Exhibit 10.3

FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT is made and entered into effective
the 17th day of August,  2006, by and between FAMILY DOLLAR STORES, INC., a
Delaware corporation (hereinafter referred to as the “Company”); and R. JAMES
KELLY (hereinafter referred to as the “Employee”);

WHEREAS, the Company and Employee are currently parties to that certain
Employment Agreement effective as of August 18, 2005 (the “Employment
Agreement”);

WHEREAS, the Company and Employee desire to amend such Employment Agreement to
reflect changes in the Employee’s position with the Company; and

WHEREAS, the Company and Employee further desire to amend such Employment
Agreement to ensure compliance with the provisions of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”);

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
Company and the Employee agree as follows:

1.                  Paragraph 3 of the Employment Agreement shall be amended its
entirety to read as follows:

3.  Duties and Responsibilities.  The Employee shall be employed as President
and Chief Operating Officer of the Company and shall perform such reasonable
duties and responsibilities as the Chairman of the Company or Board of Directors
of the Company or the Chief Executive Officer of the Company may, from time to
time, assign to the Employee.  The Employee agrees to accept this employment and
to devote his full time and attention and his best efforts, ability and fidelity
to the performance of the duties attaching to such employment.  In addition, the
Employee shall serve as a director and officer of the Company and any
corporation in the Group, if appropriately elected.  During the period of his
employment, the Employee shall not, for remuneration or profit, directly or
indirectly, render any service to, or undertake any employment for, any other
person, firm or corporation, whether in an advisory or consulting capacity or
otherwise, without first obtaining the written consent of the Company.

--------------------------------------------------------------------------------

 

2.                  The following paragraph 12 shall be added to the Employment
Agreement:

12.  Compliance with Code Section 409A.  This Agreement is intended to comply
with Code Section 409A.  Notwithstanding any provision herein to the contrary,
this Agreement shall be interpreted, operated and administered consistent with
this intent.  In that regard, the payment of any amounts under this Agreement
that are subject to Code Section 409A in connection with the Executive’s
termination of employment shall not be made earlier than six (6) months after
the Executive’s date of termination to the extent required by Code Section
409A(a)(2)(B)(i).

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

 

By:

  /s/Janet G. Kelley

 

 

Title:

 /s/Senior Vice President,

 

 

 

 

General Counsel & Secretary

 

 

 

 

Attest:

 

 

/s/Janice Burris

 

 

 

Asst. Secretary

 

 

 

 

 

 

 

EMPLOYEE

 

 

 

 

 

/s/R. James Kelly

 

 

 

R. JAMES KELLY

 

 

 

Witness:

 

 

 

 

 

/s/Janice Burris

 

 

 

 

--------------------------------------------------------------------------------