Exhibit 10

FAMILY DOLLAR

COMPENSATION DEFERRAL PLAN

 

1.             Name:

 

                This plan shall be known as the “Family Dollar Compensation
Deferral Plan” (the “Plan”).

 

2.             Purpose and Intent:

 

                Family Dollar Stores, Inc. and Family Dollar, Inc.
(collectively, the “Corporation”) establish this Plan effective March 30, 2003
for the purpose of providing certain of its associates with the opportunity to
defer payment of certain base salary and annual bonuses in accordance with the
terms and provisions set forth herein. It is the intent of the Corporation that
amounts deferred under the Plan by an associate shall not be taxable to the
associate for income tax purposes until the time actually received by the
associate. The provisions of the Plan shall be construed and interpreted to
effectuate that intent.

 

3.             Definitions:

 

                For purposes of the Plan, the following terms have the following
meanings:

 

                “Account” means the account established to record a
Participant’s interest under the Plan attributable to amounts credited to the
Participant pursuant to the Plan. The Account shall be a bookkeeping entry only
and shall be utilized solely as a device for the measurement and determination
of the amounts to be paid to a Participant, or his or her Beneficiary, pursuant
to the Plan.

 

                “Annual Bonus” means, with respect to a Participant, any annual
bonus payable to the Participant pursuant to any bonus compensation plan of a
Participating Employer approved for purposes of this Plan by the Plan Committee.

 

                “Associate” means an individual employed by a Participating
Employer.

 

                “Beneficiary” means any person or trust designated by a
Participant in accordance with procedures adopted by the Plan Committee to
receive the Participant’s Account in the event of the Participant’s death. If
the Participant does not designate a Beneficiary, the Participant’s Beneficiary
is his or her spouse, or if not then living, his or her estate.

 

                “Board” means the Board of Directors of Family Dollar Stores,
Inc.

 

                “CEO” means the Chief Executive Officer of Family Dollar Stores,
Inc.

 

                “Compensation Committee” means the committee of individuals who
are serving from time to time as the Compensation Committee of the Board.

 

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                “Eligible Associate” means an Associate designated as an
Eligible Associate pursuant to Paragraph 5(a).

 

                “Participant” means an Eligible Associate who has elected to
defer compensation under the Plan as provided in Paragraph 5(b).

 

                “Participating Employer” means the Corporation and any other
incorporated or unincorporated trade or business that adopts the Plan.

 

                “Plan Committee” means the administrative committee under the
Savings Plan.

 

                “Plan Year” means the calendar year.

 

                “Savings Plan” means the Family Dollar Employee Savings and
Retirement Plan and Trust, as in effect from time to time.

 

4.             Administration:

 

                The Plan Committee shall be responsible for administering the
Plan. The Plan Committee shall have all of the powers necessary to enable it to
properly carry out its duties under the Plan. Not in limitation of the
foregoing, the Plan Committee shall have the power to construe and interpret the
Plan and to determine all questions that arise thereunder. The Plan Committee
shall have such other and further specified duties, powers, authority and
discretion as are elsewhere in the Plan either expressly or by necessary
implication conferred upon it. The Plan Committee may appoint any agents that it
deems necessary for the effective performance of its duties, and may delegate to
those agents those powers and duties that the Plan Committee deems expedient or
appropriate that are not inconsistent with the intent of the Plan. All decisions
of the CEO, the Plan Committee and the Compensation Committee upon all matters
within the scope of his or its authority shall be made in the Chief Executive
Officer’s, Plan Committee’s or Compensation Committee’s sole discretion and
shall be final and conclusive on all persons, except to the extent otherwise
provided by law.

 

5.             Operation:

 

                (a)           Eligibility. For each Plan Year, (i) the
Compensation Committee shall designate which Associates who are “named executive
officers” in the Corporation’s annual proxy statement shall be Eligible
Associates for the Plan Year, and (ii) the CEO shall designate which Associates
other than the “named executive officers” shall be Eligible Associates for the
Plan Year; provided, however, that the determination of Eligible Associates
shall be made consistent with the requirement that the Plan be a “top hat” plan
for purposes of the Associate Retirement Income Security Act of 1974, as
amended. An Associate designated as an Eligible Associate with respect to one
Plan Year need not be designated as an Eligible Associate for any subsequent
Plan Year.

 

 

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                (b)           Elections to Defer. A person who is an Eligible
Associate for a Plan Year may elect to defer a percentage of the Eligible
Associate’s base salary for the Plan Year and a percentage of any Annual Bonus
for the Plan Year. The Plan Committee shall establish from time to time the
minimum and maximum percentages for deferral elections, which may be different
for elections to defer base salary and elections to defer Annual Bonuses and
which may vary among groups of Eligible Associates.  Elections to defer base
salary or Annual Bonuses for a Plan Year must be made before the first day of
the Plan Year, or at such other times as the Plan Committee may determine
consistent with the intent that the Plan operate so as to defer recognition of
income taxes on the amounts deferred until the date the amounts are actually
paid. All elections made under this Paragraph 5(b) shall be made in writing on a
form, or pursuant to other non-written procedures, as may be prescribed from
time to time by the Plan Committee and shall be irrevocable for the Plan Year.
An election to defer made by an Eligible Associate with respect to any base
salary or Annual Bonus payable for a Plan Year shall not automatically apply
with respect to any base salary or Annual Bonus payable for any subsequent Plan
Year.  Amounts deferred under the Plan shall not be taken into account for
purposes of determining contributions or allocations under the Savings Plan.

 

                (c)           Establishment of Accounts. A Participating
Employer shall establish (or cause to be established) an Account for each
Participant employed by the Participating Employer. Each Account shall be
designated by the name of the Participant for whom established. The amount of
any base salary or Annual Bonus Award deferred by a Participant shall be
credited to the Participant’s Account as of the date the base salary or Annual
Bonus Award would have otherwise been paid to the Participant.

 

                (d)           Account Adjustments for Deemed Investments. The
Plan Committee shall from time to time designate one or more investment
vehicle(s) in which the Accounts of Participants shall be deemed to be invested.
Each Participant may designate the investment vehicle(s) in which his or her
Account shall be deemed to be invested according to the procedures developed by
the Plan Committee, except as otherwise required by the terms of the Plan. No
Participating Employer shall be under an obligation to acquire or invest in any
of the deemed investment vehicle(s), and any acquisition of or investment in a
deemed investment vehicle by a Participating Employer shall be made in the name
of the Participating Employer and shall remain the sole property of the
Participating Employer. The Plan Committee shall also establish from time to
time a default investment vehicle into which a Participant’s Account shall be
deemed to be invested if the Eligible Associate fails to provide investment
instructions to the Plan Committee.

 

                (e)           Timing of Adjustments. The adjustments to Accounts
for deemed investments as provided in Paragraph 5(d) shall be made from time to
time at such intervals as determined by the Plan Committee. The Plan Committee
may determine the frequency of account adjustments by reference to the frequency
of Account adjustments under another plan sponsored by a Participating Employer.
The amount of the adjustment shall equal the amount that the Participant’s
Account would have earned (or lost) for the period since the last adjustment had
the Account actually been invested in the deemed investment vehicle(s)
designated by the Participant for the period.

 

                (f)            Payment of Accounts. The following provisions
shall apply with respect to the payment of a Participant’s Account:

 

 

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(i)                                     Time of Payment. Except as otherwise
provided in subparagraphs (v) and (vi) below, a Participant’s Account shall
become payable following the Participant’s termination of employment with the
Participating Employers for any reason other than death pursuant to subparagraph
(ii) below or following the Participant’s death pursuant to subparagraph (iii)
below.

 

(ii)                                  Method of Payment: Termination of
Employment Other Than Death. A Participant’s Account shall be payable commencing
as soon as administratively practicable following the Participant’s termination
of employment with the Participating Employers for any reason other than death
in the form of either a single cash payment or five (5) or ten (10) annual
installments as elected by the Participant pursuant to this subparagraph (ii).
At the time the Participant first makes a deferral election under the Plan, the
Participant shall elect the method of payment, which election shall become
immediately effective. Thereafter, the Participant may change such payment
method election at such time or times and pursuant to such procedures as
established by the Plan Committee from time to time, provided that no such
election to change the method of payment shall become effective unless the
Participant remains employed with the Participating Employers for at least
twelve (12) months from the date such election is made. If a Participant fails
to make a payment election under this subparagraph (ii), the method of payment
shall be a single cash payment. In addition, a Participant receiving installment
payments may elect, at such time and pursuant to such procedures as the Plan
Committee may establish from time to time, to receive a single cash payment of
the unpaid portion of the installment payments, provided that ten percent (10%)
of the amount payable shall be forfeited.  Notwithstanding anything herein to
the contrary, if at the time of termination of employment with the Participating
Employers the Participant has less than two years of employment (measured from
the Participant’s hire date), then the method of payment shall be a single cash
payment regardless of any installment payment election previously made by the
Participant.

 

(iii)                               Method of Payment: Death. If a Participant
dies after having commenced installment payments, any remaining unpaid
installment payments shall be paid to the Participant’s Beneficiary as and when
they would have otherwise been paid to the Participant had the Participant not
died. If a Participant terminates employment due to death, the Participant’s
Account shall be payable to the Participant’s Beneficiary commencing as soon as
administratively practicable after the Participant’s death in the form of either
a single cash payment or five (5) or ten (10) annual installments as elected by
the Participant pursuant to this subparagraph (iii). Such payment method
election shall be made by the Participant at such time or times and pursuant to
such procedures as the Plan Committee may

 

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                                                establish from time to time. If
a Participant fails to make a payment method election under this subparagraph
(iii), the method of payment to the Beneficiary shall be a single cash payment. 
In addition, a Beneficiary receiving installment payments may elect, at such
time and pursuant to such procedures as the Plan Committee may establish from
time to time, to receive a single cash payment of the unpaid portion of the
installment payments, provided that ten percent (10%) of the amount payable
shall be forfeited.  Notwithstanding anything herein to the contrary, if at the
time of death the Participant has less than two years of employment (measured
from the Participant’s hire date), then the method of payment to the Beneficiary
shall be a single cash payment regardless of any installment payment election
previously made by the Participant.

 

(iv)                              Installments. If amounts are payable to a
Participant (or Beneficiary, if applicable) in the form of annual installments,
the first annual installment shall be paid as soon as administratively
practicable after the Participant’s termination of employment or death, as
applicable, and each subsequent annual installment shall be paid on or about the
anniversary of the first installment. During the installment payment period, the
Participant (or Beneficiary, if applicable) shall have the right to direct the
deemed investment of the Account in accordance with Paragraph 5(d) above. The
amount payable on each payment date shall be equal to the balance of the Account
on the applicable payment date divided by the number of remaining installments
(including the installment then payable).

 

(v)                                 In-Service Withdrawal: Life Event. At the
time a Participant makes a deferral election, the Participant may elect, in
accordance with such procedures as the Plan Committee may establish from time to
time, to have all or a portion of the amount to be deferred pursuant to such
election to become payable to the Participant in a single cash payment on a date
specified by the Participant in such election that is no earlier than the
beginning of the fourth Plan Year after the Plan Year to which the deferral
election relates.  The amount subject to such payment election shall be subject
to adjustments for deemed investments pursuant to Sections 5(d) and (e) above
through the close of business on or around the date on which the elected amount
becomes payable, as determined by the Plan Committee in its sole discretion. 
Such amount, as adjusted, shall become payable to the Participant on the
specified date provided the Participant has not terminated employment with the
Participating Employers or died prior to such date.

 

(vi)                              In-Service Withdrawal: On Demand.  A
Participant may elect, in accordance with such procedures as the Plan Committee
may establish from time to time, to receive an unscheduled payment of up to one
hundred percent (100%) of his or her vested Account balance at any time;
provided, however, that (i) ten percent (10%) of the amount withdrawn

 

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                                                shall be forfeited from the
Participant’s Account and (ii) for a Participant in active service, the
Participant shall be ineligible to participate in the Plan for the remainder of
the Plan Year in which the withdrawal is made.

 

(vii)                           Other Payment Provisions. Subject to the
provisions of subparagraphs (v) and (vi) above, a Participant shall not be paid
any portion of the Participant’s Account prior to the Participant’s termination
of employment with the Participating Employers. Any deferral or payment
hereunder shall be subject to applicable payroll and withholding taxes. In the
event any amount becomes payable under the Plan to a Participant, Beneficiary or
other person who is a minor or an incompetent, whether or not declared
incompetent by a court, the amount may be paid directly to the minor or
incompetent person or to the person’s fiduciary (or attorney-in-fact in the case
of an incompetent) as the Plan Committee may decide, and the Plan Committee
shall not be liable to any person for any such decision or any payment pursuant
thereto.

 

                (g)           Other Contributions.  The Participating Employers
may from time to time, in their sole and exclusive discretion, elect to credit a
Participant’s Account with additional amounts not otherwise contemplated by this
Section 5, which such amounts shall be subject to the provisions hereof related
to Account adjustments and payments.

 

                (h)           Statements of Account. Each Participant shall
receive a statement of the Participant’s Account balance no less frequently than
annually.

 

6.             Amendment, Modification and Termination of the Plan:

 

                The Board shall have the right and power at any time and from
time to time to amend the Plan in whole or in part and at any time to terminate
the Plan; provided, however, that no amendment or termination may reduce the
amount actually credited to a Participant’s Account on the date of the amendment
or termination, or further defer the due dates for the payment of the amounts,
without the consent of the affected Participant. Notwithstanding any provision
of the Plan to the contrary, in connection with any termination of the Plan the
Compensation Committee shall have the authority to cause the Accounts of all
Participants (and Beneficiaries of any deceased Participants) to be paid in a
single cash payment as of a date determined by the Compensation Committee or to
otherwise accelerate the payment of all Accounts in such manner as the
Compensation Committee determines in its discretion.

 

7.             Claims Procedures:

 

Claims for benefits under the Plan shall be addressed pursuant to the claims
procedures applicable under the Savings Plan.  Any decision pursuant to such
claims procedures shall be final and conclusive upon all persons interested
therein, except to the extent otherwise provided by applicable law.

 

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8.             Indemnity of Plan Committee:

 

                The Participating Employers shall indemnify and hold harmless
the Plan Committee (and each individual member thereof) and any Associate to
whom the duties of the Plan Committee may be delegated from and against any and
all claims, losses, damages, expenses or liabilities arising from any action or
failure to act with respect to the Plan, except in the case of willful
misconduct by the Plan Committee (or any individual member thereof) or any such
Associate.

 

9.             Notice:

 

                Any notice or filing required or permitted to be given to the
Plan Committee under the Plan shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, postage pre-paid, to
the address below:

 

                Family Dollar Stores, Inc.

                Attn: Plan Committee for the Family Dollar Compensation Deferral
Plan

                P.O. Box 1017

                Charlotte, NC 28201-1017

 

                Such notice shall be deemed given as of the date of delivery or,
if delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification.  Any notice or filing required or permitted
to be given to a Participant under the Plan shall be sufficient if in writing
and hand-delivered, or sent by registered or certified mail, postage pre-paid,
to the last known address of the Participant.

 

10.          Applicable Law:

 

                The Plan shall be construed, administered, regulated and
governed in all respects under and by the laws of the United States to the
extent applicable, and to the extent such laws are not applicable, by the laws
of the state of North Carolina.

 

11.          Miscellaneous:

 

                A Participant’s rights and interests under the Plan may not be
assigned or transferred by the Participant.  In that regard, no part of any
amounts credited or payable hereunder shall, prior to actual payment, (i) be
subject to seizure, attachment, garnishment or sequestration for the payment of
debts, judgments, alimony or separate maintenance owed by the Participant or any
other person, (ii) be transferable by operation of law in the event of the
Participant’s or any person’s bankruptcy or insolvency or (iii) be transferable
to a spouse as a result of a property settlement or otherwise. The Plan shall be
an unsecured and unfunded arrangement. To the extent the Participant acquires a
right to receive payments from the Participating Employers under the Plan, the
right shall be no greater than the right of any unsecured general creditor of
the Participating Employers. Nothing contained herein may be deemed to create a
trust of any kind or any fiduciary relationship between a Participating Employer
and any Participant. Designation as an Eligible Associate or Participant in the
Plan shall not entitle or be deemed to entitle the person to continued
employment with the Participating Employers. The Plan shall be binding on the
Corporation and any successor in interest of the Corporation.

 

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