FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

     This FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") dated as of
August 23, 2005, by and between Duckwall-ALCO Stores, Inc., a Kansas corporation
(the "Company"), and Bruce Dale, an individual ("Mr. Dale").

                              W I T N E S S E T H:
                              - - - - - - - - - -

        WHEREAS, the Company entered into an Employment Agreement with Mr. Dale
on August 2, 2005 ("Employment Agreement") which Employment Agreement was
effective as of March 28, 2005 pursuant to which the Company retained Mr. Dale
as the President and Chief Executive Officer of the Company and Mr. Dale
accepted such retention; and

        WHEREAS, the Company and Mr. Dale desire to amend the Employment
Agreement in accordance with the terms of the Amendment;

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

                                 AMENDMENT TERMS

     1.   Definitions. Except as otherwise provided herein all capitalized terms
shall have the meaning ascribed to them in the Employment Agreement.

     2.   Monthly Mortgage Payment. Effective as of July 1, 2005, the Company
shall pay to Mr. Dale $5,000 on the first business day of each month until the
earlier to occur of:

          a.   the sale of Mr. Dale's residence in Bloomfield Hills, Michigan,
               and

          b.   the second business day of February 2006.

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

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

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

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     6.   Continued Effect of Employment Agreement. Except as herein
specifically modified by this Amendment, the Employment Agreement shall remain
in full force and effect, unmodified, and is hereby ratified and confirmed by
the parties hereto.

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

                                    DUCKWALL-ALCO STORES, INC.



                                    By:     /s/ Warren Gefeller
                                          --------------------------------------
                                          Warren Gefeller, Chairman of the Board




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


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