**Exhibit10(iii)**

 
| STATE OF NORTH CAROLINA |   | AMENDMENT TO         |
|-------------------------|--------|----------------------|
|                    |   | EMPLOYMENT AGREEMENT |
|                    |   |                 |
| COUNTY OF MECKLENBURG   |   |                 |

 

THIS AMENDMENT, made andentered into effective the 29th day of August 2004, by and between FAMILYDOLLAR STORES, INC., a Delaware corporation (hereinafter referred to as the“Company”); and R. James Kelly (hereinafter referred to as the “Employee”);

 

W I T N E S S E T H:

 

WHEREAS, the Company and theEmployee entered into an Employment Agreement effective December 17, 1996, asamended by Amendments to Employment Agreement effective June 21, 1999,September 2, 2001, September 1, 2002, and August 31, 2003 (hereinafter referredto as the “Agreement”); and

 

WHEREAS, the Company and theEmployee desire to amend the Agreement;

 

NOW, THEREFORE, in considerationof the mutual covenants herein contained, the Company and the Employee agree asfollows:

 

1.                    Section1.04 of the Agreement is amended by adding “Idaho” to the list of statesconstituting the “Present Territory.”

 

2.                    Section2 of the Agreement is deleted and the following is substituted in lieu thereof:

 

“2.     Employment.  The Employee shall be employed by theCompany and any Affiliate in the capacity provided for in Paragraph 3 for theperiod commencing August 29, 2004 (the “Commencement Date”), and ending onAugust 27, 2005, or upon the termination of this Agreement as provided inParagraph 6.”

 

3.                    The first sentence of Section 5.01 of theAgreement is deleted and the following sentence is substituted in lieu thereof.

 

“5.01                          In consideration of the services to berendered by the Employee pursuant to this Agreement, the Company shall pay, orcause to be paid, to the Employee a weekly base salary from August 29, 2004 toAugust 27, 2005, of $8,846.16 ($460,000.00 per annum).”

 

4.                    Subparagraph (a) of Section 5.02 of theAgreement is deleted and the following subparagraphs are substituted in lieuthereof:

 

“5.02.                       In addition, the Employee shall be entitledto:

 

(a)Participate in the Company’s Target Bonus Plan, as it may be amended ormodified in any respect, including achievement of established goals, as ViceChairman for the fiscal year commencing August 29, 2004.  The Target Bonus Plan generally will givethe Employee the opportunity to earn a bonus of up to sixty-five (65%) percentof the Employee’s base salary actually received for services on and afterAugust 29, 2004, through August 27, 2005, for the fiscal year ending August 27,2005, subject to the Company’s achievement of certain financial goals to beestablished, the Employee’s performance, and all terms and conditions of theTarget Bonus Plan as in effect for such fiscal year; provided that the amountof bonus paid may not be increased by the annual individual performance ratingof the employee by the Chairman of the Board. The Employee acknowledges that he has received a copy of the form of theTarget Bonus Plan and Bonus Conditions and is familiar with the terms andconditions thereof.  Nothing containedherein shall limit the Company’s right to alter, amend or terminate the TargetBonus Plan at any time for any reason. The Employee further acknowledges that, as provided in the Target BonusPlan, in the event the Employee is not employed

 

----

 

by the Company, for whatever reason, at thetime the bonus for the fiscal year is actually paid to participants in theTarget Bonus Plan following the end of the fiscal year, the Employee will notbe entitled to receive the bonus.

 

5.                    Section 5.02 (c) of the Agreement is deletedand the following is substituted in lieu thereof:

 

“(c) Take twenty days(exclusive of Saturdays, Sundays and paid Company holidays) of vacation duringthe twelve month period commencing August 29, 2004.  Vacation time will accrue ratably during the course of saidperiod and cannot be accumulated from year to year except that up to five daysof vacation not taken in said twelve month period may be carried over to thenext twelve month period.”

 

6.       Section 6.02 of the Agreement is deleted and the following issubstituted in lieu thereof:

 

“6.02.  Upon termination of this Agreement by the Company,other than for Cause, except for the provisions of Paragraph 4, the Employee’semployment under the terms of this Agreement and all other agreements andcontracts between the Employee, the Company and the Company’s Affiliate andsubsidiary corporations, shall be terminated effective on the TerminationDate.  In the event the Companyterminates this Agreement prior to August 27, 2005, for reasons other than forCause or Medical Disability, the Company shall pay to the Employee one hundredeighty (180) days of the base salary set forth in Paragraph 5.01 above (whichshall constitute payment in full of the compensation due to the Employeehereunder).  Any such payments shall bemade in six (6) equal monthly installments with the first installment due andpayable not later than thirty (30) days after the Termination Date.  Payments made by the Company to the Employeeunder this Paragraph 6.02 are herein called “Termination Compensation.”  In the event the Employee accepts or beginsother employment as an employee, consultant or in any other capacity prior tothe date on which the last monthly installment of Termination Compensation isdue and payable, the monthly payments of any unpaid balance of the TerminationCompensation as of the date of such new employment shall be (i) eliminated ifthe monthly base salary and all other monthly remuneration and compensationfrom the new employment exceeds the monthly base salary of the Employee ineffect on the date of the notice, or (ii) reduced to the amount by which themonthly base salary of the Employee in effect on the date of the notice exceedsthe monthly base salary and all other monthly remuneration and compensationfrom the new employment.  The Employeeagrees to pursue reasonable, good faith efforts to obtain other employment in aposition suitable to his background and experience.

 

In the event this Agreement is not terminated by theCompany or the Employee for any reason prior to August 27, 2005, and theCompany and the Employee do not agree in writing before August 27, 2005, toextend the term of this Agreement beyond August 27, 2005, or to enter into anew agreement to extend the employment relationship beyond August 27, 2005,this Agreement shall terminate automatically on August 27, 2005, which shall bethe Termination Date, and the Company shall pay to the Employee sixty (60) daysof the base salary set forth in Paragraph 5.01 (which shall constitute paymentin full of the compensation due to the Employee hereunder).  Any such payments shall be made in two (2)equal monthly installments with the first installment due and payable not laterthan thirty (30) days after the Termination Date.”

 

7.                    In Section 8of the Agreement in the first sentence, delete the date “August 28, 2004” andsubstitute in lieu thereof the date “August 27, 2005,” and in the eighth linedelete “sixty (60%)” and substitute in lieu thereof “sixty-five (65%).”

 

8.                    All other terms and provisions of theAgreement shall remain in full force and effect.

 

2

----

 

IN WITNESS WHEREOF, the parties hereto haveexecuted this Agreement in triplicate, all as of the day and year first abovewritten.

 
|                        | FAMILY DOLLAR STORES, INC. |
|-----------------------------|----------------------------|
|                        |                       |
| Attest:                     | By                         | /s/ Howard R. Levine |   |
|                        |                       | Chairman of the Board |
| /s/ George R. Mahoney,  Jr. |                       |   |
| Secretary                   |                       |
|                        |                       |
| (Corporate Seal)            |                       |
|                        |                       | /s/ R. James Kelly |  (SEAL) |
|                        |                       | R. James Kelly |
|                        |                       |
| Witness:                    |                       |
|                        |                       |
| /s/ Florence W. Stanley     |                       |   |

 

3

----