S-8

As filed with the Securities and Exchange Commission on March 18, 2010

 Registration No. ______________

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________

FORM S-8

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

___________

DUCKWALL-ALCO STORES, INC.

(Exact name of registrant as specified in its charter)

___________

Kansas	48-0201080
(State of Incorporation)	(I.R.S. Employer Identification No.)

401 Cottage Street

Abilene, Kansas 67410

(785) 263-3350

(Address and telephone number of principal executive offices)

____________

DUCKWALL-ALCO STORES, INC.

NON-QUALIFIED

STOCK OPTION AGREEMENT

AND

DUCKWALL-ALCO STORES, INC.

INCENTIVE STOCK OPTION PLAN

(Full Title of Plans)

___________

Richard E. Wilson

Duckwall-ALCO Stores, Inc.

401 Cottage Street

Abilene, Kansas 67410

(785) 263-3350

(Name, address and telephone number of registrant’s agent for service)

___________

with copies to:

Brett C. Bogan, Esq.

Lathrop & Gage LLP

10851 Mastin Boulevard, Suite 1000

Overland Park, Kansas 66210

(913) 451-5100

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer,"  ‘accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer x

Non-accelerated filer o   (Do not check if smaller reporting company)

Smaller reporting company o

CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities To Be Registered(1)	Amount To Be Registered(2)	Proposed Maximum Offering Price Per Share	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee
Common Stock issuable under the Non-Qualified Stock Option Agreement	10,000	$14.56(3)	$145,600(3)	$10.38

CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities To Be Registered(1)	Amount To Be Registered(2)	Proposed Maximum Offering Price Per Share	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee
Common Stock issuable under the Incentive Stock Option Plan	500,000	$14.56(3)	$7,280,000(3)	$519.07(4)

(1) Includes associated rights (the “Rights”) to purchase the registrant’s common stock.  Until the occurrence of certain prescribed events, none of which has occurred, the Rights are not exercisable.

(2) Pursuant to Rule 416(a) under the Securities Act of 1933, as amended, (the “Securities Act”) this registration statement also covers any additional shares of the registrant’s common stock that may become issuable under stock options granted by the registrant under the Duckwall-ALCO Stores, Inc. Non-Qualified Stock Option Agreement or the Duckwall-ALCO Stores, Inc. Incentive Stock Option Plan (the “Plans”) by reason of any stock split, stock dividend, recapitalization or similar transaction effective without the registrant’s receipt of consideration that results in an increase in the number of the registrant’s outstanding shares of common stock.

(3) Pursuant to Rule 457(c) and (h) under the Act, the proposed maximum offering price per share and the proposed maximum aggregate offering price are estimated solely for purposes of calculating the registration fee, and are based upon the average of the closing price of the registrant’s common stock as reported on the NASDAQ National Market on March 12, 2010, which was $14.56 per share.

(4) The total registration fee for both Plans registered under this Form S-8 is $529.45.

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3.  Incorporation of Documents by Reference.

The following documents are incorporated by reference in this registration statement: (i) the latest annual report of Duckwall-ALCO Stores, Inc. (the "Registrant") filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); (ii) all other reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by the annual report referred to in clause (i) above (other than any Current Reports on Form 8-K containing Regulation FD disclosure furnished under Item 7.01 (or its successor) or Results of Operations and Financial Condition disclosure furnished under Item 2.02 (or its successor) and exhibits relating to such disclosures, unless otherwise specifically stated in such Current Reports on Form 8-K); and (iii) the description of the Registrant's common stock set forth in the Registrant's Registration Statement on Form S-1 relating thereto, including any amendment or report filed for the purpose of updating such description.  All documents subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14, and 15(d) of the Exchange Act, prior to the filing of a post-effective amendment which indicates all securities offered have been sold or which deregisters all securities then remaining unsold (other than any Current Reports on Form 8-K containing Regulation FD disclosure furnished under Item 7.01 (or its successor) or Results of Operations and Financial Condition disclosure furnished under Item 2.02 (or its successor) and exhibits relating to such disclosures, unless otherwise specifically stated in such Current Reports on Form 8-K), shall be deemed to be incorporated by reference in this registration statement and to be a part hereof from the date of filing of such documents.

Item 4.  Description of Securities.

Not applicable.

Item 5.  Interests of Named Experts and Counsel.

Not applicable.

Item 6.  Indemnification of Directors and Officers.

Section 17-6002 (a)(8) of the Kansas General Corporation Code provides that a Kansas corporation may include in its articles of incorporation a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 17-6424 of the Kansas General Corporation Code (relating to liability for unauthorized acquisitions or redemptions of, or dividends on, capital stock); or (iv) for any transaction from which the director derived an improper personal benefit.  The Registrant's restated and amended certificate of incorporation contains a provision, as permitted by Section 17-6002 of the Kansas General Corporation Code, that eliminates the Registrant's and its stockholders' rights (through stockholders' derivative suits on behalf of the Registrant) to recover monetary damages against a director for breach of the fiduciary duty of care as a director except in the situations described in clauses (i) through (iv) above.  The limitations described above, however, do not affect the ability of the Registrant or its stockholders to seek non-monetary based remedies, such as an injunction or rescission, against a director for breach of his fiduciary duty nor would such limitations limit liability under the federal securities laws.

Under Section 17-6303 of the Kansas General Corporation Code, a Kansas corporation has the power, under specified circumstances to indemnify its directors, officers, employees and agents in connection with actions, suits or proceedings brought against them by a third party or in the right of the corporation, because they were or are directors, officers, employees or agents of the Registrant, against expenses, judgments and other amounts incurred in any such action, suit or proceeding.  The Registrant's bylaws provide that each person who is or was a director or officer of the Registrant or is or was serving at the request of the Registrant as a director or officer of another corporation (including the heirs, executors, administrators and estate of such person) will be indemnified by the Registrant to the full extent permitted or authorized by the laws of the State of Kansas, as now in effect and as hereafter amended, against any expenses, judgments, fines and amounts paid in settlement (including attorneys' fees) actually and reasonably incurred by such person in his capacity as or arising out of his status as a director or officer of the Registrant or, if serving at the request of the Registrant, as a director or officer of another corporation.  The indemnification provided by the Registrant's bylaws is not exclusive of any other rights to which those indemnified may be entitled under the Registrant’s articles of incorporation, under any other of the Registrant’s bylaws or under any agreement, vote of stockholders or disinterested directors or otherwise, and will not limit in any way any right which the Registrant may have to provide different or further indemnification benefits with the respect to the same or different persons or classes of persons.

The Registrant’s bylaws further provide that no person will be liable to the Registrant for any loss, damage, liability or expense suffered by the Registrant due to any action taken or omitted to be taken by the person as a director or officer of the Registrant or of any other corporation which he serves as a director or officer at the request of the Registrant, if such person (i) exercised the same degree of care and skill as a prudent person would have exercised under the circumstances in the conduct of the person’s own affairs, or (ii) took or omitted to take such action in reliance upon advice of counsel for the Registrant, or for such other corporation, or upon statements made or information furnished by directors, officers, employees or agents of the Registrant, or of such other corporation, which the person had no reasonable grounds to disbelieve.

The Registrant has purchased directors’ and officers’ liability insurance coverage.

Item 7.  Exemption from Registration Claimed.

Not applicable.

Item 8.  Exhibits.

4.1	Amended and Restated Articles of Incorporation (filed as Exhibit 3(a) to Duckwall-ALCO Stores, Inc.’s Registration Statement on Form S-1 and hereby incorporated herein by reference).
4.2	Certificate of Amendment to the Articles of Incorporation (filed as Exhibit 3(b) to Duckwall-ALCO Stores, Inc.’s Annual Report on Form 10-K for the fiscal year ended January 29, 1995, and incorporated herein by reference) (filed as Exhibit 3(b) to Duckwall-ALCO Stores, Inc.’s Annual Report on Form 10-K for the fiscal year ended January 29, 1995, and incorporated herein by reference).
4.3	Bylaws (filed as Exhibit 3(b) to Duckwall-ALCO Stores, Inc.’s Registration Statement on Form S-1 and hereby incorporated herein by reference).
4.4	Specimen Common Stock Certificates (filed as Exhibit 4.1 to Duckwall-ALCO Stores, Inc.’s Registration Statement on Form S-1 and incorporated herein by reference).
*4.5	Amended and Restated Bylaws of Duckwall-ALCO Stores, Inc. dated June 6, 2007
*4.6	Duckwall-ALCO Stores, Inc. Non-Qualified Stock Option Agreement.
*4.7	Duckwall-ALCO Stores, Inc. Incentive Stock Option Plan.
*5.1	Opinion of Lathrop & Gage LLP.
*23.1	Consent of Independent Registered Public Accounting Firm.
*23.2	Consent of Counsel (included in the opinion filed as Exhibit 5.1 to this Registration Statement).
*24.1	Powers of Attorney executed by officers and directors of Duckwall-ALCO Stores, Inc., who have signed the Registration Statement.

*           Filed Herewith

Item 9.  Undertakings.

(a)           The undersigned Registrant undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

(i)  to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

(iii)  to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement.

Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this Registration Statement;

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(b)           The undersigned Registrant undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in this Registration Statement shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c)           Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.  In the event that a claim for indemnification (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Abilene, Kansas, on the 18th day of March, 2010.

DUCKWALL-ALCO STORES, INC.

By:          /s/ Richard E. Wilson

Name:  Richard E. Wilson

Title:  President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:

/s/ Donny R. Johnson              Donny R. Johnson Executive Vice President – Chief Financial Officer (Principal Financial and Accounting Officer)	March 18, 2010
/s/ Royce Winsten                   Royce Winsten Director	March 18, 2010
/s/ Raymond A.D. French         Raymond A.D. French Director	March 18, 2010
/s/ Lolan C. Mackey               Lolan C. Mackey Director	March 18, 2010
/s/ Dennis E. Logue                Dennis E. Logue Director	March 18, 2010

Brett C. Bogan, by signing his name hereto, does hereby sign this Registration Statement on behalf of each of the above referenced directors and officers of Duckwall-ALCO Stores, Inc. pursuant to powers of attorney executed by each of such persons and filed herewith as Exhibit 24.1.

*By     /s/ Brett C. Bogan                           Brett C. Bogan             Corporate Secretary March 18, 2010

EXHIBIT INDEX

4.1	Amended and Restated Articles of Incorporation (filed as Exhibit 3(a) to Duckwall-ALCO Stores, Inc.’s Registration Statement on Form S-1 and hereby incorporated herein by reference).
4.2	Certificate of Amendment to the Articles of Incorporation (filed as Exhibit 3(b) to Duckwall-ALCO Stores, Inc.’s Annual Report on Form 10-K for the fiscal year ended January 29, 1995, and incorporated herein by reference) (filed as Exhibit 3(b) to Duckwall-ALCO Stores, Inc.’s Annual Report on Form 10-K for the fiscal year ended January 29, 1995, and incorporated herein by reference).
4.3	Bylaws (filed as Exhibit 3(b) to Duckwall-ALCO Stores, Inc.’s Registration Statement on Form S-1 and hereby incorporated herein by reference).
4.4	Specimen Common Stock Certificates (filed as Exhibit 4.1 to Duckwall-ALCO Stores, Inc.’s Registration Statement on Form S-1 and incorporated herein by reference).
*4.5	Amended and Restated Bylaws of Duckwall-ALCO Stores, Inc. dated June 6, 2007
*4.6	Duckwall-ALCO Stores, Inc. Non-Qualified Stock Option Agreement.
*4.7	Duckwall-ALCO Stores, Inc. Incentive Stock Option Plan.
*5.1	Opinion of Lathrop & Gage LLP.
*23.1	Consent of Independent Registered Public Accounting Firm.
*23.2	Consent of Counsel (included in the opinion filed as Exhibit 5.1 to this Registration Statement).
*24.1	Powers of Attorney executed by officers and directors of Duckwall-ALCO Stores, Inc. who have signed the Registration Statement.

*           Filed Herewith

CWDOCS 650217v1

EX-4.5

AMENDED AND RESTATED

BYLAWS

OF

DUCKWALL-ALCO STORES, INC.

June 6, 2007

Offices

1.  Registered Office and Resident Agent.  The location of the registered office and the name of the resident agent of the corporation in the State of Kansas shall be as stated in the articles of incorporation or as shall be determined from time to time by resolution of the Board of Directors and on file in the appropriate public offices of the State of Kansas pursuant to applicable provisions of law.

2.   Corporate Offices.  The corporation may have such other corporate offices and places of business anywhere within or without the State of Kansas as the Board of Directors may from time to time designate or the business of the corporation may require.

Seal

3.  Corporate Seal.  The corporate seal shall have inscribed thereon the name of the corporation and the words “Corporate Seal, Kansas”.  The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced.

Stockholders’ Meetings

4.  Place of Meetings.  All meetings of the stockholders shall be held at the offices of the corporation in the City of Abilene, State of Kansas, or at such other place either within or without the State of Kansas as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof.

5.  Annual Meeting.  The Annual Meeting of Shareholders shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the Notice of the meeting, at which meetings the Shareholders shall elect by cumulative voting a Board of Directors, and transact such other business as may properly be brought before the meeting.  Written Notice of the Annual Meeting stating the place, date and hour of the meeting shall be given to each Shareholder entitled to vote at such meeting not less than ten (10) or more than fifty (50) days before the date of the meeting.

6.  Special Meetings.  Special meetings of the stockholders may be held for any purpose or purposes, unless otherwise prescribed by statute or by the articles of incorporation, and may be called by the Chairman of the Board, by the President, by the Secretary, by the Board of Directors, or by the holders of, or by any officer or stockholder upon the written request of the holders of, not less than twenty percent (20%) of the outstanding stock entitled to vote at such meeting, and shall be called by any officer directed to do so by the Board of Directors or requested to do so in writing by a majority of the Board of Directors.  Any such written request shall state the purpose or purposes of the proposed meeting.

The “call” and the “notice” of any such meeting shall be deemed to be synonymous.

7.  Voting.  At all meetings of stockholders, every stockholder having the right to vote shall be entitled to vote in person, or by proxy appointed by an instrument in writing subscribed by such stockholder and bearing a date not more than three years prior to said meeting, unless said instrument shall provide for a longer period.  Unless otherwise provided by the articles of incorporation, each stockholder shall have one vote for each share of stock entitled to vote at such meeting registered in his name on the books of the corporation including, without limitation, respecting the election of directors.  At all meetings of stockholders the voting may be otherwise than by ballot, including the election of directors, except that, unless otherwise provided by the articles of incorporation, any stockholder entitled to vote may request a vote by written ballot on any matter, in which event such vote shall be taken by written ballot.

8.  Quorum.  The holders of a majority of the outstanding shares of stock entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of any business, except as otherwise provided by law, by the articles of incorporation, or by these bylaws.  Every decision of a majority in amount of stock of such quorum shall be valid as a corporate act, except in those specific instances in which a larger vote is required by law or by the articles of incorporation or by these bylaws.

If the holders of a majority of the outstanding shares of stock entitled to vote not be present at a meeting of stockholders, the holders of a majority of the stock present in person or by proxy at such meeting shall have power successively to adjourn the meeting from time to time to a specified time and place, without notice to anyone other than announcement at the meeting, until a quorum shall be present in person or by proxy.  At such adjourned meeting at which a quorum shall be present in person or by proxy, any business may be transacted which might have been transacted at the original meeting which was adjourned.  If the adjournment is for more than thirty (30) days, or if after adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

9.  Stock Ledger.  The original or duplicate stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required under section 10 of these bylaws or the books of the corporation, or to vote in person or by proxy at any meeting of the stockholders.

10.  Stockholders’ Lists.  The Secretary or Assistant Secretary, who shall have charge of the stock ledger, shall, if requested in writing by any stockholder at least twenty (20) days prior to any meeting of stockholders or if ordered to do so by the Board of Directors, prepare and make, at least ten (10) days before such meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder.  Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held.  The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

11.  Notices.  Written or printed notice of each meeting of the stockholders, whether annual or special, stating the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes thereof, shall be given to each stockholder of record of the corporation entitled to vote at such meeting, either personally or by mail, not less than ten (10) days nor more than fifty (50) days prior to the meeting.  If mailed, such notice shall be deemed to be given when it is deposited in the United States mail, with postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation.

12.  Consent of Stockholders in Lieu of Meeting.  To the extent, if any, and in the manner permitted by statute and unless otherwise provided in the articles of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if consent in writing, setting forth the action so taken, shall be signed by all the holders of outstanding stock entitled to vote thereon.

Board of Directors

13.  Management.  The business and affairs of the corporation shall be managed by a Board of Directors.  Unless and until changed by the Board of Directors as hereinafter provided, the number of directors to constitute the Board of Directors shall be not less than five (5) nor more than seven (7).  The Board of Directors shall have the power to change the number of directors by resolution adopted by a majority of the whole Board.  Unless required by the articles of incorporation, directors need not be stockholders.  In addition to the powers and authorities by these bylaws and the articles of incorporation expressly conferred upon it, the Board of Directors may exercise all such powers of the corporation, and do all such lawful acts and things as are not by statute or by the articles of incorporation or by these bylaws directed or required to be exercised or done by the stockholders.

14.  Vacancies and Newly Created Directorships.  Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, unless it is otherwise provided in the articles of incorporation or these bylaws, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and qualified, or until their earlier resignation or removal.  If there are no directors in office, then an election of directors may be held in the manner provided by statute.

15.  Meetings of the Newly Elected Board – Notice.  The first meeting of the members of each newly elected Board of Directors shall be held (i) at such time and place either within or without the State of Kansas as shall be suggested or provided by resolution of the stockholders at the meeting at which such newly elected Board was elected, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or (ii) if not so suggested or provided for by resolution of the stockholders or if a quorum shall not be present, at such time and place as shall be consented to in writing by a majority of the newly elected directors, provided that written or printed notice of such meeting shall be given to each of the other directors in the same manner as provided in section 18 of these bylaws with respect to the giving of notice for special meetings of the Board except that it shall not be necessary to state the purpose of the meeting in such notice, or (iii) regardless of whether or not the time and place of such meeting shall be suggested or provided for by resolution of the stockholders, at such time and place as shall be consented to in writing by all of the newly elected directors.

Every director of the corporation, upon his election, shall qualify by accepting the office of director, and his attendance at, or his written approval of the minutes of, any meeting of the Board subsequent to his election shall constitute his acceptance of such office; or he may execute such acceptance by a separate writing, which shall be placed in the minute book.

16.  Regular Meetings.  Regular meetings of the Board of Directors may be held without notice at such times and places either within or without the State of Kansas as shall from time to time be fixed by resolution adopted by the full Board of Directors.  Any business may be transacted at a regular meeting.

17.  Special Meetings.  Special meetings of the Board of Directors may be called at any time by the Chairman of the Board, the President, any Vice President or the Secretary, or by any two (2) or more of the directors.  The place may be within or without the State of Kansas as designated in the notice.

18.  Notice of Special Meetings.  Written or printed notice of each special meeting of the Board, stating the place, day and hour of the meeting and the purpose or purposes thereof, shall be mailed to each director addressed to him at his residence or usual place of business at least three (3) days before the day on which the meeting is to be held, or shall be sent to him by telegram, or delivered to him personally, at least two (2) days before the day on which the meeting is to be held.  If mailed, such notice shall be deemed to be delivered when it is deposited in the United States mail with postage thereon addressed to the director at his residence or usual place of business.  If given by telegraph, such notice shall be deemed to be delivered when it is delivered to the telegraph company.  The notice may be given by any officer having authority to call the meeting.  “Notice” and “call” with respect to such meetings shall be deemed to be synonymous.  Any meeting of the Board of Directors shall be a legal meeting without any notice thereof having been given if all directors shall be present.

19.  Meetings by Conference Telephone or Similar Communications Equipment.  Unless otherwise restricted by the articles of incorporation or these bylaws, members of the Board of Directors of the corporation, or any committee designated by the Board, may participate in a meeting of the Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant hereto shall constitute presence in person at such meeting.

20.  Quorum.  Unless otherwise required by law, the articles of incorporation or these bylaws, a majority of the total number of directors shall be necessary at all meetings to constitute a quorum for the transaction of business, and except as may be otherwise provided by law, the articles of incorporation or these bylaws, the vote of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors.

If at least two (2) directors or one third (1/3) of the whole Board of Directors, whichever is greater, is present at any meeting at which a quorum is not present, a majority of the directors present at such meeting shall have power successively to adjourn the meeting from time to time to a subsequent date, without notice to any director other than announcement at the meeting.  At such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the original meeting which was adjourned.

21.  Standing or Temporary Committees.  The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, designate one (1) or more committees, each committee to consist of one (1) or more directors of the corporation.  The Board may designate one (1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.  In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.  Any such committee, to the extent provided in the resolution of the Board of Directors or in these bylaws, shall have and may exercise all of the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority of the Board of Directors with respect to amending the articles of incorporation, adopting an agreement or merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation’s property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the bylaws of the corporation; and, unless the resolution, these bylaws or the articles of incorporation expressly so provide, no such committee shall have power or authority to declare a dividend or to authorize the issuance of stock.

Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors.  All committees so appointed shall, unless otherwise provided by the Board of Directors, keep regular minutes of the transactions at their meetings and shall cause them to be recorded in books kept for that purpose in the office of the corporation and shall report the same to the Board of Directors at its next meeting.  The Secretary or an Assistant Secretary of the corporation may act as secretary of the committee if the committee or the Board so requests.

22.  Compensation.  Unless otherwise restricted by the articles of incorporation or these bylaws, the Board of Directors may, by resolution, fix the compensation to be paid directors for serving as directors of the corporation and may, by resolution, fix a sum which shall be allowed and paid for attendance at each meeting of the Board of Directors and may provide for reimbursement of expenses incurred by directors in attending each meeting; provided that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving his regular compensation therefor.  Members of special or standing committees may be allowed similar compensation for attending committee meetings.  The corporation shall also provide, with no expense to the Directors, assistance in the preparation and filing of reports required under the Securities Exchange Act of 1934, as amended including but not limited to reports on initial ownership or changes of beneficial ownership of common stock of the corporation on Schedule 13D, Schedule 13G, Form 3, Form 4 or Form 5.

23.  Resignations.  Any directors may resign at any time upon written notice to the corporation.  Such resignation shall take effect at the time specified therein or shall take effect upon receipt thereof by the corporation if no time is specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

24.  Indemnification and Liability of Directors and Officers.  Each person who is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director or officer of another corporation (including the heirs, executors, administrators and estate of such person) shall be indemnified by the corporation as of right to the full extent permitted or authorized by the laws of the State of Kansas, as now in effect and as hereafter amended, against any expenses, judgments, fines and amounts paid in settlement (including attorneys’ fees) actually and reasonably incurred by such person in his capacity as or arising out of his status as a director or officer of the corporation or, if serving at the request of the corporation, as a director or officer of another corporation.  The indemnification provided by this bylaw provision shall not be exclusive of any other rights to which those indemnified may be entitled under the articles of incorporation, under any other bylaw or under any agreement, vote of stockholders or disinterested directors or otherwise, and shall not limit in any way any right which the corporation may have to make different or further indemnifications with respect to the same or different persons or classes of persons.

No person shall be liable to the corporation for any loss, damage, liability or expense suffered by it on account of any action taken or omitted to be taken by him as a director or officer of the corporation or of any other corporation which he serves as a director or officer at the request of the corporation, if such person (i) exercised the same degree of care and skill as a prudent man would have exercised under the circumstances in the conduct of his own affairs, or (ii) took or omitted to take such action in reliance upon advice of counsel for the corporation, or for such other corporation, or upon statements made or information furnished by directors, officers, employees or agents of the corporation, or of such other corporation, which he had no reasonable grounds to disbelieve.

25.  Action Without a Meeting.  Unless otherwise restricted by the articles of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if written consent thereto is signed by all members of the Board of Directors or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee.

Officers

26.  (a) Officers – Who Shall Constitute.  The officers of the corporation shall be a Chairman of the Board, a President, one or more Vice Presidents, a Secretary, a Treasurer, one or more Assistant Secretaries and one or more Assistant Treasurers.  The Board shall elect a President, a Secretary and a Treasurer at its first meeting after each annual meeting of the stockholders.  The Board then, or from time to time, may elect one or more of the other prescribed officers as it may deem advisable, but need not elect any officers other than a President, a Secretary and a Treasurer.  The Board may, if it desires, elect or appoint additional officers and may further identify or describe any one or more of the officers of the corporation.

Officers of the corporation need not be members of the Board of Directors.  Any two (2) or more offices may be held by the same person.

An officer shall be deemed qualified when he enters upon the duties of the office to which he has been elected or appointed and furnishes any bond required by the Board; but the Board may also require his written acceptance and promise faithfully to discharge the duties of such office.

(b)  Term of Office.  Each officer of the corporation shall hold his office at the pleasure of the Board of Directors or for such other period as the Board may specify at the time of his election or appointment, or until his death, resignation or removal by the Board, whichever first occurs.  In any event, each officer of the corporation who is not reelected or reappointed at the annual election of officers by the Board next succeeding his election or appointment shall be deemed to have been removed by the Board, unless the Board provides otherwise at the time of his election or appointment.

(c)  Other Agents.  The Board from time to time may also appoint such other agents for the corporation as it shall deem necessary or advisable, each of whom shall serve at the pleasure of the Board or for such period as the Board may specify, and shall exercise such powers, have such titles and perform such duties as shall be determined from time to time by the Board or by an officer empowered by the Board to make such determinations.

27.  The Chairman of the Board.  If a Chairman of the Board be elected, he shall preside at all meetings of the stockholders and directors at which he may be present and shall have such other duties, powers and authority as may be prescribed elsewhere in these bylaws.  The Board of Directors may delegate such other authority and assign such additional duties to the Chairman of the Board, other than those conferred by law exclusively upon the President or another officer, as it may from time to time determine, and, to the extent permissible by law, the Board may designate the Chairman of the Board as the Chief Executive Officer of the corporation with all of the powers otherwise conferred upon the President of the corporation under section 28 of these bylaws, or it may, from time to time, divide the responsibilities, duties and authority for the general control and management of the corporation’s business and affairs between the Chairman of the Board and the President.

28.  The President. Unless the Board otherwise provides, the President shall be the Chief Executive Officer of the corporation with such general executive powers and duties of supervision and management as are usually vested in the office of the Chief Executive Officer of a corporation, and he shall carry into effect all directions and resolutions of the Board.  The President, in absence of the Chairman of the Board or if there be no Chairman of the Board, shall preside at all meetings of the stockholders and directors.

The President may execute all bonds, notes, debentures, mortgages and other instruments for and in the name of the corporation, may cause the corporate seal to be affixed thereto, and may execute all other instruments for an in the name of the corporation.

Unless the Board otherwise provides, the President, or any person designated in writing by him, shall have full power and authority on behalf of this corporation (i) to attend and to vote or take action at any meeting of the holders of securities of corporations in which this corporation may hold securities, and at such meetings shall possess and may exercise any and all rights and powers incident to being a holder of such securities, and (ii) to execute and deliver waivers of notice and proxies for and in the name of the corporation with respect to any securities held by this corporation.

He shall, unless the Board otherwise provides, be ex officio a member of all standing committees.

He shall have such other or further duties and authority as may be prescribed elsewhere in these bylaws or from time to time by the Board of Directors.

If a Chairman of the Board be elected or appointed and designated as the Chief Executive Officer of the corporation, as provided in section 27 of these bylaws, the President shall perform such duties as may be specifically delegated to him by the Board of Directors or are conferred by law exclusively upon him, and in the absence, disability or inability or refusal to act of the Chairman of the Board, the President shall perform the duties and exercise the powers of the Chairman of the Board.

29.  Vice President.  In the absence of the President or in the event of his disability or inability or refusal to act, any Vice President may perform the duties and exercise the powers of the President until the Board otherwise provides.  Vice Presidents shall perform such other duties and have such other authority as the Board may from time to time prescribe.

30.  Secretary and Assistant Secretaries. The Secretary shall attend all sessions of the Board and all meetings of the stockholders, shall prepare minutes of all proceedings at such meetings and shall preserve them in a minute book of the corporation.  He shall perform similar duties for the executive and other standing committees when requested by the Board or any such committee.

The Secretary shall see that all books, records, lists and information, or duplicates, required to be maintained in Kansas, or elsewhere, are so maintained.

The Secretary shall keep in safe custody the seal of the corporation, and shall have authority to affix the seal to any instrument requiring a corporate seal and, when so affixed, he shall attest the seal by his signature.  The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature.

The Secretary shall have the general duties, powers and responsibilities of a secretary of a corporation and shall perform such other duties and have such other responsibility and authority as may be prescribed elsewhere in these bylaws or from time to time by the Board of Directors or the Chief Executive Officer of the corporation, under whose direct supervision he shall be.

In the absence of the Secretary or in the event of his disability or inability or refusal to act, any Assistant Secretary may perform the duties and exercise the powers of the Secretary until the Board otherwise provides.  Assistant Secretaries shall perform such other duties and have such other authority as the Board of Directors may from time to time prescribe.

31.  The Treasurer and Assistant Treasurers. The Treasurer shall have responsibility for the safekeeping of the funds and securities of the corporation, shall keep or cause to be kept full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall keep or cause to be kept all other books of account and accounting records of the corporation.  He shall deposit or cause to be deposited all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors or by any officer of the corporation to whom such authority has been granted by the Board.

He shall disburse, or permit to be disbursed, the funds of the corporation as may be ordered, or authorized generally, by the Board, and shall render to the Chief Executive Officer of the corporation and the directors whenever they may require it, an account of all his transactions as Treasurer and of those under his jurisdiction, and of the financial condition of the corporation.

He shall perform such other duties and shall have such other responsibility and authority as may be prescribed elsewhere in these bylaws or from time to time by the Board of Directors.

He shall have the general duties, powers and responsibility of a Treasurer of a corporation and shall, unless otherwise provided by the Board, be the chief financial and accounting officer of the corporation.

If required by the Board, he shall give the corporation a bond in a sum and with one or more sureties satisfactory to the Board, for the faithful performance of the duties of his office and for the restoration to the corporation, in the case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control which belong to the corporation.

In the absence of the Treasurer or in the event of his disability or inability or refusal to act, any Assistant Treasurer may perform the duties and exercise the powers of the Treasurer until the Board otherwise provides.  Assistant Treasurers shall perform such other duties and have such other authority as the Board of Directors may from time to time prescribe.

32.  Duties of Officers May be Delegated.  If any officer of the corporation be absent or unable to act, or for any other reason that the Board may deem sufficient, the Board may delegate, for the time being, some or all of the functions, duties, powers and responsibilities of any officer to any other officer, or to any other agent or employee of the corporation or other responsible person, provided a majority of the whole Board concurs.

33.  Removal.  Any officer or agent elected or appointed by the Board of Directors, and any employee, may be removed or discharged by the Board whenever in its judgment the best interests of the corporation would be served thereby, but such removal or discharge shall be without prejudice to the contract rights, if any, of the person so removed or discharged.

34.  Salaries and Compensation. Salaries and compensation of all elected officers of the corporation shall be fixed, increased or decreased by the Board of Directors, but this power, except as to the salary or compensation of the Chairman of the Board and the President, may, unless prohibited by law, be delegated by the Board to the Chairman of the Board or the President, or may be delegated to a committee.  Salaries and compensation of all appointed officers, agents and employees of the corporation may be fixed, increased or decreased by the Board of Directors, but until action is taken with respect thereto by the Board of Directors, the same may be fixed, increased or decreased by the President or such other officer or officers as may be empowered by the Board of Directors to do so.

35.  Delegation of Authority to Hire, Discharge and Designate Duties.  The Board from time to time may delegate to the Chairman of the Board, the President or other officer or executive employee of the corporation, authority to hire, discharge and fix and modify the duties, salary or other compensation of employees of the corporation under the jurisdiction of such person, and the Board may delegate to such officer or executive employee similar authority with respect to obtaining and retaining for the corporation the services of attorneys, accountants and other experts.

Stock

36.  Certificates for Shares of Stock.  The shares of the corporation shall be represented by a certificate or shall be uncertificated.  Certificates shall be signed by, or in the name of the corporation by, the Chairman of the Board of Directors, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation.  Any of or all the signatures on a certificate may be facsimile.  In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

37.  Transfers of Stock.  Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.  Upon receipt of proper transfer instructions from the registered owner of uncertificated shares such uncertificated shares shall be canceled and issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the corporation.  Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) or a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

38.  Registered Stockholders.  Only stockholders whose names are registered in the stock ledger shall be entitled to be treated by the corporation as the holders and owners in fact of the shares standing in their respective names, and the corporation shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided by the laws of Kansas.

39.  Lost Certificates.  The Board of Directors may direct a new certificate or certificates or uncertificated shares to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed.  When authorizing such issue of a new certificate or certificates or uncertificated shares, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

40.  Regulations.  The Board of Directors shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer, conversion and registration of certificates for shares of stock of the corporation, not inconsistent with the laws of Kansas, the articles of incorporation of the corporation or these bylaws.

41.  Fixing Record Date.  In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.  A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Dividends and Finance

42.  Dividends.  Dividends upon the outstanding shares of stock of the corporation, subject to the provisions of the articles of incorporation and of any applicable law and of these bylaws, may be declared by the Board of Directors at any meeting.  Subject to such provisions, dividends may be paid in cash, in property, or in shares of stock of the corporation.

43.  Creation of Reserves.  The directors may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve in the manner in which it was created.

44.  Depositories.  The moneys of the corporation shall be deposited in the name of the corporation in such bank or banks or other depositories as the Board of Directors shall designate, and shall be drawn out only by check signed by persons designated by resolution adopted by the Board of Directors, except that the Board of Directors may delegate said powers in the manner hereinafter provided in this bylaw 44.  The Board of Directors may by resolution authorize an officer or officers of the corporation to designate any bank or banks or other depositories in which moneys of the corporation may be deposited, and to designate the persons who may sign checks drawn on any particular account or accounts of the corporation, whether created by direct designation of the Board of Directors or by an authorized officer or officers as aforesaid.

45.  Fiscal Year.  The Board of Directors shall have power to fix and from time to time change the fiscal year of the corporation.  In the absence of action by the Board of Directors, the fiscal year of the corporation shall end each year on the date which the corporation treated as the close of its first fiscal year, until such time, if any, as the fiscal year shall be changed by the Board of Directors.

46.  Directors’ Annual Statement.  The Board of Directors may present at each annual meeting of the stockholders, and when called for by vote of the stockholders shall present to any annual or special meeting of the stockholders, a full and clear statement of the business and condition of the corporation.

Books and Records

47.  Books, Accounts and Records.  The books, accounts and records of the corporation, except as may be otherwise required by the laws of the State of Kansas, may be kept outside of the State of Kansas, at such place or places as the Board of Directors may from time to time determine.  The Board of Directors shall determine whether, to what extent and the conditions upon which the books, accounts and records of the corporation, or any of them, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any book, account or record of the corporation, except as conferred by law or by resolution of the stockholders or directors.

Miscellaneous

48.  Waiver of Notice.  Whenever any notice is required to be given under the provisions of the statutes of Kansas, or of the articles of incorporation or of these bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice.  Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is now lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice unless so required by the articles of incorporation or these bylaws.

49.  Contracts.  The Board of Directors may authorize any officer or officers, or agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.

50. Amendments.  These bylaws may be altered, amended or repealed, or new bylaws may be adopted, in the manner provided in the articles of incorporation.

EX-4.6

DUCKWALL-ALCO STORES, INC.

NON-QUALIFIED STOCK OPTION AGREEMENT

THIS AGREEMENT, made and entered into this 1st day of July, 2008 (the “Grant Date”), by and between DUCKWALL-ALCO STORES, INC., a Kansas corporation (the “Company”), and Lawrence J. Zigerelli (the “Optionee”).

WHEREAS, the Compensation Committee has determined that the Optionee shall be granted an option to purchase shares of common stock of the Company (the “Common Stock”) on the terms and conditions herein set forth as a material inducement to the Optionee to join the Company as its President and Chief Executive Officer.

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

1.Nature of the Option.  This Option is not intended to be an “Incentive Stock Option” as defined in and subject to the limitations of Section 422A of the Internal Revenue Code of 1986 and it will not be treated as an Incentive Stock Option, whether or not, by its terms, it meets the requirements of Section 422A.

2.Grant of Option.  Pursuant to the authorization of the Compensation Committee, and subject to the terms, conditions and provisions contained in this Agreement, the Company hereby grants to the Optionee the right and option (the “Option”) to purchase from the Company, at the times and on the terms and conditions hereinafter set forth, all or part of an aggregate of 10,000 shares of Common Stock at the purchase price of $9.05 per share, which is equal to the closing sale price of the Common Stock on the NASDAQ Global Market on the Grant Date.  Exercises of this Option may be honored by issuing authorized and unissued shares of Common Stock or, at the election of the Company, by transferring shares of Common Stock which may at the time be held by the Company as treasury shares.

3.Exercise of Option.  Optionee may exercise this Option by delivery of written notice to the Company in the form attached as Exhibit A, stating the number of shares of Common Stock with respect to which the Option is being exercised, making such representations, warranties and agreements with respect to such shares of Common Stock as may be required by the Company, and accompanied by full payment of the purchase price for the Common Stock so purchased.  Payment may be made in cash, by check, by delivery of shares of Common Stock or in such other form or combination of forms as will be acceptable to the Company.  No certificate for fractional shares of stock shall be issued by the Company.

4.Vesting.

4.1.Subject to Section 5 herein, this Option will vest (each date, a “Vesting Date”) as follows:

(a)25% of the Option will vest on the first anniversary of the Grant Date,

(b)50% of the Option will vest on the second anniversary of the Grant Date,

(c)75% of the Option will vest on the third anniversary of the Grant Date, and

(d)100% of the Option will vest on the fourth anniversary of the Grant Date.

4.2.Subject to Section 5 herein, to the extent not earlier vested under Section 4.1,

(a)in the event the Company shall not be the surviving corporation in any merger, consolidation, or reorganization, or in the event of the acquisition by another corporation of all or substantially all of the assets of the Company and if such surviving, continuing, successor or purchasing corporation does not agree to assume or replace the Option granted hereunder in accordance with paragraph 9 of this Agreement, or in the event of the liquidation or dissolution of the Company, the Option granted hereunder shall become immediately exercisable to the extent of all of the aggregate number of shares subject to this Option for a period commencing 30 days immediately prior to and ending on the day immediately prior to such merger, consolidation, reorganization or acquisition of all or substantially all of the assets of the Company, or the liquidation or dissolution of the Company.

(b)Notwithstanding the provisions of paragraph 4.1 of this Agreement, in the event of a Change of Control of the Company, the Option granted hereunder shall become immediately exercisable to the extent of all of the aggregate number of shares subject to this Option.  In the event of a Change of Control, the Company shall notify the Optionee as soon as practicable of the Optionee’s rights hereunder.  For purposes of this subparagraph (b), a “Change of Control” means a change in control of the Company of a nature that would be required to be reported in response to item 6(e) of Schedule 14A of Regulation 14A (in effect on the date hereof) promulgated under the Securities Exchange Act of 1934, as in effect on the date hereof (the “Exchange Act”); provided, however, that, without limitation, such a change in control shall be deemed to have occurred upon the occurrence of any of the following events:

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

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

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

(iv)the sale or disposition by the Company of all or substantially all of the Company’s assets.

(c)The Option shall be exercisable in the manner set forth above, during the lifetime of the Optionee only by him and may not be exercisable by him unless at the time of exercise he is a full-time employee of the Company or of one of its subsidiary corporations and shall have been continuously so employed since the Grant Date, or, if the Optionee’s employment with the Company or any of its subsidiary corporations shall have terminated the Option shall be exercisable only if exercised prior to the expiration of thirty (30) days after the date of such termination or prior to five (5) years after the Grant Date, whichever shall first occur, and (except as otherwise provided by subparagraph (a) and subparagraph (b) of this paragraph 4.2) only to the extent that the Optionee was entitled to exercise the Option prior to the date of such termination.

(d)The Option shall be exercisable after the death of the Optionee only if the Optionee shall at the time of his death have been an employee of the Company and shall have been continuously employed since the Grant Date, and then (i) only by or on behalf of such person or persons to whom the Optionee’s rights under the Option shall have been passed by the Optionee’s will or by the laws of descent and distribution, (ii) (except as otherwise provided by subparagraph (a) and subparagraph (b) of this paragraph 4.2) only to the extent that the Optionee was entitled to exercise said Option prior to the date of his death, and (iii) only if said Option is exercised prior to the expiration of twelve (12) months after the date of the Optionee’s death or prior to five (5) years after the Grant Date, whichever shall first occur.

5.Termination.  This Option will expire five years from the Grant Date above, (the “Expiration Date”) unless earlier terminated in accordance with this Agreement. To the extent that the Optionee does not purchase part or all of the shares of Common Stock to which he is entitled prior to the Expiration Date, this Option shall expire as to such unpurchased shares.

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

7.Governing Law. This Agreement will be governed and construed in accordance with the laws of the State of Kansas without giving effect to the principles of conflicts of laws.

8.Amendment and Administration.  The Company has the authority to adopt, amend, and rescind rules and regulations for the administration of this Agreement; provided however, that no such actions by the Company may adversely affect the rights of the Optionee under this Agreement without the consent of the Optionee.  All such actions of the Company will be final and conclusive for all purposes and will be binding upon Optionee.

9.Adjustments for Mergers, Reorganizations, etc.  Subject to paragraph 4.2(a) of this Agreement, if the Company shall become a party to any corporate merger, consolidation, major acquisition of property for stock, separation, reorganization or liquidation, the Company shall have power to make arrangements which shall be binding upon the Optionee for the substitution of a new Option for this Option, or for the assumption of this Option, provided that such arrangements shall meet the requirements of Section 424(a) of the Internal Revenue Code of 1986, as amended (the “Code”), or such similar provisions of the Code as may then be in effect.

10.Withholding of Tax.  If the exercise of the Option results in compensation income to the Optionee for federal or state income tax purposes, Optionee must deliver to the Company at the time of exercise the amount of money or shares of Common Stock as the Company may require to meet its obligations under applicable tax laws or regulation, and, if Optionee fails to do so, the Company is authorized to withhold from any cash or stock remuneration then or thereafter payable to Optionee any tax required to be withheld as a result of such compensation income.  The Company is further authorized in its discretion to satisfy such withholding requirement out of any cash or Common Stock distributable to Optionee upon such exercise.

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

12.Adjustments for Stock Dividends, Splits, etc.

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

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

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

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

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

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

16.Miscellaneous.  The Option will inure to the benefit of and be binding upon each successor of the Company.  All obligations imposed upon Optionee, all rights granted to the Optionee, and all rights reserved by the Company under this Agreement are binding upon and will inure to the benefit of Optionee, Optionee’s heirs, personal representatives, and successors.

IN WITNESS WHEREOF, the Company and the Optionee have executed this Non-Qualified Stock Option Agreement effective on the first date mentioned above.

Duckwall-ALCO Stores, Inc.

By:/s/ Royce Winsten

Name: Royce Winsten

    Chairman of the Board

/s/ Lawrence J. Zigerelli

Address: Duckwall-Alco Stores, Inc.

401 Cottage

Abilene, KS  67410

SS NO.:

EXHIBIT A

Form of Notice

DUCKWALL ALCO STORES, INC.

NOTIFICATION OF STOCK OPTION EXERCISE

I, Lawrence J. Zigerelli, hereby notify the [officer] of Duckwall ALCO Stores, Inc. (the “Company”) of my request to exercise(quantity) options granted on July 1, 2008 at the Option price of $9.05 per share under the terms and conditions of the Nonqualified Stock Option Agreement, dated July 1, 2008, by and between the Company, and Lawrence J. Zigerelli.

A check in the amount of $__________ and/or delivery of _________ shares of Common Stock at $_____ per share, payable to Duckwall ALCO Stores, Inc., is attached.

Please register these shares as follows and mail the certificate to the address below:

Name: _____________________________________                                                                          

Address: ___________________________________                                                                          

City/State/Zip:_______________________________                                                                                     

I understand that the Company may be entitled to a tax deduction in certain circumstances if I decide to sell the underlying shares.  I agree to provide the Company with information regarding the sale of these shares, including date of sale, sales price per share, the number of shares sold and such other information that they may reasonably require, or do hereby authorize my broker to provide such information directly to the Company.

_________________________

Lawrence J. Zigerelli

_________________________ 

Social Security Number

_________________________ 

Date

Stock Option exercise request received and accepted on behalf of Duckwall ALCO Stores, Inc.:

____________________________________ 

By: _________________________________

Date:________________________________

EX-4.7

Duckwall-ALCO Stores, Inc.

INCENTIVE STOCK OPTION PLAN

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

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

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

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

4.           Eligibility.

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

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

5.           Shares Subject to the Plan. Options granted under this Plan shall be granted solely with respect to shares of Duckwall-ALCO Common Stock.  Subject to any adjustments made pursuant to the provisions of Section 13, the aggregate number of shares of Duckwall-ALCO Common Stock which may be issued upon exercise of the options which will be granted under this Plan shall not exceed 500,000.  With respect to each optionee, no more than 100,000 shares of Duckwall-Alco Common Stock shall become subject to options granted to such optionee under this Plan in a calendar year.

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

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

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

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

8.           Period and Exercise of Option:

(a)           Period--Subject to the provisions of Sections 10 and 11 hereof with respect to the death or termination of employment of an optionee, the period during which each option granted under this Plan may be exercised shall be fixed by the Compensation Committee at the time such option is granted, provided that such period shall expire no later than five (5) years from the date on which the option is granted.  In the event the Company shall not be the surviving corporation in any merger, consolidation, or reorganization, or in the event of acquisition by another corporation of all or substantially all of the assets of the Company, every option outstanding hereunder may be assumed (with appropriate changes) by the surviving, continuing, successor or purchasing corporation, as the case may be, subject to any applicable provisions of the Code or replaced with new options of comparable value (in accordance with Section 424(a) of the Code).  In the event (i) that such surviving, continuing, successor or purchasing corporation, as the case may be, does not assume or replace the outstanding options hereunder, or (ii) of liquidation or dissolution of the Company, the Compensation Committee may provide that each optionee shall have the right, within a period commencing not more than 30 days immediately prior to and ending on the day immediately prior to such merger, consolidation, reorganization or acquisition by another corporation of all or substantially all of the assets of the Company or the liquidation or dissolution of the Company, to exercise the optionee's outstanding options to the extent of all or any part of the aggregate number of shares subject to such option(s).  In the event of a "Change of Control" (as defined below) the Compensation Committee may accelerate the time at which options granted under this Plan may be exercised by the optionee.

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

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

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

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

(iv)           the sale or disposition by the Company of all or substantially all of the Company's assets.

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

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

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

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

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

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

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

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

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

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

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

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

(5-22-03/ph)

EX-5.1

Opinion of Lathrop & Gage LLP

Duckwall-ALCO Stores, Inc.

401 Cottage Street

Abilene, Kansas 67410

Ladies and Gentlemen:

At your request, we are rendering this opinion in connection with the proposed issuance of an aggregate of 510,000 shares of common stock, $0.0001 par value ("Common Stock"), of Duckwall-ALCO Stores, Inc., a Kansas corporation (the "Company"), under stock options granted by the Company (collectively, the "Options") under the Non-Qualified Stock Option Agreement dated July 1, 2008 and the Incentive Stock Option Plan dated May 22, 2003 (such Agreement and Plan being referred to herein, collectively, as the "Plans").

In connection therewith, we have examined the originals, or certified, conformed or reproduction copies of:

1. resolutions of the Board of Directors;

2. the Company’s Registration Statement on Form S-8, to be filed with the Securities and Exchange Commission on or about March 18, 2010;

3. the Plans;

4. the Amended and Restated Certificate of Incorporation of the Company; and

5. the Bylaws of the Company, as amended.

We have also made such other factual and legal investigations and have examined such instruments, documents, and records as we deemed necessary in order to render the opinions hereinafter expressed.  In such examination, we have assumed the following: (a) the authenticity of original documents and the genuineness of all signatures; (b) the conformity to authentic originals of all documents submitted to us as copies; and (c) the truth, accuracy and completeness of the information, representations and warranties contained in the records, documents, instruments and certificates we have reviewed.  As to any facts material to the opinion set forth below which were not independently established or verified, we have relied upon statements and representations of officers and other representatives of the Company and others.

Based on the foregoing, it is our opinion that:

1. the Plans have been duly adopted and amended by the Company;

2. upon the exercise of the Options and issuance of shares of Common Stock underlying the Options, in accordance with the terms of the Plans, and delivery of such shares to the purchasers thereof against payment of the exercise price therefor, the shares will be validly issued, fully paid and non-assessable; and

3.. the Plans are not subject to the provisions of the Employee Retirement Income Security Act of 1974.

         We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to all references to our firm in the Registration Statement and all amendments thereto, and to the use of our name wherever it appears in the Registration Statement.  In giving such consent, we do not consider that we are "experts," within the meaning of such term as used in the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission issued thereunder, with respect to any part of the Registration Statement, including this opinion as an exhibit or otherwise.

          The opinions set forth in this letter are effective as of the date hereof.  No expansion of this opinion may be made by implication or otherwise.  We express no opinion other than as herein expressly set forth.  The opinions expressed herein are solely for your benefit and may not be relied upon in any manner or for any purpose by any other person or entity.  This opinion may not be quoted in whole or in part without our prior written consent.  We disclaim any obligation to update this opinion for events occurring after the date hereof.

Very truly yours,

 /s/ LATHROP & GAGE LLP

Overland Park, Kansas

March 18, 2010

EX-23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Duckwall-ALCO Stores, Inc.:

We consent to the incorporation by reference in this Registration Statement on Form S-8 of our reports dated April 16, 2009, with respect to the consolidated balance sheets of Duckwall-ALCO Stores, Inc. as of February 1, 2009 and February 3, 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended February 1, 2009, and the effectiveness of internal control over financial reporting as of February 1, 2009, which reports appear in the February 1, 2009 annual report on Form 10-K of Duckwall-ALCO Stores, Inc.

Our report on the consolidated financial statements refers to the adoption of certain new accounting principles in fiscal 2007 and 2006.

/s/ KPMG LLP

Kansas City, Missouri

March 18, 2010

EX-24.1

EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Brett C. Bogan, as his true and lawful attorney-in-fact and agent, with full power of substitution and in his place and stead in any and all capacities, to sign a Registration Statement on Form S-8 with respect to the Common Stock of the Company offered under the Duckwall-ALCO Stores, Inc. Non-Qualified Stock Option Agreement dated July 1, 2008 and for the Duckwall-ALCO Stores, Inc. Incentive Stock Option Plan dated  May 22, 2003 and any and all amendments (including post effective amendments) to such Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises to perfect and complete such filing(s), as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

/s/ Donny R. Johnson              Donny R. Johnson Executive Vice President – Chief Financial Officer (Principal Financial and Accounting Officer)	March 18, 2010
/s/ Royce Winsten                   Royce Winsten Director	March 18, 2010
/s/ Raymond A.D. French         Raymond A.D. French Director	March 18, 2010
/s/ Lolan C. Mackey               Lolan C. Mackey Director	March 18, 2010
/s/ Dennis E. Logue                Dennis E. Logue Director	March 18, 2010