kansas corporation,
hereby establishes a stock option plan for members of its Board of
Directors, which shall be known as the Duckwall ALCO Stores, Inc.
Non-Qualified Stock Option Plan for Non-Management Directors (the
"Plan").
The purpose of the Plan is to aid the Company in
competing with other companies for the services of new Directors,
to induce Directors to remain as Directors, to focus Directors on
the long-term Company objectives, to reward and recognize Directors
for their contributions to the success of the Company and to
motivate Directors to acquire an interest in the
Company.
The "Effective Date" of the Plan shall be the date
of approval by the holders of a majority of the shares of Stock
entitled to vote represented in person or by proxy at a meeting
duly called after the adoption of the Plan by the Board.
Article II.
Definitions
Whenever used herein, the masculine pronoun shall be
deemed to include the feminine, the singular to include the plural,
unless the context clearly indicates otherwise, and the following
capitalized words and phrases are used herein with the meaning
thereafter ascribed:
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a.
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"Annual Options" means options granted on an ongoing
annual basis.
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b. "Beneficiary"
means the person or persons designated by a Participant to exercise
an Option in the event of the Participant's death while employed
by, or as a Director of, the Company, or in the absence of such
designation, the legal representative of the Participant's
estate.
c. "Board"
or "Directors" means the non-management members of the Board of
Directors of the Company.
d. A
"Change in Control" shall be as defined in the Incentive Stock
Option Plan of 2003, as may be amended.
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e.
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"Code" means the Internal Revenue Code of 1986, as
amended.
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f.
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"Committee" means the Compensation Committee of the
Board.
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g.
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"Company" means Duckwall ALCO Stores, Inc., a Kansas
corporation.
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h. "Disability"
means the inability of an individual to fulfill his
responsibilities as a Director as a result of mental or physical
incapacity.
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i.
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"Effective Date" means the date the Plan is approved
by the stockholders.
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j. "Exercise
Price" means, with respect to any Option, a value as specified in
Section 7.3, determined as of the date of grant of such
Option.
k. "Fair
Market Value" means, for any particular date, (i) for any period
during which the Stock shall not be listed for trading on a
national securities exchange, but when prices for the Stock shall
be reported by the National Market of the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or the
Over-the-Counter Bulletin Board Market ("OTCBB"), the last
transaction price per share as quoted by the National Market of
NASDAQ or the OTCBB, (ii) for any period during which the Stock
shall not be listed for trading on a national securities exchange
or its price reported by the National Market of NASDAQ or the
OTCBB, but when prices for the Stock shall be reported by NASDAQ,
the closing bid price as reported by NASDAQ, (iii) for any period
during which the Stock shall be listed for trading on a national
securities exchange, the closing price per share of Stock on such
exchange as of the close of such trading day, or (iv) the market
price per share of Stock as determined by a qualified valuation
expert selected by the Board in the event neither (i), (ii), or
(iii) above shall be applicable. If the Fair Market Value is to be
determined as of a day when the securities markets are not open,
the Fair Market Value on that day shall be the Fair Market Value on
the next succeeding day when the markets are open.
l. "Initial
Options" means Options granted to Directors on the Option Date
following the Effective Date or in the initial year that an
individual becomes a Director.
m. "Non-Qualified
Stock Option" means a Stock Option, other than an Option qualifying
as an Incentive Stock Option, as defined in Code Section
422.
n. "Option"
means the contractual right granted to a Participant to purchase a
share of Stock under the Plan at a stated price for a specified
period of time.
o. "Option
Date" means the date or dates established by the Committee after
the approval of the Plan by the stockholders.
p. "Participant"
means a Director who has been granted Options under the
Plan.
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q. "Service"
means the period of time that an individual serves as a member of
the Board and includes any service prior to the adoption of the
Plan as well as service as a consultant to the Board prior to
election to the Board.
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r.
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"Stock" means the Company's Common Stock.
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s. "Stock
Option Agreement" means an agreement between the Participant and
the Company evidencing the grant and terms of an Option.
t. "Vested"
means that an Option is nonforfeitable and exercisable with regard
to a designated number of shares of Stock as specified in Section
7.5.
Article III.
Eligibility and Participation
All members of the Board, who are not otherwise
officers or employees of the Company, shall be eligible to
participate in the Plan on the Effective Date.
Article IV.
Administration
The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action
thereof, is authorized to interpret the Plan, to prescribe, amend,
and rescind rules and regulations relating to the Plan, to provide
for conditions and assurances deemed necessary or advisable to
protect the interests of the Company, and to make all other
determinations necessary or advisable for the administration of the
Plan, but only to the extent not
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