Exhibit 10.2


 


EMPLOYMENT AGREEMENT


 


This
Employment Agreement (this “Agreement”) is effective this 7th day of October,
2008 (the “Date of this Agreement”), by and between R. JAMES KELLY (“Employee”)
and Family Dollar Stores, Inc., and its successors, subsidiaries and
affiliated companies (collectively, the “Company”).  For and in consideration of the premises, the
mutual covenants and agreements hereinafter contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the Company and Employee, intending to be legally bound, hereby agree and
covenant as follows.


 


1.             Recitals. 
Employee and the Company recite the following:


 


A.            Employee
has heretofore been employed by the Company in a position of senior management
up to and through the Date of this Agreement, pursuant to a contract of
employment, dated August 18, 2005, as amended by agreement dated August 17,
2006 (as amended, the “Previous Employment Agreement”), and, understanding and
accepting the terms and conditions of Employee’s employment as set forth
herein, desires to continue to be employed by the Company in such modified
capacity, and under the terms and restrictions as set forth herein.


 


B.            The
Company desires to obtain the agreement of Employee to certain restrictive
covenants and other provisions as set forth herein in exchange for Employee’s
receipt of good and valuable consideration to which Employee was not previously
entitled, including without limitation: (i) the Company’s agreement to
provide certain severance payments as described herein, (ii) an increase
in Employee’s rate of base salary effective as of September 7, 2008, (iii) an
award opportunity under the Company’s Incentive Bonus Plan for the fiscal year
beginning August 31, 2008, (iv) an award of Performance Share Rights
under the 2006 Incentive Plan for the 3-year performance period commencing August 31,
2008, and (v) an award of stock options under the 2006 Incentive Plan with
a grant date of October 7, 2008.


 


C.            Notwithstanding
any provision of this Agreement, the Company and Employee agree that Employee’s
employment with the Company is “at will” and may be terminated at any time with
or without “Cause” without any liability or obligation of the Company except as
expressly set forth herein.


 


D.            This
Agreement revokes and supersedes all prior or contemporaneous employment
agreements, representations, promises and understandings, whether written or
oral, between the parties, including without limitation the Previous Employment
Agreement between Employee and the Company.


 


2.             Definitions.  When used in this Agreement the following
terms and provisions shall have the meanings set forth herein:


 


A.            “Cause”
–  i. 
At any time after a Change in Control, Cause means any of the following
acts by Employee, as determined by the Compensation Committee of the Board of
Directors of the Company:  (a) gross
neglect of duty, (b) prolonged absence from duty without 


 

















 


the consent of the Company, (c) intentionally
engaging in any activity that is in conflict with or adverse to the business,
reputation or other interests of the Company, or (d) willful misconduct,
misfeasance or malfeasance of duty which is reasonably determined to be
detrimental to the Company. The determination of the Compensation Committee as
to the existence of “Cause” shall be conclusive on Employee and the Company.


 


ii.             At
any time prior to a Change in Control, Cause means any of the following: (a) conviction
of a felony, any act involving moral turpitude, or a misdemeanor where imprisonment
is imposed, (b) commission of any act of theft, fraud, dishonesty, or
falsification of any employment or Company records, (c) improper
disclosure of the Company’s confidential or proprietary information, (d) Employee’s
failure to comply with reasonable written directives of the Chairman of the
Board or the Board of Directors of the Company, (e) a course of conduct
amounting to gross incompetence, (f) chronic and unexcused absenteeism, or
(g) misconduct in connection with the performance of any of Employee’s
duties, including, without limitation, misappropriation of funds or property of
the Company, securing or attempting to secure personally any profit in
connection with any transaction entered into on behalf of the Company,
misrepresentation to the Company, or any violation of law or regulations on
Company premises or to which the Company is subject.


 


B.            “Change
in Control” – Change in Control shall have the meaning set forth in Section 2.1(f) of
the 2006 Incentive Plan; provided, however, that to the extent
applicable under Section 409A of the Code, for purposes of paying certain
severance payments within 24 months after a Change in Control under Paragraph 4
below, Change in Control shall have the same meaning as set forth in any
regulations, revenue procedure, revenue rulings or other pronouncements issued
by the Secretary of the United States Treasury pursuant to Section 409A of
the Code.


 


C.            “Code”
– Code means the Internal Revenue Code of 1986, as amended from time to time,
and includes a reference to the underlying final regulations.


 


D.            “Company’s
Business” – The Company’s Business means the operation of multi-merchandise
retail stores, the majority of which stores each have 25,000 square feet or
less of total selling space, and that sell, or offer for sale, low-cost, basic
merchandise for family and home needs, including perishable and non-perishable
goods.


 


E.             “Competitive
Position” – Competitive Position means any employment with or activity or
service performed for a Competitor (whether as owner, member, manager, lender,
partner, shareholder, member, consultant, agent, employee, co-venturer or
otherwise) in which (i) Employee will use or could reasonably be expected
to use any Confidential Company Information or Trade Secrets of the Company for
the benefit of a Competitor in competition with the Company; or (ii) Employee
will hold a position, have duties, or perform services for such Competitor that
is or are the same as or substantially similar to Employee’s position with,
duties for, or services actually performed for the Company during Employee’s
employment with the Company.


 


F.             “Competitor”
– Competitor means (i) any person or entity whose business is the same as
or substantially similar to the Company’s Business; (ii) any person or
entity who 


 


2

















 


owns or operates
multi-merchandise retail stores that each have 25,000 square feet, or less, of
total selling space, and that sell, or offer for sale, merchandise that is the
same as or substantially similar to merchandise sold or offered for sale by the
Company; or (iii) any person or entity who plans to own or operate
multi-merchandise retail stores that have 25,000 square feet, or less, of total
selling space, and that will sell, or offer for sale, merchandise that is the
same as or substantially similar to merchandise sold or offered for sale by the
Company.


 


G.            “Confidential
Company Information” – Confidential Company Information means, unless otherwise
available to the public, (i) any and all information relating to the
Company’s methods of operation, source of merchandise supply, organizational
details, personnel information, marketing plans, business plans, strategic
plans, forecasts, or financial information or data; (ii) any and all
information relating to the Company’s real estate activities including, but not
limited to, landlords, prospective landlords, and lease data; (iii) the
specific terms of the Company’s agreements or arrangements with any officers,
directors, employees, vendors, suppliers, or any other entity with which the
Company may be affiliated from time to time, including, but not limited to, the
value of any consideration provided or received by the Company or the
expiration date of any such agreement or arrangement; and (iv) any and all
information of a technical or proprietary nature developed by or acquired by
the Company or made available to the Company and its employees by vendors,
suppliers, contractors, or other employees of the Company, on a confidential
basis, including, but not limited to, ideas, concepts, designs, specifications,
prototypes, techniques, technical data or know-how, formulae, methods, research
and development, and inventions, as such Confidential Company Information may
exist from time to time and whether in electronic, print or other form and all
copies, notes, or other reproductions thereof.


 


H.            “Disability”
–  Disability
shall have the meaning set forth in Section 2.1(m) of the 2006
Incentive Plan.


 


I.              “Employee’s
Termination Date” – Employee’s Termination Date means the date of Employee’s
termination of employment with the Company, regardless of:  (i) the date, cause, or manner of such
termination of employment; (ii) whether such termination is with or
without Cause or is a result of Employee’s resignation; or (iii) whether
the Company provides severance benefits to Employee under this Agreement.


 


J.             “Good
Reason” – Good Reason means any of the following acts by the Company, without
the consent of Employee (in each case, other than an isolated, insubstantial
and inadvertent action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by Employee): (i) a
reduction by the Company in Employee’s base salary; (ii) a direct or
indirect material reduction by the Company in Employee’s aggregate annual and
long-term incentive compensation opportunities, such as through a reduction in
target or maximum award opportunities, a change in the performance goals or
formulas for earning awards resulting in a material increase in the degree of
difficulty of achieving target performance, or similar changes; (iii) a
material reduction in Employee’s position, duties and responsibilities,
assignment to duties inconsistent with such position or material adverse change
in reporting relationships, (iv) with respect to an employee who is
stationed at the Company’s headquarters in Charlotte, North Carolina, or in
Matthews, North Carolina, the Company requiring Employee, without his or her
consent, to be based at any office 


 


3

















 


or location more than 35 miles
from the location at which Employee was stationed immediately prior to a Change
in Control, or (v) the continuing material breach by the Company of any
employment agreement between Employee and the Company after the expiration of
any applicable period for cure.


 


K.            “Incentive
Bonus Plan” – Incentive Bonus Plan means the annual cash incentive bonus plan
established pursuant to the Guidelines for Annual Cash Bonus adopted under the
2006 Incentive Plan.


 


L.             “Restricted
Territory” – Restricted Territory means any state in the United States of
America, or any state in Mexico, in which (i) the Company is conducting
the Company’s Business on Employee’s Termination Date, or (ii) the Company
is planning to conduct the Company’s Business on Employee’s Termination Date
and Employee has knowledge, or should have knowledge, of such Company plans.


 


M.           “Target
Bonus” – Target Bonus means Employee’s “target bonus” for the applicable fiscal
year within the meaning of Section 4 of the Incentive Bonus Plan.


 


N.            “Trade
Secret” – Trade Secret of the Company means any item of Confidential Company
Information that constitutes a trade secret under the common law or statutory
law of the State of North Carolina, namely N.C. Gen. Stat. §§ 66-152 et seq., but such definition of “Trade
Secret” shall not alter either the Company’s rights or Employee’s obligations
under any state or federal statutory or common law regarding trade secrets and
unfair trade practices.


 


O.            “2006
Incentive Plan” – 2006 Incentive Plan means the Family Dollar Stores, Inc.
2006 Incentive Plan, as in effect from time to time.


 


3.             Employment. 
The Company hereby continues the employment of Employee, in such
modified capacity, and under the terms, conditions and restrictions as set
forth herein, effective as of the Date of this Agreement, and Employee hereby
accepts such employment.


 


4.             Position, Duties and Responsibilities.  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 Employee.  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, Employee shall serve as a director and officer of the Company or any
of its constituent entities, if appropriately elected.  During the period of his employment, 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.


 


4

















 


5.             Compensation.


 


A.            In
consideration of the services to be rendered by Employee pursuant to this
Agreement, the Company shall pay, or cause to be paid, to Employee a weekly
base salary as established by the Board of Directors of the Company.  The base salary shall be reviewed annually by
the Board in connection with its annual review of executive compensation,
unless Employee’s employment shall have been terminated earlier pursuant to the
Agreements, to determine if such base salary should be increased for the
following year in recognition of services to the Company and shall initially be
set at a rate not less than Employee’s current annual salary.  The salary shall be payable at such intervals
in conformity with the Company’s prevailing practice as such practice shall be
established or modified from time to time.


 


B.            In
addition, Employee shall be entitled to:


 


i.              Participate
in the Company’s Incentive Bonus Plan, as it may be amended or modified in any
respect, including achievement of established goals, as Chairman of the Board
and Chief Executive Officer.  Employee
acknowledges that he has received a copy of the form of the Incentive Bonus
Plan and related guidelines for the operation of such Plan and is familiar with
the terms and conditions thereof. 
Nothing contained herein shall limit the Company’s right to alter, amend
or terminate the Incentive Bonus Plan at any time for any reason.


 


ii.             Employee
shall be entitled to participate in any group life insurance plan, group health
and accident plan, vacation plan, and retirement plan or other benefit plan or
arrangement which the Company has or may from time to time hereafter establish
for the benefit of its employees upon Employee’s complying with all Company
policies regarding participation in any such plan or arrangement, provided
however that such participation by Employee must be permissible under
such plan or arrangement and able to be implemented without inordinate expense


 


iii.            Additional
benefits and/or compensation in such form and in such manner and at such times
as the Board of Directors of the Company, in the exercise of its absolute
discretion, shall determine, and/or as otherwise provided by the Company,
consistent with benefits and/or compensation currently provided to Company
employees in similar positions.


 


C.            The
Company shall withhold all appropriate income and employment taxes from any
compensation or other payments otherwise due to Employee hereunder.


 


6.             Severance Upon Termination without Cause Prior to a
Change in Control.   Subject to the provisions of Paragraphs 8 and
11 hereunder, in the event of Employee’s termination by the Company without
Cause or due to Employee’s Disability or death, in each case prior to a Change
in Control, the Company shall provide Employee with the following severance
benefits:


 


5
















 


(i)            The
Company shall continue the payment of Employee’s base salary in effect on the
date of such termination of employment for a period of twenty-four (24)
months.  Such salary continuation
payments shall be paid in a series of substantially equal installments in
accordance with the regular payroll practices of the Company as in effect as of
the date of termination over said period, commencing as soon as
administratively practicable, but in no event more than sixty (60) days,
following the Participant’s date of termination of employment (except as
otherwise required by Paragraph 17). 
Such salary continuation payments shall not be considered eligible
compensation under any of the Company’s employee benefit plans.


 


(ii)           If
Employee’s date of termination of employment is after the end of the Company’s
fiscal year but prior to the payment date of any bonus under the Incentive
Bonus Plan for such fiscal year, the Company shall pay Employee the portion of
the Target Bonus earned by Employee for such fiscal year according to the terms
of the Incentive Bonus Plan (i.e., based on the Company’s applicable
performance level), without regard to any requirement in the Incentive Bonus
Plan otherwise requiring Employee to remain employed through the bonus payment
date.  In addition, Employee shall be
eligible to receive a pro rated bonus under the Incentive Bonus Plan for the
fiscal year of the Company in which such termination of employment occurs,
without regard to any requirement in the Incentive Bonus Plan otherwise requiring
Employee to remain employed through the bonus payment date, based on the number
of completed weeks during the applicable fiscal year through the date of
termination of employment and further based on the Company’s applicable
performance level for the fiscal year. 
Any such payment shall be made to Employee at the same time the Company
makes payments to other participants in the Incentive Bonus Plan.


 


(iii)          For
the number of months set forth in clause (i) above after Employee’s date
of termination of employment, but not to exceed 18 months, the Company shall
continue to provide health insurance coverage and benefits to Employee and
Employee’s dependents as if Employee’s employment had not been terminated,
including but not limited to the provision of the Company’s Medical Expense
Reimbursement Plan (the “MERP”). Any period during which health benefits are
continued pursuant to this Paragraph shall be considered to be in satisfaction
of the Company’s obligation to provide “continuation coverage” pursuant to Section 4980B
of the Code, and the period of coverage required under said Section 4980B
shall be reduced by the period during which health benefits were provided
pursuant to this Paragraph.


 


Such payments
and benefits provided by the Company to Employee as set forth in Paragraphs
6(i), (ii) and (iii) are herein called “Termination Compensation.”  Such Termination Compensation shall be
reduced, in whole or in part, by: (x) all other salary, bonus, consulting
fees or other compensation received by or payable to Employee for services
rendered in any capacity to any third party during the period that such
Termination Compensation is paid; (y) all disability or life insurance
payments made pursuant to disability or life insurance policies provided by and
paid for by the Company to Employee and which payments are received during the
period that such Termination Compensation is paid; and (z) comparable
health insurance coverage actually received by Employee for services rendered
in any capacity to any third party during the period that such Termination
Compensation is paid.  Employee agrees to
pursue 


 


6

















 


reasonable,
good faith efforts to obtain other employment in a position suitable to
Employee’s background and experience. Moreover, Employee agrees to notify the
Company within three business days of obtaining other employment during the
time period in which Employee is receiving Termination Compensation.  Notwithstanding any of the foregoing,
Employee’s Termination Compensation shall be subject to forfeiture as set forth
below in Paragraphs 8 and 11.


 


7.             Severance Payable in connection with a Change in
Control.  In the event of a
Change in Control and a termination of Employee’s employment within 24 months
after such Change in Control either by the Company without Cause or by Employee
for Good Reason, the Company shall provide Employee with the following
severance benefits:


 


(i)            The
Company shall pay to Employee in a lump sum in cash within 30 days after the
date of such termination of employment an amount equal to the product of (x) thirty
(30) months and (y) the sum of (A) Employee’s monthly base salary at
the highest rate in effect during the period beginning immediately prior to the
Change in Control through the date of Employee’s termination of employment and (B) the
monthly equivalent of the average of the bonuses, if any, paid or payable to
Employee under the Incentive Bonus Plan for each of the three (3) fiscal
years preceding the fiscal year in which Employee’s termination of employment
occurs (or such fewer number of fiscal years for which Employee was eligible to
receive a bonus under the Incentive Bonus Plan).


 


(ii)           For
the number of months represented by the multiple set forth in clause (i) (x) above
after Employee’s date of termination of employment, but not to exceed 18
months, the Company shall continue to provide health insurance coverage and
benefits to Employee and Employee’s dependents as if Employee’s employment had
not been terminated, including but not limited to the provision of the Company’s
Medical Expense Reimbursement Plan (the “MERP”). Any period during which health
benefits are continued pursuant to this Paragraph shall be considered to be in
satisfaction of the Company’s obligation to provide “continuation coverage”
pursuant to Section 4980B of the Code, and the period of coverage required
under said Section 4980B shall be reduced by the period during which
health benefits were provided pursuant to this Paragraph.  Such health insurance coverage shall be
subject to offset as provided in Paragraph 3 above for comparable coverage
received by Employee from a third party during the continuation period.


 


Employee’s
right in connection with or following a Change in Control to receive a pro rata
bonus under the Incentive Bonus Plan or any other incentive compensation
program under the 2006 Incentive Plan shall be determined in accordance with
the provisions of Section 15.7 of the 2006 Incentive Plan.


 


8.             Restrictive Covenants; Non-Disclosure Obligations;
Forfeiture of Termination Compensation.  Employee and the Company understand and agree
that the purpose of the provisions of this Paragraph 8 is to protect the
legitimate business interests of the Company, especially within the
multi-merchandise retail industry, in light of Employee’s leadership position
with the Company and exposure and access to Confidential Company Information
and Trade Secrets.  Employee and the
Company further agree and understand that 


 


7

















 


the multi-merchandise retail
industry and the Company’s Business are national in scope and that the Company
has plans to expand the Company’s Business internationally.  Employee acknowledges that the employment and
post-employment restrictions set forth in this Paragraph 8 are therefore
reasonable in that these restrictions are limited to the multi-merchandise
retail industry and to the legitimate protection of the Company’s Business, and
that they do not, and will not, unduly impair Employee’s ability to earn a
living during or after Employee’s employment with the Company.  As a result of Employee’s educational
background, prior work experience, and Employee’s employment and position with
the Company, Employee possesses general skills and knowledge enabling Employee,
if need be, to pursue profitable work in businesses not competitive with the
Company’s Business.


 


Therefore, in
consideration of good and valuable consideration to which Employee was not
previously entitled, including, without limitation, as is set forth in
Paragraph 1.B above, Employee agrees as follows:


 


A.            Covenant
Not to Compete.


 


i.              Employee
agrees that during Employee’s employment with the Company and for the period of
twelve (12) months immediately following Employee’s Termination Date (such
period not to include any period(s) of violation or period(s) of time
required for litigation to enforce the provisions of this Paragraph 8.A(i))
(the “Restricted Period”), Employee shall not, without the prior written
consent of the Company, directly or indirectly, accept, obtain, or hold a
Competitive Position within the Restricted Territory with a Competitor.  Notwithstanding the foregoing, the provisions
of this Paragraph 8.A(i) shall not apply from and after a Change in
Control.


 


ii.             Employee
agrees that in the event Employee, without the Company’s prior written consent,
directly or indirectly accepts, obtains, or holds a Competitive Position within
the Restricted Territory with a Competitor during the period between the
expiration date of the Restricted Period and the date of the Company’s final
payment to Employee of any Termination Compensation under this Agreement (the “Concluding
Compensation Period”), the Company shall be entitled to terminate any
compensation, benefits, and/or remaining payments of the Termination
Compensation otherwise payable to Employee under this Agreement and Employee
forfeits such Termination Compensation. 
Notwithstanding the foregoing, the provisions of this Paragraph 8.A(ii) shall
not apply from and after a Change in Control.


 


iii.            Notwithstanding
the foregoing, Employee may, as a passive investor, own capital stock of a
publicly held corporation, which is actively traded in the over-the-counter
market or is listed and traded on a national securities exchange, which
constitutes or is affiliated with a Competitor, so long as Employee’s ownership
is not in excess of five percent (5%) of the total outstanding capital stock of
the Competitor.


 


B.            Non-Solicitation
of Company Employees.


 


i.              Employee
understands and agrees that the relationship between the Company and each of
its employees constitutes a valuable asset of the Company and may not be 


 


8

















 


converted to Employee’s own use
or benefit, or for the use or benefit of any other third party.  Accordingly, Employee hereby agrees that
during Employee’s employment and during the Restricted Period, Employee shall
not, without the Company’s prior written consent, directly or indirectly, (A) solicit
or recruit for employment; hire; attempt to solicit or recruit for employment;
attempt to hire; or accept as an employee, consultant, contractor, or
otherwise, any Company employee, or (B) urge; encourage; induce; or
attempt to urge, encourage, or induce, any Company employee to terminate his or
her employment with Company; or (C) otherwise interfere with the Company’s
relationship with any Company employee. 
Notwithstanding the foregoing, the provisions of this Paragraph 8.B(i) shall
not apply from and after a Change in Control.


 


ii.             Employee
agrees that in the event Employee, without the Company’s prior written consent,
directly or indirectly, (A) solicits or recruits for employment; hires;
attempts to solicit or recruit for employment; attempts to hire; or accepts as
an employee, consultant, contractor, or otherwise, any Company employee, or (B) urges;
encourages; induces; or attempts to urge, encourage, or induce, any Company
employee to terminate his or her employment with Company; or (C) otherwise
interferes with the Company’s relationship with any Company employee during the
Concluding Compensation Period, the Company shall be entitled to terminate any
compensation, benefits, and/or remaining payments of the Termination
Compensation otherwise payable to Employee under this Agreement and Employee
forfeits such Termination Compensation. 
Notwithstanding the foregoing, the provisions of this Paragraph 8.B(ii) shall
not apply from and after a Change in Control.


 


C.            Non-Disclosure
of Confidential Company Information; Trade Secret Protections.  Employee recognizes and acknowledges that
during the course of Employee’s employment, the Company has provided and will
continue to provide Employee with exposure and access to Confidential Company
Information and Trade Secrets of the Company, or confidential information
belonging to other third parties who may have furnished such information to the
Company under obligations of confidentiality. 
Employee, therefore, agrees that during Employee’s employment with the
Company and at all times after Employee’s Termination Date, Employee shall not
disclose any such Confidential Company Information or Trade Secrets, or other
information subject to an obligation of the Company to keep confidential, to
any third party not employed by or otherwise expressly affiliated with the
Company for any reason or purpose whatsoever, and shall not use such
Confidential Company Information or Trade Secrets except on behalf of the
Company.


 


D.            Employee
Acknowledgement.  Employee
acknowledges and agrees that (i) the restrictive covenants in this
Paragraph 8 are reasonable in time, territory and scope, and in all other
respects; (ii) should any part or provision of any covenant be held
invalid, void or unenforceable in any court of competent jurisdiction, such
invalidity, voidness, or unenforceability shall not render invalid, void or
unenforceable any other part or provision of this Agreement; and (iii) if
any portion of the foregoing provisions is found to be invalid or unenforceable
by a court of competent jurisdiction because its duration, territory,
definition of activities or definition of information covered is considered to
be invalid or unreasonable in scope, the invalid or unreasonable terms shall be
redefined, or a new enforceable term provided, such that the intent of the
Company and Employee in agreeing to the provisions of this Agreement will not
be impaired and the provision in question shall be enforceable to the fullest 


 


9

















 


extent of the applicable
laws.  The restrictive covenants
contained herein shall be construed as agreements independent of any other
provision in this Agreement and the existence of any claim or cause of action
of Employee against the Company, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company of this
restrictive covenant.  Any decision in
one state or jurisdiction invalidating or holding unenforceable any provision
of this Paragraph 8 shall not be binding in any other state or jurisdiction.


 


9.             Other Post-Termination Covenants.


 


A.            Employee
agrees that Employee shall resign and does resign from all positions as an
officer and director of the Company and from any other positions, with such
resignations to be effective upon Employee’s Termination Date.


 


B.            Upon
Employee’s Termination Date, Employee agrees not to make any statements to the
Company’s employees, customers, vendors, or suppliers or to any public or media
source, whether written or oral, regarding Employee’s employment or termination
from the Company’s employment, except as may be approved in writing by an
executive officer of the Company in advance. 
Employee further agrees not to make any statement (including to any
media source, or to the Company’s suppliers, customers or employees) or take
any action that would disrupt, impair, embarrass, harm or affect adversely the
Company or any of the employees, officers, directors, or customers of the
Company or place the Company or such individuals in any negative light.


 


C.            Following
Employee’s Termination Date, Employee covenants to render further advice and
assistance to the Company as may be required from time to time, and to provide
all information available to Employee on matters handled by and through
Employee while employed by the Company or of which Employee has personal
knowledge, and by making available to the Company at reasonable times and
circumstances, upon request by the Company, information pertinent to its
operations in Employee’s possession; and, to the extent that it is necessary,
to cooperate with and assist the Company to conclude any matters that are
pending and which may require Employee’s assistance; provided, that he shall be
paid reasonable compensation by the Company in the event Employee is required
to expend time in the performance of such services; and provided further, that
Employee may perform such services in a manner that does not unreasonably
interfere with other employment obtained by Employee.   Employee shall be reimbursed for any
expenses incurred by Employee in the performance of the covenants herein set
forth in this Paragraph 9.C.


 


D.            In
addition, Employee agrees to cooperate with and provide assistance to the
Company and its legal counsel in connection with any litigation (including
arbitration or administrative hearings) or investigation affecting the Company,
in which, in the reasonable judgment of the Company’s counsel, Employee’s
assistance or cooperation is needed. 
Employee shall, when requested by the Company, provide testimony or other
assistance and shall travel at the Company’s request in order to fulfill this
obligation.  In connection with such
litigation or investigation, the Company shall attempt to accommodate Employee’s
schedule, shall reimburse Employee (unless prohibited by law) for any actual
loss of wages in connection therewith, shall provide Employee with reasonable
notice in advance of the times in which Employee’s 


 


10

















 


cooperation or assistance is
needed, and shall reimburse Employee for any reasonable expenses incurred in
connection with such matters.


 


10.           Delivery of Property upon Termination.  Upon Employee’s Termination Date, Employee
shall, as soon as possible but no later than two (2) days from Employee’s
Termination Date, surrender to the Company all Confidential Company Information
and Trade Secrets in Employee’s possession and return to the Company all
Company property in Employee’s possession or control, including but not limited
to, all paper records and documents, computer disks and access cards and keys
to any Company facilities.


 


11.           Enforcement of Restrictions in Paragraphs 8 and 9.  Because Employee’s services to the Company
are special and unique and because Employee has been exposed to and has had
access to Confidential Company Information and Trade Secrets, Employee and the
Company agree that any breach or threatened breach of the provisions of
Paragraphs 8.A(i), 8.B(i), 8.C, and 9 would cause irreparable injury to the
Company and that money damages would not provide an adequate remedy to the
Company.  In the event of a breach or
threatened breach of Paragraphs 8.A(i), 8.B(i), 8.C, or 9 of this Agreement,
the Company or its successors or assigns may, in addition to any other rights
and remedies existing in their favor, apply to any court of competent
jurisdiction for specific performance; temporary, preliminary, and permanent
injunctive relief; expedited discovery; or other equitable relief in order to
enforce or prevent any violations of any such provisions (without posting a
bond or other security).  The Company
shall be specifically entitled to an injunction restraining Employee from
disclosing any Confidential Company Information or Trade Secrets, and, further,
from accepting or continuing any employment with or rendering any services, or
continuing to render services, to any such third-party to whom any Confidential
Company Information or Trade Secret has been disclosed or is threatened to be
disclosed by Employee.


 


In addition to
the foregoing and not in any way in limitation thereof, or in limitation of any
right or remedy otherwise available to the Company, if Employee violates any
provision of Paragraphs 8.A(i), 8.B(i), 8.C, and 9 of this Agreement: (i) any
compensation, benefits and/or Termination Compensation then or thereafter due
from the Company to Employee shall be terminated forthwith; (ii) the
Company’s obligation to pay or provide and Employee’s right to receive such
compensation, benefits and/or Termination Compensation shall terminate and be of
no further force or effect; and (iii) upon demand by the Company, Employee
shall repay to the Company any such compensation, benefits and/or Termination
Compensation previously paid by the Company because of not being informed or
aware of Employee’s violation of a provision of Paragraphs 8.A(i), 8.B(i), 8.C,
or 9 of this Agreement; in each case without limiting or affecting Employee’s
obligations under such Paragraphs 8.A(i), 8.B(i), 8.C, or 9 or the Company’s
other rights and remedies available at law or in equity, and provided that at
least $20,000 of such compensation, benefits and/or Termination Compensation
shall be retained by Employee representing the consideration Employee received
in exchange for Employee’s release and waiver of rights or claims under
Paragraph 12 of this Agreement.


 


12.           Waiver and Release.  In consideration for the payments and
benefits provided and to be provided hereunder, Employee agrees that Employee
will, upon termination of employment and as a condition to the Company’s obligation
to pay any severance benefits under this Agreement, deliver to the Company a
fully executed release agreement substantially in a 


 


11

















 


form then used by and agreeable
to the Company and which shall fully and irrevocably release and discharge the
Company, its directors, officers, and employees from any and all claims,
charges, complaints, liabilities of any kind, known or unknown, owed to
Employee.


 


13.           Special Provisions.  This Agreement shall inure to the benefit of
any successor to or assignee of the Company, and Employee specifically agrees
on demand to execute any and all necessary documents in connection with the
performance of this Agreement.  No waiver
by either party of any breach by the other of any provision hereof shall be
deemed to be a waiver of any later or other breach thereof or as a waiver of
any such or other provision of this Agreement. 
If any provision of this Agreement shall be declared invalid or
unenforceable as a matter of law, such invalidity or unenforceability shall not
affect the validity or enforceability of any other provision of this Agreement
or of the remainder of this Agreement as a whole.


 


14.           Complete Agreement.  This Agreement sets forth all of the terms of
the understanding between the parties with reference to the subject matter set
forth herein and may not be waived, changed, discharged or terminated orally or
by any course of dealing between the parties, but only by an instrument in
writing signed by the party against whom any waiver, change, discharge or
termination is sought.  This Agreement
revokes and supersedes all prior or contemporaneous agreements,
representations, promises and understandings, whether written or oral, between
the parties, including without limitation the previous Employment Agreement
between Employee and the Company dated August 18, 2005, as amended by
agreement dated August 17, 2006.


 


15.           Choice of Law; Consent to Jurisdiction.  This Agreement shall be governed
by and construed under the laws of the State of North Carolina without regard
to its choice of law or conflict of law principles.  Employee hereby expressly and irrevocably
consents  to the venue and
jurisdiction of the United States District Court for the Western District of
North Carolina, or any state court in Mecklenburg County, North Carolina.


 


16.           Notices. 
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if personally
delivered, if mailed by registered, certified or express mail, postage prepaid,
or if delivered to a recognized courier service, addressed to Employee at the
address shown on the Company’s records for tax reporting purposes or to the
Company as follows (or in either case to such other address as one party shall
give the other in the manner provided herein):


 


	
  Family Dollar Stores, Inc.

  	
   

  	
  Chairman of the Board

  
	
   

  	
   

  	
  Post Office Box 1017

  
	
   

  	
   

  	
  Charlotte, NC  28201-1017

  
	
   

  	
   

  	
   

  
	
  With copy to:

  	
   

  	
  General Counsel

  
	
   

  	
   

  	
  Family Dollar Stores, Inc.

  
	
   

  	
   

  	
  Post Office Box 1017

  
	
   

  	
   

  	
  Charlotte, NC  28201-1017

  



 


17.           Compliance with Code Section 409A.  This Agreement is intended to comply with
Code Section 409A, to the extent applicable.  Notwithstanding any provision herein to the 


 


12

















 


contrary, this Agreement shall
be interpreted, operated and administered consistent with this intent.  Each separate installment under this
Agreement shall be treated as a separate payment for purposes of determining
whether such payment is subject to or exempt from compliance with the
requirements of Code Section 409A. 
In addition, in the event that Employee is a “specified employee” within
the meaning of Section 409A of the Code (as determined in accordance with
the methodology established by the Company as in effect on the date of
termination of Employee’s employment), any payment or benefits hereunder that
are nonqualified deferred compensation subject to the requirements of Section 409A
of the Code shall be provided to Employee no earlier than six (6) months
after the date of Employee’s “separation from service” within the meaning of Section 409A
of the Code.


 


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


 


	
   

  	
   

  	
  FAMILY DOLLAR STORES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Howard R. Levine

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Chairman and CEO

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Janet G. Kelley

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EMPLOYEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ R. James Kelly

  
					



 


13