FIRST AMENDMENT TO CREDIT AGREEMENT

Exhibit 10 (ii)

 FIRST AMENDMENT TO CREDIT AGREEMENT

THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the “Amendment”) is made as of the 29th day of May, 2003 by and among FAMILY DOLLAR STORES, INC., FAMILY DOLLAR, INC. (collectively, the “Borrowers”), and WACHOVIA BANK, NATIONAL ASSOCIATION (formerly known as First Union National Bank) (the “Bank”).

RECITALS:

The Borrowers and the Bank entered into a certain Credit Agreement dated as of August 7, 2001 (as amended, modified or supplemented prior to the date hereof, including by letter amendment dated May 1, 2002, the “Credit Agreement”).  Capitalized terms used in this Amendment which are not otherwise defined in this Amendment shall have the respective meanings assigned to them in the Credit Agreement.

The Borrowers and the Bank wish to amend the Credit Agreement in certain respects, as hereinafter provided.

NOW, THEREFORE, in consideration of the Recitals and the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers and the Bank, intending to be legally bound hereby, agree as follows:

SECTION 1.  Recitals.  The Recitals are incorporated herein by reference and shall be deemed to be a part of this Amendment.

SECTION 2.  Amendments to the Credit Agreement.  The Credit Agreement is hereby amended as set forth in this Section 2.

SECTION 2.1 Amendments to Definitions. The definitions set forth in Section 1.01 of the Credit Agreement are hereby amended by amending and restating in their entirety as set forth below the following defined terms:

“Tranche A Commitment” means the obligation of the Bank to make Tranche A Loans hereunder in an aggregate principal amount up to but not exceeding Fifty Million Dollars ($50,000,000.00), as the same may be reduced pursuant to Sections 2.01(c) and 2.12 or terminated pursuant to Section 2.12.

“Tranche A Termination Date” means May 31, 2005 except to the extent extended pursuant to Section 2.01(c), or such earlier date as the Tranche A Commitment is terminated pursuant to this Agreement.

“Tranche B Commitment” means the obligation of the Bank to make Tranche B Loans hereunder in an aggregate principal amount up to but not exceeding Fifty Million Dollars ($50,000,000.00), as the same may be reduced or terminated pursuant to Section 2.12.

“Tranche B Termination Date” means May 27, 2004, or such earlier date as the Tranche B Commitment is terminated pursuant to this Agreement.

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SECTION 2.2  Amendment to Section 2.01(c).  The reference in the first sentence of Section 2.01(c) to “or seven (7) years” shall be deleted.

SECTION 2.3  Amendment to Section 2.03(c)(i).  Section 2.03(c)(i) is hereby deleted in its entirety and replaced with the following:

(i)  installments of principal each in an amount equal to one-fifth of the original principal amount of such Term Loan shall be payable on the First Anniversary and Second Anniversary of such Term Loan, and (B) thereafter (x) if the Borrower has notified the Bank pursuant to Section 2.01(c) that after the Second Anniversary installments of principal will be payable quarterly, installments of principal shall be payable in twelve (12) equal, consecutive quarterly installments each in a principal amount equal to one twelfth (1/12th) of the then outstanding principal amount of such Term Loan on the Second Anniversary after giving effect to the scheduled payment of principal on such date, with the first such quarterly installment being payable on the date occurring three (3) months after the Second Anniversary and subsequent like installments being payable every three (3) months thereafter, or (y) if the Borrower has notified the Bank pursuant to Section 2.01(c) that after the Second Anniversary installments of principal will be payable semiannually, installments of principal shall be payable in six (6) equal, consecutive semiannual installments each in a principal amount equal to one sixth (1/6th) of the then outstanding principal amount of such Term Loan after giving effect to the scheduled payment of principal on such date, with the first such semiannual installment being payable on the date occurring six (6) months after the Second Anniversary and subsequent like installments being payable every six (6) months thereafter.

SECTION 2.4  Amendment to Section 2.03(c)(ii).  Section 2.03(c)(ii) is hereby deleted in its entirety.

SECTION 3.   Conditions to Effectiveness.  The effectiveness of this Amendment and the obligations of the Bank hereunder are subject to the satisfaction of the following conditions:

(a)                 the Bank shall have received (i) from each of the Borrowers and each of the Guarantors a counterpart hereof signed by such party; (ii) from each of the Borrowers, a duly executed Trache A Note in the amount of the Tranche A Commitment, which Tranche A Notes shall replace and supercede any prior Tranche A Notes; and (iii) from each of the Borrowers, a duly executed Trache B Note in the amount of the Tranche B Commitment, which Tranche B Notes shall replace and supercede any prior Tranche B Notes;  and

(b)                the Bank shall have received corporate borrowing resolutions duly adopted by the board of directors (or the executive committee of the board of directors) of each Borrower and Guarantor authorizing the borrowings contemplated hereunder (and the obligations of the Guarantors pursuant to the Guaranty with respect thereto) and the execution, delivery, and performance of this Amendment.

SECTION 4.  No Other Amendment.  Except for the amendments set forth above, the text of the Credit Agreement and each of the other Loan Documents, including, without limitation, the Guaranty, shall

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remain unchanged and in full force and effect.  This Amendment is not intended to effect, nor shall it be construed as, a novation.  The Credit Agreement and this Amendment shall be construed together as a single agreement.  Nothing herein contained shall waive, annul, vary or affect any provision, condition, covenant or agreement contained in the Credit Agreement, except as herein amended, nor affect or impair any rights, powers or remedies under the Credit Agreement as hereby amended.  The Borrowers promise and agree to perform all of the requirements, conditions, agreement and obligations under the terms of the Credit Agreement, as hereby amended, the Credit Agreement, as amended, being hereby ratified and affirmed.  The Borrowers hereby expressly agree that the Credit Agreement, as amended, and each of the other Loan Documents, is in full force and effect.

SECTION 5.  Representations and Warranties.  Each of the Borrowers hereby represents and warrants to the Bank as follows:

(a)                 No Default or Event of Default under the Credit Agreement or any other Loan Document has occurred and is continuing unwaived by the Bank on the date hereof;

(b)                The representations and warranties of the Borrowers set forth in Article V of the Credit Agreement (as amended hereby) shall be true on and as of the date hereof.

(c)                 Each of the Borrowers has the power and authority to enter into this Amendment and to do all acts and things as are required or contemplated hereunder, or thereunder, to be done, observed and performed by it.

(d)                This Amendment has been duly authorized, validly executed and delivered by one or more authorized officers of each Borrower and constitutes a legal, valid and binding obligation of each of the Borrowers, enforceable against each of the Borrowers in accordance with its terms, provided that such enforceability is subject to general principles of equity.

(e)                 The execution and delivery of this Amendment and the performance hereunder by each of the Borrowers does not and will not require the consent or approval of any regulatory authority or governmental authority or agency having jurisdiction over any Borrower, nor be in contravention of or in conflict with the certificate of incorporation or bylaws of any Borrower, or the provision of any statute, or any judgement, order, indenture, instrument, agreement or undertaking, to which any Borrower is party or by which the assets or properties of any Borrower are or may become bound.

SECTION 6.  Counterparts.  This Amendment may be executed in multiple counterparts each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same agreement.

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SECTION 7.  Governing Law.  This Amendment shall be governed by and construed in accordance with the laws of the State of North Carolina, without reference to the conflicts or choice of law principles thereof.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed, under seal, by their respective authorized officers as of the day and year first above written.

ACKNOWLEDGED AND AGREED BY GUARANTORS:

[SIGNATURES CONTINUE ON FOLLOWING PAGE]

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