Company Name: Food Lion, Inc.
Public Availability Date: January 13, 1999 

Document Sections:

LETTER OF INQUIRY 1
LETTER OF INQUIRY 2
STAFF REPLY LETTER

[LETTER OF INQUIRY 1]

November 27, 1998

Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: Food Lion, Inc.

Proposed Holding Company Structure

Ladies and Gentlemen:

We are writing to you on behalf of our client, Food Lion, Inc. ("Food Lion"). Food Lion proposes to adopt a holding company structure (the "Holding Company Proposal" or the "Restructuring") in which, pursuant to a Plan and Agreement of Share Exchange (the "Plan of Exchange"), (i) Food Lion will become a subsidiary of a holding company (the "Holding Company"), to be formed solely for the purpose of the Restructuring as a wholly owned subsidiary of Food Lion, (ii) every three outstanding shares of Food Lion's Class A Common Stock, par value $.50 per share (the "Food Lion Class A Common Stock") will be exchanged automatically for one share of the Holding Company's Class A Common Stock (the "Holding Company Class A Common Stock") and (iii) every three outstanding shares of Food Lion's Class B Common Stock, par value $.50 per share (the "Food Lion Class B Common Stock" and, together with the Food Lion Class A Common Stock, the "Food Lion Common Stock") will be exchanged automatically for one share of the Holding Company's Class B Common Stock (the "Holding Company Class B Common Stock" and, together with the Holding Company Class A Common Stock, the "Holding Company Common Stock").1 Food Lion respectfully requests an interpretive or no-action letter from the staff of the Division of Corporation Finance (the "Staff") of the Securities and Exchange Commission (the "Commission") with respect to certain legal issues under the Securities Act of 1933 (the "1933 Act") and the Securities Exchange Act of 1934 (the "1934 Act") regarding the Holding Company Proposal.

A. BACKGROUND

Food Lion is a North Carolina corporation engaged in the grocery and food services business. Food Lion currently has two wholly owned subsidiaries, FLI Holding Corp., a Delaware corporation ("FLI"), and Risk Management Services, Inc. ("Risk Management Services"). FLI has three wholly owned subsidiaries, Kash n' Karry Food Stores, Inc. ("Kash n' Karry"), FL Food Lion, Inc. ("FL Food Lion"), and Barnwell, Inc. ("Barnwell"). Prior to implementation of the Holding Company Proposal, the Holding Company will be formed as a North Carolina corporation and a wholly-owned subsidiary of Food Lion and FLI will be merged into the Holding Company so that the stock of Kash n' Karry, FL Food Lion and Barnwell will be held by the Holding Company.

The Restructuring is subject to Food Lion shareholder approval (as described below under "Description of the Holding Company Proposal"), prior to the effective time of the Restructuring (the "Effective Time").

At October 31, 1998, Food Lion's authorized capitalization consisted of (i) 1,500,000,000 shares of Food Lion Class A Common Stock, of which 231,514,364 were issued and outstanding; and (ii) 1,500,000,000 shares of Food Lion Class B Common Stock, of which 248,872,276 were issued and outstanding. Food Lion Class A Common Stock is currently listed and traded on the Nasdaq National Market (the "NNM") under the symbol "FDLNA" and Food Lion Class B Common Stock is currently listed and traded on the NNM under the symbol "FDLNB," each at prices that are reported in newspapers.

Common Stock Plans and Registration Statements

Food Lion maintains plans that provide for the investment by Food Lion's directors, officers and employees in Food Lion Common Stock. Registration statements on Form S-8 under the 1933 Act are effective for the Food Lion, Inc. 1983 Employee Stock Option Plan (No. 033-18799) and the 1991 Employee Stock Option Plan of Food Lion, Inc. (No. 033-50066) (as amended and restated by the 1996 Employee Stock Incentive Plan of Food Lion, Inc. (No. 333-3669)) (collectively, the "Employee Stock Plans"). Food Lion also maintains the Food Lion Dividend Reinvestment Plan (together with the Employee Stock Plans, the "Stock Plans"), which is not required to be registered under the 1933 Act.

In addition to the registration statements for the Stock Plans, a registration statement on Form S-3 under the 1933 Act (No. 033-49620) is effective for Food Lion's unsecured debt securities.

Description of the Holding Company Proposal

The Holding Company will be a North Carolina corporation incorporated by Food Lion for purposes of implementing the Holding Company Proposal. The Holding Company has not had, and will not have, any business operations. The outstanding shares of Holding Company Common Stock will be owned by Food Lion until the Holding Company Proposal is implemented at which time the shares owned by Food Lion will be canceled pursuant to the Plan of Exchange. The Holding Company Proposal will be implemented pursuant to the Plan of Exchange.

Upon implementation of the Holding Company Proposal, the Holding Company will own all of the outstanding shares of Food Lion Common Stock and the Holding Company Common Stock will be held by the former holders of Food Lion Common Stock. Each person who owned three shares of either class of Food Lion Common Stock immediately prior to the Restructuring will own one share of the same class of Holding Company Common Stock immediately following the Restructuring.

The Holding Company will also have subsidiaries other than Food Lion. The current FLI subsidiaries, Kash n' Karry, FL Food Lion and Barnwell, which, immediately prior to implementation of the Plan of Exchange will be subsidiaries of the Holding Company, will remain subsidiaries of the Holding Company after implementation of the Plan of Exchange, and one current Food Lion subsidiary, Risk Management Services, will become a subsidiary of the Holding Company. Any new wholly-owned subsidiaries of Food Lion established and funded prior to the Effective Time are also expected to become subsidiaries of the Holding Company.

Food Lion intends to solicit the holders of its current public debt for approval to exchange such debt for debt of the Holding Company through a registered exchange offer under the 1934 Act (the "Exchange Offer"). Such public debt would be guaranteed under guaranties (the "Guaranties") executed by all of the Holding Company's subsidiaries (the "Subsidiary Guarantors"). Any public debt remaining at the Food Lion level, either because such holders choose not to exchange such debt for Holding Company debt or because the minimum participation level for the exchange is not reached, will be guaranteed by the Holding Company and the other Subsidiary Guarantors. All guarantees will be full and unconditional, on a joint and several basis.

The Holding Company Proposal will be implemented by a share exchange between the Holding Company and Food Lion by which the shares of Food Lion Common Stock are automatically exchanged for shares of Holding Company Common Stock and the shares of Holding Company Common Stock are canceled, pursuant to Section 55-11-02 of the North Carolina Business Corporation Act ("NCBCA") (a copy of which is attached hereto as Exhibit A) (collectively, the "Share Exchange"). The Share Exchange also will include a one for three exchange ratio, exchanging every three shares of Food Lion Common Stock for one share of the same class of the Holding Company Common Stock.

In accordance with applicable North Carolina law, the Plan of Exchange has been adopted by Food Lion's Board of Directors and also must be adopted by the Holding Company's Board of Directors and by the holders of at least a majority of the outstanding shares of each class of Food Lion Common Stock, whether voting or non-voting. It is currently contemplated that the Plan of Exchange will be submitted to a vote at a special meeting of shareholders of Food Lion (the "Special Meeting") to be held on approximately February 8, 1999.

Proxies for the Special Meeting will be solicited on behalf of Food Lion's Board of Directors pursuant to Section 14(a) of the 1934 Act. A proxy statement (the "Proxy Statement") will be furnished to Food Lion shareholders in connection with the Special Meeting.

There will be no material differences between the rights of holders of shares of Food Lion Common Stock and the rights of holders of shares of Holding Company Common Stock.2 The Proxy Statement will disclose that it is expected that Food Lion, as sole shareholder of the Holding Company, will elect Food Lion's directors as the directors of the Holding Company, effective as of the Effective Time, and that the Holding Company's Board will appoint certain executive officers of Food Lion as the executive officers of the Holding Company.

Application will be made for each class of Holding Company Common Stock to be listed for trading on the New York Stock Exchange (the "NYSE"), subject to issuance, at the Effective Time, in substitution for each class of Food Lion Common Stock currently listed in the NNM. The Holding Company will register the Holding Company Common Stock pursuant to Section 12(b) of the 1934 Act, effective as of the Effective Time. At the time of the listing of the Holding Company Common Stock on the NYSE, the Food Lion Common Stock will be delisted from the NNM and no longer will be registered pursuant to Section 12 of the 1934 Act.

The Stock Plans will be amended, from and after the Effective Time, to apply to the Holding Company Common Stock instead of the Food Lion Common Stock. The Proxy Statement will state that a vote to adopt the Plan of Exchange also will constitute approval of such amendments.

The consolidated assets and liabilities of Food Lion and its subsidiaries immediately before the Effective Time will be the same as the consolidated assets and liabilities of the Holding Company and its subsidiaries immediately after the Effective Time. All of the business and operations conducted by Food Lion and through its subsidiaries immediately before the Effective Time will continue to be conducted by the Holding Company and through its subsidiaries immediately after the Effective Time.

The Plan of Exchange will provide that a condition precedent to the effectiveness thereof, among other things, is approval of the issuance and exchange of the Holding Company Common Stock pursuant to a fairness hearing held under North Carolina General Statutes Section 78A-30 (a copy of which is attached hereto as Exhibit B) (the "Fairness Hearing"). Such statute provides for an application for approval to issue securities in exchange for other securities. Upon receiving such an application, a public Fairness Hearing concerning the fairness of the terms and conditions of the issuance and exchange of the securities is required. Notice of the Fairness Hearing must be given to all persons to whom the securities are to be issued or delivered, and all such persons have the right to appear at the Fairness Hearing. After the Fairness Hearing, the presiding official is required to approve the issuance and exchange or to state that he or she will not give approval.

B. REQUEST

Food Lion respectfully requests an interpretive or no-action letter from the Staff concurring in the following conclusions, each of which is discussed more fully under the heading "Discussion" below:

1. The issuance of the Holding Company Common Stock in exchange for the Food Lion Common Stock pursuant to the Plan of Exchange will be exempt from the registration requirements of the 1933 Act pursuant to the exemption therefrom provided by Section 3(a)(10) of the 1933 Act.

2. Food Lion and the Holding Company may omit from the Proxy Statement the information required by Items 14(a)(5) through 14(a)(8) and Item 14(b) of Schedule 14A of Regulation 14A under the 1934 Act ("Schedule 14A").

3. Actions to be taken with respect to the future issuance of the Holding Company Common Stock in lieu of the Food Lion Common Stock under the amended Employee Stock Plans do not constitute actions that require the disclosure of information under Item 10 of Schedule 14A.

4. After the Effective Time, the Holding Company may include the prior activities and status of Food Lion in determining whether the Holding Company meets the eligibility requirements for the use of various forms of registration statements including Forms S-2, S-3, S-4 and S-8.

5. After the Effective Time, the Holding Company will constitute a "successor issuer" of Food Lion for purposes of Rule 414 under the 1933 Act and, as contemplated by Rule 414, may file post-effective amendments to any of Food Lion's currently effective registration statements, including the Stock Plans' registration statements.

6. The Holding Company may rely on Rule 12g-3 under the 1934 Act and Form 8-A to register the Holding Company Common Stock under the 1934 Act.

7. The prior activities of Food Lion may be taken into account in determining the Holding Company's compliance with the current public information requirements of Rule 144(c)(1) under the 1933 Act.

8. Persons who have filed statements on Schedules 13D or 13G, as the case may be, reporting ownership interests in the capital stock of Food Lion will not be required to file any additional or amended statements or forms as a result of the Restructuring, but may note in their next subsequent filings that the Holding Company is the successor issuer to Food Lion.

9. After implementation of the Plan of Exchange and after the Holding Company becomes the successor issuer of Food Lion (see paragraph 5 above), Food Lion may cease reporting under the 1934 Act as a separate entity, with only the Holding Company filing periodic reports under the 1934 Act that describe the business of the Holding Company, Food Lion and the Subsidiary Guarantors on a consolidated basis.

10. We request that Food Lion and the other Subsidiary Guarantors be exempt from the informational and reporting requirements of Sections 13 and 15(d) of the 1934 Act, pursuant to Section 12(h) of the 1934 Act, or, in the alternative, that the Staff confirm that it will raise no objection if Food Lion and the other Subsidiary Guarantors do not separately comply with such informational and reporting requirements; provided that the Holding Company complies with such informational and reporting requirements by filing periodic reports that describe the businesses of the Holding Company and the Subsidiary Guarantors and includes the consolidated financial statements of the Holding Company that includes the Holding Company, Food Lion and the other Subsidiary Guarantors.

11. Food Lion and the Holding Company need not include in a current report on Form 8-K the information required by Item 2 of Form 8-K pertaining to any sale or disposition that may be deemed to have occurred upon the execution of the Plan of Exchange or the consummation of the Restructuring nor the financial statements required by Item 7 of Form 8-K with respect to an acquired business.

C. DISCUSSION

1. Section 3(a)(10). Section 3(a)(10) of the 1933 Act exempts offers and sales of securities from the registration requirements of the 1933 Act of securities issued in specified exchange transactions. As explained in Staff Legal Bulletin No. 3 (July 25, 1997) ("SLB No. 3"), the exemption is available if: (i) the securities are issued in exchange for securities, not cash (other than cash in lieu of fractional shares), (ii) an authorized governmental entity must approve the fairness of the terms of the exchange, (iii) the governmental entity must be authorized to hold a hearing to approve the fairness of the terms of the exchange, which hearing must be open to everyone to whom it is proposed to issue securities and adequate notice must be given of the hearing, and (iv) the governmental entity must be advised that the issuer will rely on the Section 3(a)(10) exemption based on the entity's hearing and approval of the fairness of the terms of the exchange.

We are of the view that Section 3(a)(10) exempts the offer and sale of the Holding Company Common Stock in exchange for the Food Lion Common Stock pursuant to the Plan of Exchange. Specifically, the Holding Company Common Stock will be issued only in exchange for shares of Food Lion Common Stock and not for cash, other than cash payments made in lieu of fractional shares. Food Lion and the Holding Company intend to apply for a hearing on the fairness of the terms of the proposed exchange of Holding Company Common Stock for Food Lion Common Stock pursuant to the Plan of Exchange under Section 78A-30 of the North Carolina Securities Act (the "Act"). The Act requires (i) that notice must be mailed (deemed effective upon mailing) via U.S. mail, postage prepaid, not less than 10 days prior to the hearing and (ii) the hearing must be held within 30 days after receipt by the Secretary of State of North Carolina of an application and supporting documents as required by law. The Act specifically requires notice to be given to all persons to whom it is proposed to issue securities and that all such persons have the right to appear at the hearing. Food Lion and the Holding Company intend to apply for the hearing before the Proxy Statement is mailed to shareholders and to seek to schedule the hearing before the Special Meeting of shareholders (but after the proxy statement has been mailed to shareholders). Food Lion and the Holding Company intend to include the notice of the fairness hearing with the Proxy Statement that will be mailed to all shareholders. This procedure will provide shareholders with notice about the date, time and location of the hearing and with information about the proposed Plan of Exchange. Shareholders will then have the opportunity to attend and appear at the hearing. The Act expressly states that it is intended to provide a fairness hearing with respect to transactions which, if approved, would be exempt from the registration requirements of the 1933 Act pursuant to Section 3(a)(10). The Act requires the Secretary of State of North Carolina within 10 business days after holding the fairness hearing to either issue the approval of the terms of the proposed transaction or a statement that such approval will not be forthcoming.

It is our opinion, and the opinion of Robinson, Bradshaw & Hinson, P.A., North Carolina counsel assisting with this transaction, that if the terms and conditions of the proposed Restructuring are approved in a Fairness Hearing pursuant to North Carolina General Statutes Section 78A-30, the Holding Company may issue shares of Holding Company Common Stock pursuant to the Plan of Exchange in exchange for the shares of Food Lion Common Stock without registration of the Holding Company Common Stock under the Securities Act of 1933, pursuant to the exemption from registration provided by Section 3(a)(10) of the 1933 Act. This conclusion is consistent with the positions taken by the Staff on the Act in Old Stone Corporation (available December 1, 1986) and in Old Stone Corporation (available December 14, 1984) and SLB No. 3.

2. Item 14 of Schedule 14A. Item 14 of Schedule 14A requires a registrant engaged in a merger, consolidation, acquisition or similar matter (such as the Restructuring) to furnish, among other things, certain financial information and other information about the registrant and the person being acquired or merged with. However, Instruction 4 to Item 14 of Schedule 14A provides an exemption from the requirement of providing the information called for by Items 14(a)(5) through 14(a)(8), Item 14(a)(13) and Item 14(b) of Schedule 14A in its entirety "if the plan being voted on involves only the registrant and one or more of its totally held subsidiaries and does not involve a liquidation of the registrant or a spin-off."

Immediately prior to the Restructuring, the Holding Company will be a totally held subsidiary of Food Lion and no liquidation or spin-off will occur as a result of Restructuring. As stated above, the consolidated assets and liabilities of the Holding Company and its subsidiaries immediately after the Effective Time will be the same as the consolidated assets and liabilities of Food Lion and its subsidiaries immediately before the Effective Time. In addition, all information necessary for the consideration of the Restructuring by Food Lion's shareholders will be included in the Proxy Statement, or in the documents incorporated by reference therein, in compliance with the other requirements of Schedule 14A.

Accordingly, we are of the view that Food Lion and the Holding Company may omit from the Proxy Statement the information required by Items 14(a)(5) through 14(a)(8), Item 14(a)(13) and Item 14(b) of Schedule 14A. The Staff has taken similar positions with respect to the required contents of the registration statement on Form S-4 in the following no-action letters: Quality Food Centers, Inc. (available August 26, 1997); BMC West Corp. (available Apr. 4, 1997); Halliburton Company (available December 11, 1996); PS Group, Inc. (available May 23, 1996); America West Airlines Inc. (available April 25, 1996); Proler International Corp. (available March 8, 1996); Carr-Gottstein Foods Company (available February 6, 1996); AXIA Incorporated (available December 14, 1995); Toys "R" Us, Inc. (available December 1, 1995); Walbro Corporation (available November 22, 1995); SHL Systemhouse, Inc. (available November 22, 1995); Doskocil Companies (available March 24, 1995); Falcon Drilling Company (available March 17, 1995); Fleming Companies, Inc. (available December 9, 1994); Affinity Group (available June 15, 1994); AIM Management Group, Inc. (available January 6, 1994); UNC Incorporated (available July 21, 1993); Wyman-Gordon Company (available May 28, 1993); and Evergreen International Aviation, Inc. (available March 31, 1993) (collectively, the "No-Action Letters").

3. Item 10 of Schedule 14A. The assumption by the Holding Company of the obligations of Food Lion for the future issuance of Holding Company Common Stock in lieu of Food Lion Common Stock under the Employee Stock Plans does not constitute the grant or extension of any new rights, but is simply a conversion of existing rights and a continuation of existing plans under the new corporate structure.

Accordingly, we are of the view that the actions to be taken with respect to the future issuance of Holding Company Common Stock in lieu of Food Lion Common Stock under the Employee Stock Plans do not constitute actions that require the disclosure of information under Item 10 of Schedule 14A of the 1934 Act. The Staff has taken similar positions with respect to Item 10 in the No-Action Letters.

4. Eligibility to Use Forms S-2, S-3, S-4 and S-8. General Instruction I.A.7 to the registration statement on Form S-3 under the 1933 Act deems a successor registrant to have met the conditions for eligibility to use a Form S-3 set forth in General Instruction I.A.1, 2, 3 and 5 to the registration statement on Form S-3 if (i) its predecessor and it, taken together, meet such conditions, (ii) the succession was primarily for the purpose of forming a holding company and (iii) the assets and liabilities of the successor at the time of succession were substantially the same as those of the predecessor. Consistent with General Instruction I.A.7 to Form S-3, the proposed succession of the Holding Company to the business, assets and liabilities of Food Lion will be primarily for the purpose of forming a holding company, and the consolidated assets and liabilities of the Holding Company immediately after the Effective Time will be the same as the consolidated assets and liabilities of Food Lion immediately before the Effective Time. Similar instructions exist for the use of Form S-2.

Accordingly, we are of the view that, after the Effective Time, the Holding Company will be entitled to take into account Food Lion's activities and status prior to the Effective Time in determining whether the Holding Company is eligible to use Forms S-2, S-3, S-4 and S-8, if and to the extent applicable. The Staff has taken similar positions with respect to the eligibility for the use of such Forms in the No-Action Letters.

5. Rule 414 under the 1933 Act. Rule 414 under the 1933 Act provides that if an issuer has been succeeded by another issuer for the purpose of changing its form of organization, the registration statement of the predecessor issuer will be deemed to be the registration statement of the successor issuer for the purpose of continuing the offering covered by such registration statement, provided that certain enumerated conditions are satisfied.

As to the continued offering under the Stock Plans, the conditions enumerated in Rule 414 will be satisfied under the terms and provisions of the Plan of Exchange and upon the filing by the Holding Company of amendments to Food Lion's registration statements for the Stock Plans in the manner and to the effect contemplated by paragraph (d) of Rule 414, except for the technical satisfaction of paragraph (b) of Rule 414, which requires the successor issuer to acquire all of the assets and assume all of the liabilities and obligations of the predecessor issuer.

Since substantially all of the assets and liabilities will remain with Food Lion and the other subsidiaries of the Holding Company after the Restructuring, other than to the extent that Food Lion debt securities are exchanged for debt securities of the Holding Company in the Exchange Offer, the Holding Company will not directly acquire all of the assets and assume all of the liabilities and obligations of Food Lion. Nevertheless, the Holding Company indirectly will acquire all of such assets and will assume all of such liabilities and obligations (other than those liabilities transferred in the Exchange Offer) by reason of its direct or indirect ownership of all of the outstanding Food Lion Common Stock and the common stock of the other subsidiaries. Immediately after the Restructuring, the consolidated assets and liabilities of the Holding Company will be the same as the consolidated assets and liabilities of Food Lion immediately before the Restructuring.

Accordingly, we are of the view that after the Effective Time the Holding Company will constitute a "successor issuer" of Food Lion for purposes of Rule 414 under the 1933 Act and, as contemplated by Rule 414, may file post-effective amendments to the Stock Plans' registration statements. The Staff has taken similar positions with respect to Rule 414 in the No-Action Letters.

6. Rule 12g-3; Form 8-A. Rule 12g-3(a) under the 1934 Act provides that where in connection with a succession by merger, consolidation, exchange of securities, acquisition of assets or otherwise, securities of an issuer that are not already registered pursuant to Section 12 of the 1934 Act, such as the Holding Company Common Stock, are issued to the holders of any class of securities of another issuer that is registered pursuant to either Section 12(b) or Section 12(g) of the 1934 Act, such as the Food Lion Common Stock (which is registered under Section 12(g) of the 1934 Act), the class of securities so issued shall be deemed to be registered under the same paragraph of Section 12 of the 1934 Act. Rule 12g-3(f) under the 1934 Act provides that the issuer of the securities deemed registered pursuant Rule 12g-3(a) under the 1934 Act shall indicate in the Form 8-K filed with the Commission in connection with the succession, pursuant to the requirements of Form 8-K, the paragraph of Section 12 of the 1934 Act under which the class of securities issued by the successor issuer is deemed registered.

Rule 12g-3 would not technically cover the Restructuring unless it were considered a succession. Rule 12b-2 under the 1934 Act defines "succession" as "the direct acquisition of assets comprising a going business, whether by merger, consolidation, purchase or other direct transfer." The term does not include the acquisition of control of a business unless followed by the direct acquisition of its assets. This definition of "succession" presents substantially the same technical issue as discussed above with respect to Rule 414 under the 1933 Act. While the Holding Company will not directly acquire all of the assets of Food Lion pursuant to the Restructuring, the Holding Company will acquire all of such assets indirectly by reason of its ownership of all of the outstanding Food Lion Common Stock and the common stock of the other Subsidiary Guarantors.

Exchange Act Release 34-38850 states that "[i]n order to simplify the registration statement requirements for successor issuers and eliminate interpretive questions about this little-used Form, the Commission is rescinding Form 8-B today. The Commission is adopting amendments to Rule 12g-3 to include any transactions or securities that were previously covered by Form 8-B, but not by Rule 12g-3." Transactions such as the Restructuring were covered by Form 8-B pursuant to staff interpretations in the No-Action Letters.

Accordingly, we are of the view that the Holding Company may rely on Rule 12g-3 under the 1934 Act to register the Holding Company Common Stock under the 1934 Act.3

7. Current Public Information Requirements of Rule 144. Rule 144 under the 1933 Act imposes certain restrictions on sales of "restricted" securities and sales of securities by and for the account of affiliates of an issuer. Rule 144(c)(1) requires the issuer to have been subject to the reporting requirements of the 1934 Act for a period of at least 90 days immediately preceding the sale of the securities, and to have filed all reports required to be filed under the 1934 Act during the 12 months preceding the sale of the securities, or such shorter time as the issuer was required to file such reports.

In as much as (i) immediately after the Effective Time the Holding Company will have, on a consolidated basis, the same assets, liabilities, business and operations as Food Lion had, on a consolidated basis, immediately before the Effective Time and (ii) Food Lion has been subject to, and has complied with, the reporting requirements of Section 13 of the 1934 Act, we are of the view that, for purposes of Rule 144, the Holding Company should be deemed, immediately after the Effective Time, to have complied with the public information requirements of Rule 144(c)(1). The Staff has taken similar positions with respect to Rule 144 in the No-Action Letters.

8. Schedules 13D and 13G. Section 13(d)(1) of the 1934 Act and Rule 13d-1 thereunder require that a person that acquires more than five percent of an equity security registered pursuant to Section 12 file a statement on Schedule 13D or 13G. Section 13(d)(2) of the 1934 Act and Rule 13d-2 thereunder require the Schedule 13D to be amended when material changes in ownership occur and require the Schedule 13G to be amended within 45 days after the end of each calendar year. Following the Restructuring, the Holding Company will represent the same company on a consolidated basis as did Food Lion prior to the Restructuring. Consequently, persons who have filed a Schedule 13D or 13G for securities acquired in Food Lion should not be required to file a new or amended Schedule 13D or 13G, provided they state in their next amendment to Schedule 13D or 13G that the Holding Company is deemed the successor issuer to Food Lion for purposes of filings under Section 13(d). See Quality Food Centers, Inc. (available August 26, 1997); BMC West Corp. (available April 4, 1997); Halliburton Co. (available December 11, 1996); America West Airlines Inc. (available April 25, 1996); Proler International Corp. (available March 8, 1996); Toys "R" Us, Inc. (available December 1, 1995); Doskocil Cos. (available March 24, 1995).

Accordingly, we respectfully request that you concur in our opinion that persons who have filed a Schedule 13D or 13G in connection with the acquisition of securities of Food Lion should not be required to file a new or amended Schedule 13D or 13G, provided that they state in their next amendment to their Schedule 13D or 13G that the Holding Company is deemed the successor issuer to Food Lion.

We note that the SEC has taken the position that the formation of a holding company does not require any person who files Forms 4 or 5 pursuant to Section 16(a) of the 1934 Act to file new forms or amendments so long as the ownership percentage of such persons remains unchanged immediately after the transaction creating the holding company. Such persons should indicate in their next filing that the holding company is deemed to be the successor issuer to Food Lion. See Exchange Act Release Nos. 34-28869 (February 20, 1991) at § VIII-C and 34-18114, subsection 30 (October 1, 1981).

9. Termination of Food Lion's Reporting Obligations. Section 15(d) of the 1934 Act ("Section 15(d)") requires that "...each issuer which shall ... file a registration statement which has become effective pursuant to the Securities Act of 1933, as amended, shall file with the Commission, in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors, such supplementary and periodic information, documents, and reports as may be required pursuant to Section 13 of this title in respect of a security registered pursuant to Section 12 of this title." Section 15(d) provides that such issuers, unless otherwise exempted, shall file annual, quarterly and periodic reports as prescribed by Section 13 of the 1934 Act. If less than all of the holders of Food Lion debt securities agree to exchange such debt securities for debt securities of the Holding Company, Food Lion will continue to have public debt outstanding. Unless exempted, or unless enough holders of Food Lion debt securities agree in the Exchange Offer to exchange the debt securities for debt securities of the Holding Company so that less than 300 holders of Food Lion debt remain (in which case Food Lion's reporting obligations would be suspended) Food Lion, as a result of its issuance of public debt, would be required to make such periodic filings and include therein financial statements meeting the requirements of Regulation S-X, in addition to the Holding Company's consolidated reports. Food Lion is not expected to have any 1934 Act reporting obligations arising in any other manner.

The issuance of the Guaranties will not trigger any reporting requirements under the 1934 Act because there was no sale of a security within the meaning of Section 2(3) of the 1933 Act. The issuance of the Guaranties is not required to be registered under the 1933 Act and, therefore, are not subject to Section 15(d) of the 1934 Act. Further, the Guaranties are not equity securities and therefore are not required to be registered pursuant to Section 12(g) of the 1934 Act and will not be listed on any national securities exchange and therefore are not required to be registered pursuant to Section 12(b) of the 1934 Act.

After implementation of the Plan of Exchange, Food Lion will have only one shareholder, the Holding Company, and the Food Lion Common Stock will be delisted from the NNM to be replaced by Holding Company Common Stock, listed on the NYSE. Accordingly, we respectfully request that you concur with our opinion that Food Lion's separate reporting obligation under Section 15(d) be terminated, and deemed to be met by the periodic filings of the Holding Company regardless of the number of holders of Food Lion debt securities who fail to consent in the Exchange Offer.

10. The Reporting Obligations. Holding Company's Reporting Obligations. The Holding Company will be subject to the informational and reporting obligations of Section 13(a) of the 1934 Act because its Common Stock will be listed on the NYSE and registered under Section 12(b) of the 1934 Act. Consequently, the Holding Company will be required to file with the SEC various periodic reports including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and will be required to comply with the proxy regulations in Section 14 of the 1934 Act. The consolidated financial statements of the Holding Company will be essentially the same as the consolidated financial statements currently included in the periodic reports of Food Lion. The Holding Company will guarantee the debt securities of Food Lion that are not exchanged in the Exchange Offer. The general rule set forth in Rule 3-10(a) of Regulation S-X provides that each guarantor of securities shall file the financial statements that would be required if the guarantor were a registrant. We believe that this requirement will be met by the inclusion of the Holding Company's consolidated financial statements in its periodic reports filed under the 1934 Act and that no separate financial statements for the Holding Company only would be necessary because the Holding Company has no operations or assets separate from its investment in its subsidiaries. Therefore, separate Holding Company financial statements will not provide material or meaningful information to any holders of the debt securities of Food Lion. The consolidated financial statements of the Holding Company will also have a narrative discussion of the legal aspects of the Guaranties, a discussion of any restrictions on distributions or dividends by subsidiaries of the Holding Company and a statement that separate financial statements and other disclosures concerning the Guarantors are not deemed material.

Food Lion's Reporting Obligations. As explained above, after the implementation of the Holding Company Proposal, it is contemplated that Food Lion will no longer be subject to the periodic reporting requirements of the 1934 Act. Nonetheless, the holders of the debt securities of Food Lion will be receiving the 1934 Act periodic reports of the Holding Company, which will contain the consolidated financial statements of the Holding Company. Because the Holding Company has no operations or assets other than its investment in its subsidiaries, including Food Lion, these consolidated financial statements will be virtually identical to the current consolidated financial statements of Food Lion. Moreover, the publicly-held debt of Food Lion will be guaranteed by the Holding Company and all of the wholly-owned subsidiaries of the Holding Company (other than Food Lion itself). Such debt is not currently guaranteed. Therefore, the Holding Company and Food Lion believe that consolidated financial statements of the Holding Company will present the financial information that is meaningful to holders of Food Lion's debt and that separate financial statements of Food Lion will not be material to the holders of such debt.

Subsidiary Guarantors' Reporting Obligations. The general rule set forth in Rule 3-10(a) of Regulation S-X provides that each guarantor of securities shall file the financial statements that would be required if the guarantor were a registrant. Topic 1-H of Staff Accounting Bulletin ("SAB") 53 provides that in certain situations the Staff has taken the position that separate financial statements of each subsidiary guarantor are required. However, beginning with a no-action letter to Anheuser-Busch Companies, Inc. (available May 4, 1987), the Staff has taken the position that in certain limited circumstances, the disclosure standards contained in Topic 1-G may be applied by analogy to situations covered by Topic 1-H for purposes of determining the required level of disclosure. In a series of no-action letters following Anheuser-Busch, the Staff appears to have adopted the more flexible approach contained in Topic 1-G in considering reports of registrants whose securities are guaranteed by their subsidiaries in order to exempt a subsidiary issuing a guarantee of its parent's debt from 1934 Act reporting requirements pursuant to Topic 1-H. See, e.g., Carr-Gottstein Foods Co. (available February 6, 1996); AXIA Incorporated (available December 14, 1995); Walbro Corporation (available November 22, 1995); SHL Systemhouse, Inc. (available November 22, 1995); Falcon Drilling Company (available March 17, 1995); Fleming Companies, Inc. (available December 9, 1994); Affinity Group (available June 15, 1994); UNC Incorporated (available July 21, 1993); Wyman-Gordon Company (available May 28, 1993); Evergreen International Aviation, Inc. (available March 31, 1993); and Anheuser-Busch Companies, Inc. (available May 4, 1987).

Specifically, the Staff has deemed no-action relief appropriate where the following conditions are met: (i) the debt is guaranteed by all direct and indirect subsidiaries, (ii) each subsidiary guarantor was a wholly owned subsidiary, (iii) the guarantees are joint and several and full and unconditional, and (iv) the parent has no operations or assets separate from its investment in its subsidiaries. If these conditions are met, the subsidiary guarantors will not be required to file separate financial statements. AmeriTruck Distribution Corp. (available March 20, 1996); APS Holding Corporation (available July 24, 1991); Presidio Oil Company (available March 28, 1989); and Kay Corporation (available December 12, 1987). See also Anvil Holdings, Inc. (available January 30, 1998); Abraxas Petroleum Corporation (available March 26, 1997); and Twinlab Corporation (available November 1, 1996).

Food Lion believes that these criteria are applicable in the present case, and that it is consistent with the public interest and the protection of investors for the Subsidiary Guarantors each to be relieved of any separate reporting obligations under Section 13 of the 1934 Act. This belief is based on the following factors:

(i) The Subsidiary Guarantors represent all of the subsidiaries of the Holding Company.

(ii) Each of the Subsidiary Guarantors will be a wholly owned subsidiary of the Holding Company as defined in 1-02(aa) of Regulation S-X.

(iii) Each of the Guarantors will fully and unconditionally guaranteed all of the applicable debt on a joint and several basis.

(iv) The Holding Company will have no operations or assets separate from its investment in its subsidiaries.

Restrictions on Distributions. The credit agreements of Food Lion, which are contemplated to be assumed by the Holding Company, contain certain limitations on the ability of Food Lion and the Subsidiary Guarantors to pay dividends or make other distributions to the Holding Company. The presence of restrictions on the ability of a wholly-owned subsidiary to pay dividends or to make other distributions to its parent, however, has not prevented the Staff from granting no-action relief regarding a subsidiary's cessation of its reporting requirements, provided that the information required by 4-08(e)(3)(i) and (ii) of Regulation S-X is provided and a discussion regarding any such restrictions on distributions is included in the Management's Discussion and Analysis section of the periodic reports filed by the parent company under the 1934 Act, regardless of whether the restrictions are on the ability of a subsidiary guarantor to make distributions to a parent issuer, see Falcon Drilling Company, Inc. (available March 17, 1995) and SHL Systemhouse, Inc. (available November 22, 1995); or whether the restrictions are on the ability of a wholly-owned subsidiary issuer to make distributions to a parent guarantor, see Jacor Communications (available May 10, 1997), Hines Holdings, Inc. (available April 30, 1996) and The Promus Companies Incorporated and Embassy Suites, Inc. (available May 20, 1992). The Holding Company undertakes to provide such information required by 4-08(e)(3)(i) and (ii) of Regulation S-X, and a discussion regarding any such restrictions on distributions in the Management's Discussion and Analysis section of the periodic reports filed by the Holding Company under the 1934 Act.

Guaranties. The Guaranties will contain a fraudulent conveyance savings clause of the type that limits the amount guaranteed to the extent legally necessary to prevent the Guaranties from violating or becoming voidable under applicable fraudulent conveyance or transfer laws (as opposed to the type of fraudulent conveyance savings clause that limits the Guaranties to a specific dollar amount). The type of fraudulent conveyance savings clause to be contained in the Guaranties has not been considered by the Staff to render the Guaranties less than full and unconditional. Carr-Gottstein Foods Co. (available February 6, 1996); Falcon Drilling Company, Inc. (available March 17, 1995); Wyman-Gordon Company (available May 28, 1993); Evergreen International Aviation, Inc. (available March 31, 1993).

Conclusion. Food Lion and the other Subsidiary Guarantors believe that their request for no-action relief from 1934 Act reporting by the Subsidiary Guarantors is consistent with the position previously taken by the Staff in regard to 1934 Act reporting requirements, and is consistent with the policy and spirit of Section 12(h) of the 1934 Act. The Holding Company, Food Lion and the other Subsidiary Guarantors believe that separate financial information with respect to the individual Subsidiary Guarantors will not provide material information necessary to an investment decision as to the credit worthiness of Food Lion and that such information will be adequately reflected in the Holding Company's and its subsidiaries' consolidated financial statements. The Guaranties will provide that the Subsidiary Guarantors, jointly and severally, unconditionally guarantee, in accordance with the terms of the Guaranties, the payment of the principal and interest on the applicable debt. The holders of the applicable debt instruments will have a direct claim for payment against the Subsidiary Guarantors, on the basis of their joint and several liability under the Guaranties. As a result, Food Lion believes that investors in the applicable debt will rely on information about the Holding Company and its subsidiaries taken as a whole, rather than on information about Food Lion or any other individual Subsidiary Guarantor.

The holders of Food Lion's public debt currently receive only the consolidated financial statements of Food Lion. After implementation of the Restructuring, the consolidated financial statements of the Holding Company will be substantially similar to such current consolidated financial statements of Food Lion that investors currently receive. The Holding Company, Food Lion and the other Subsidiary Guarantors believe that separate periodic reports by Food Lion and the other Subsidiary Guarantors would not provide supplemental information that would be material to any investment decision, compared to the information which would be contained in the consolidated financial statements of the Holding Company, and that periodic filings by Food Lion and the other Subsidiary Guarantors would be confusing to investors and impose the costly burden of multiple filings on the Holding Company, without furthering the public interest or the protection of investors. On this basis, the Holding Company, Food Lion and the other Subsidiary Guarantors believe that relieving Food Lion and the other Subsidiary Guarantors of their reporting obligations under the 1934 Act is consistent with the public interest and the protection of investors. The Holding Company, Food Lion and the other Subsidiary Guarantors respectfully submit that consolidated reporting for the Holding Company and its subsidiaries after the Restructuring, similar to the current consolidated reporting by Food Lion and its subsidiaries, will continue to provide a sufficient basis for an investor to analyze the credit worthiness of the Food Lion debt and make a well-reasoned investment decision.

11. Form 8-K Reporting Requirements. Item 2 of Form 8-K under the 1934 Act provides that a registrant that has acquired or disposed of a significant amount of assets, other than in the ordinary course of business, must provide certain information in a current report on Form 8-K. The term "disposition" is defined in Instruction 2 of Item 2 of Form 8-K to include "every sale [or] merger...." As a result, even though Food Lion is not merging with the Holding Company, Food Lion may be deemed to have disposed of a significant amount of assets for purposes of Item 2 of Form 8-K when the Restructuring is consummated. Similarly, since Instruction 2 of Item 2 defines an "acquisition" to include "every ... succession," the Holding Company may be deemed to have acquired a significant amount of assets for purposes of Item 2 of Form 8-K when the Restructuring is consummated.

Instruction 1 to Item 2, however, states that no information need be given as to any transaction between any person and a wholly-owned subsidiary of such person. The Holding Company will be a wholly-owned subsidiary of Food Lion formed solely for the purpose of the Restructuring. Prior to the consummation of the Restructuring, the Holding Company will not own any significant assets or conduct any significant business other than in connection with the effectuation of the Restructuring. Immediately after the Effective Time, the consolidated assets and liabilities of the Holding Company will be the same as those of Food Lion immediately prior to the Effective Time. Thus, we conclude the disclosures required by Item 2 of Form 8-K and the financial statements required by Item 7 of Form 8-K (which applies only to business acquisitions required to be described under Item 2) are not required in connection with the Restructuring. We anticipate that the Holding Company will report the Restructuring under Item 5 of Form 8-K. See PS Group, Inc. (available May 23, 1996).

D. CONCLUSION

Food Lion respectfully requests the concurrence of the Staff in each of the conclusions listed under Section B above at the Staff's earliest convenience. If the Staff disagrees with any of such conclusions, please allow us the opportunity to discuss the matter with the Staff prior to any written response to this letter. Further, if the Staff continues to disagree with any of such conclusions, we request the opportunity to withdraw the requests set forth in this letter.

Pursuant to the 1934 Act Release No. 6269, a manually signed copy and seven photocopies of this letter, each complete with the materials being submitted herewith, are being furnished to you.

If there should be any questions or if the Staff requires additional information, please contact the undersigned at (202) 887-4446, Ronald R. Adee at (212) 872-1069 or J. Steven Patterson at (202) 887-4152.

Very truly yours,

Bruce S. Mendelsohn

-----FOOTNOTES-----

1 A preliminary proxy statement relating to the transactions described herein was filed with the Securities and Exchange Commission on November 25, 1998, on a confidential basis pursuant to Rule 14a-6(e)(2).

2 It is contemplated that the Articles of Incorporation of the Holding Company will contain a provision allowing the board of directors to issue preferred stock. This "blank check preferred" provision is not contained in the Articles of Incorporation of Food Lion.

3 At such time, the Holding Company Common Stock will, pursuant to Rule 12g-3, be deemed to be registered under Section 12(g) of the 1934 Act. However, because the Holding Company Common Stock will be listed for trading on the NYSE, the Holding Company Common Stock will also be registered under Section 12(b) of the 1934 Act pursuant to a Form 8-A to be filed by the Holding Company. We are of the opinion that this should not affect the ability of the Holding Company to rely on Rule 12g-3 as described above. After implementation of the Plan of Exchange, since the Holding Company Common Stock will be both registered under Section 12(b) and deemed registered under Section 12(g), the Holding Company may request to withdraw its registration under Section 12(g). See also Rule 12g-3(f).

[LETTER OF INQUIRY 2]

January 4, 1999

BY HAND DELIVERY

Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: Food Lion, Inc.

Proposed Holding Company Structure

Supplement to Request for No-Action Letter Request filed November 27, 1998

Ladies and Gentlemen:

On November 27, 1998, our firm filed with your office a request for a no-action letter (the "November 27 Letter") on behalf of Food Lion, Inc. in connection with a proposed restructuring of Food Lion in which Food Lion would become a subsidiary of a newly formed holding company (the "Holding Company"). This letter supplements and amends the November 27 Letter as described below.

In Section C (entitled "Discussion"), paragraph 10, at page 16 of the November 27 Letter, the paragraph entitled "Restrictions on Distributions" should be deleted and disregarded in its entirety. Although at the time of the filing of the November 27 Letter Food Lion's credit agreements contained restrictions on the payment of dividends and other distributions by Food Lion, on December 14, 1998, Food Lion entered into a new credit agreement that replaced the existing credit agreements. The new credit agreement does not contain any restrictions on the ability of Food Lion or the other Subsidiary Guarantors (as defined in the November 27 Letter) to pay dividends or make other distributions to the Holding Company in the event that the proposed holding company restructuring is implemented.

If you have any questions or comments, please do not hesitate to contact me at (202) 887-4152.

Very truly yours,

J. Steven Patterson

[STAFF REPLY LETTER]

January 13, 1999

RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE

Re: Food Lion, Inc. ("Food Lion")

Incoming letters dated November 27, 1998, and January 4, 1999

Based upon the facts presented, the Division's views are as stated below. Capitalized terms have the same meanings defined in your letter.

The Division will not recommend enforcement action to the Commission if Holding Company, in reliance on your opinion of counsel that the exemption provided by section 3(a)(10) of the Securities Act of 1933 ("Securities Act") is available, causes the described exchange of the Common Stock of the Holding Company for all of the outstanding common stock of Food Lion without registration under the Securities Act.

In reaching this position, the Division has noted the recent enactment of section 302 of the Securities Litigation Uniform Standards Act of 1998 (105 P.L. 353, 112 Stat. 3227), which adds a reference to section 3(a)(10) in section 18(b)(4)(C) of the Securities Act. Section 18 of the Securities Act defines the term "covered security" and creates an exemption from registration requirements under state securities laws for covered securities. Section 18(b)(4)(C), however, removes securities that are otherwise covered securities from the definition if they are offered and sold in reliance on federal exemptions from registration including section 3(a)(10). As a result, provisions under state securities laws authorizing the approval of certain exchanges of securities may be used to perfect an exemptive claim under section 3(a)(10) where the issuer's security is otherwise a "covered security." Because of this Congressional action, statements to the contrary in Staff Legal Bulletin No. 3, as published on July 25, 1997, are no longer valid.

The Division will not object if the financial and other information required by Schedule 14A is omitted from the Proxy Statement to the extent permitted by Instruction 4 to Item 14 of Schedule 14A. In reaching this position, we note your representation that, after the Effective Time, the financial condition of the Holding Company will be substantially the same as Food Lion's and that all information necessary for evaluation of the Restructuring will be disclosed in the Proxy Statement.

Actions taken to allow the substitution of the Holding Company for Food Lion under the amended Employee Stock Plans are not actions that require disclosure under Item 10 of Exchange Act Schedule 14A.

Food Lion's reporting history under the Exchange Act may be used to determine the Holding Company's eligibility to use Forms S-2, S-3, and S-8, and to furnish information on Form S-4 in the manner permitted for issuers eligible to use Forms S-2 or S-3.

The Holding Company will be a "successor issuer" within the meaning of rule 414 under the Securities Act, so that it may file post-effective amendments to adopt Food Lion's registration statements for the Employee Stock Plans.

After the Effective Time, the Holding Company's Common Stock will be registered under the Exchange Act by operation of rule 12g-3(a).

Exchange Act reports filed by Food Lion may be taken into account in determining the Holding Company's satisfaction of the current public information requirement under Securities Act rule 144(c)(1).

Persons who have filed statements on Schedule 13D or 13G under the Exchange Act reporting beneficial ownership of Food Lion's common stock registered under section 12 of the Exchange Act will not be required to file additional or amended statements on Schedule 13D or 13G as a result of the Restructuring, provided that they note in their next subsequent filings on Schedule 13D or 13G that Holding Company is the successor to Food Lion.

The Division will not object if Food Lion does not file reports under the Exchange Act with respect to any of its debt securities that are not exchanged in the Exchange Offer, provided that Holding Company and the Subsidiary Guarantors fully and unconditionally guarantee such unexchanged debt securities on a joint and several basis, Holding Company owns 100% of the outstanding voting shares of Food Lion and each of the other Subsidiary Guarantors, and the Holding Company provides the same narrative disclosure and financial statement information in its Exchange Act reports as required below for the Subsidiary Guarantors in respect of the debt securities issued by the Holding Company in the Restructuring.

The Division will not object if the Subsidiary Guarantors (including Food Lion) do not file reports with respect to their guarantees of the debt securities issued by Holding Company in the Restructuring and registered under section 12(b) of the Exchange Act. In reaching this position, we note the following:

the Holding Company is a holding company with no independent operations;

the Subsidiary Guarantors will be 100%-owned consolidated subsidiaries of Holding Company;

the Subsidiary Guarantors will fully and unconditionally guarantee such Holding Company debt securities on a joint and several basis;

the Subsidiary Guarantors will constitute all of the Holding Company's direct and indirect subsidiaries.

This no-action position is conditioned on the Holding Company's inclusion of certain narrative disclosure and financial statement information in its Exchange Act reports. The Holding Company must state, in a footnote to its financial statements in its Exchange Act reports filed after the Effective Date, that:

the Holding Company has no assets or operations other than its investments in its subsidiaries;

the Subsidiary Guarantors are 100%-owned subsidiaries of Holding Company and have fully and unconditionally guaranteed such parent debt securities on a joint and several basis;

the Subsidiary Guarantors comprise all of the direct and indirect subsidiaries of Holding Company; and

the Holding Company has not presented separate financial statements and other disclosures concerning each Subsidiary Guarantor because management has determined that such information is not material to investors.

Because the Restructuring is a transaction between a "person and any wholly-owned subsidiary of such person," the Restructuring need not be reported under Item 2 or 7 of Form 8-K.

This position is based on the representations made to the Division in your letter. Any different facts might require different results. This response expresses the Division's position on enforcement action only and does not express a legal conclusion on the questions presented.

Sincerely,

Michael Hyatte

Special Counsel