FAMILY DOLLAR STORES INC
I - CREDIT AGREEMENT
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<PRE>
<B>
                                CREDIT AGREEMENT
</B>
                           Dated as of August 7, 2001

                                     Between
<B>
                           FAMILY DOLLAR STORES, INC.

                                       and

                              FAMILY DOLLAR, INC.,
</B>
                                       as

                                    Borrower,

                                       and
<B>
                           FIRST UNION NATIONAL BANK,
</B>
                                     as Bank

                                U.S. $50,000,000



                              ___________________



<B>
                                TABLE OF CONTENTS
</B>
This Table of Contents is not part of the  Agreement to which it is attached but
is for convenience of reference.


<B>ARTICLE I DEFINITIONS</B>........................................................1
     SECTION 1.01. <U>Definitions</U>...............................................1
     SECTION 1.02. <U>Accounting Terms and Determinations</U>......................10
     SECTION 1.03. <U>Classes and Types of Loans</U>...............................10

<B>ARTICLE II LOANS</B>............................................................10
     SECTION 2.01. <U>Commitments</U>..............................................10
     SECTION 2.02. <U>Notes</U>....................................................11
     SECTION 2.03. <U>Repayment of Loans</U>.......................................11
     SECTION 2.04. <U>Interest</U>.................................................12
     SECTION 2.05. <U>Borrowing Procedure</U>......................................13
     SECTION 2.06. <U>Prepayments. Conversions. and Continuations of Loans</U>.....13
     SECTION 2.07. <U>Minimum Amounts</U>..........................................14
     SECTION 2.08. <U>Certain Notices</U>..........................................14
     SECTION 2.09. <U>Use of Proceeds</U>..........................................14
     SECTION 2.10  <U>Facility Fee</U>.............................................15
     SECTION 2.11. <U>Computations</U>.............................................15
     SECTION 2.12. <U>Reduction or Termination of Commitments</U>..................15
     SECTION 2.13. <U>Payments</U>.................................................15
     SECTION 2.14. <U>Extension of Tranche A Termination Date</U>..................15
     SECTION 2.15. <U>Extension of Tranche B Termination Date</U>..................15
     SECTION 2.16. <U>Lending Office</U>...........................................16

<B>ARTICLE III CHANGE IN CIRCUMSTANCES</B>.........................................16
     SECTION 3.01. <U>Increased Cost and Reduced Return</U>........................16
     SECTION 3.02. <U>Limitation on LIBOR Loans</U>................................17
     SECTION 3.03. <U>Illegality</U>...............................................17
     SECTION 3.04. <U>Compensation</U>.............................................18

<B>ARTICLE IV CONDITIONS</B>.......................................................18
     SECTION 4.01. <U>Initial Tranche A Loan or Tranche B Loan</U>.................18
     SECTION 4.02. <U>Each Tranche A Loan or Tranche B Loan</U>....................19
     SECTION 4.03. <U>Term Loans</U>...............................................19

<B>ARTICLE V REPRESENTATIONS AND WARRANTIES</B>....................................20
     SECTION 5.01. <U>Existence</U>................................................20
     SECTION 5.02. <U>Financial Statements</U>.....................................20
     SECTION 5.03. <U>Authorization: No Breach</U>.................................20
     SECTION 5.04. <U>Litigation</U>...............................................21
     SECTION 5.05. <U>Enforceability</U>...........................................21
     SECTION 5.06. <U>Approvals</U>................................................21
     SECTION 5.07. <U>Compliance with Laws</U>.....................................21
     SECTION 5.08. <U>Ownership of Property; Liens</U>.............................21

<B>ARTICLE VI COVENANTS</B>........................................................21
     SECTION 6.01. <U>Information</U>..............................................21
     SECTION 6.02. <U>Fundamental Obligations</U>..................................22
     SECTION 6.03. <U>Liens</U>....................................................23
     SECTION 6.04. <U>Leverage Ratio</U>...........................................24
     SECTION 6.05. <U>Consolidated Fixed Charge Coverage Ratio</U>.................24
     SECTION 6.06. <U>Disposition of Property</U>..................................24
     SECTION 6.06. <U>Mergers, Consolidations Etc</U>..............................25

<B>ARTICLE VII DEFAULT</B>.........................................................25
     SECTION 7.01. <U>Events of Default</U>........................................25
     SECTION 7.02. <U>Remedies</U>.................................................27

<B>ARTICLE VIII MISCELLANEOUS</B>..................................................28
     SECTION 8.01. <U>Right of Set-off</U>.........................................28
     SECTION 8.02. <U>No Waiver Cumulative Remedies</U>............................28
     SECTION 8.03. <U>Successors and Assigns</U>...................................28
     SECTION 8.04. <U>Amendments</U>...............................................29
     SECTION 8.05. <U>Notices</U>..................................................29
     SECTION 8.06. <U>Counterparts</U>.............................................29
     SECTION 8.07. <U>Severability</U>.............................................29
     SECTION 8.08. <U>Controlling Agreement</U>....................................29
     SECTION 8.09. <U>Survival</U>.................................................29
     SECTION 8.10  <U>Governing Law</U>............................................29
     SECTION 8.11  <U>WAIVER OF JURY TRIAL</U>.....................................30
     SECTION 8.12  <U>ENTIRE AGREEMENT</U>.........................................30
     SECTION 8.13  <U>Confidentiality</U>..........................................30



<B>Exhibits to Credit Agreement:</B>


Exhibit A-1   -   Form of Tranche A Note (Family Dollar Stores, Inc.)
Exhibit A-2   -   Form of Tranche A Note (Family Dollar, Inc.)
Exhibit B-1   -   Form of Tranche B Note (Family Dollar Stores, Inc.)
Exhibit B-2   -   Form of Tranche B Note (Family Dollar, Inc.)
Exhibit C     -   Form of Term Note
Exhibit D     -   Form of Guarantee Agreement



                              ___________________


<B>
                                CREDIT AGREEMENT
</B>
     CREDIT  AGREEMENT  (the  "Agreement")  dated as of August 7, 2001,  between
FAMILY DOLLAR  STORES,  INC., a Delaware  corporation  ("FDSI"),  FAMILY DOLLAR,
INC.,  a North  Carolina  corporation  ("FDI")  (FDSI  and FDI are  collectively
referred to herein as the "Borrower"), and FIRST UNION NATIONAL BANK, a national
banking association (the "Bank").

     The parties hereto agree as follows:

<B>
                                   ARTICLE I
                                  DEFINITIONS
</B>
     SECTION 1.01. <U>Definitions.</U> As used in this Agreement, the following
terms have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):

          "<U>Adjusted CD Rate</U>" means, for any day, the rate per annum
     (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by
     the Bank to be equal to the sum of (a) the quotient obtained by dividing
     (i) the CD Rate for such day by (ii) 1 minus the Domestic Reserve
     Percentage plus (b) the Assessment Rate.

          "<U>Adjusted LIBOR Rate</U>" means, for any LIBOR Loan for any
     Interest Period therefor, the rate per annum (rounded upwards, if
     necessary, to the nearest 1/100 of 1%) determined by the Bank to be equal
     to the quotient obtained by dividing (a) LIBOR for such Interest Period by
     (b) 1 minus the LIBOR Reserve Percentage for such LIBOR Loan for such
     Interest Period.

          "<U>Affiliate</U>" means, with respect to any Person, (i) any Person
     that directly, or indirectly through one or more intermediaries, controls
     such Person (a "Controlling Person") or (ii) any Person that is controlled
     by or under common control with a Controlling Person. As used herein, the
     term "control" means possession, directly or indirectly, of the power to
     direct or cause the direction of the management of a Person by voting
     securities, by contract, or otherwise.

          "<U>Applicable Lending Office</U>" means, for each Type of Loan, the
     "Lending Office" of the Bank (or of an Affiliate of the Bank) designated
     for such Type of Loan on the signature pages hereof or such other office of
     the Bank (or of an Affiliate of the Bank) as the Bank may from time to time
     specify to the Borrower as the office by which its Loans of such Type are
     to be made and maintained.

          "<U>Applicable Margin</U>" means 0.275%.

          "<U>Assessment Rate</U>" means, for any day, the annual assessment
     rate (rounded upwards, if necessary, to the nearest 1/100 of 1%) which is
     payable by the Bank to the Federal Deposit Insurance Corporation (or any
     successor) for deposit insurance for Dollar time deposits with the Bank at
     its Principal Office as determined by the Bank. The Adjusted CD Rate shall
     be adjusted automatically on and as of the effective date of any change in
     the Assessment Rate.

          "<U>Business Day</U>" means any day except a Saturday, Sunday, or
     other day on which banks in Charlotte, North Carolina, are authorized by
     law to close and, if the applicable Business Day relates to LIBOR Loans, on
     which commercial banks in London are open for international business
     (including dealings in Dollar deposits in the London interbank market).

          "<U>CD Loans</U>" means Tranche A Loans and Tranche B Loans that bear
     interest at rates based upon the Adjusted CD Rate.

          "<U>CD Rate</U>" means, for any day, the rate per annum equal to the
     interest rate for certificates of deposit in the secondary market with
     maturities of three (3) months as published for such day in Federal Reserve
     Statistical Release H.15 or any successor publication, or if such day is
     not a Business Day, the rate published for the preceding Business Day.

          "<U>Class</U>" shall have the meaning specified in Section 1.03.

          "<U>Commitments</U>" means the Tranche A Commitment and the Tranche B
     Commitment.

          "<U>Consolidated Debt</U>" means, at any time, the total Debt of the
     Borrower and its Subsidiaries which would be shown on a consolidated
     balance sheet of the Borrower and its Subsidiaries prepared in accordance
     with GAAP at such time.

          "<U>Consolidated EBITR</U>" means, for any period, for the Borrower
     and its Subsidiaries on a consolidated basis, an amount equal to the sum of
     (a) Consolidated Net Income, (b) Consolidated Interest Charges, (c) the
     amount of taxes, based on or measured by income, used or included in the
     determination of such Consolidated Net Income, and (d) total Lease Rentals.

          "<U>Consolidated Fixed Charge Coverage Ratio</U>" means, as of any
     date of determination, the ratio of Consolidated EBITR for the period of
     the four fiscal quarters ending on such date to the sum of (a) total
     Interest Charges for the period of the four fiscal quarters ending on such
     date, and (b) total Lease Rentals for the period of the four fiscal
     quarters ending on such date.

          "<U>Consolidated Net Income</U>" means, with respect to any period,
     the net income (or loss) from continuing operations and after extraordinary
     items (excluding gains or losses from dispositions of Property) of the
     Borrower and its Subsidiaries for such period (taken as a cumulative
     whole), as determined in accordance with GAAP.

          "<U>Consolidated Net Worth</U>" means, at any time,

               (a) the total assets of the Borrower and its Subsidiaries which
          would be shown as assets on a consolidated balance sheet of the
          Borrower and its Subsidiaries as of such time prepared in accordance
          with GAAP, after eliminating all amounts properly attributable to
          minority interests, if any, in the stock and surplus of
          Subsidiaries,<U>minus</U>

               (b) the total liabilities of the Borrower and its Subsidiaries
          which would be shown as liabilities on a consolidated balance sheet of
          the Borrower and its Subsidiaries as of such time prepared in
          accordance with GAAP.

          "<U>Continue", "Continuation</U>", and "Continued" shall refer to a
     continuation pursuant to Section 2.06 of a LIBOR Loan as a LIBOR Loan from
     one Interest Period to the next Interest Period.

          "<U>Convert", "Conversion",</U> and "<U>Converted</U>" shall refer to
     the conversion pursuant to Section 2.06 or Article III of one Type of
     Tranche A Loan or Tranche B Loan into another Type of Tranche A Loan or
     Tranche B Loan, as the case may be.

          "<U>Debt</U>" means as to any Person at any time (without
     duplication): (a) all obligations of such Person for borrowed money, (b)
     all obligations of such Person evidenced by bonds, notes, debentures, or
     other similar instruments, (c) all obligations of such Person to pay the
     deferred purchase price of Property or services, except trade accounts
     payable of such Person arising in the ordinary course of business that are
     not past due by more than ninety (90) days, (d) all capital lease
     obligations and Synthetic Lease Obligations of such Person, (e) all Debt or
     other obligations of others Guaranteed by such Person, (f) all obligations
     secured by a Lien existing on Property owned by such Person whether or not
     the obligations secured thereby have been assumed by such Person or are
     non-recourse to the credit of such Person, (g) all reimbursement
     obligations of such Person (whether contingent or otherwise) in respect of
     letters of credit, bankers' acceptances, surety or other bonds and similar
     instruments, (h) all obligations of such Person to redeem or retire shares
     of capital stock or other equity securities of such Person, and (i) all
     obligations of such Person in respect of interest rate protection
     agreements, foreign currency exchange agreements, commodity purchase or
     option agreements, or other interest or exchange rate or price hedging
     agreements.

          "<U>Debtor Relief Laws</U>" means the Bankruptcy Code of the United
     States of America and all other applicable liquidation, conservatorship,
     bankruptcy, moratorium, rearrangement, receivership, insolvency,
     reorganization, suspension of payments, or similar debtor relief laws from
     time to time in effect affecting the rights of creditors generally.

          "<U>Default</U>" means an Event of Default or the occurrence of an
     event or condition that with notice or lapse of time or both would become
     an Event of Default.

          "<U>Default Rate</U>" means, with respect to any principal of any Loan
     or any other amount payable by the Borrower under this Agreement, a rate
     per annum during the period from and including the due date to but
     excluding the date on which such amount is paid in full equal to two
     percent (2%) <U>plus</U> the rate of interest that would otherwise be
     applicable pursuant to this Agreement.

          "<U>Dollars</U>" and "<U>$</U>" mean lawful money of the United States
     of America.

          "<U>Domestic Reserve Percentage</U>" means for any day that percentage
     (expressed as a decimal) which is in effect on such day, as prescribed by
     the Board of Governors of the Federal Reserve System (or any successor) for
     determining the actual reserve requirement (including, without limitation
     any basic, supplemental, or emergency reserves) for a member bank of the
     Federal Reserve System in New York City with deposits exceeding one billion
     Dollars in respect of new certificates of deposit having a maturity of
     three (3) months and in an amount of $100,000 or more. In the event that
     the foregoing reserve requirement is required by law to be determined on
     the basis of the aggregate of such deposits of the Bank, the Bank may use
     any reasonable allocation or attribution methods in determining the
     Domestic Reserve Percentage. The Adjusted CD Rate shall be adjusted
     automatically on and as of the effective date of any change in the Domestic
     Reserve Percentage.

          "<U>Equity Issuance</U>" means (a) any issuance or sale by the
     Borrower or any of its Subsidiaries after the date hereof of (i) any
     capital stock of such issuing or selling Person, (ii) any warrants or stock
     options exercisable in respect of any capital stock of such issuing or
     selling Person or (iii) any other security or instrument representing an
     equity interest (or their right to obtain an equity interest) in the
     issuing or selling Person, or (b) the receipt by the Borrower or any of its
     Subsidiaries after the date hereof of any capital contribution received
     (whether or not evidenced by any equity security issued by the recipient of
     such contribution); <U>provided</U>, however, that the term "Equity
     Issuance" shall not include (x) any such issuance or sale by any Subsidiary
     of the Borrower to the Borrower or any Wholly-Owned Subsidiary of the
     Borrower or (y) any capital contribution by the Borrower or any
     Wholly-Owned Subsidiary of the Borrower to any Subsidiary of the Borrower.

          "<U>ERISA</U>" means the Employee Retirement Income Security Act of
     1974, as amended, or any successor statute.

          "<U>ERISA Group</U>" means the Borrower, any Subsidiary, and all
     members of a controlled group of corporations and all trades and businesses
     (whether or not incorporated) under common control which, together with the
     Borrower or any Subsidiary, are treated as a single employer under Section
     414 of the Internal Revenue Code.

          "<U>Event of Default</U>" has the meaning specified in Section 7.01.

          "<U>Family Member</U>" means, with respect to Mr. Leon Levine, his
     spouse and/or lineal descendants and any trusts created for the benefit of
     his spouse and/or lineal descendants.

          "<U>Financial Statements</U>" means the consolidated financial
     statements of the Borrower and its Subsidiaries dated August 26, 2000.

          "<U>First Anniversary</U>" means, with respect to any Term Loan, the
     date of the first anniversary of the Term Loan Conversion Date for such
     Loan.

          "<U>GAAP</U>" means at any time generally accepted accounting
     principles as then in effect in the United States, applied on a basis
     consistent with the most recent audited consolidated financial statements
     of the Borrower and its Subsidiaries theretofore delivered to the Bank.

          "<U>Governmental Authority</U>" means any nation or government, any
     state or political subdivision thereof, any central bank (or similar
     monetary or regulatory authority), and any entity exercising executive,
     legislative, judicial, regulatory, or administrative functions of or
     pertaining to government.

          "<U>Guarantee</U>" by any Person means any obligation, contingent or
     otherwise, of such Person directly or indirectly guaranteeing any Debt or
     other obligation of any other Person and, without limiting the generality
     of the foregoing, any obligation direct or indirect, contingent or
     otherwise, of such Person (a) to purchase or pay (or advance or supply
     funds from the purchase or payment of) such Debt or other obligation
     (whether arising by virtue of partnership arrangements, by agreement to
     keep-well, to purchase assets, goods, securities, or services, to
     take-or-pay, or to maintain financial statement conditions or otherwise) or
     (b) entered into for the purpose of assuring in any other manner the
     obligee of such Debt or other obligation of the payment thereof or to
     protect the obligee against loss in respect thereof (in whole or in part),
     provided that the term Guarantee shall not include endorsements for
     collection or deposit in the ordinary course of business.

          "<U>Guarantors</U>" means Family Dollar Services, Inc., a North
     Carolina corporation, Family Dollar Operations, Inc., a North Carolina
     corporation, and Family Dollar Trucking, Inc., a North Carolina
     corporation.

          "<U>Guaranty</U>" means the Guarantee Agreement of the Guarantors in
     favor of the Bank, in substantially the form of Exhibit D, as the same may
     be amended, modified, or supplemented.

          "<U>Interest Charges</U>" means, for any period, for the Borrower the
     sum of (a) all interest, premium payments, fees, charges and related
     expenses of the Borrower and its Subsidiaries in connection with borrowed
     money (including capitalized interest) or in connection with the deferred
     purchase price of assets, in each case to the extent treated as interest in
     accordance with GAAP, (b) the portion of total Lease Rentals with respect
     to such period under capital leases that is treated as interest in
     accordance with GAAP, and (c) all debt discount and expense amortized or
     required to be amortized in the determination of Consolidated Net Income
     for such period.

          "<U>Interest Period</U>" means with respect to any LIBOR Loan, each
     period commencing on the date such Loan is made or Converted from a CD Loan
     or the last day of the preceding Interest Period with respect to such Loan,
     and ending on the numerically corresponding day in the first calendar month
     thereafter; except that each such Interest Period which commences on the
     last Business Day of a calendar month (or on any day for which there is no
     numerically corresponding day in the appropriate subsequent calendar month)
     shall end on the last Business Day of the appropriate subsequent calendar
     month. Notwithstanding the foregoing: (a) each Interest Period which would
     otherwise end on a day which is not a Business Day shall end on the next
     succeeding Business Day (or, if such succeeding Business Day falls in the
     next succeeding calendar month, on the preceding Business Day); (b) any
     Interest Period which would otherwise extend beyond the Maturity Date shall
     end on the Maturity Date; (c) no Interest Period for any LIBOR Loan shall
     have a duration of less than one month, and if the Interest Period for any
     LIBOR Loan would otherwise be a shorter period, such Loan shall not be
     available hereunder; and (d) there shall be no more than eight Interest
     Periods outstanding at any time.

          "<U>Internal Revenue Code</U>" means the Internal Revenue Code of
     1986, as amended, or any successor statute.

          "<U>Lease Rentals</U>" means, with respect to any period, the sum of
     the rental and other obligations required to be paid during such period by
     the Borrower and its Subsidiaries on a consolidated basis as lessee under
     all leases of real or personal Property that would be treated as lease or
     rental expense under GAAP.

          "<U>Leverage Ratio</U>" means, as of any date of determination, the
     ratio of (a) Consolidated Debt as of such date, to (b) the sum of
     Consolidated Debt and Consolidated Net Worth.

          "<U>LIBOR"</U> means the rate of interest per annum determined on the
     basis of the rate for deposits in Dollars in minimum amounts of at least
     $5,000,000 for a period equal to the applicable Interest Period which
     appears on the Dow Jones Market Screen 3750 (London interbank offered rate)
     at approximately 11:00 a.m. (London time) two (2) Business Days prior to
     the first day of the applicable Interest Period (rounded upward, if
     necessary, to the nearest 1/100th of 1%). If, for any reason, such rate
     does not appear on Dow Jones Market Screen 3750, then "LIBOR" shall be
     determined by the Bank to be the arithmetic average of the rate per annum
     at which deposits in Dollars in minimum amounts of at least $5,000,000
     would be offered by first class banks in the London interbank market to the
     Bank at approximately 11:00 a.m. (London time) two (2) Business Days prior
     to the first day of the applicable Interest Period for a period equal to
     such Interest Period.

          "<U>LIBOR Loan</U>" means any Loan bearing interest at a rate based
     upon the LIBOR Rate as provided in Section 2.4.

          "<U>LIBOR Reserve Percentage"</U> means, for any day, that percentage
     (expressed as a decimal) which is in effect on such day as prescribed by
     the Board of Governors of the Federal Reserve System (or any successor) for
     determining the actual reserve requirement for a member bank of the Federal
     Reserve System in New York City with deposits exceeding one billion Dollars
     in respect of "Eurocurrency Liabilities" which includes deposits by
     reference to which the interest rate on LIBOR Loans is determined or any
     category of extensions of credit or other assets which includes loans by a
     non-United States office of the Bank to United States residents. In the
     event that the foregoing reserve requirement is required by law to be
     determined on the basis of the aggregate of such Eurocurrency Liabilities,
     extensions of credit, or other assets of the Bank, the Bank may use any
     reasonable allocation or attribution methods in determining the LIBOR
     Reserve Percentage. The Adjusted LIBOR Rate shall be adjusted automatically
     on and as of the effective date of any change in the LIBOR Reserve
     Percentage.

          "<U>Lien</U>" means any mortgage, pledge, hypothecation, assignment,
     deposit arrangement, encumbrance, lien (statutory or other), charge, or
     preference, priority or other security interest or preferential arrangement
     of any kind or nature whatsoever (including any conditional sale or other
     title retention agreement, any financing lease having substantially the
     same economic effect as any of the foregoing, and the filing of any
     financing statement under the Uniform Commercial Code or comparable laws of
     any jurisdiction), including the interest of a purchaser of accounts
     receivable.

          "<U>Loan Documents"</U> means this Agreement, the Notes and the
     Guaranty, as the same may be amended, modified, renewed, extended, or
     supplemented.

          "<U>Loan Party</U>" means the Borrower, each Guarantor, or any other
     Person that guaranties or secures any or all of the Borrower's obligations
     under the Loan Documents.

          "<U>Loans</U>" means Tranche A Loans and Tranche B Loans.

          "<U>Material Adverse Effect</U>" means any event or condition which
     (a) causes Consolidated Net Worth (measured as of the last day of the
     Borrower's most recently ended fiscal quarter (the "Current Quarter")) to
     decrease by more than fifteen percent (15.0%) relative to Consolidated Net
     Worth (measured as of the last day of the fiscal quarter of the Borrower
     which ended immediately prior to the Current Quarter), (b) has a material
     adverse effect on the ability of any Loan Party to pay and perform its
     obligations under any Loan Document, or (c) has a material adverse effect
     on the validity or enforceability of any Loan Document or the rights and
     remedies of the Bank thereunder.

          "<U>Material Subsidiaries</U>" means, at any time, Subsidiaries of the
     Borrower, the total assets of which exceed $25,000,000. "Material
     Subsidiary" means, at any time, any Subsidiary, the total assets of which
     exceed $25,000,000.

          "<U>Maturity Date</U>" means (i) in the case of Tranche A Loans, the
     Tranche A Termination Date, (ii) in the case of Tranche B Loans, the
     Tranche B Termination Date, and (iii) in the case of any Term Loan, the
     date that the last installment of principal of such Loan is payable in
     accordance with Section 2.03(c).

          "<U>Multiemplover Plan</U>" means, at any time, an employee pension
     benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any
     member of the ERISA Group is then making or accruing an obligation to make
     contributions or has within the preceding five plan years made
     contributions, including for these purposes any Person that has ceased to
     be a member of the ERISA Group during such five year period.

          "<U>Notes</U>" means the Tranche A Note, the Tranche B Note, and the
     Term Notes.

          <U> "PBGC</U>" means the Pension Benefit Guaranty Corporation or any
     entity succeeding to any or all of its functions under ERISA.

          "<U>Person</U>" means any individual, corporation, company, joint
     venture, association, partnership, trust, unincorporated organization,
     Governmental Authority, or other entity.

          "<U>Prime Rate</U>" means the per annum rate of interest established
     from time to time by the Bank as its prime rate, which rate may not be the
     lowest rate of interest charged by the Bank to its customers. Any change in
     the Prime Rate shall be effective on the date of such change.

          "<U>Principal Office</U>" means the office of the Bank located at
     Charlotte Plaza, 201 South College Street, Charlotte, North Carolina
     28288-0608.

          "<U>Property</U>" means property of all kinds, real, personal, or
     mixed, tangible, or intangible (including, without limitation, all rights
     relating thereto), whether owned or acquired after the date of this
     Agreement.

          "<U>Quarterly Date</U>" means the last day of each March, June,
     September, and December of each year, the first of which shall be the first
     such day after the date of this Agreement.

          "<U>Second Anniversary</U>" means, with respect to any Term Loan, the
     date of the second anniversary of the Term Loan Conversion Date for such
     Loan.

          "<U>Subsidiary</U>" means, any corporation or other entity of which
     securities or other ownership interests having ordinary voting power to
     elect a majority of the board of directors or other Persons performing
     similar functions are at the, time directly or indirectly owned by the
     Borrower.

          "<U>Synthetic Lease Obligation</U>" means the monetary obligation of a
     Person under (a) a so-called synthetic, off-balance sheet or tax retention
     lease, or (b) an agreement for the use or possession of property creating
     obligations which do not appear on the balance sheet of such Person but
     which, upon the insolvency or bankruptcy of such Person, would be
     characterized as the Debt of such Person (without regard to accounting
     treatment).

          "<U>Term Loan</U>" has the meaning specified in Section 2.01(c).

          "<U>Term Loan Conversion Date</U>" has the meaning specified in
     Section 2.01(c).

          "<U>Term Note</U>" means any promissory note provided for in Section
     2.02(c) and any and all extensions, renewals, modifications, and
     restatements thereof.

          "<U>Tranche A Commitment</U>" means the obligation of the Bank to make
     Tranche A Loans hereunder in an aggregate principal amount up to but not
     exceeding Twenty-five Million Dollars ($25,000,000.00), as the same may be
     reduced pursuant to Sections 2.01(c) and 2.12 or terminated pursuant to
     Section 2.12.

          "<U>Tranche A Loan</U>" has the meaning specified in Section 2.01(a).

          "<U>Tranche A Note</U>" means the promissory note provided for in
     Section 2.02(a) and any and all extensions, renewals, modifications, and
     restatements thereof.

          "<U>Tranche A Termination Date</U>" means May 31, 2003 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.

          "<U>Tranche B Commitment</U>" means the obligation of the Bank to make
     Tranche B Loans hereunder in an aggregate principal amount up to but not
     exceeding Twenty-five Million Dollars ($25,000,000.00), as the same may be
     reduced or terminated pursuant to Section 2.12.

          "<U>Tranche B Loan</U>" has the meaning specified in Section 2.01(b).

          "<U>Tranche B Note</U>" means the promissory note as referred to in
     Section 2.02(b) and any and all extensions, renewals, modifications, and
     restatements thereof.

          "<U>Tranche B Termination Date</U>" means May 30, 2002, or such
     earlier date as the Tranche B Commitment is terminated pursuant to this
     Agreement.

          "<U>Type</U>" shall have the meaning specified in Section 1.03.

          "<U>Wholly Owned Subsidiary</U>" means any Subsidiary all of the
     shares of capital stock or other ownership interests of which (except
     directors' qualifying shares) are at the time directly or indirectly owned
     by the Borrower.

     SECTION 1.01. <U>Accounting Terms and Determinations</U>. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP as
in effect from time to time; provided that, if the Borrower notifies the Bank
that the Borrower wishes to amend any covenant in Article VI to eliminate the
effect of any change in GAAP on the operation of such covenant (or if the Bank
notifies the Borrower that the Bank wishes to amend any such covenant for such
purpose), then the Borrower's compliance with such covenant shall be determined
on the basis of GAAP as in effect immediately before the relevant change in GAAP
became effective, until either such notice is withdrawn or such covenant is
amended in a manner satisfactory to the Borrower and the Bank.

     SECTION 1.02. <U>Classes and Types of Loans</U>. Loans hereunder are
distinguished by "Class" and "Type". The "Class" of a Loan (or of a Commitment
to make such a Loan) refers to the determination whether such Loan is a Tranche
A Loan, a Tranche B Loan or a Term Loan, each of which constitutes a Class. The
"Type" of a Tranche A Loan or a Tranche B Loan refers to the determination
whether such Loan is a CD Loan or a LIBOR Loan.



                              ___________________


<B>
                                   ARTICLE II
                                      LOANS
</B>
     SECTION 2.01. <U>Commitments</U>.

     (a) Subject to the terms and conditions of this Agreement, the Bank agrees
to make one or more loans (the "<U>Tranche A Loans</U>") to the Borrower from
time to time from and including the date hereof to but excluding the Tranche A
Termination Date; <U>provided</U>, that the aggregate principal amount of the
Tranche A Loans at any time outstanding shall not exceed the amount of the
Tranche A Commitment. Subject to the foregoing limitations, and the other terms
and provisions of this Agreement, the Borrower may borrow, repay, and reborrow
hereunder the amount of the Tranche A Commitment by means of CD Loans and LIBOR
Loans.

     (b) Subject to the terms and conditions of this Agreement, the Bank agrees
to make one or more loans (the "<U>Tranche B Loans</U>") to the Borrower from
time to time from and including the date hereof to but excluding the Tranche B
Termination Date; <U>provided</U>, that the aggregate principal amount of the
Tranche B Loans at any time outstanding shall not exceed the amount of the
Tranche B Commitment. Subject to the foregoing limitations, and the other terms
and provisions of this Agreement, the Borrower may borrow, repay, and reborrow
hereunder the amount of the Tranche B Commitment by means of CD Loans and LIBOR
Loans.

     (c) Subject to the terms and conditions of this Agreement, at any time and
from time to time on any Business Day on or before the Tranche A Termination
Date, the Borrower may convert all or a portion of the Tranche A Loans then
outstanding into Term Loans (each a "<U>Term Loan</U>") with a maturity of five
(5) years or seven (7) years. The Borrower shall give the Bank at least five (5)
Business Days prior written notice of each such conversion specifying the date
of the conversion (the "<U>Term Loan Conversion Date</U>"), the principal amount
of the Term Loan, whether installments of principal of the Loan will be payable
quarterly or semiannually after the Second Anniversary for such Term Loan and
the term of such Term Loan. Each Term Loan shall be in a minimum principal
amount of $5,000,000 or increments of $100,000 above such amount, except for the
last Term Loan which may be less than such amount. Effective as of each Term
Loan Conversion Date, the Tranche A Commitment shall be irrevocably reduced by
the aggregate principal amount of the Tranche A Loans converted into a Term Loan
on such date.

     SECTION 2.02. <U>Notes</U>.

     (a) The Tranche A Loans made by the Bank shall be evidenced by a single
promissory note of each Borrower in substantially the form of Exhibit A-1 or
A-2, as appropriate, dated the date hereof, payable to the order of the Bank in
a principal amount equal to the Tranche A Commitment as originally in effect,
and otherwise duly completed. In the event that a portion (but not all) of the
Tranche A Loans are converted to a Term Loan pursuant to Section 2.01(c), the
Borrower shall on or before the Term Loan Conversion Date for such Term Loan,
execute and deliver to the Bank a new Tranche A Note (in the form of Exhibit A-1
or A-2, as appropriate) in a principal amount equal to the Tranche A Commitment
minus the principal amount of all Tranche A Loans converted to Term Loans
pursuant to Section 2.01(c), and dated the Term Loan Conversion Date for such
Term Loan. If the Bank shall have received the new Tranche A Note duly executed
by the Borrower as aforesaid, the Bank shall promptly return the existing
Tranche A Note to the Borrower marked "replaced".

     (b) The Tranche B Loans made by the Bank shall be evidenced by a single
promissory note of each Borrower, substantially in the form of <U>Exhibit B-1 or
B-2</U>, as appropriate, dated the date hereof, payable to the order of the Bank
in a principal amount equal to the Tranche B Commitment as originally in effect,
and otherwise duly completed.

     (c) Each Term Loan shall be evidenced by a separate promissory note of the
Borrower in substantially the form of <U>Exhibit C</U>, dated the Term Loan
Conversion Date for such Term Loan, payable to the order of the Bank in a
principal amount equal to the amount specified by the Borrower pursuant to
Section 2.01(c) for such Term Loan, and otherwise duly completed.

     SECTION 2.03. <U>Repayment of Loans</U>.

     (a) The Borrower shall pay to the Bank the outstanding principal amount of
the Tranche A Loans on the Tranche A Termination Date.

     (b) The Borrower shall pay to the Bank the outstanding principal amount of
the Tranche B Loans on the Tranche B Termination Date.

     (c) In the event that the Borrower converts all or a portion of the Tranche
A Loans into a Term Loan in accordance with Section 2.01(c), the Borrower shall
pay to the Bank the entire principal amount of such Term Loan as follows:

               (i) if such Term Loan will have a term of five (5) years, (A)
          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; or

               (ii)if the Term Loan will have a term of seven (7) years, (A)
          installments of principal each in an amount equal to one-seventh of
          the original principal amount of such Term Loan shall be payable on
          the First Anniversary of such Term Loan and the 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 of such Loan will be payable quarterly,
          installments of principal shall be payable in twenty (20) equal,
          consecutive quarterly installments each in a principal amount equal to
          one twentieth (1/20th) 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 ten (10)
          equal, consecutive semiannual installments each in a principal amount
          equal to one tenth (1/10th) 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
          semiannual installment being payable on the date occurring six (6)
          months after the Second Anniversary and subsequent like installments
          being payable on the dates occurring every six (6) months thereafter.

     SECTION 2.04. <U>Interest</U>.

     (a) The Borrower shall pay to the Bank interest on the unpaid principal
amount of each Tranche A Loan and each Tranche B Loan for the period commencing
on the date of each such Loan to but excluding the date such Loan or portion
thereof shall be paid in full, at the following rates per annum:

               (i) during the periods such Loan is a CD Loan, the Adjusted CD
          Rate plus the Applicable Margin; and

               (ii) during the periods such Loan is a LIBOR Loan, the Adjusted
          LIBOR Rate <U>plus</U> the Applicable Margin.

          (b) The Borrower shall pay to the Bank interest on the unpaid
     principal amount of each Term Loan at a rate per annum equal to the Prime
     Rate.

          (c) Notwithstanding the foregoing, the Borrower shall pay to the Bank
     interest at the Default Rate on any principal of any Loan and (to the
     fullest extent permitted by law) on any other amount payable by the
     Borrower under this Agreement or any other Loan Document which is not paid
     in full when due (whether at stated maturity, by acceleration, or
     otherwise), for the period from and including the due date thereof to but
     excluding the date the same is paid in full.

          (d) Accrued interest on the Loans shall be due and payable in arrears
     as follows: (i) in the case of CD Loans, on each Quarterly Date; (ii) in
     the case of each LIBOR Loan, on the last day of the Interest Period with
     respect thereto; (iii) in the case of each Term Loan, every three (3)
     months after the Term Loan Conversion Date for such Loan; (iv) upon the
     payment or prepayment of any Term Loan or any LIBOR Loan or the Conversion
     of any LIBOR Loan to a CD Loan (but only on the principal amount so paid,
     prepaid, or Converted); and (v) on the Maturity Date; <U>provided</U> that
     interest payable at the Default Rate shall be payable from time to time on
     demand.

     SECTION 2.05. <U>Borrowing Procedure</U>. The Borrower shall give the Bank
notice of each borrowing of a Tranche A Loan or Tranche B Loan hereunder in
accordance with Section 2.08. Not later than 3:00 p.m. (Charlotte time) on the
date specified for each such borrowing hereunder, the Bank will make available
the amount of the Tranche A Loan or Tranche B Loan to be made by it on such date
to the Borrower by depositing the same, in immediately available funds, in an
account of the Borrower (designated by the Borrower) maintained with the Bank at
the Principal Office or as otherwise directed by the Borrower.

     SECTION 2.06. <U>Prepayments. Conversions. and Continuations of Loans</U>.
Subject to Section 2.07, the Borrower shall have the right from time to time to
prepay all or part of the Loans, or to Convert all or part of any Tranche A Loan
or Tranche B Loan of one Type into a Loan of another Type (but of the same
Class) or to Continue Tranche A Loans or Tranche B Loans as LIBOR Loans;
<U>provided</U> that: (a) the Borrower shall give the Bank notice of each such
prepayment, Conversion, or Continuation as provided in Section 2.08, (b) LIBOR
Loans may only be Converted on the last day of the Interest Period, and (c)
except for Conversions into CD Loans, no Conversions or Continuations shall be
made while a Default has occurred and is continuing. Prepayments of any Term
Loan shall, at the election of the Borrower (with notice to the Bank), be
applied either (i) to installments of principal of such Loan in inverse order of
maturity, or (ii) to the then remaining installments of principal of such Loan
pro rata. Principal of the Term Loans paid or prepaid may not be reborrowed.

     SECTION 2.07. <U>Minimum Amounts</U>. Except for Conversions and
prepayments pursuant to Article III, each borrowing, each Conversion, and each
prepayment of principal of the Loans shall be in an amount at least equal to
$100,000.

     SECTION 2.08. <U>Certain Notices</U>. Notices by the Borrower to the Bank
of a termination or reduction of the Commitments, of borrowings, Conversions,
Continuations and optional prepayments of Loans shall be irrevocable and shall
be effective only if received by the Bank not later than 1:00 p.m. (Charlotte
time) on the number of Business Days prior to the date of the relevant
termination, reduction, borrowing, Conversion, Continuation, or prepayment
specified below:

<B>
                                                        Number of Business
                          Notice                            Days Prior
</B>
          Termination or reduction of Commitments               3

          Borrowing or prepayment of, or Conversions         same day
            into, CD Loans

          Borrowing or prepayment of, Conversions               3
            into, or Continuations as, LIBOR Loans

Each such notice of termination or reduction shall specify the amount of the
Commitments to be terminated or reduced. Each such notice of borrowing,
Conversion, Continuation, or optional prepayment shall specify (a) the Class,
amount, and Type of the Loan to be borrowed, Converted, Continued, or prepaid
(and, in the case of a Conversion, the Type of Loan to result from such
Conversion), and (b) the date of borrowing, Conversion, Continuation, or
prepayment (which shall be a Business Day). In the event the Borrower fails to
select the Type of Loan within the time period and otherwise as provided in this
Section 2.08, such Loan (if outstanding as a LIBOR Loan) will be automatically
Converted into a CD Loan on the last day of the preceding Interest Period for
such Loan or (if outstanding as a CD Loan) will remain as, or (if not then
outstanding) will be made as, a CD Loan. Notices pursuant to this Section 2.08
may be verbal provided that they are promptly confirmed in writing by facsimile.

     SECTION 2.09. <U>Use of Proceeds</U>.

          (a) The proceeds of the Tranche A Loans and Tranche B Loans shall be
     used by the Borrower for general corporate purposes including, but not
     limited to, the financing of capital expenditures and the purchase of
     shares of common stock of the Borrower.

          (b) The Borrower will not, directly or indirectly, use any part of the
     proceeds of the Loans for the purpose of purchasing or carrying any margin
     stock within the meaning of Regulations U, T, or X of the Board of
     Governors of the Federal Reserve System, except for purchases of common
     stock of the Borrower.

     SECTION 2.10. <U>Facility Fee</U>. The Borrower shall pay to the Bank a
facility fee (the "Facility Fee") in an amount equal to 0.0575% per annum on the
amount of the Commitments (as reduced from time to time pursuant to Section
2.01(c) and/or Section 2.12 hereof), payable quarterly in arrears on each
Quarterly Date and on the Tranche A Termination Date. The Facility Fee shall not
accrue (a) on the Tranche A Commitment after the Tranche A Termination Date, or
(b) on the Tranche B Commitment after the Tranche B Termination Date.

     SECTION 2.11. <U>Computations</U>. Interest payable by the Borrower
hereunder and under the other Loan Documents shall be computed on the basis of a
year of 360 days and the actual number of days elapsed (including the first day
but excluding the last day) occurring in the period for which payable.

     SECTION 2.12. <U>Reduction or Termination of Commitments</U>. The Borrower
shall have the right to irrevocably terminate or reduce in part the unused
portion of the Commitments at any time and from time to time; provided that: (a)
the Borrower shall give notice of each such termination or reduction as provided
in Section 2.08; and (b) each partial reduction shall be in an aggregate amount
at least equal to $1,000,000.

     SECTION 2.13. <U>Payments</U>. All payments of principal, interest, and
other amounts to be made by the Borrower under this Agreement and other Loan
Documents shall be made to the Bank at the Principal Office in Dollars, in
immediately available funds, without setoff, counterclaim or other deduction.
Whenever any payment under this Agreement or any other Loan Document shall be
stated to be due on a day that is not a Business Day, such payment may be made
on the next succeeding Business Day, and such extension of time in such case
shall be included in the computation of interest.

     SECTION 2.14. <U>Extension of Tranche A Termination Date</U>. Within ninety
(90) days prior to the date occurring one year prior to the Tranche A
Termination Date then in effect, the Borrower may submit a written request to
the Bank for an extension of the Tranche A Termination Date for an additional
period of one year. Within thirty (30) days after receipt by the Bank of such
notice, the Bank shall give written notice to the Borrower of its agreement or
refusal to extend the Tranche A Termination Date; provided, however, any failure
by the Bank to respond to any such request in a timely manner shall be deemed to
be a refusal by the Bank to extend the Tranche A Termination Date.

     SECTION 2.15. <U>Extension of Tranche B Termination Date</U>. Within ninety
(90) days prior to the Tranche B Termination Date then in effect, the Borrower
may submit a written request of the Bank for an extension of the Tranche B
Termination Date for an additional period of 364 days. Within thirty (30) days
after receipt by the Bank of such notice, the Bank shall give written notice to
the Borrower of its agreement or refusal to extend the Tranche B Termination
Date; provided, however, any failure by the Bank to respond to any such request
in a timely manner shall be deemed to be a refusal to extend the Tranche B
Termination Date.

     SECTION 2.16. <U>Lending Office</U>. The Loans of each Class and Type made
by the Bank shall be made and maintained at the Bank's Applicable Lending Office
for Loans of such Class and Type.



                              ___________________


<B>
                                    ARTICLE III
                             CHANGE IN CIRCUMSTANCES
</B>
     SECTION 3.01. <U>Increased Cost and Reduced Return</U>.

          (a) If on or after the date hereof, the Bank shall have reasonably
     determined that the adoption on or after the date hereof of any applicable
     law, rule, or regulation, or any change in any applicable law, rule, or
     regulation, or any change on or after the date hereof in the interpretation
     or administration thereof by any Governmental Authority charged with the
     interpretation or administration thereof, or compliance by the Bank with
     any request or directive on or after the date hereof (whether or not having
     the force of law) of any such Governmental Authority:

               (i) shall change the basis of taxation of any amounts payable to
          the Bank under this Agreement or the Tranche A Note or Tranche B Note
          in respect of any LIBOR Loans (other than taxes imposed on the overall
          net income of the Bank or its Applicable Lending Office by the
          jurisdiction in which the Bank has its Principal Office or such
          Applicable Lending Office);

               (ii) shall impose or modify any reserve, special deposit, or
          similar requirement (other than the LIBOR Reserve Percentage utilized
          in the determination of the Adjusted LIBOR Rate) relating to any
          extensions of credit or other assets of, or any deposits with or other
          liabilities or commitments of, the Bank (including the Commitments);
          or

               (iii) shall impose on the Bank (or its Applicable Lending Office)
          or the London interbank market any other condition affecting this
          Agreement or the Tranche A Note or Tranche B Note or any of such
          extensions of credit or liabilities or commitments;

and the result of any of the foregoing is to increase the cost to the Bank (or
its Applicable Lending Office) of making or maintaining any LIBOR Loans or to
reduce any sum received or receivable by the Bank under this Agreement or the
Tranche A Note or Tranche B Note with respect to LIBOR Loans, then the Borrower
shall pay to the Bank on demand such amount or amounts as will compensate the
Bank for such increased cost or reduction.

          (b) If, on or after the date hereof, the Bank shall have reasonably
     determined that the adoption on or after the date hereof of any applicable
     law, rule, or regulation regarding capital adequacy or any change therein
     on or after the date hereof or in the interpretation or administration
     thereof on or after the date hereof by any Governmental Authority charged
     with the interpretation or administration thereof, or any request or
     directive on or after the date hereof regarding capital adequacy (whether
     or not having the force of law) of any such Governmental Authority, has the
     effect of reducing the rate of return on the capital of the Bank as a
     consequence of the Bank's obligations hereunder to a level below that which
     the Bank could have achieved but for such adoption, change, request, or
     directive by an amount deemed by the Bank to be material, then from time to
     time, upon demand, the Borrower shall pay to the Bank such additional
     amount or amounts as will compensate the Bank for such reduction.

          (c) The Bank will promptly notify the Borrower of any event or
     circumstance of which it has knowledge, occurring after the date hereof,
     which will entitle the Bank to compensation pursuant to Section 3.01(a) or
     Section 3.01(b) and will designate a different Applicable Lending Office if
     such designation will avoid the need for, or reduce the amount of, such
     compensation and will not, in the reasonable judgment of the Bank, be
     otherwise disadvantageous to the Bank. A certificate of the Bank claiming
     compensation under this Section 3.01 and setting forth in reasonable detail
     the basis for the claim shall be provided to the Borrower with such notice.
     In determining such amount, the Bank may use any reasonable averaging and
     attribution methods.

          (d) The Bank shall not be entitled to claim compensation pursuant to
     Section 3.01(a) or Section 3.01(b) for any increased cost, reduction in
     amounts received or receivable, or reduction in rate of return (i) incurred
     or accrued on or before the ninetieth (90th) day following the date that
     the Bank first notifies the Borrower of the change in law or other
     circumstances on which such claim is based, or (ii) incurred as a result of
     the fault of the Bank.

     SECTION 3.02. <U>Limitation on LIBOR Loans</U>. If, on or prior to the
first day of any Interest Period for any LIBOR Loan:

          (a) the Bank reasonably determines that, by reason of circumstances
     affecting the London interbank market, adequate and reasonable means do not
     exist for ascertaining the Adjusted LIBOR Rate for such Interest Period; or

          (b) the Bank reasonably determines that the Adjusted LIBOR Rate will
     not adequately and fairly reflect the cost to the Bank of funding LIBOR
     Loans for such Interest Period;

then the Bank shall give the Borrower prompt notice thereof setting forth in
reasonable detail the basis for the Bank's determination and so long as such
condition remains in effect, the Bank shall be under no obligation to make
additional LIBOR Loans, Continue LIBOR Loans, or to Convert CD Loans into LIBOR
Loans and the Borrower shall, on the last day(s) of the then current Interest
Period(s) for the outstanding LIBOR Loans, either prepay such Loans or Convert
such Loans into CD Loans in accordance with the terms of this Agreement.

     SECTION 3.03. <U>Illegality</U>. Notwithstanding any other provision of
this Agreement, in the event that it becomes unlawful for the Bank to make,
maintain, or fund LIBOR Loans hereunder, then the Bank shall promptly notify the
Borrower thereof and the Bank's obligation to make or Continue LIBOR Loans and
to Convert CD Loans into LIBOR Loans shall be suspended until such time as the
Bank may again make, maintain, and fund LIBOR Loans and the Borrower shall, on
the last day of the Interest Period for each outstanding LIBOR Loan (or earlier,
if required by law), either prepay such Loans or Convert such Loans into CD
Loans in accordance with the terms of this Agreement. In the event that it
becomes lawful for the Bank to make, maintain, or fund LIBOR Loans, the Bank
shall give the Borrower prompt notice thereof.

     SECTION 3.04. <U>Compensation</U>. Upon the request of the Bank, the
Borrower shall pay to the Bank such amount or amounts as shall be sufficient (in
the reasonable opinion of the Bank) to compensate it for any cost or expense
incurred by it as a result of:

          (a) any payment, prepayment or Conversion of a LIBOR Loan for any
     reason (including, without limitation, the acceleration of the Loans
     pursuant to Section 7.02) not the fault of the Bank on a date other than
     the last day of an Interest Period for such Loan; <U>provided</U>, that the
     Borrower shall not be required to compensate the Bank if the reason for
     such payment, prepayment or Conversion relates to any of the circumstances
     described in Sections 3.01 or 3.03; or

          (b) any failure by the Borrower for any reason (including, without
     limitation, the failure of any conditions precedent specified in Article IV
     to be satisfied) not the fault of the Bank, to borrow, Convert, Continue,
     or prepay a LIBOR Loan on the date for such borrowing, Conversion,
     Continuation, or prepayment specified in the relevant notice of borrowing,
     prepayment, Continuation, or Conversion under this Agreement;
     <U>provided</U>, that the Borrower shall not be required to compensate the
     Bank if the reason for such failure to borrow, Convert, Continue, or prepay
     relates to any of the circumstances described in Sections 3.01, 3.02 or
     3.03.

Without limiting the effect of the preceding sentence, such compensation shall
include any cost or expense incurred by the Bank in obtaining, liquidating, or
employing deposits from third parties.



                              ___________________


<B>
                                   ARTICLE IV
                                   CONDITIONS
</B>
     SECTION 4.01. <U>Initial Tranche A Loan or Tranche B Loan</U>. The
effectiveness of this Agreement and the obligation of the Bank to make the
initial Tranche A Loan or Tranche B Loan hereunder are subject to the
satisfaction of the following conditions:

          (a) receipt by the Bank of the duly executed Tranche A Note, complying
     with the provisions of Section 2.02(a);

          (b) receipt by the Bank of the duly executed Tranche B Note, complying
     with the provisions of Section 2.02(b);

          (c) receipt by the Bank of the Guaranty duly executed by the
     Guarantors; and

          (d) receipt by the Bank of a certificate of the Secretary or Assistant
     Secretary of each Loan Party, dated the date hereof and certifying (i) that
     attached thereto is a true and complete copy of the corporate charter of
     such Person and all amendments thereto, (ii) that attached thereto is a
     true and complete copy of the bylaws of such Person and all amendments
     thereto, (iii) that attached thereto is a true and complete copy of
     resolutions duly adopted by the board of directors or the executive
     committee the board of directors of such Person authorizing the execution,
     delivery, and performance of the Loan Documents to which such Person is or
     is intended to be a party, and that such resolutions have not been
     modified, rescinded, or amended and are in full force and effect and (iv)
     as to the incumbency and specimen signature of each officer of such Person
     executing the Loan Documents to which such Person is or is intended to be a
     party and each other document to be delivered by such Person from time to
     time in connection therewith (and the Bank may conclusively rely on each
     such certificate until it receives notice in writing from such Person).

     SECTION 4.02. <U>Each Tranche A Loan or Tranche B Loan</U>. The obligation
of the Bank to make any Tranche A Loan or Tranche B Loan (including the initial
Tranche A Loan or Tranche B Loan) is subject to the satisfaction of the
following conditions precedent:

          (a) receipt by the Bank of a notice of borrowing and a notice of
     account designation in accordance with Section 2.08;

          (b) the fact that immediately after the making of such Tranche A Loan
     or Tranche B Loan, the aggregate outstanding principal amount of the
     Tranche A Loans or Tranche B Loans (as the case may be) will not exceed the
     amount of the Tranche A Commitment or the Tranche B Commitment (as the case
     may be);

          (c) the fact that, immediately before and after such Loan, no Default
     shall have occurred and be continuing; and

          (d) the fact that the representations and warranties of each Loan
     Party contained in this Agreement and the other Loan Documents shall be
     true and correct on and as of the date of such Loan.

Each borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such borrowing that the conditions precedent
specified in clauses (b), (c), and (d) of this Section 4.02 have been satisfied.

     SECTION 4.03. <U>Term Loans</U>. The obligation of the Bank to convert all
or a portion of the Tranche A Loan to a Term Loan pursuant to Section 2.01(c) is
subject to the satisfaction of the following conditions precedent:

          (a) receipt by the Bank of a notice of conversion pursuant to Section
     2.01(c);

          (b) receipt by the Bank of a duly executed Term Note for such Loan,
     dated the Term Loan Conversion Date for such Loan, complying with the
     provisions of Section 2.02(c);

          (c) if any Tranche A Loans will be outstanding after such conversion,
     receipt by the Bank of a duly executed Tranche A Note, dated as of the Term
     Loan Conversion Date for such Loan, complying with the provisions of
     Section 2.02(b);

          (d) the fact that immediately before and after the conversion of all
     or part of the Tranche A Loans to a Term Loan, no Default shall have
     occurred and be continuing; and

          (e) the fact that the representations and warranties of the Loan
     Parties contained in this Agreement and the other Loan Documents shall be
     true and correct on and as of the date of such conversion.

The conversion of all or part of the Tranche A Loans to a Term Loan pursuant to
Section 2.01(a) shall be deemed a representation and warranty by the Borrower on
the Term Loan Conversion Date for such Loan that the conditions precedent
specified in clauses (d) and (e) of this Section have been satisfied.



                              ___________________


<B>
                                   ARTICLE V
                         REPRESENTATIONS AND WARRANTIES
</B>
     To induce the Bank to enter into this Agreement, the Borrower represents
and warrants to the Bank that:

     SECTION 5.01. <U>Existence</U>. The Borrower (a) is duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
organization; and (b) has the requisite power and authority and legal right to
own its assets and carry on its business as now being or as proposed to be
conducted. The Borrower has the power, authority, and legal right to execute,
deliver, and perform its obligations under the Loan Documents.

     SECTION 5.02. <U>Financial Statements</U>. The Financial Statements have
been prepared in accordance with GAAP, and fairly and accurately present the
financial condition of the Borrower and the Subsidiaries as of the respective
dates indicated therein and the results of operations for the respective periods
indicated therein. Since the effective date of the Financial Statements, no
event or condition has occurred that the Borrower expects will have a Material
Adverse Effect.

     SECTION 5.03. <U>Authorization: No Breach</U>. The execution, delivery, and
performance by the Borrower of the Loan Documents to which it is a party and
compliance with the terms and provisions thereof have been duly authorized by
all requisite action on the part of the Borrower and do not (a) violate or
conflict with, or result in a breach of, or require any consent under (i) the
articles of incorporation, bylaws, or other organizational documents of the
Borrower or any of the Material Subsidiaries, (ii) to the best of the Borrower's
knowledge, any applicable law, rule, or regulation or any order, writ,
injunction, or decree of any Governmental Authority or arbitrator, or (iii) any
agreement or instrument to which the Borrower or any of the Material
Subsidiaries is a party or by which any of them or any of their Property is
bound or subject, or (b) constitute a default, or result in the creation of a
Lien (other than Liens permitted by this Agreement) under any such agreement or
instrument. Neither the Borrower nor any Subsidiary is in default under any
indenture, mortgage, deed of trust, agreement, or instrument to which it is a
party or by which it may be bound and which is material to the financial
condition of the Borrower and its Subsidiaries on a consolidated basis.

     SECTION 5.04. <U>Litigation</U>. There is no action, suit, investigation,
or proceeding before or by any Governmental Authority or arbitrator pending, or
to the knowledge of the Borrower, threatened against or affecting the Borrower
or any Subsidiary, that the Borrower expects will have a Material Adverse
Effect.

     SECTION 5.05. <U>Enforceability</U>. This Agreement constitutes, and the
other Loan Documents when executed and delivered by the Borrower shall
constitute, the legal, valid, and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms,
except as limited by applicable Debtor Relief Laws and general principles of
equity.

     SECTION 5.06. <U>Approvals</U>. No authorization, approval, or consent of,
and no filing or registration with, any Governmental Authority or third party is
or will be necessary for the execution, delivery, or performance by the Borrower
of any of the Loan Documents to which they are party or for the validity or
enforceability thereof.

     SECTION 5.07. <U>Compliance with Laws</U>. The Borrower and its
Subsidiaries are in compliance in all material respects with all applicable
laws, rules, and regulations, other than such laws, rules, and regulations (i)
the validity or applicability of which the Borrower or such Subsidiary is
contesting in good faith by appropriate proceedings or (ii) failures to comply
with which the Borrower reasonably expects will not have a Material Adverse
Effect.

     SECTION 5.08. <U>Ownership of Property; Liens</U>. The Borrower and each
Subsidiary has good record and marketable title in fee simple to, or valid
leasehold interests in, all real property necessary or used in the ordinary
conduct of its business, except for such defects in title as would not,
individually or in the aggregate, have a Material Adverse Effect. As of the date
of this Agreement, the property of the Borrower and its Subsidiaries is subject
to no Liens, other than Liens permitted by Section 6.03.



                              ___________________


<B>
                                   ARTICLE VI
                                    COVENANTS
</B>
     The Borrower agrees that, so long as the Bank has any Commitments hereunder
or any amount payable under the Notes remains unpaid, the Borrower:

     SECTION 6.01. <U>Information</U>. Shall deliver to the Bank:

          (a) within 90 days after the end of each fiscal year of the Borrower,
     the Borrower's consolidated financial statements as of the end of such
     fiscal year unless approval is granted by the Securities and Exchange
     Commission for later filing of the Borrower's financial statements. Such
     financial statements shall contain a consolidated balance sheet and related
     consolidated statements of income and cash flows for such fiscal year
     setting forth in each case in comparative form the figures for the previous
     fiscal year, all prepared in accordance with GAAP and audited by the
     independent public accountants then engaged by the Borrower;

          (b) within 45 days after the end of the first three quarters of each
     fiscal year of the Borrower, those financial reports which are required to
     be submitted to the Securities and Exchange Commission quarterly unless
     approval is granted by the Securities and Exchange Commission for later
     filing of the Borrower's reports. Such quarterly reports shall contain a
     consolidated balance sheet and related consolidated statements of income
     and cash flows and shall be signed by the principal accounting officer of
     the Borrower as having been prepared in accordance with GAAP (subject to
     normal year-end adjustments);

          (c) within three (3) Business Days after any executive officer of the
     Borrower obtains knowledge of any Default, a certificate of the chief
     financial officer of the Borrower setting forth the details thereof and any
     action which the Borrower is taking or proposes to take with respect
     thereto;

          (d) within three (3) Business Days after the occurrence thereof,
     notice to the Bank of any change in the individuals holding the positions
     of Chairman of the Board or President of the Borrower; and

          (e) from time to time such additional information regarding the
     financial condition or business of the Borrower and the Subsidiaries as the
     Bank may reasonably request.

     SECTION 6.02. <U>Fundamental Obligations</U>. Shall, and shall cause each of the
Subsidiaries to:

          (a) preserve and maintain all of its rights, privileges, and
     franchises necessary or desirable in the normal conduct of its business,
     except where failure to do the same could not reasonably be expected to
     have a Material Adverse Effect.

          (b) comply with the requirements of all applicable laws, rules,
     regulations, and orders of Governmental Authorities except for instances of
     non-compliance that could not reasonably be expected to have, individually
     or in the aggregate, a Material Adverse Effect.

          (c) pay and discharge when due all taxes, assessments, and
     governmental charges or levies imposed on it or on its income or profits or
     any of its Property, except for any such tax, assessment, charge, or levy
     the payment of which is being contested in good faith and by proper
     proceedings and against which adequate reserves are being maintained and
     except where failure to do so could not reasonably be expected to have a
     Material Adverse Effect.

          (d) maintain all of its Properties owned or used in its business in
     good working order and condition, ordinary wear and tear excepted, except
     where failure to so maintain such Properties could not reasonably be
     expected to have a Material Adverse Effect.

          (e) permit representatives of the Bank, during normal business hours
     and upon reasonable prior notice to the Borrower, to inspect its
     Properties, and to discuss its business and affairs with its officers,
     directors, and accountants.

          (f) maintain insurance (which may include self insurance) in such
     amounts, with such deductibles, and against such risks as is customary for
     similarly situated businesses, except where the failure to so maintain
     insurance could not reasonably be expected to have a Material Adverse
     Effect.

     SECTION 6.03. <U>Liens</U>. Shall not create, nor shall it permit any of its
Subsidiaries to directly or indirectly, incur, assume or suffer to exist, any
Lien upon any of its Property or revenues, whether now owned or hereafter
acquired, other than the following:

          (a) Liens pursuant to any Loan Document;

          (b) Liens existing on the date hereof, and any renewals or extensions
     thereof, <U>provided</U> that the property covered thereby is not
     increased;

          (c) Liens for taxes, assessments or charges (i) which are not yet
     delinquent, (ii) which are being contested in good faith and by appropriate
     proceedings, if adequate reserves with respect thereto are maintained on
     the books of the applicable Person in accordance with GAAP, or (iii) are
     not in the aggregate material to the financial condition of the Borrower
     and its Subsidiaries on a consolidated basis;

          (d) carriers', warehousemen's, mechanics', materialmen's, landlords'
     repairmen's or other like Liens arising in the ordinary course of business
     which (i) do not in the aggregate materially impair the value or use of the
     related Properties or other assets in the conduct of the Borrower's or any
     relevant Subsidiary's business, or (ii) are not in the aggregate material
     to the financial condition of the Borrower and its Subsidiaries on a
     consolidated basis;

          (e) pledges, deposits or unsecured standby letters of credit (not
     including any collateral pledged to the issuer of any letter of credit
     pursuant to such issuer's contractual right to demand collateral upon the
     occurrence of certain events or conditions occurring subsequent to the
     issuance of such letter of credit (such collateral, "Default Collateral"))
     in the ordinary course of business in connection with general liability,
     workers' compensation, unemployment insurance and other social security
     legislation;

          (f) deposits or pledges to secure the performance of bids, trade
     contracts (other than for borrowed money), leases, statutory obligations,
     surety and appeal bonds, performance bonds and other obligations of a like
     nature incurred in the ordinary course of business;

          (g) easements, rights-of-way, restrictions and other similar
     encumbrances affecting real property which are not in the aggregate
     material to the financial condition of the Borrower and its Subsidiaries on
     a consolidated basis;

          (h) Liens securing judgments for the payment of money in an aggregate
     amount not in excess of $25,000,000 (except to the extent covered by
     independent third-party insurance as to which the insurer has acknowledged
     in writing its obligation to cover), unless any such judgment remains
     undischarged for a period of more than 60 consecutive days during which
     execution is not effectively stayed (or execution has not been otherwise
     effectively suspended in accordance with the laws of the relevant
     jurisdiction); and

          (i) Liens arising from letters of credit issued for the account of
     Borrower or any of its Subsidiaries in connection with the purchase of
     inventory and equipment in the ordinary course of business;
     <U>provided</U>, <U>however</U>, that (i) this Subparagraph (i) shall not
     apply to any Default Collateral, and (ii) Liens arising under this
     Subparagraph (i) shall at no time exceed $250,000,000;

          (j) Liens upon Property heretofore leased or leased after the date
     hereof (under operating or capital leases) in the ordinary course of
     business by the Borrower or any of its Subsidiaries in favor of the lessor
     created at the inception of the lease transaction, securing obligations of
     the Borrower or any of its Subsidiaries under or in respect of such lease
     and extending to or covering only the Property subject to the lease
     (including without limitation distribution center conveyors, racks and
     related equipment, and trailers to be used in shipping operations); and

          (k) Liens (other than Liens of the type permitted in Subparagaphs (a)
     through (j) above (collectively, "<U>Permitted Liens</U>")) securing Debt,
     which do not in the aggregate exceed 15.0% of Consolidated Net Worth
     (<U>minus</U> outstanding Permitted Liens under Subparagraph (h) above) at
     any time.

     SECTION 6.04. <U>Leverage Ratio</U>. Will not permit the Leverage Ratio, at
any time during any fiscal quarter to be greater than 0.50 to 1.0.

     SECTION 6.05. <U>Consolidated Fixed Charge Coverage Ratio</U>. Will not
permit the Consolidated Fixed Charge Coverage Ratio, calculated as of the end of
each fiscal quarter of the Borrower for the four fiscal quarters of the Borrower
then most recently ended, to be less than 2.00 to 1.0.

     SECTION 6.06. <U>Disposition of Property</U>. Will not, and will not permit
any of its Subsidiaries to, sell, lease, assign, transfer, or otherwise dispose
of all or substantially all of its Properties (including the stock of any
Subsidiaries), whether in one transaction or a series of transactions; provided
that:

          (a) the Borrower and its Subsidiaries may sell inventory in the
     ordinary course of business;

          (b) the Borrower and its Subsidiaries may sell, open, close, or lease
     stores and distribution facilities and their related assets and may enter
     into sale and leaseback transactions with respect to their stores and
     distribution facilities and their related assets;

          (c) any Subsidiary (other than a Guarantor) may transfer Property to
     another Subsidiary or the Borrower; and

          (d) any Guarantor may transfer Property to another Guarantor or the
     Borrower.

     SECTION 6.07. <U>Mergers, Consolidations Etc</U>.

          (a) Shall not (i) merge or consolidate with or into any other Person
     unless the Borrower is the surviving corporation and no Default shall exist
     immediately prior to or after giving effect to such merger or
     consolidation, or (ii) dissolve, liquidate, or terminate its legal
     existence.

          (b) Shall not (i) permit any Guarantor to merge or consolidate with or
     into any Person unless a Guarantor or the Borrower is the surviving
     corporation and no Default shall exist immediately prior to or after giving
     effect to such merger or consolidation, or (ii) permit any Guarantor to
     dissolve, liquidate, or terminate its legal existence (except as permitted
     in clause (a)(i) or (b)(i) of this Section 6.07).



                              ___________________


<B>
                                    ARTICLE VII
                                     DEFAULT
</B>
     SECTION 7.01. <U>Events of Default</U>. Each of the following shall
constitute an "<U>Event of Default</U>":

          (a) the Borrower shall fail to pay when due any principal of any Loan
     and such failure shall continue for a period of three (3) Business Days
     after notice thereof to the Borrower by the Bank.

          (b) the Borrower shall fail to pay when due any interest on any Loan,
     any fee, or any other amount payable under this Agreement and such failure
     shall continue for a period of ten (10) days after notice thereof to the
     Borrower by the Bank.

          (c) any representation or warranty made (or deemed made pursuant to
     Section 4.02 or 4.03) in any Loan Document or in any certificate or
     financial statement delivered pursuant hereto shall be false, misleading,
     or erroneous in any material respect when made or so deemed made and such
     deficiency shall remain unremedied for a period of ten (10) days after
     notice thereof shall have been given by the Bank to the Borrower, or such
     additional periods as shall be necessary to remedy such deficiency if the
     Borrower is proceeding in good faith to remedy such deficiency and if the
     failure to remedy the deficiency within said period of ten (10) days will
     not, in the reasonable determination of the Bank, have a Material Adverse
     Effect.

          (d) the Borrower shall fail to comply with Section 6.01(c).

          (e) any Loan Party shall fail to perform, observe, or comply with any
     other covenant, agreement, or term contained in any Loan Document (other
     than a failure covered elsewhere in this Section 7.01) and such failure
     shall continue for a period of thirty (30) days after notice thereof to
     such Loan Party by the Bank.

          (f) any Loan Party or any Material Subsidiary or Material Subsidiaries
     shall admit in writing its or their inability to, or be generally unable
     to, pay its or their debts as such debts become due.

          (g) any voluntary or involuntary proceeding under any Debtor Relief
     Law shall be commenced by or against any Loan Party or any Material
     Subsidiary or Material Subsidiaries or any of their respective assets, and
     if an involuntary proceeding is commenced, such proceeding shall not be
     dismissed within sixty (60) days after the commencement thereof.

          (h) any Loan Party or any Material Subsidiary or Material Subsidiaries
     shall fail to pay when due any principal of or interest on any Debt (other
     than the Notes) having an outstanding principal amount greater than
     $25,000,000 and such failure shall continue for a period of ten (10) days,
     whether as principal obligor, guarantor, or otherwise, or any event shall
     have occurred that permits (after the passage of any applicable grace
     period) any holder or holders of such Debt or any Person acting on behalf
     of such holder or holders to accelerate the maturity thereof and such event
     shall continue for a period of ten (10) days.

          (i) any judgment or order for the payment of money (not covered by
     insurance where the insurer has confirmed coverage) in excess of
     $25,000,000 shall be rendered against any Loan Party or any Material
     Subsidiary or Material Subsidiaries and such judgment or order shall
     continue unsatisfied and unstayed (or execution thereof shall not have been
     otherwise effectively suspended in accordance with the laws of the relevant
     jurisdiction) for a period of sixty (60) days.

          (j) any Guarantor repudiates its obligations under the Guaranty or
     asserts that the Guaranty is unenforceable, or the Guaranty ceases for any
     reason to be enforceable and in full force and effect.

          (k) each of the following events shall have occurred:

          (i) any person or group of persons (within the meaning of Section 13
     or 14 of the Securities Exchange Act of 1934, as amended) (other than Mr.
     Leon Levine and his Family Members or an investment manager acceptable to
     Bank in its sole discretion) shall have acquired beneficial ownership
     (within the meaning of Rule 13d-3 promulgated by the Securities and
     Exchange Commission under said Act) of 40% or more of the outstanding
     shares of common stock of the Borrower;

               (ii) Mr. Leon Levine and his Family Members collectively shall
          own less than 15% of the outstanding shares of common stock of the
          Borrower; and

               (iii) one hundred fifty (150) days shall have elapsed from the
          date that the events specified in clauses (i) and (ii) of this
          paragraph (k) shall have occurred.

          (l) any of the following events shall occur or exist with respect to
     any member of the ERISA Group: (i) any prohibited transaction (as defined
     in Sections 406 and 408 of ERISA and Section 4975 of the Internal Revenue
     Code) involving any Plan; (ii) any reportable event (as defined in Section
     4043 of ERISA) with respect to any Plan; (iii) the filing under Section
     4041 of ERISA of a notice of intent to terminate any Plan or the
     termination of any Plan; (iv) any event or circumstance that might
     constitute grounds entitling the PBGC to institute proceedings under
     Section 4042 of ERISA for the termination of, or for the appointment of a
     trustee to administer, any Plan, or the institution by the PBGC of any such
     proceedings; (v) any "accumulated funding deficiency" (as defined in
     Section 302 of ERISA), whether or not waived; or (vi) complete or partial
     withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan or
     the reorganization, insolvency, or termination of any Multiemployer Plan;
     and in each case above, such event or condition, together with all other
     events or conditions, if any, have subjected, or could in the reasonable
     opinion of the Bank subject, the Borrower and its Subsidiaries to any tax,
     penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC, or
     otherwise (or any combination thereof) which in the aggregate exceed or
     could reasonably be expected to exceed $25,000,000.

     SECTION 7.02. <U>Remedies</U>. If any Event of Default shall occur and be
continuing, the Bank may do any one or more of the following:

          (a) <U>Acceleration</U>. Declare all outstanding principal of and
     accrued and unpaid interest on the Notes and all other amounts payable by
     the Borrower under the Loan Documents immediately due and payable, and the
     same shall thereupon become immediately due and payable, without
     presentment, demand, protest, notice of acceleration, notice of intent to
     accelerate, or other notices or formalities of any kind, all of which are
     hereby expressly waived by the Borrower.

          (b) <U>Termination of Commitments</U>. Terminate the Commitments
     without notice to the Borrower.

          (c) <U>Rights</U>. Exercise any and all rights and remedies afforded
     by applicable law or otherwise.

Notwithstanding the foregoing, upon the occurrence of an Event of Default under
Section 7.01(g), the Commitments shall automatically terminate, and the
outstanding principal of and accrued and unpaid interest on the Notes and all
other amounts payable by the Borrower under the Loan Documents shall thereupon
become immediately due and payable without presentment, demand, protest, notice
of acceleration, notice of intent to accelerate, or other notices or formalities
of any kind, all of which are hereby expressly waived by the Borrower.



                              ___________________


<B>
                                   ARTICLE VIII
                                  MISCELLANEOUS
</B>
     SECTION 8.01. <U>Right of Set-off</U>. Upon the occurrence and during the
continuance of any Event of Default, the Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Bank (or
any of its Affiliates) to or for the credit or the account of the Borrower
against any and all of the obligations of the Borrower now or hereafter existing
under the Loan Documents, irrespective of whether the Bank shall have made any
demand under the Loan Documents and although such obligations may be unmatured.
The Bank agrees promptly to notify the Borrower after any such set-off and
application made by the Bank; provided, however, that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Bank under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) that the Bank may have.

     SECTION 8.02. <U>No Waiver Cumulative Remedies</U>. No failure on the part of the
Bank to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under any Loan Document shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power, or privilege under any Loan Document preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege. The
rights and remedies provided for in the Loan Documents are cumulative and not
exclusive of any rights and remedies provided by law.

     SECTION 8.03. <U>Successors and Assigns</U>. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of their rights or obligations hereunder without the prior written consent of
the Bank. The Bank may at any time and from time to time (a) grant participating
interests in the Commitments and the Loans to any Person(s), and (b) assign all
or any portion of its rights and/or obligations under the Loan Documents to any
Person(s); <U>provided</U>, that the Bank may not assign its Commitments to any
Person (other than an Affiliate of the Bank) without the prior written consent
of the Borrower. All information provided by the Borrower to the Bank may be
furnished by the Bank to its Affiliates and to any actual or proposed assignee
or participant, provided that any actual or proposed assignee or participant
agrees to be bound by the provisions of Section 8.14.

     SECTION 8.04. <U>Amendments</U>. No amendment or waiver of any provision of
any Loan Document to which the Borrower is a party, nor any consent to any
departure by the Borrower therefrom, shall be effective unless the same shall be
agreed or consented to in writing by the Bank and the Borrower, and each such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it is given.

     SECTION 8.05. <U>Notices</U>. All notices, requests, and other
communications to either party hereunder shall be in writing (including bank
wire, facsimile transmission, or similar writing) and shall be given to such
party at its address or facsimile number set forth on the signature pages
hereof. Each such notice, request, or other communication shall be effective
when received.

     SECTION 8.06. <U>Counterparts</U>. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     SECTION 8.07. <U>Severability</U>. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.

     SECTION 8.08. <U>Controlling Agreement</U>. Notwithstanding anything to the
contrary contained in any Loan Document, the interest paid or agreed to be paid
under the Loan Documents shall not exceed the maximum rate of non-usurious
interest permitted by applicable law (the "Maximum Rate"). If the Bank shall
receive interest in an amount that exceeds the Maximum Rate, the excessive
interest shall be applied to the principal of the Loans or, if it exceeds the
unpaid principal, refunded to the Borrower.

     SECTION 8.09. <U>Survival</U>. All representations and warranties made or
deemed made by the Borrower in the Loan Documents shall survive the execution
and delivery thereof and the making of the Loans, and no investigation by the
Bank or any closing shall affect the representations and warranties by the
Borrower or the right of the Bank to rely upon them. Without prejudice to the
survival of any other obligation of the Borrower hereunder, the obligations of
the Borrower and the Bank under Article III shall survive repayment of the Notes
and termination of the Commitments.

     SECTION 8.10. <U>Governing Law</U>. This Agreement and the Notes shall be
governed by and construed in accordance with the law of the State of North
Carolina and the applicable laws of the United States of America. The Borrower
and the Bank hereby submit to the nonexclusive jurisdiction of the United States
District Court and each state court in Charlotte, North Carolina for the
purposes of all legal proceedings arising out of or relating to any of the Loan
Documents or the transactions contemplated thereby. The Borrower and the Bank
irrevocably consent to the service of any and all process in any action or
proceeding by the mailing of copies of such process to the Borrower or the Bank,
as the case may be, at its address set forth underneath its signature hereto.
The Borrower and the Bank irrevocably waive, to the fullest extent permitted by
law, any objection which either of them may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum.

     SECTION 8.11. <U>WAIVER OF JURY TRIAL</U>. TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND EXPRESSLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO
ANY LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY OR THE
NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.

     SECTION 8.12. <U>ENTIRE AGREEMENT</U>. THIS WRITTEN AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

     SECTION 8.13. <U>Confidentiality</U>. The Bank agrees, with respect to any
non-public information delivered or made available by the Borrower to the Bank,
to maintain the confidentiality of such information. Nothing herein shall
prevent the Bank from disclosing such information (i) to its Affiliates,
officers, directors, employees, agents, attorneys, and accountants, provided
that each such Person shall be informed of, and directed to abide by, the terms
of this Section 8.14, (ii) upon the order, request, or demand of any court or
other Governmental Authority (other than bank regulatory authorities having
jurisdiction over the Bank); provided that the Bank will furnish to the Borrower
prompt notice of any such request or demand as far in advance of such disclosure
as may be reasonably practicable so that the Borrower may, at the Borrower's
expense, seek an appropriate protective order, (iii) to bank regulatory
authorities having jurisdiction over the Bank, (iv) which has been publicly
disclosed, (v) to the extent reasonably required in connection with any
litigation to which the Bank, the Borrower, or their respective Affiliates may
be a party, provided that the Bank shall give the Borrower reasonable prior
notice of such disclosure by the Bank or any of its Affiliates, (vi) to the
extent reasonably required in connection with the exercise by the Bank of any
remedy hereunder, provided that the Bank shall give the Borrower reasonable
prior notice of such disclosure, and (vii) with the prior written consent of
Borrower.


                            [Signature Pages Follow]



                              ___________________



     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
under seal as of the date first above written.


[CORPORATE SEAL]                   BORROWER:


                                   FAMILY DOLLAR STORES, INC.

                                   By <U>/s/ Howard R. Levine                   </U>
                                          Howard R. Levine&nbsp;&nbsp;
                                          President (Chief Executive Officer)
<B>
                                   Address for Notices:
</B>
                                   Family Dollar Stores, Inc.
                                   P.  O.  Box 1017
                                   Charlotte, North Carolina  28201-1017
                                   Facsimile No.: (704) 841-1401
                                   Attention:  Senior Vice President - Finance



[CORPORATE SEAL]                   FAMILY DOLLAR, INC.

                                   By <U>/s/ Howard R. Levine                   </U>
                                          Howard R. Levine&nbsp;&nbsp;
                                          President (Chief Executive Officer)
<B>
                                   Address for Notices:
</B>
                                   Family Dollar, Inc.
                                   c/o Family Dollar Stores, Inc.
                                   P.  O.  Box 1017
                                   Charlotte, North Carolina  28201-1017
                                   Facsimile No.: (704) 841-1401
                                   Attention:  Senior Vice President - Finance



                                   BANK:

                                   FIRST UNION NATIONAL BANK

                                   By <U>/s/ Michael T. Grady                   </U>
                                          Michael T. Grady&nbsp;&nbsp;
                                          Managing Partner

                                   Lending Office for CD Loans and LIBOR Loans
<B>
                                   Address for Notices:
</B>
                                   First Union National Bank
                                   Charlotte Plaza, CP-23
                                   201 South College Street
                                   Charlotte, North Carolina 28288-0608
                                   Facsimile No.: (704) 383-0288
                                   Attention:  Michael Grady






                              ___________________

<B>
                                   EXHIBIT A-1
</B>
                                 TRANCHE A NOTE


$25,000,000.00                                                 August ____, 2001

     FOR VALUE RECEIVED, the undersigned, FAMILY DOLLAR STORES, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of FIRST UNION
NATIONAL BANK (the "Bank"), at the Principal Office, in lawful money of the
United States of America, the principal amount of TWENTY-FIVE AND 00/100 MILLION
DOLLARS ($25,000,000) or such lesser amount as shall equal the aggregate unpaid
principal amount of the Tranche A Loans made by the Bank to the Borrower under
the Credit Agreement referred to below, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Tranche A Loan, at such office, in like money, for
the period commencing on the date of such Tranche A Loan until such Tranche A
Loan shall be paid in full, at the rates per annum and on the dates provided in
the Credit Agreement.

     The books and records of the Bank shall be prima facie evidence of all
amounts outstanding hereunder.

     This Note is the Tranche A Note referred to in the Credit Agreement of even
date herewith, between the Borrower and the Bank (such Credit Agreement, as the
same may be amended, modified, or supplemented from time to time, being referred
to herein as the "<U>Credit Agreement</U>"), and evidences Tranche A Loans made
by the Bank thereunder. The Credit Agreement, among other things, contains
provisions for acceleration of the maturity of this Note upon the happening of
certain stated events and for prepayments of Tranche A Loans prior to the
maturity of this Note upon the terms and conditions specified in the Credit
Agreement. Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.

     This Note shall be governed by and construed in accordance with the laws of
the State of North Carolina (without reference to the conflicts of law
principles thereof) and the applicable laws of the United States of America.

                            [Signature Page Follows]



                              ___________________



     IN WITNESS WHEREOF, the undersigned have executed this Tranche A Note under
seal as of the date first written above.


[CORPORATE SEAL]                   FAMILY DOLLAR STORES, INC.


                                   By:  ___________________________________
                                        Name: _____________________________
                                        Title:_____________________________






                              ___________________

<B>
                                  EXHIBIT A-2

                                 TRANCHE A NOTE
</B>

$25,000,000                                                     August ___, 2001


     FOR VALUE RECEIVED, the undersigned, FAMILY DOLLAR, INC., a North Carolina
corporation (the "Borrower"), hereby promises to pay to the order of FIRST UNION
NATIONAL BANK (the "Bank"), at the Principal Office, in lawful money of the
United States of America, the principal amount of TWENTY-FIVE MILLION AND 00/100
DOLLARS ($25,000,000) or such lesser amount as shall equal the aggregate unpaid
principal amount of the Tranche A Loans made by the Bank to the Borrower under
the Credit Agreement referred to below, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Tranche A Loan, at such office, in like money, for
the period commencing on the date of such Tranche A Loan until such Tranche A
Loan shall be paid in full, at the rates per annum and on the dates provided in
the Credit Agreement.

     The books and records of the Bank shall be prima facie evidence of all
amounts outstanding hereunder.

     This Note is the Tranche A Note referred to in the Credit Agreement of even
date herewith, between the Borrower and the Bank (such Credit Agreement, as the
same may be amended, modified, or supplemented from time to time, being referred
to herein as the "Credit Agreement"), and evidences Tranche A Loans made by the
Bank thereunder. The Credit Agreement, among other things, contains provisions
for acceleration of the maturity of this Note upon the happening of certain
stated events and for prepayments of Tranche A Loans prior to the maturity of
this Note upon the terms and conditions specified in the Credit Agreement.
Capitalized terms used in this Note have the respective meanings assigned to
them in the Credit Agreement.

     This Note shall be governed by and construed in accordance with the laws of
the State of North Carolina (without reference to the conflicts of law
principles thereof) and the applicable laws of the United States of America.



                            [Signature Page Follows]



                              ___________________



   IN WITNESS WHEREOF, the undersigned have executed this Tranche A Note under
seal as of the date first written above.

                                   FAMILY DOLLAR, INC.


                                   By:  ___________________________________
                                        Name: _____________________________
                                        Title:_____________________________





<B>

                                  EXHIBIT B-1

                                 TRANCHE B NOTE
</B>
$25,000,000.00                                                  August ___, 2001

     FOR VALUE RECEIVED, the undersigned, FAMILY DOLLAR STORES, INC., a Delaware
corporation (the "<U>Borrower</U>"), hereby promise to pay to the order of FIRST
UNION NATIONAL BANK (the "<U>Bank</U>"), at the Principal Office, in lawful
money of the United States of America, the principal amount of TWENTY-FIVE
MILLION AND 00/100 Dollars ($25,000,000) or such lesser amount as shall equal
the aggregate unpaid principal amount of the Tranche B Loans made by the Bank to
the Borrower under the Credit Agreement referred to below, on the dates and in
the principal amounts provided in the Credit Agreement, and to pay interest on
the unpaid principal amount of each such Tranche B Loan, at such office, in like
money, for the period commencing on the date of such Tranche B Loan until such
Tranche B Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.

     The books and records of the Bank shall be prima facie evidence of all
amounts outstanding hereunder.

     This Note is the Tranche B Note referred to in the Credit Agreement of even
date herewith, between the Borrower and the Bank (such Credit Agreement, as the
same may be amended, modified, or supplemented from time to time, being referred
to herein as the "<U>Credit Agreement</U>"), and evidences Tranche B Loans made
by the Bank thereunder. The Credit Agreement, among other things, contains
provisions for acceleration of the maturity of this Note upon the happening of
certain stated events and for prepayments of Tranche B Loans prior to the
maturity of this Note upon the terms and conditions specified in the Credit
Agreement. Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.

     This Note shall be governed by and construed in accordance with the laws of
the State of North Carolina (without reference to the conflicts of law
principles thereof) and the applicable laws of the United States of America.



                            [Signature Page Follows]



                              ___________________



     IN WITNESS WHEREOF, the undersigned have executed this Tranche B Note under
seal as of the date first written above.

[CORPORATE SEAL]                   FAMILY DOLLAR STORES, INC.


                                   By:  ___________________________________
                                        Name: _____________________________
                                        Title:_____________________________



<B>

                                  EXHIBIT B-2

                                 TRANCHE B NOTE
</B>

$25,000,000                                                     August ___, 2001


     FOR VALUE RECEIVED, the undersigned, FAMILY DOLLAR, INC., a North Carolina
corporation (the "<U>Borrower</U>"), hereby promises to pay to the order of
FIRST UNION NATIONAL BANK (the "Bank"), at the Principal Office, in lawful money
of the United States of America, the principal amount of TWENTY-FIVE MILLION AND
00/100 DOLLARS ($25,000,000) or such lesser amount as shall equal the aggregate
unpaid principal amount of the Tranche B Loans made by the Bank to the Borrower
under the Credit Agreement referred to below, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Tranche B Loan, at such office, in like money, for
the period commencing on the date of such Tranche B Loan until such Tranche B
Loan shall be paid in full, at the rates per annum and on the dates provided in
the Credit Agreement.

     The books and records of the Bank shall be prima facie evidence of all
amounts outstanding hereunder.

     This Note is the Tranche B Note referred to in the Credit Agreement of even
date herewith, between the Borrower and the Bank (such Credit Agreement, as the
same may be amended, modified, or supplemented from time to time, being referred
to herein as the "<U>Credit Agreement</U>"), and evidences Tranche B Loans made
by the Bank thereunder. The Credit Agreement, among other things, contains
provisions for acceleration of the maturity of this Note upon the happening of
certain stated events and for prepayments of Tranche B Loans prior to the
maturity of this Note upon the terms and conditions specified in the Credit
Agreement. Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.

     This Note shall be governed by and construed in accordance with the laws of
the State of North Carolina (without reference to the conflicts of law
principles thereof) and the applicable laws of the United States of America.



                            [Signature Page Follows]



                              ___________________



     IN WITNESS WHEREOF, the undersigned have executed this Tranche B Note under
seal as of the date first written above.

                                   FAMILY DOLLAR, INC.


                                   By:  ___________________________________
                                        Name: _____________________________
                                        Title:_____________________________





<B>
                                   EXHIBIT C

                                   TERM NOTE
</B>
$_______________                                                          [Date]

     FOR VALUE RECEIVED, the undersigned, FAMILY DOLLAR STORES, INC., a Delaware
corporation, and FAMILY DOLLAR, INC., a ________ corporation (the
"<U>Borrower</U>"), hereby promise to pay to the order of FIRST UNION NATIONAL
BANK (the "Bank"), at the Principal Office, in lawful money of the United States
of America, the principal amount of ________________________ Dollars ($_______),
together with interest on the outstanding principal balance as specified herein.

     The outstanding principal of this Note shall be payable in _______ (_____)
installments of principal as follows:

          (a) two (2) installments of principal each in the amount of $_________
     shall be payable on __________ and ___________________; and

          (b) ________ (______)installments of principal each in the amount of
     __________ Dollars, shall be due and payable, the first such installment to
     be due and payable on __________, with like successive installments of
     principal to be due and payable on the last day of each [insert dates]
     thereafter until and including ; and thereafter

          (c) a final installment in the amount of all outstanding principal of
     this Note shall be due and payable on _______________.

     The outstanding principal of this Note shall bear interest at the rates per
annum provided in the Credit Agreement. Accrued and unpaid interest on this Note
shall be payable on each, and of each __________, ___________, ___________ and
___________ of each year, commencing on _____________, and at maturity.

     The books and records of the Bank shall be prima facie evidence of all
amounts outstanding hereunder.

     This Note is a Term Note referred to in the Credit Agreement dated August
___, 2001, between the Borrower (as defined in such Credit Agreement) and the
Bank (as the same may be amended, modified, or supplemented from time to time,
being referred to herein as the "<U>Credit Agreement</U>"), and evidences a Term
Loan thereunder. The Credit Agreement, among other things, contains provisions
for acceleration of the maturity of this Note upon the happening of certain
stated events and for prepayments of the Term Loan evidenced hereby prior to the
maturity of this Note upon the terms and conditions specified in the Credit
Agreement. Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.

     This Note shall be governed by and construed in accordance with the laws of
the State of North Carolina (without reference to the conflicts of law
principles thereof) and the applicable laws of the United States of America.


                            [Signature Page Follows]



                              ___________________



     IN WITNESS WHEREOF, the undersigned have executed this Term Note under seal
as of the date first written above.

[CORPORATE SEAL]                   FAMILY DOLLAR STORES, INC.

                                   By:  ___________________________________
                                        Name: _____________________________
                                        Title:_____________________________



[CORPORATE SEAL]                    FAMILY DOLLAR, INC.

                                   By:  ___________________________________
                                        Name: _____________________________
                                        Title:_____________________________







                              ___________________

<B>
                                   EXHIBIT D

                           FORM OF GUARANTEE AGREEMENT
</B>

     GUARANTEE AGREEMENT (this "Agreement") dated as of August __, 2001, is
executed by Family Dollar Services, Inc., a North Carolina corporation, Family
Dollar Operations, Inc., a North Carolina corporation, and Family Dollar
Trucking, Inc., a North Carolina corporation (each a "<U>Guarantor</U>" and
collectively the "<U>Guarantors</U>") in favor of First Union National Bank, a
national banking association (the "Bank").

     WHEREAS, Family Dollar Stores, Inc., a Delaware corporation ("<U>FDSI</U>")
and Family Dollar, Inc., a North Carolina corporation ("<U>FDI</U>") (FDSI and
FDI, collectively, the "<U>Borrower</U>"), are parties to that certain Credit
Agreement with the Bank of even date pursuant to which the Bank has provided
financing to the Borrower in a total amount of up to $50,000,000; and

     WHEREAS, to induce the Bank to enter into the Credit Agreement, the
Guarantors are willing to guarantee the obligations of the Borrower under the
Loan Documents (as defined in the Credit Agreement); and

     WHEREAS, the execution and delivery of this Agreement by the Guarantors is
a condition to the willingness of the Bank to enter into the Credit Agreement;
and

     WHEREAS, the ability of the Borrower to borrow from time to time under the
Credit Agreement will benefit the Guarantors directly and indirectly; and

     WHEREAS, each Guarantor has determined, reasonably and in good faith, that
it is solvent, it has adequate capital to conduct its business as presently
conducted and as proposed to be conducted, and that it will be able to meet its
obligations hereunder and in respect of its other existing and future
indebtedness and liabilities as and when the same shall be due and payable; and

     WHEREAS, each Guarantor has determined that the execution and delivery of
this Agreement are to its advantage and benefit, having regard to all relevant
facts and circumstances;

     NOW, THEREFORE, in consideration of the mutual agreements contained herein
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:

     1. Terms defined in the Credit Agreement and not otherwise defined herein
are used herein as therein defined.

     2. The Guarantors hereby jointly, severally, unconditionally, and
irrevocably guarantee to the Bank and its successors and assigns, the full and
punctual payment of all present and future amounts payable by the Borrower
pursuant to the Loan Documents, including, but not limited to, the full and
punctual payment of all principal of and interest on the Notes (whether at
maturity, by declaration or otherwise). The indebtedness guaranteed hereunder
shall include any and all post-petition interest (including reasonable
attorneys' fees) whether or not allowed under any bankruptcy, insolvency, or
other similar law. Upon any failure by the Borrower to pay when due any amount
guaranteed hereunder, the Guarantors hereby jointly, severally and
unconditionally agree to forthwith on demand pay such amount as and when the
same shall become due and payable, whether at maturity or by declaration or
otherwise.

     3. Each Guarantor's obligations hereunder shall be unconditional and
absolute and, without limiting the generality of the foregoing shall not be
released, discharged, impaired, or otherwise affected by any of the following,
whether or not with notice to or the consent of such Guarantor:

          (a) any extension, renewal, settlement, compromise, indulgence, waiver
     or release in respect of any obligation of the Borrower or any other Loan
     Party under any of the Loan Documents, by operation of law or otherwise;

          (b) any modification or amendment of or supplement to any of the Loan
     Documents;

          (c) any release, exchange, impairment, non-perfection or invalidity of
     any direct or indirect security, or of any guarantee or other liability of
     any third party for any obligation of the Borrower or any other Loan Party
     under any of the Loan Documents;

          (d) any change in the corporate existence, structure or ownership of
     the Borrower or any other Loan Party, or any insolvency, bankruptcy or
     other similar proceeding affecting the Borrower or any other Loan Party or
     any of their respective assets or any resulting release or discharge of any
     obligation of the Borrower or any other Loan Party contained in the Loan
     Documents;

          (e) the existence of any claim, set-off or other rights which such
     Guarantor may have at any time against the Bank, the Borrower, any other
     Loan Party or any other Person whether in connection herewith or any
     unrelated transactions; provided that nothing herein shall prevent the
     assertion of any such claim by separate suit or compulsory counterclaim;

          (f) the invalidity or unenforceability of any Loan Document; or

          (g) any other act or omission to act or delay of any kind by the Bank,
     the Borrower, any other Loan Party, or any other Person or any other
     circumstance whatsoever which might, but for the provisions of this
     paragraph, constitute a legal or equitable discharge of such Guarantor's
     obligations hereunder.

Each Guarantor hereby waives the benefits of North Carolina General Statutes,
Sections 26-7 through 26-9 inclusive.

     4. The obligations of each Guarantor hereunder shall be limited to an
aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance under Section 548 of the United
States Bankruptcy Code or to being set aside or annulled under any applicable
state law relating to fraud on creditors.

     5. Each Guarantor's obligations hereunder shall remain in full force and
effect until the Commitments shall have terminated and all principal of and
interest on the Notes and all other amounts payable by the Borrower under the
Loan Documents shall have been paid in full.

     6. If at any time any payment of any amount payable by the Borrower is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Borrower or otherwise, each Guarantor's
obligations hereunder with respect to such payment shall be reinstated as though
such payment had been due but not made at such time.

     7. The Guarantors irrevocably waive acceptance hereof, presentment, demand,
protest, notice of the incurring by the Borrower of indebtedness under the Loan
Documents, and any notice not expressly provided for herein, as well as any
requirement that at any time any action be taken against the Borrower, any other
Loan Party, or any other Person or against any direct or indirect security for
any obligation or liability of the Borrower under the Loan Documents.

     8. Upon making any payment with respect to the Borrower under the Loan
Documents, the relevant Guarantor shall be subrogated to the rights of the Bank
against the Borrower with respect to such payment; <U>provided</U> that such
Guarantor shall not enforce any payment by way of subrogation, contribution,
indemnity, or otherwise until the Commitments have terminated and all principal
of and interest on the Notes and all other amounts payable by the Borrower under
the Loan Documents have been paid in full.

     9. If acceleration of the time for payment of any amount that is guaranteed
hereunder is stayed or demand for payment of any such amount is precluded upon
the insolvency, bankruptcy or reorganization of the Borrower (determined without
regard to whether a court might act favorably on a request for relief from any
such stay or other preclusion), all such amounts otherwise subject to
acceleration under the terms of the Loan Documents shall nonetheless be payable
by each Guarantor hereunder forthwith on demand by the Bank.

     10. Each Guarantor hereby represents and warrants to the Bank that:

          (a) such Guarantor is duly organized, validly existing, and in good
     standing under the laws of the jurisdiction of its organization; and (b)
     has the requisite power and authority and legal right to own its assets and
     carry on its business as now being or as proposed to be conducted. Such
     Guarantor has the power, authority, and legal right to execute, deliver,
     and perform its obligations under this Agreement.

          (b) the execution, delivery, and performance by such Guarantor of this
     Agreement and compliance with the terms and provisions hereof have been
     duly authorized by all requisite action on the part of such Guarantor and
     do not (a) violate or conflict with, or result in a breach of, or require
     any consent under (i) the articles of incorporation, bylaws, or other
     organizational documents of such Guarantor, (ii) to the best of such
     Guarantor's knowledge, any applicable law, rule, or regulation or any
     order, writ, injunction, or decree of any Governmental Authority or
     arbitrator, or (iii) any agreement or instrument to which such Guarantor is
     a party or by which it or any of its Property is bound or subject, or (b)
     constitute a default under any such agreement or instrument.

          (c) this Agreement constitutes the legal, valid, and binding
     obligation of such Guarantor, enforceable against such Guarantor in
     accordance with its terms, except as limited by applicable Debtor Relief
     Laws and general principles of equity.

          (d) no authorization, approval, or consent of, and no filing or
     registration with, any Governmental Authority or third party is or will be
     necessary for the execution, delivery, or performance by such Guarantor of
     this Agreement or for the validity or enforceability thereof.

          (e) the statements set forth in the recitals hereto are true and
     correct with respect to such Guarantor.

     11. Effective upon the occurrence and during the existence of an Event of
Default, any and all indebtedness of the Borrower to the Guarantors, or any of
them, now or hereafter existing, together with any interest thereon, shall be,
and such indebtedness is, hereby deferred, postponed and subordinated to the
prior payment in full of all amounts guaranteed hereunder. If an Event of
Default shall exist, the Guarantors agree not to accept any payment or
satisfaction of any kind of indebtedness of the Borrower to the Guarantors, or
any of them, and hereby assign all such indebtedness to the Bank, including the
right to file proof of claim and to vote thereon in connection with any case by
or against the Borrower under the United States Bankruptcy Code and the right to
vote on any plan of reorganization thereunder.

     12. All notices, requests, demands and other communications to or from the
parties hereto shall be in writing (including telecopy or similar writing) and
shall be given to such party: (x) in the case of any Guarantor, at the address
or telecopier number set forth on the signature pages hereof, and (y) in the
case of the Bank, at its address or telecopy number set forth on the signature
pages of the Credit Agreement. Each such notice, request or other communication
shall be effective when received.

     13. This Agreement shall be binding upon each of the Guarantors and their
respective successors and assigns, and shall inure to the benefit of the Bank
and its successors and assigns. No Guarantor may assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
the Bank.

     14. None of the terms of this Agreement may be waived, altered or amended
except by an instrument in writing duly executed by each Guarantor and the Bank.
No failure or delay on the part of the Bank in exercising any right, power, or
privilege under any of Loan Documents shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power, or privilege under any
of the Loan Documents preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege. The rights and remedies
provided in and contemplated by this Agreement are cumulative and not exclusive
of any rights or remedies provided by law.

     15. This Agreement shall be construed in accordance with and governed by
the laws of the State of North Carolina.

     16. Each Guarantor and the Bank hereby submits to the nonexclusive
jurisdiction of the United States District Court or any North Carolina state
court sitting in Charlotte, North Carolina for purposes of all legal proceedings
arising out of or relating to the Loan Documents or the transactions
contemplated hereby. Each Guarantor and the Bank irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW EACH
OF THE GUARANTORS AND THE BANK HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.

     17. This Agreement is an absolute, present and continuing guarantee of
payment and not of collection. Each Guarantor agrees that the Bank may enforce
this Agreement without the necessity of resorting to or exhausting any security
or collateral and without the necessity of proceeding against the Borrower or
any other Loan Party.

     18. Each Guarantor agrees that nothing contained herein shall prevent the
Bank from suing on the Loan Documents or from exercising any rights available to
the Bank, thereunder and that the exercise of any of the aforesaid rights shall
not constitute a legal or equitable discharge of any Guarantor. Each Guarantor
hereby authorizes and empowers the Bank to exercise, in its sole discretion, any
rights and remedies, or any combination thereof, which may then be available to
the Bank, since it is the intent and purpose of each Guarantor that its
obligations hereunder shall be absolute, independent and unconditional under any
and all circumstances.

     19. This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.



                              ___________________



     IN WITNESS WHEREOF, each of the undersigned have caused this Guarantee
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written


                                   FAMILY DOLLAR SERVICES, INC.


                                   By:  ___________________________________
                                        Name: _____________________________
                                        Title:_____________________________
<B>
                                        Address for Notices:
</B>
                                        Family Dollar Services, Inc.
                                        P. O. Box 1017
                                        Charlotte, N. C.  28201-1017

                                        Facsimile No.: (704) 841-1401

                                        Attention:



                                   FAMILY DOLLAR OPERATIONS, INC.


                                   By:  ___________________________________
                                        Name: _____________________________
                                        Title:_____________________________
<B>
                                        Address for Notices:
</B>
                                        Family Dollar Operations, Inc.
                                        Family Dollar Services, Inc.
                                        P. O. Box 1017
                                        Charlotte, N. C.  28201-1017

                                        Facsimile No.: (704) 841-1401

                                        Attention:


                                        FAMILY DOLLAR TRUCKING, INC.

                                   By:  ___________________________________
                                        Name: _____________________________
                                        Title:_____________________________
<B>
                                        Address for Notices:
</B>
                                        Family Dollar Trucking, Inc.
                                        P. O. Box 1017
                                        Charlotte, N. C.  28201-1017

                                        Facsimile No.: (704) 841-1401
                                        Attention:


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