RETIREMENT AGREEMENT

      THIS AGREEMENT (this "Agreement"), made and entered into as
of this 7th day of April, 1999, by and between Food Lion, Inc., a
North Carolina corporation (the "Company"), and Tom E. Smith (the
"Executive"),

                      W I T N E S S E T H:

      WHEREAS,  the Executive is serving as the Chairman  of  the
Board of Directors, President and Chief Executive Officer of  the
Company; and

       WHEREAS,  in  recognition  of  the  Executive's  long  and
distinguished service with the Company; and

      WHEREAS, by mutual agreement between the Executive and  the
Company,  the Executive shall retire from the Company as  of  the
date   hereof   (the  "Retirement  Date")  and  the   Executive's
employment  with  the Company and his service as  Chairman  shall
terminate as of such Retirement Date.

      NOW,  THEREFORE,  for and in consideration  of  the  mutual
promises, covenants and obligations contained herein, the Company
and the Executive agree as follows:

ARTICLE I:     RETIREMENT AND CONSULTANCY

     Section 1.1    Retirement.  The Executive hereby retires and
resigns  as an employee, officer and director of the Company  and
its  affiliates, effective as of the end of the  meeting  of  the
Board  of  Directors of the Company held on the Retirement  Date.
Notwithstanding any provision of the Employment Agreement between
the   Company  and  the  Executive  dated  August  1,  1991  (the
"Employment  Agreement")  to the contrary,  such  retirement  and
resignation  shall not be deemed to be a breach by the  Executive
of  the Employment Agreement, and the Employment Agreement  shall
terminate as of the Retirement Date.

     Section 1.2    Consulting Services.  The Executive agrees to
be available from time to time during the period beginning on the
Retirement Date and ending July 31, 2001, for consulting with the
Chief  Executive  Officer and the Chairman  of  the  Company,  as
either the Chief Executive Officer or the Chairman may reasonably
request.   Reasonable unavailability of the  Executive  for  such
consulting  at  any time shall not be deemed  a  breach  of  this
Agreement.

ARTICLE II:    RETIREMENT PAYMENTS AND BENEFITS

     Section  2.1     Retirement Payments.  The  Executive  shall
continue  to  receive  the annual salary  he  currently  receives
through  July  31,  2001.   The Executive  shall  receive  annual
bonuses of $432,315 (which would be the amount of his 1999 bonus)
through  April 7, 2002.  In addition, the Executive shall receive
$36,950 (the amount that would have been paid to the Executive as
a  "wellness  bonus" for 1999) annually through  April  7,  2002.
Such  annual salary and bonus payments shall be made on the  same
schedule  as  currently  made  for the  Executive  and  shall  be
prorated as applicable.

     Section  2.2     Options.  As provided in the  stock  option
agreements governing such stock options, all vested stock options
held  by  the  Executive as of the Retirement Date  shall  remain
exercisable for three months following the Retirement  Date,  and
thereafter  any  of  such stock options that  remain  unexercised
shall  terminate  and cease to be exercisable.  All  other  stock
options that have been granted to the Executive that vest  on  or
before December 31, 2000, shall remain outstanding and shall vest
on  the  same schedule as if the Executive had remained  employed
with  the Company through December 31, 2000, and, once each  such
options  are  vested, shall remain exercisable for  three  months
following the respective vesting dates of each such options.   As
of  the Retirement Date, all stock options that have been granted
to  the Executive that would vest after December 31, 2000,  shall
terminate   as   of  the  Retirement  Date.   For   purposes   of
clarification,  Schedule B attached hereto sets forth  the  stock
options  that have been granted to the Executive as of  the  date
immediately  prior to the Retirement Date and sets forth  whether
such options will survive the Retirement Date.
     
     Section  2.3     Restricted  Stock.   The  Executive   shall
continue to be vested in all restricted stock that has vested  as
of the Retirement Date.  All restricted stock under awards to the
Executive that vest on or before December 31, 2000, shall  remain
outstanding following the Retirement Date and shall vest  on  the
same schedule as if the Executive had remained employed with  the
Company  through December 31, 2000.  All restricted  stock  under
awards to the Executive that would vest after December 31,  2000,
shall  be  forfeited as of the Retirement Date.  For purposes  of
clarification,  Schedule  B  attached  hereto  sets   forth   the
restricted stock that has been awarded to the Executive as of the
date  immediately  prior to the Retirement Date  and  sets  forth
whether  such restricted stock awards will survive the Retirement
Date.
     
     Section 2.4.   Put Right.  The Executive shall have  a  one-
time  right,  exercisable  within  30  trading  days  after   the
Retirement  Date, to sell to the Company, and, in the  event  the
Executive exercises such right, the Company shall be obligated to
purchase from the Executive for cash, up to 33% of the shares  of
Class  A  Common  Stock and Class B Common Stock of  the  Company
owned by the Executive on the date of exercise of such right (the
"Put").   The per share purchase price of the shares  subject  to
the  Put shall be the average closing price of the Class A Common
Stock  or  Class B Common Stock, as the case may be, for  the  30
trading days preceding the date of exercise as reported on NASDAQ
(National  Market System).  Payments by the Company  pursuant  to
the  Put will be made within five business days of proper  notice
of  exercise  of  the  Put by the Executive,  subject  to  proper
delivery  in proper form by the Executive of the relevant  shares
of Common Stock

       Section  2.5.    Split-Dollar  Life.   The  Company  shall
continue to pay the premiums on and shall maintain in effect  the
two split-dollar life insurance policies currently in effect with
respect  to  the Executive (Policy No. 2,161,371 and  Policy  No.
3123424)  through  December 31, 2001.  As of December  31,  2001,
such  insurance  policies shall be transferred to the  Executive,
and  thereafter  the  Executive  shall  be  responsible  for  all
premiums  under  such policies, and the Company shall  waive  its
right  to  receive  reimbursement  for  premiums  paid  on   such
policies.

      Section  2.6     Company Benefits.  For a period  of  three
years  following  the  Retirement Date, the  Executive  shall  be
entitled  to participate in the benefit plans of the Company  set
forth  on  Schedule  A  attached hereto.   With  respect  to  the
Company's  Profit  Sharing  Plan and Profit  Sharing  Restoration
Plan,  the Executive shall be entitled to all accrued amounts  to
which  the  Executive is eligible under such plans and agreement.
In  addition, following the Retirement Date, the Executive  shall
receive cash payments from the Company in the amounts that  would
have  been contributed to the Profit Sharing Plan and the  Profit
Sharing  Restoration  Plan for the Executive  (and  on  the  same
schedule) as if he remained employed by the Company through April
7,  2002.  If the Company is unable to include the Executive  and
his  spouse in the Executive Medical Plan or the Food Lion  Group
Benefit  Plan, it shall secure similar benefits for the Executive
and his spouse for such three-year period.  Following such three-
year  period,  the Executive shall receive COBRA continuation  of
health  care.  As soon as practicable after the Retirement  Date,
the Company shall transfer title to the vehicle currently used by
the  Executive to the Executive.  Thereafter, the Executive shall
be  responsible for all maintenance, insurance and other expenses
relating  to such vehicle, and the Company shall have no  further
obligations with respect to such vehicle.

     Section  2.7     Withholding  of  Taxes.   The  Company  may
withhold  from  any benefits or compensation payable  under  this
Agreement  all  federal, state, city or other  taxes  as  may  be
required  pursuant  to  any  law or  governmental  regulation  or
ruling.

       Section  2.8     Miscellaneous.   Except  as  specifically
provided  herein  or  as otherwise may be required  by  law,  the
Executive  shall  not be entitled to receive any other  payments,
benefits  or  severance  amounts from the Company  following  the
Retirement Date.

ARTICLE III:      CONFIDENTIAL INFORMATION

           The Executive acknowledges that during his service and
employment  with  the  Company as its Chairman,  Chief  Executive
Officer  and President that he has been privy and made  party  to
confidential information, including but not limited to  knowledge
or   data  relating  to  the  Company  and  its  businesses   and
investments, information regarding vendors, employees,  strategic
and  business  plans, and analysis of competitors  ("Confidential
Information")  and  Trade Secrets (as defined below).   Following
the  Retirement  Date, the Executive shall hold  in  a  fiduciary
capacity  for  the benefit of the Company all Trade  Secrets  and
Confidential Information, which shall have been obtained  by  the
Executive  during the Executive's employment by the  Company  and
which is not generally available public knowledge (other than  by
acts by the Executive in violation of this Agreement).  For three
years  following  the Retirement Date, the Executive  shall  not,
without  the  prior  written consent of the  Company  or  as  may
otherwise  be  required by law or any legal  process,  or  as  is
necessary  in connection with any adversarial proceeding  against
the Company (in which case the Executive shall use his reasonable
best  efforts  in  cooperating with the Company  in  obtaining  a
protective  order  against disclosure by  a  court  of  competent
jurisdiction), communicate or divulge any such Trade  Secrets  or
Confidential  Information to anyone other than  the  Company  and
those  designated by the Company.  All records, files,  drawings,
documents,  models,  equipment, and  the  like  relating  to  the
Company's  business, which the Executive has control over,  shall
not  be  removed from the Company's premises and, if so  removed,
shall  be  returned to the Company by the Retirement  Date.   The
Executive  acknowledges that he has assigned to the  Company  all
rights  to  Trade  Secrets  and other products  relating  to  the
Company's business developed by him alone or in conjunction  with
others  at any time while employed by the Company.  For  purposes
of  this  Agreement,  Trade Secrets shall mean  all  information,
without  regard to form, including, but not limited to, technical
or   non-technical   data,   formulae,  patterns,   compilations,
programs,  devices,  methods,  techniques,  drawings,  processes,
financial  data,  financial  plans,  business  projects,  product
plans,  distribution  lists  or  lists  of  actual  or  potential
customers,  advertisers or suppliers which is not commonly  known
by  or available to the public and which information: (i) derives
economic  value,  actual or potential, from not  being  generally
known to, and not being readily ascertainable by proper means by,
other  persons who can obtain economic value from its  disclosure
or  use  and  (ii) is the subject of efforts that are  reasonable
under the circumstances to maintain its secrecy.
     
ARTICLE IV:  NON-COMPETITION; NON-SOLICITATION; NON-DISPARAGEMENT

     Section 4.1    Acknowledgements.  The Executive acknowledges
(i)  that  during  his service and employment as Chairman,  Chief
Executive  Officer  and  President of the  Company,  he  required
special  expertise and talent in conducting his duties  and  that
the Executive had substantial contacts with customers, suppliers,
advertisers  and vendors of the Company and its affiliates;  (ii)
that  the  Executive  was  placed in  a  position  of  trust  and
responsibility  and  had  access  to  a  substantial  amount   of
Confidential Information and Trade Secrets and that  the  Company
placed  him  in  such  position  and  gave  him  access  to  such
information  in reliance upon his agreement not to  compete  with
the  Company during the time periods set forth below,  including,
but not limited to, the review and preparation of strategic plans
and   business  strategies  to  expand  the  Company's   business
operations;  (iii)  that  due to the Executive's  management  and
supervising   duties,  the  Executive  is  a  repository   of   a
substantial portion of the goodwill of the Company and would have
an  unfair advantage in competing with the Company; (iv) that due
to  the Executive's special experience and talent, the breach  of
this  Article  4  cannot be reasonably or adequately  compensated
solely by damages in an action at law; (v) that the Executive  is
capable of competing with the Company and its subsidiaries;  (vi)
that  the  Executive  is capable of obtaining gainful  employment
that   does  not  violate  the  restrictions  contained  in  this
Agreement;  and (vii) that a material inducement for the  Company
in executing this Agreement and making the payments hereunder was
the  Executive's  willingness to be bound by the  terms  of  this
Article 4.
     
     Section   4.2      Non-Competition.   In   light   of    the
acknowledgements  set  forth above and in  consideration  of  the
payments  made  to  the  Executive  hereunder,  for  three  years
following the Retirement Date, the Executive shall not,  directly
or  indirectly, own, manage, operate, control, be employed by, or
perform  services  for any business, howsoever organized  and  in
whatsoever form, that engages in any retail or wholesale  grocery
or  supermarket business and which is located anywhere within the
continental United States.
     
     Section 4.3.   Non-Solicitation.  To protect the goodwill of
the  Company and the Company's legitimate business interests  and
in consideration of the payments made to the Executive hereunder,
for  three  years after the Retirement Date, the Executive  shall
not, directly or indirectly, solicit the customers, suppliers  or
employees  of  the Company or its affiliates to  terminate  their
relationship  with the Company or its affiliates  (or  to  modify
such relationship in a manner that is adverse to the interests of
the Company or its affiliates), or to violate any valid contracts
they  may  have  with the Company or its subsidiaries;  provided,
however,  that  nothing in this Section 4.3  shall  prohibit  the
Executive  from  responding to an unsolicited  request  from  any
third  party  for  an employment reference with  respect  to  any
person  who was an employee of the Company during the  period  of
the Executive's employment with the Company.
     
     Section  4.4.   Non-Disparagement.  Following the Retirement
Date, the Executive shall not disparage the Company or any of the
Company's   subsidiaries,  affiliates,   and   their   respective
officers,  directors, employees, agents, successors and  assigns,
and  the Company shall not disparage the Executive or any of  his
representatives or agents, or any of their respective  heirs  and
assigns.  A proceeding brought by any party to enforce its rights
shall not be deemed to be a breach of this Section 4.4.
     
     Section  4.5.    Miscellaneous.  The Executive  acknowledges
that  the restrictions, prohibitions and other provisions of this
Article  4 are reasonable, fair and equitable in scope, term  and
duration,  are  necessary  to  protect  the  legitimate  business
interests  of the Company and its affiliates and are  a  material
inducement to the Company to enter into this Agreement  and  make
the  payments  hereunder.   It is the intention  of  the  parties
hereto  that  the  restrictions contained in this  Article  4  be
enforceable  to  the fullest extent permitted by applicable  law.
Therefore,  if,  at any time, the provisions of  this  Article  4
shall be determined to be invalid or unenforceable, by reason  of
being  vague  or unreasonable as to area, duration  or  scope  of
activity, this Article 4 shall be considered divisible and  shall
become and be immediately amended to only such area, duration and
scope  of  activity as shall be determined to be  reasonable  and
enforceable  by the court or other body having jurisdiction  over
the  matter and the Executive agrees that this Article  4  as  so
amended  shall  be  valid and binding as though  any  invalid  or
unenforceable provision had not been included herein.

ARTICLE V:     MISCELLANEOUS

     Section  5.1    Remedy.  Should the Executive engage  in  or
perform,   either  directly  or  indirectly,  any  of  the   acts
prohibited  by  Articles 3 and 4, it is agreed that  the  Company
shall  be  entitled  to  immediately  withhold  any  payments  or
benefits  to  be made to the Executive under Article  2  of  this
Agreement and all outstanding stock options held by the Executive
shall immediately be canceled and cease to be exercisable (and to
the extent such payments and benefits have already been made, the
Executive  shall immediately repay such amounts  to  the  Company
upon  such  breach,  including, but  not  limited  to,  any  gain
realized upon the lapse of restricted stock or exercise of  stock
options,  as  provided in Sections 2.2 and 2.3  hereof)  and  the
Company shall be entitled to full injunctive relief, to be issued
by  any competent court of equity, enjoining and restraining  the
Executive  and  each and every other person, firm,  organization,
association,   or   corporation  concerned  therein,   from   the
continuance  of such violative acts.  The foregoing remedy  shall
not be deemed to limit or prevent the exercise by the Company  of
any or all further rights and remedies which may be available  to
the Company hereunder or at law or in equity.
     
     Section  5.2     Notices.  For purposes of  this  Agreement,
notices and all other communications provided for herein shall be
in  writing  and  shall be deemed to have been  duly  given  when
personally delivered, sent by facsimile or when mailed by  United
States  registered  or certified mail, return receipt  requested,
postage  prepaid,  addressed to such  address  or  sent  to  such
facsimile  number  as  each party may furnish  to  the  other  in
writing from time to time.

     Section 5.3    Applicable Law, Jurisdiction and Venue.  This
Agreement  is entered into under, and shall be governed  for  all
purposes  by,  the laws of the State of North Carolina.   In  any
such litigation, each party hereto waives personal service of any
summons,  complaint or other process and agrees that the  service
thereof  may be made by certified mail directed to such party  at
his  or  its  address for purposes of notice  under  Section  5.1
hereof.

     Section 5.4    No Waiver.  No failure by either party hereto
at  any time to give notice of any breach by the other party  of,
or to require compliance with, any condition or provision of this
Agreement  shall (i) be deemed a waiver of similar or  dissimilar
provisions  or  conditions  at  the  same  or  at  any  prior  or
subsequent   time  or  (ii)  preclude  insistence   upon   strict
compliance in the future.

     Section  5.5     Severability.   If  a  court  of  competent
jurisdiction  determines that any provision of this Agreement  is
invalid or unenforceable, then the invalidity or unenforceability
of that provision shall not affect the validity or enforceability
of   any  other  provision  of  this  Agreement,  and  all  other
provisions shall remain in full force and effect.

     Section 5.6    Counterparts.  This Agreement may be executed
in  one or more counterparts, each of which shall be deemed to be
an  original, but all of which together will constitute  one  and
the same Agreement.

     Section  5.7    Headings.  The paragraph headings have  been
inserted  for purposes of convenience and shall not be  used  for
interpretive purposes.

     Section 5.8    Gender and Plurals.  Wherever the context  so
requires,  the masculine gender includes the feminine or  neuter,
and the singular number includes the plural and conversely.

     Section 5.9    Affiliate.  As used in this Agreement, unless
otherwise indicated, "affiliate" shall mean any person or  entity
which   directly   or  indirectly  through  any   one   or   more
intermediaries owns or controls, is owned or controlled by, or is
under common ownership or control with the Company.

     Section 5.10   Assignment.  This Agreement is binding on the
Executive  and  the  Company and their  successors  and  assigns;
provided, however, that the rights and obligations of the Company
under  this Agreement may be assigned to a successor entity which
assumes  (either by operation of law or otherwise) the  Company's
obligations  hereunder.  Any such assignment by the Company  will
not  release the Company unless and until all obligations to  the
Executive   hereunder  are  fully  discharged.    No  rights   or
obligations  of  the Executive hereunder may be assigned  by  the
Executive  to any other person or entity, except by will  or  the
laws   of  descent  and  distribution.   In  the  event  of   the
Executive's  death  prior  to receipt by  the  Executive  of  all
amounts  payable by the Company hereunder, such amounts shall  be
payable  to the Executive's designated beneficiaries on the  same
schedule as provided for in this Agreement.

     Section   5.11    Entire  Agreement.   Except  as  otherwise
specifically  provided  herein, this  Agreement  constitutes  the
entire agreement of the parties with regard to the subject matter
hereof,  contains  all the covenants, promises,  representations,
warranties and agreements between the parties with respect to the
Executive's  resignation  of employment  with  the  Company,  and
amends   and   supersedes  all  prior  employment  or   severance
agreements  between the Executive and the Company or any  of  its
predecessors,  including,  but not  limited  to,  the  Employment
Agreement.   The  Executive  acknowledges  and  agrees  that  the
consideration  provided for herein is adequate consideration  for
the  Executive waiving his rights under the Employment Agreement.
Except as otherwise provided herein, each party to this Agreement
acknowledges  that  no  representation,  inducement,  promise  or
agreement, oral or written, has been made by either party, or  by
anyone  acting on behalf of either party, which is  not  embodied
herein, and that no agreement, statement, or promise relating  to
the Executive's resignation of employment with the Company, which
is  not  contained in this Agreement, shall be valid or  binding.
Any  modification of this Agreement will be effective only if  it
is in writing and signed by the party to be charged..

      Section  5.12   Arbitration.  Except as otherwise necessary
to  secure the remedy specified in Section 5.1 of this Employment
Agreement,  any  dispute  arising between  the  Company  and  the
Executive  with  respect to the performance or interpretation  of
this  Retirement Agreement shall be submitted to  arbitration  in
Salisbury, North Carolina, for resolution in accordance with  the
commercial   arbitration  rules  of  the   American   Arbitration
Association,  modified  to  provide  that  the  decision  by  the
arbitrators  shall be binding on the parties, shall be  furnished
in  writing, separately and specifically stating the findings  of
fact  and conclusions of law on which the decision is based,  and
shall  be  rendered within 90 days following impanelment  of  the
arbitrators.  The cost of arbitration shall initially be borne by
the  party requesting arbitration.  Following a decision  by  the
arbitrators,  the  costs  of  arbitration  shall  be  divided  as
directed by the arbitrators.

ARTICLE VI:         EXECUTIVE ACKNOWLEDGEMENTS

     The Executive acknowledges that:

          (a)   He  has  read and understands the terms  of  this
     Agreement and has voluntarily agreed to their terms  without
     coercion  or undue persuasion by the Company or any officer,
     director or other agent thereof;
     
          (b)   He  has been encouraged by the Company to  seeks,
     and  has  sought, competent legal counsel in his review  and
     consideration of this Agreement and its terms; and
     
          (c)  This Agreement does not purport to waive, and does
     not  waive,  any rights the Executive may have  which  arise
     after the date on which this Agreement is finally executed.
     
              [The next page is the signature page]
                                

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

                                   FOOD LION, INC.
                                   
                                   
                                   By: \s\ William G. Ferguson
                                           William  G.  Ferguson,
                                   Chairman Senior Management Compensation
                                     Committee
                                   
                                     \s\ Tom E. Smith
                                   Tom E. Smith, Individually
                                   
                                   
                                   
                           SCHEDULE A
                                
Food  Lion Group Benefit Plan (including life insurance  coverage
  but excluding disability  coverage)
Executive Medical Plan
Financial  planning services up to $1,500 per  year,  reduced  in
  1999 for the value of any  services already received


                           SCHEDULE B
                                
                          STOCK OPTIONS
                                
Grant No.    Grant     No. of     Amount and          Exercise    Survives
             Date      Options     Date of             Price      Retirement
                       Granted     Vesting                        Date
  4241      11/6/91    75,000       60,000 vested     $12.4166      Yes
                                   7,500 on 11/6/99                 Yes
                                   7,500 on 11/6/00                 Yes
  4242      5/3/96     246,607    82,202 on 5/3/99     $7.3750      Yes
                                  82,202 on 5/3/00                  Yes
                                  82,203 on 5/3/01                   No
  4243      5/1/97     342,598   114,199 on 5/1/00     $6.6875      Yes
                                 114,199 on 5/1/01                   No
                                 114,200 on 5/1/02                   No
  41704     5/7/98     225,662    75,220 on 5/7/01    $10.2200       No
                                  75,221 on 5/7/02                   No
                                  75,221 on 5/7/03                   NO        


                        RESTRICTED STOCK

Grant No.    Grant     No. of     Amount and         Survives
             Date      Options     Date of           Retirement
                       Granted     Vesting            Date
  41175     5/3/96     47,031     11,758 vested        Yes
                                  11,758 on 5/3/99     Yes
                                  11,758 on 5/3/00     Yes
                                  11,757 on 5/3/01     No
  41332     5/1/97     68,227     17,057 on 5/1/99     Yes
                                  17,057 on 5/1/00     Yes
                                  17,057 on 5/1/01     No
                                  17,056 on 5/1/02     No
  41705     5/7/98     45,596     11,399 on 5/7/00     Yes
                                  11,399 on 5/7/01     No
                                  11,399 on 5/7/02     No
                                  11,399 on 5/7/03     No