**Exhibit 10.31**

[CompanyLetterhead]

 

 

 

 

July19, 2005

 

 

Mr. Robert George

10 Saddleridge Road

Holliston, MA 01746

 

Dear Robert:

 

                Pursuant to our various conversations, I amconfirming the offer by Family Dollar Stores, Inc. (the “Company”) for youremployment in the position of Executive Vice President and Chief MerchandisingOfficer. The terms of your employment are set forth below, subject to youracceptance and the approval of the Compensation Committee of the Company’sBoard of Directors.

 

StartingDate of Employment

You will begin youremployment with the Company on a full-time basis, not later than August 15,2005.

 

AnnualCompensation

Your starting annual basesalary will be $350,000 and may be increased from time to time in theCompensation Committee’s discretion. In addition, you will qualify for a bonusfor the Company’s 2006 fiscal year under our Target Bonus Program with a “target”payment of 50% of your salary, subject to all terms of said Plan and theCompany’s achievement of its earnings goals; provided that payment of 50% ofyour target bonus for the 2006 fiscal year will be made without regard to theCompany’s achievement of its target bonus earning goals.

 

StockOptions

Within the first week ofyour employment you will receive a stock option grant for the purchase of75,000 shares of the Company’s common stock pursuant to the Company’s 1989Non-Qualified Stock Option Plan.  Inaddition, you will receive a stock option grant for 70,000 shares of theCompany’s common stock as a part of the Company’s stock option grant program onor about September of 2005 and will be eligible for additional stock optiongrants in future years.  As discussed,the Company is currently considering adding a stock performance plan to itslong-term incentive (“LTI”) plan.  Ifthis program is adopted as part of our LTI program, you may receive acombination of performance

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shares and stock optionswhich will have a combined value at least as great as the 70,000 options notedabove.  Appropriate valuations withregard to these grants will be made by HayGroup Consulting.

 

CashPayments

In addition to the otherpayments set forth herein, the Company will pay you the sum of $50,000 withinthirty days of the commencement of your employment and, an additional $50,000on the first anniversary of the date of your initial employment with theCompany, whether or not you are still employed by the Company on that date.

 

SeverancePayments 

If your employment with theCompany is terminated by the Company for any reason, other than for Cause,within the initial two years of such employment, the Company will provideseverance benefits to you equal to your then current annual base salary for aperiod of one hundred twenty (120) days. Severance payments shall be made in four (4) equal monthly payments andshall be reduced or eliminated by any salary, bonus or other compensation paid,payable or earned by you during such period from any subsequent employment. Youwill use your best efforts to promptly obtain suitable employment during such severanceperiod.  For purposes of this provision, “Cause”shall mean: (i) your willful failure to comply with reasonable writtendirectives of the Board or executive management of the Company; (ii) chronicabsenteeism not resulting from an illness or medical condition that preventsyou from performing your duties for 90 days or longer; or (iii) willfulmisconduct or gross negligence.

 

Indemnification

The Company will reimburseyou for reasonable attorneys’ fees and related expenses you may incur inconnection with any action, suit or proceeding to which you may be made a partyby reason of restrictive covenants you made with your prior employer as towhich you have advised the Company.

 

OtherBenefits

You will be eligible toreceive four weeks (20 days) of vacation per year consistent with the Company’svacation policies.  In addition, you willreceive various benefits offered to other officers of the Company in accordancewith the terms of the Company’s benefit plans, effective thirty (30) days afteryour actual start date.  A summary ofthose benefits has previously been provided to you. Please note that you willqualify for our supplemental health care program (MERP) which pays 70% ofhealth care costs in addition to those covered under basic health insuranceprograms. We will also provide relocation and moving benefits as previouslyprovided to you. Of course, you will receive all of the tools useful to performyour duties at Family Dollar such as a cell phone, computer and “Blackberry”device.

 

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Robert, I believe theforegoing fully sets forth our understandings regarding your employment.  If you concur, please sign one copy of thisletter and return it to me.  We areexcited that you are joining the Family Dollar team and look forward to seeingyou soon.

 

| Sincerely,                |
|---------------------------|
|                      |
|                      |
| /s/ Howard R. Levine      |
| Howard R. Levine          |
| Chairman of the Board and |
| Chief Executive Officer   |

 

 

Accepted by:

 
| /s/ Robert George |
|-------------------|
| Robert George     |
| Date:             | 7/19/05 |

 

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