**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. andFamily Dollar, Inc. (collectively, the “Corporation”) establish this Planeffective March 30, 2003 for the purpose of providing certain of its associateswith the opportunity to defer payment of certain base salary and annual bonusesin accordance with the terms and provisions set forth herein. It is the intentof the Corporation that amounts deferred under the Plan by an associate shallnot be taxable to the associate for income tax purposes until the time actuallyreceived by the associate. The provisions of the Plan shall be construed andinterpreted to effectuate that intent.

 

**3.             Definitions:**

 

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

 

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

 

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

 

                “Associate” means anindividual employed by a Participating Employer.

 

                “Beneficiary” means anyperson or trust designated by a Participant in accordance with proceduresadopted by the Plan Committee to receive the Participant’s Account in the eventof the Participant’s death. If the Participant does not designate aBeneficiary, the Participant’s Beneficiary is his or her spouse, or if not thenliving, his or her estate.

 

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

 

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

 

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

 

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                “Eligible Associate”means an Associate designated as an Eligible Associate pursuant to Paragraph5(a).

 

                “Participant” means anEligible Associate who has elected to defer compensation under the Plan asprovided in Paragraph 5(b).

 

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

 

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

 

                “Plan Year” means thecalendar year.

 

                “Savings Plan” means theFamily Dollar Employee Savings and Retirement Plan and Trust, as in effect fromtime to time.

 

**4.             Administration:**

 

                The Plan Committee shall be responsible foradministering the Plan. The Plan Committee shall have all of the powersnecessary to enable it to properly carry out its duties under the Plan. Not inlimitation of the foregoing, the Plan Committee shall have the power toconstrue and interpret the Plan and to determine all questions that arisethereunder. The Plan Committee shall have such other and further specifiedduties, powers, authority and discretion as are elsewhere in the Plan eitherexpressly or by necessary implication conferred upon it. The Plan Committee mayappoint any agents that it deems necessary for the effective performance of itsduties, and may delegate to those agents those powers and duties that the PlanCommittee deems expedient or appropriate that are not inconsistent with theintent of the Plan. All decisions of the CEO, the Plan Committee and theCompensation Committee upon all matters within the scope of his or itsauthority shall be made in the Chief Executive Officer’s, Plan Committee’s orCompensation Committee’s sole discretion and shall be final and conclusive onall persons, except to the extent otherwise provided by law.

 

**5.             Operation:**

 

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

 

 

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                (b)           Electionsto Defer. A person who is an Eligible Associate for a Plan Year may electto defer a percentage of the Eligible Associate’s base salary for the Plan Yearand a percentage of any Annual Bonus for the Plan Year. The Plan Committeeshall establish from time to time the minimum and maximum percentages fordeferral elections, which may be different for elections to defer base salaryand elections to defer Annual Bonuses and which may vary among groups ofEligible Associates.  Elections to deferbase salary or Annual Bonuses for a Plan Year must be made before the first dayof the Plan Year, or at such other times as the Plan Committee may determineconsistent with the intent that the Plan operate so as to defer recognition ofincome taxes on the amounts deferred until the date the amounts are actuallypaid. All elections made under this Paragraph 5(b) shall be made in writing ona form, or pursuant to other non-written procedures, as may be prescribed fromtime 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 basesalary or Annual Bonus payable for a Plan Year shall not automatically applywith respect to any base salary or Annual Bonus payable for any subsequent PlanYear.  Amounts deferred under the Planshall not be taken into account for purposes of determining contributions orallocations under the Savings Plan.

 

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

 

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

 

                (e)           Timing ofAdjustments. The adjustments toAccounts for deemed investments as provided in Paragraph 5(d) shall be madefrom time to time at such intervals as determined by the Plan Committee. ThePlan Committee may determine the frequency of account adjustments by referenceto the frequency of Account adjustments under another plan sponsored by aParticipating Employer. The amount of the adjustment shall equal the amountthat the Participant’s Account would have earned (or lost) for the period sincethe last adjustment had the Account actually been invested in the deemedinvestment vehicle(s) designated by the Participant for the period.

 

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

 

 

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(i)                                     Time of Payment. Except asotherwise provided in subparagraphs (v) and (vi) below, a Participant’s Accountshall become payable following the Participant’s termination of employment withthe Participating Employers for any reason other than death pursuant tosubparagraph (ii) below or following the Participant’s death pursuant tosubparagraph (iii) below.

 

(ii)                                  Method ofPayment: Termination of Employment Other Than Death. AParticipant’s Account shall be payable commencing as soon as administrativelypracticable following the Participant’s termination of employment with theParticipating Employers for any reason other than death in the form of either asingle cash payment or five (5) or ten (10) annual installments as elected bythe Participant pursuant to this subparagraph (ii). At the time the Participantfirst makes a deferral election under the Plan, the Participant shall elect themethod of payment, which election shall become immediately effective.Thereafter, the Participant may change such payment method election at suchtime or times and pursuant to such procedures as established by the PlanCommittee from time to time, provided that no such election to change themethod of payment shall become effective unless the Participant remainsemployed with the Participating Employers for at least twelve (12) months fromthe date such election is made. If a Participant fails to make a paymentelection under this subparagraph (ii), the method of payment shall be a singlecash payment. In addition, a Participant receiving installment payments mayelect, at such time and pursuant to such procedures as the Plan Committee mayestablish from time to time, to receive a single cash payment of the unpaidportion of the installment payments, provided that ten percent (10%) of theamount payable shall be forfeited. Notwithstanding anything herein to the contrary, if at the time oftermination of employment with the Participating Employers the Participant hasless 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 anyinstallment payment election previously made by the Participant.

 

(iii)                               Method ofPayment: Death. If a Participant dies after having commencedinstallment payments, any remaining unpaid installment payments shall be paidto the Participant’s Beneficiary as and when they would have otherwise beenpaid to the Participant had the Participant not died. If a Participantterminates employment due to death, the Participant’s Account shall be payableto the Participant’s Beneficiary commencing as soon as administrativelypracticable after the Participant’s death in the form of either a single cashpayment or five (5) or ten (10) annual installments as elected by theParticipant pursuant to this subparagraph (iii). Such payment method electionshall be made by the Participant at such time or times and pursuant to suchprocedures as the Plan Committee may

 

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                                                establish fromtime to time. If a Participant fails to make a payment method election underthis subparagraph (iii), the method of payment to the Beneficiary shall be asingle cash payment.  In addition, aBeneficiary receiving installment payments may elect, at such time and pursuantto such procedures as the Plan Committee may establish from time to time, toreceive a single cash payment of the unpaid portion of the installmentpayments, provided that ten percent (10%) of the amount payable shall beforfeited.  Notwithstanding anythingherein to the contrary, if at the time of death the Participant has less thantwo years of employment (measured from the Participant’s hire date), then themethod of payment to the Beneficiary shall be a single cash payment regardlessof any installment payment election previously made by the Participant.

 

(iv)                              Installments. If amountsare payable to a Participant (or Beneficiary, if applicable) in the form ofannual installments, the first annual installment shall be paid as soon asadministratively practicable after the Participant’s termination of employmentor death, as applicable, and each subsequent annual installment shall be paidon or about the anniversary of the first installment. During the installmentpayment period, the Participant (or Beneficiary, if applicable) shall have theright to direct the deemed investment of the Account in accordance withParagraph 5(d) above. The amount payable on each payment date shall be equal tothe balance of the Account on the applicable payment date divided by the numberof remaining installments (including the installment then payable).

 

(v)                                 In-ServiceWithdrawal: Life Event. At the time a Participant makes a deferralelection, the Participant may elect, in accordance with such procedures as thePlan Committee may establish from time to time, to have all or a portion of theamount to be deferred pursuant to such election to become payable to theParticipant in a single cash payment on a date specified by the Participant insuch election that is no earlier than the beginning of the fourth Plan Yearafter the Plan Year to which the deferral election relates.  The amount subject to such payment electionshall be subject to adjustments for deemed investments pursuant to Sections5(d) and (e) above through the close of business on or around the date on whichthe elected amount becomes payable, as determined by the Plan Committee in itssole discretion.  Such amount, asadjusted, shall become payable to the Participant on the specified dateprovided the Participant has not terminated employment with the ParticipatingEmployers or died prior to such date.

 

(vi)                              In-ServiceWithdrawal: On Demand.  AParticipant may elect, in accordance with such procedures as the Plan Committeemay establish from time to time, to receive an unscheduled payment of up to onehundred 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 beforfeited from the Participant’s Account and (ii) for a Participant in activeservice, the Participant shall be ineligible to participate in the Plan for theremainder of the Plan Year in which the withdrawal is made.

 

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

 

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

 

                (h)           Statements of Account. Each Participant shallreceive a statement of the Participant’s Account balance no less frequentlythan annually.

 

**6.             Amendment,Modification and Termination of the Plan:**

 

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

 

**7.             Claims Procedures:**

 

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

 

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**8.             Indemnityof Plan Committee:**

 

                The Participating Employersshall indemnify and hold harmless the Plan Committee (and each individualmember thereof) and any Associate to whom the duties of the Plan Committee maybe delegated from and against any and all claims, losses, damages, expenses orliabilities 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 anyindividual member thereof) or any such Associate.

 

**9.             Notice:**

 

                Any notice or filing required orpermitted to be given to the Plan Committee under the Plan shall be sufficientif 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 theFamily Dollar Compensation Deferral Plan

                P.O. Box 1017

                Charlotte, NC 28201-1017

 

                Such notice shall be deemedgiven as of the date of delivery or, if delivery is made by mail, as of thedate shown on the postmark on the receipt for registration orcertification.  Any notice or filingrequired or permitted to be given to a Participant under the Plan shall besufficient if in writing and hand-delivered, or sent by registered or certifiedmail, 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 ofthe United States to the extent applicable, and to the extent such laws are notapplicable, by the laws of the state of North Carolina.

 

**11.          Miscellaneous:**

 

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

 

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