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Issuer Accelerated Share Repurchase Transaction Confirmation

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Sectors: Retail
Governing Law: New York, View New York State Laws
Effective Date: October 05, 2010
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Exhibit 10.26


CONFIDENTIAL TREATMENT REQUESTED

Date: October 5, 2010

To: Family Dollar Stores, Inc.

10401 Monroe Road

Matthews, N.C. 28105

Attn: Treasury Department, Steven Burt

Telephone: 704-849-7515

Facsimile: 704-849-2011

From WELLS FARGO SECURITIES, LLC

solely as agent of Wells Fargo Bank, National Association (the " Agent" )

Re: Issuer Accelerated Share Repurchase Transaction

(Wells Fargo Transaction Reference Number: 8228652)

Ladies and Gentlemen:

The purpose of this communication (this " Confirmation" ) is to confirm the terms and conditions of the Transaction entered into between Wells Fargo Bank, National Association (" Bank" or " Wells Fargo" ) and Family Dollar Stores, Inc. (" Counterparty" ) on the Trade Date specified below (the " Transaction" ). The terms of the Transaction shall be set forth in this Confirmation, including Schedule A hereto. This Confirmation, including Schedule A hereto, constitutes a " Confirmation" as referred to in the ISDA Master Agreement specified below.

1. This Confirmation is subject to, and incorporates, the definitions and provisions of the 2000 ISDA Definitions (including the Annex thereto) (the " 2000 Definitions" ) and the definitions and provisions of the 2002 ISDA Equity Derivatives Definitions (the " Equity Definitions" , and together with the 2000 Definitions, the " Definitions" ), in each case as published by the International Swaps and Derivatives Association, Inc. (" ISDA" ). In the event of any inconsistency between the 2000 Definitions and the Equity Definitions, the Equity Definitions will govern.

This Confirmation evidences a complete and binding agreement between Bank and Counterparty as to the terms of the Transaction to which this Confirmation relates. This Confirmation shall be subject to an agreement (the " Agreement" ) in the form of the ISDA 2002 Master Agreement (the " ISDA Form" ) as if Bank and Counterparty had executed an agreement in such form (without any Schedule but with the elections set forth in this Confirmation). The Transaction shall be the only Transaction under the Agreement.

All provisions contained in, or incorporated by reference to, the Agreement will govern this Confirmation except as expressly modified herein. In the event of any inconsistency between this Confirmation and either the Definitions or the Agreement, this Confirmation shall govern. The Transaction is a Share Forward Transaction within the meaning set forth in the Equity Definitions.

2. The terms of the particular Transaction to which this Confirmation relates are as follows:

General Terms:

Trade Date: October 5, 2010

1 Seller: Bank Buyer: Counterparty Shares: The common stock of Counterparty, par value USD 0.10 per share (Ticker Symbol: " FDO" ) Prepayment: Applicable Prepayment Amount: USD 250,000,000.00 Prepayment Date: As specified in Schedule A. Initial Shares: As specified in Schedule A. Initial Share Delivery Date: The Prepayment Date. On the Initial Share Delivery Date, Seller shall deliver a number of Shares equal to the Initial Shares to Buyer in accordance with Section 9.4 of the Equity Definitions, with the Initial Share Delivery Date deemed to be a " Settlement Date" for purposes of such Section 9.4. Exchange: New York Stock Exchange Related Exchange(s): All Exchanges Calculation Agent: Wells Fargo

Valuation Terms:

Averaging Dates: Each of the consecutive Exchange Business Days commencing on, and including, the Initial Averaging Date and ending on and including the Final Averaging Date (and such period, the " Averaging Period" ). Initial Averaging Date: As specified in Schedule A (or if such date is not an Exchange Business Day, the next following Exchange Business Day). Final Averaging Date: The Scheduled Final Averaging Date; provided that Bank shall have the right, in its absolute discretion, at any time to accelerate the Final Averaging Date to any date that is on or after the Scheduled Earliest Acceleration Date by written notice to Counterparty no later than 8:00 pm New York City time on the Exchange Business Day immediately following the date of acceleration. Scheduled Final Averaging Date: As specified in Schedule A (or if such date is not an Exchange Business Day, the next following Exchange Business Day). Scheduled Earliest Acceleration Date: As specified in Schedule A (or if such date is not an Exchange Business Day, the next following Exchange Business Day).

2 Valuation Date: The Final Averaging Date. Averaging Date Disruption: Modified Postponement, provided that notwithstanding anything to the contrary in the Equity Definitions, to the extent that a Disrupted Day occurs on an Averaging Date, the Calculation Agent may, in its good faith and commercially reasonable discretion, postpone the Scheduled Final Averaging Date in accordance with Modified Postponement (as modified herein). If any such Disrupted Day is a Disrupted Day because of a Market Disruption Event, the Calculation Agent shall determine whether (i) such Disrupted Day is a Disrupted Day in full, in which case the VWAP Price for such Disrupted Day shall not be included for purposes of determining the Settlement Price, or (ii) such Disrupted Day is a Disrupted Day only in part, in which case the VWAP Price for such Disrupted Day shall be determined by the Calculation Agent based on Rule 10b-18 eligible transactions in the Shares on such Disrupted Day effected before the relevant Market Disruption Event occurred and/or after the relevant Market Disruption Event ended, and the weighting of the VWAP Price for the relevant Averaging Dates shall be adjusted in a commercially reasonable manner by the Calculation Agent for purposes of determining the Settlement Price, with such adjustments based on, among other factors, the duration of any Market Disruption Event and the volume, historical trading patterns and price of the Shares. Market Disruption Events: The first sentence of Section 6.3(a) of the Equity Definitions is hereby amended (A) by deleting the words " during the one hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be" in the third, fourth and fifth lines thereof, and (B) by replacing the words " or (iii) an Early Closure." by " (iii) an Early Closure, or (iv) a Regulatory Disruption." Regulatory Disruption: Any event that Bank, in its reasonable discretion based on the advice of counsel, determines makes it appropriate with regard to any legal, regulatory or self-regulatory requirements or related generally applicable policies and procedures (whether or not such requirements including without limitation Rule 10b-18, Rule 10b-5, Regulation 13D-G, Regulation 14E and Regulation M under the Securities Exchange Act of 1934, as amended (the " Exchange Act" ) or related policies or procedures are imposed by law or have been voluntarily adopted by Bank), for Bank to refrain from or decrease any market activity in connection with the Transaction. Bank shall notify Counterparty as soon as reasonably practicable that a Regulatory Disruption has occurred and the Averaging Dates affected by it.

Settlement Terms:

Settlement Currency: USD Settlement Method: Physical Settlement.

3 On the Settlement Date, Seller shall deliver to Buyer a number of Shares equal to (a) (i) the Prepayment Amount divided by (ii) the Settlement Price as determined on the Valuation Date, minus (b) the Initial Shares (such number of Shares, the " Settlement Amount" ), rounded to the nearest whole number of Shares; provided, however, that if the Settlement Amount is less than zero, then Buyer shall deliver to Seller a number of Shares equal to the absolute value of the Settlement Amount (such number of Shares, the " Payment Shares" ). Notwithstanding the proviso above, if the Settlement Amount is less than zero, Buyer may cash settle its obligation to deliver the Payment Shares by delivering to Seller a notice by no later than the second Scheduled Trading Day immediately following the Valuation Date electing to cash settle its obligation to deliver the Payment Shares. Any such cash settlement shall be effected in accordance with " Cash Settlement of Payment Shares" below. Settlement Date: The date that falls one Settlement Cycle following the Valuation Date. Cash Settlement of Payment Shares: If Buyer elects to cash settle its obligation to deliver Payment Shares, then on the Valuation Date a balance (the " Settlement Balance" ) shall be created with an initial balance equal to the absolute value of the Settlement Amount. On the Settlement Date, Buyer shall deliver to Seller a U.S. dollar amount equal to the Payment Shares multiplied by a price per Share as reasonably determined by the Calculation Agent (such cash amount, the " Initial Cash Settlement Amount" ). On the Exchange Business Day immediately following the delivery of the Initial Cash Settlement Amount, Seller shall begin purchasing Shares in a commercially reasonable manner (all such Shares purchased, " Cash Settlement Shares" ). At the end of each Exchange Business Day on which Seller purchases Cash Settlement Shares, Seller shall reduce (i) the Settlement Balance by the number of Cash Settlement Shares purchased on such Exchange Business Day and (ii) the Initial Cash Settlement Amount by the aggregate purchase price (including actual commissions not to exceed USD0.02 per Share) of such Cash Settlement Shares purchased on such Exchange Business Day. If, on any Exchange Business Day, the Initial Cash Settlement Amount is reduced to or below zero but the Settlement Balance is above zero, Seller shall notify Buyer and Buyer shall (i) deliver to Seller or as directed by Seller on the next Exchange Business Day after notice an additional U.S. dollar amount (an " Additional Cash Settlement Amount" ) equal to the Settlement Balance as of such Exchange Business Day multiplied by a price per Share as reasonably determined by the Calculation Agent. This provision shall be applied successively until the Settlement Balance is reduced to zero. On the Exchange Business Day that the Settlement Balance is reduced to zero, Seller shall return to Buyer any unused portion of the Initial Cash Settlement Amount or the Additional Cash Settlement Amount, as the case may be. For the avoidance of doubt, any purchases of Cash Settlement Shares contemplated by this paragraph shall be made in accordance with the timing, price and volume restrictions contained in subparagraphs (2), (3), and (4) of paragraph (b) of Rule 10b-18 under the Exchange Act (" Rule 10b-18" ).

4 Settlement Price: The arithmetic average of the VWAP Prices for all Averaging Dates minus Price Adjustment. Price Adjustment: As specified in Schedule A. VWAP Price: For any Averaging Date, the Rule 10b-18 dollar volume weighted average price per Share for such day based on transactions executed during such day, as reported on Bloomberg Page " FDO AQR SEC" (or any successor thereto) or, in the event such price is not so reported on such day for any reason, as reasonably determined by the Calculation Agent. Excess Dividend Amount: For the avoidance of doubt, all references to the Excess Dividend Amount in Section 9.2(a)(iii) of the Equity Definitions shall be deleted. Other Applicable Provisions: To the extent either party is obligated to deliver Shares hereunder, the provisions of the last sentence of Section 9.2 (except if Counterparty is delivering Private Shares), Sections 9.8, 9.9, 9.10, 9.11 (except that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws that exist as a result of the fact that Counterparty is the Issuer of the Shares) and 9.12 of the Equity Definitions will be applicable as if " Physical Settlement" applied to the Transaction.

Share Adjustments:

Potential Adjustment Event: Notwithstanding anything to the contrary in Section 11.2(e) of the Equity Definitions, an Extraordinary Dividend shall not constitute a Potential Adjustment Event. Method of Adjustment: Calculation Agent Adjustment It shall constitute an additional Potential Adjustment Event if the Scheduled Final Averaging Date is postponed pursuant to " Averaging Date Disruption" above, in which case the Calculation Agent shall, in its commercially reasonable discretion, adjust any relevant terms of the Transaction as the Calculation Agent determines appropriate to account for the economic effect on the Transaction of such postponement. Extraordinary Dividend: For any calendar quarter occurring (in whole or in part) during the Relevant Period, any dividend or distribution on the Shares with an ex-dividend date occurring during such calendar quarter (other than any dividend or distribution of the type described in Section 11.2(e)(i) or Section 11.2(e)(ii)(A) of the Equity Definitions) (a " Dividend" ) the amount or value of which (as determined by the Calculation Agent), when aggregated with the amount or value (as determined by the Calculation Agent) of any and all previous Dividends with ex-dividend dates occurring in the same calendar quarter, exceeds the Ordinary Dividend Amount.

5 Ordinary Dividend Amount: As specified in Schedule A. Early Ordinary Dividend Payment: If an ex-dividend date for any dividend that is not an Extraordinary Dividend occurs during any calendar quarter occurring (in whole or in part) during the Relevant Period (as defined below) and is prior to the Scheduled Ex-Dividend Date for such calendar quarter, the Calculation Agent shall make adjustment to the exercise, settlement, payment or any other terms of the Transaction as the Calculation Agent determines appropriate to account for the economic effect on the Transaction of such event. Scheduled Ex-Dividend Date: As specified in Schedule A.

Extraordinary Events:

Consequences of Merger Events: (a) Share-for-Share: Modified Calculation Agent Adjustment (b) Share-for-Other: Cancellation and Payment (c) Share-for-Combined: Cancellation and Payment Tender Offer: Applicable Consequences of Tender Offers: (a) Share-for-Share: Modified Calculation Agent Adjustment (b) Share-for-Other: Modified Calculation Agent Adjustment (c) Share-for-Combined: Modified Calculation Agent Adjustment Composition of Combined Consideration: Not Applicable Consequences of Announcement Events: Modified Calculation Agent Adjustment as set forth in Section 12.3(d) of the Equity Definitions; provided that references to " Tender Offer" shall be replaced by references to " Announcement Event" and references to " Tender Offer Date" shall be replaced by references to " Announcement Date." An Announcement Event shall be an " Extraordinary Event" for purposes of the Equity Definitions, to which Article 12 of the Equity Definitions is applicable.

6 Announcement Event: The occurrence of an Announcement Date in respect of a potential Acquisition Transaction (as defined in Section 9 below). Announcement Date: The date of the first public announcement in relation to an Acquisition Transaction, or any publicly announced change or amendment to the announcement giving rise to an Announcement Date.

Provisions applicable to Merger

Events and Tender Offers:


The consequences set forth opposite " Consequences of Merger Events" and " Consequences of Tender Offers" above shall apply regardless of whether a particular Merger Event or Tender Offer relates to an Announcement Date for which an adjustment has been made pursuant to Consequences of Announcement Events, without duplication of any such adjustment. Nationalization, Insolvency or Delisting: Cancellation and Payment; provided that in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it will also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Market or the NASDAQ Global Select Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.

Additional Disruption Events:

Change in Law: Applicable Failure to Deliver: Applicable Insolvency Filing: Applicable Hedging Disruption: Not Applicable Increased Cost of Hedging: Not Applicable Loss of Stock Borrow: Applicable Maximum Stock Loan Rate: 200 basis points per annum Increased Cost of Stock Borrow: Applicable Initial Stock Loan Rate: 25 basis points per annum Hedging Party: For all applicable Additional Disruption Events, Bank


Determining Party: For all Extraordinary Events and Additional Disruption Events, Bank

7 Non-Reliance: Applicable

Agreements and Acknowledgments

Regarding Hedging Activities: Applicable Additional Acknowledgments: Applicable

3. Account Details :


(a) Account for delivery of Shares to Counterparty:


American Stock Transfer & Trust Company, LLC

DTC No.:

(b) Account for payments to

Counterparty:


Bank of America, N.A.

ABA#

Account #

(c) Account for payments to Bank:

Wells Fargo Bank, N.A.

ABA

Internal acct no.

A/C name:

4. Offices :


(a) The Office of Counterparty for the Transaction is: Counterparty is not a Multibranch Party

(b) The Office of Bank for the Transaction is: New York

5. Notices : For purposes of this Confirmation:


(a) Address for notices or communications to Counterparty:

Family Dollar Stores, Inc.

10401 Monroe Road

Matthews, N.C. 28105

Attn: Treasury Department, Steven Burt

Telephone: 704-849-7515

Facsimile: 704-849-2011

Email: sburt@familydollar.com


(b) Address for notices or communications to Bank:

Wells Fargo Bank, N.A.

375 Park Avenue

New York, NY 10152

Attention: Structured Derivatives Support

Telephone No.: 212-214-6101

Facsimile No.: 212-214-5913

8


Trader' s Contact Information:

Mark Kohn or Head Trader

Telephone: 212-214-6089

Facsimile: 212-214-8914

6. Additional Provisions Relating to Transactions in the Shares .

(a) Counterparty acknowledges and agrees that Bank may, during the period from the date hereof to the Valuation Date or, if later, the date on which all Shares or other consideration deliverable or payable hereunder, including without limitation in connection with a termination or cancellation of the Transaction, have been delivered or paid (the " Relevant Period" ), purchase Shares in connection with the Transaction, which Shares may be delivered to Counterparty. Such purchases will be conducted independently of Counterparty. The timing of such purchases by Bank, the number of Shares purchased by Bank on any day, the price paid per Share pursuant to such purchases and the manner in which such purchases are made, including without limitation whether such purchases are made on any securities exchange or privately, shall be within the absolute discretion of Bank. It is the intent of the parties that the Transaction comply with the requirements of Rule 10b5-1(c)(1)(i)(B) of the Exchange Act, and the parties agree that this Confirmation shall be interpreted to comply with the requirements of Rule 10b5-1(c), and Counterparty shall not take any action that results in the Transaction not so complying with such requirements. Without limiting the generality of the preceding sentence, Counterparty acknowledges and agrees that (A) Counterparty does not have, and shall not attempt to exercise, any influence over how, when or whether Bank effects any purchases of Shares in connection with the Transaction, (B) during the period beginning on (but excluding) the date of this Confirmation and ending on (and including) the last day of the Relevant Period, neither Counterparty nor its officers or employees shall, directly or indirectly, communicate any information regarding Counterparty or the Shares to any employee of Bank or its Affiliates (as defined in Rule 405 of the Securities Act of 1933, as amended (the " Securities Act" )) responsible for trading the Shares in connection with the transactions contemplated hereby, (C) Counterparty is entering into the Transaction in good faith and not as part of a plan or scheme to evade compliance with federal securities laws including, without limitation, Rule 10b-5 promulgated under the Exchange Act and (D) Counterparty will not alter or deviate from this Confirmation or enter into or alter a corresponding hedging transaction with respect to the Shares. Counterparty also acknowledges and agrees that any amendment, modification, waiver or termination of this Confirmation must be effected in accordance with the requirements for the amendment or termination of a " plan" as defined in Rule 10b5-1(c) under the Exchange Act. Without limiting the generality of the foregoing, any such amendment, modification, waiver or termination shall be made in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5 under the Exchange Act, and no such amendment, modification or waiver shall be made at any time at which Counterparty or any officer or director of Counterparty is aware of any material nonpublic information regarding Counterparty or the Shares.

(b) Counterparty agrees that neither Counterparty nor any of its Affiliates or agents shall take any action that would cause Regulation M promulgated under the Exchange Act (" Regulation M" )
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