Exhibit 10.1

SETTLEMENT AGREEMENT

This Settlement Agreement (Agreement) is entered into among the United States of
America, acting through the United States Department of Justice and on behalf of
the United States Postal Service, Department of Agriculture, and Department of
Defense (collectively the United States), Horizon Lines, LLC (Horizon), and the
Relator, William B. Stallings (hereafter the United States, Horizon, and the
Relator are collectively referred to as the Parties), through their authorized
representatives.

RECITALS

A. Horizon is a Charlotte, North Carolina-based company that, inter alia,
provides ocean transportation services on behalf of commercial and government
customers between the continental United States and Puerto Rico.

B. On January 15, 2013, William B. Stallings filed a qui tam action in the
United States District Court for the Middle District of Florida captioned United
States ex rel. Stallings v. Sea Star Line, LLC, et al., No. 3:13-cv-152-J-12JBT,
pursuant to the qui tam provisions of the False Claims Act, 31 U.S.C. § 3730(b)
(the Civil Action). The qui tam complaint alleges that Horizon engaged in price
fixing of certain ocean transportation contracts between the continental United
States and Puerto Rico during the period from April 2002 through April 2008.

C. The United States contends that it has certain civil claims against Horizon
arising from price fixing of United States Postal Service, Department of
Agriculture, and Department of Defense contracts for the ocean transportation of
cargo from the continental United States to Puerto Rico during the period from
April 2002 through April 2008. The United States contends that, to carry out the
scheme, Horizon executives used

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Settlement Agreement among the United States, Horizon Lines LLC, and William B.
Stallings

 

personal email accounts to communicate confidential bidding information, thereby
enabling Horizon to know the ocean transportation rates that its competitors
intended to submit to the United States. The United States contends that this
scheme resulted in inflated ocean transportation rates on government contracts
between April 2002 and April 2008. The conduct alleged in this paragraph C is
referred to below as the Covered Conduct.

D. This Agreement is neither an admission of liability by Horizon, nor a
concession by the United States that its claims are not well founded, except to
the extent admitted in Horizon’s February 2011 guilty plea.

E. Relator claims entitlement under 31 U.S.C. § 3730(d) to a share of the
proceeds of this Agreement and to Relator’s reasonable expenses, attorney’s fees
and costs.

To avoid the delay, uncertainty, inconvenience, and expense of protracted
litigation of the above claims, and in consideration of the mutual promises and
obligations of this Agreement, the Parties agree and covenant as follows:

TERMS AND CONDITIONS

1. Horizon shall pay to the United States the total sum of $1,508,750
(Settlement Amount). The payments shall be made as follows: No later than 5
business days after the Effective Date of this Agreement, Horizon shall make an
initial payment to the United States in the amount of $500,000. No later than 90
calendar days after making the initial payment to the United States, Horizon
shall make a second payment to the United States in the amount of $127,500. No
later than 90 calendar days after making the second payment to the United
States, Horizon shall make a third payment to the United

 

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Settlement Agreement among the United States, Horizon Lines LLC, and William B.
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States in the amount of $127,187.50. No later than 90 calendar days after making
the third payment to the United States, Horizon shall make a fourth payment to
the United States in the amount of $126,875. No later than 90 calendar days
after making the fourth payment to the United States, Horizon shall make a fifth
payment to the United States in the amount of $376,562.50. No later than 90
calendar days after making the fifth payment to the United States, Horizon shall
make a sixth payment to the United States in the amount of $250,625. Each of the
6 payments by Horizon to the United States shall be made by electronic funds
transfer pursuant to written instructions to be provided by the Civil Division
of the United States Department of Justice.

2. Default will be deemed to have occurred if any payment required by paragraph
1 above is not received by the United States within 10 business days after the
date any payment is due, the United States has notified in writing counsel for
Horizon that payment was not received, and Horizon has failed to make payment
within 5 business days after receipt of the written notice. Horizon agrees that,
if it is in default as provided for by this paragraph 2, the United States, in
its discretion, shall have the right to offset any amounts then currently due
and owing by withholding payment on any contract Horizon has with any agency of
the United States government, or shall have the right to enforce this Agreement,
or shall have the right to reinstate its claims against Horizon. In the event
the United States elects to reinstate its claims for the Covered Conduct
described above in paragraph C, Horizon waives and shall not raise any
time-related defenses such as statute of limitations, laches, or estoppel,
except to the extent that such defenses were available to Horizon on the
Effective Date of this Agreement; the time period between the Effective Date of
this Agreement and the commencement of

 

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Settlement Agreement among the United States, Horizon Lines LLC, and William B.
Stallings

 

such suit shall be excluded from the calculation of any such limitations period;
and the United States will furnish Horizon with a credit for any funds paid by
Horizon to the United States under this Agreement.

3. Conditioned upon the United States receiving each payment from Horizon set
forth in paragraph 1 above, or upon receipt of any amount recovered pursuant to
paragraph 2 above, paragraph 9 below, or paragraph 16.b. below, the United
States agrees that it shall pay to Relator by electronic funds transfer 15
percent of each such payment as soon as feasible after receipt of each payment.
In the event that Horizon fails to make one or more of the 6 payments set forth
in paragraph 1 above, the United States shall not be required to pay to Relator
15 percent of the payment or payments that should have been made by Horizon to
the United States.

4. Horizon and Relator agree that Horizon shall pay Relator $75,000 for
expenses, attorney’s fees, and costs, pursuant to 31 U.S.C. § 3730(d)
(Attorney’s Fees and Costs). Horizon agrees to pay the Attorney’s Fees and Costs
to Relator by way of electronic funds transfer pursuant to written instructions
provided by Relator’s counsel. Horizon shall make this electronic funds transfer
within 5 business days after the Effective Date of this Agreement or receipt of
the above-described written instructions, whichever is later.

5. Subject to the exceptions in paragraph 7 (concerning excluded claims) below,
and conditioned upon Horizon’s full payment of the Settlement Amount, and
subject to paragraph 16 (concerning bankruptcy proceedings commenced within 91
days of the Effective Date of this Agreement or any payment made under this
Agreement) below, the United States releases Horizon, as well as its current and
former parent

 

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Settlement Agreement among the United States, Horizon Lines LLC, and William B.
Stallings

 

corporations, direct and indirect subsidiaries, divisions, affiliates, current
and former owners, directors, officers, and employees, and the successors and
assigns of any of them from any civil or administrative monetary claim the
United States has for the Covered Conduct under the False Claims Act, 31 U.S.C.
§§ 3729-3733; the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812; the
Contract Disputes Act, 41 U.S.C. §§ 7101–7109; the common law theories of breach
of contract, payment by mistake, unjust enrichment, and fraud, and under any
statute creating causes of action for civil damages or civil penalties which the
Civil Division of the United States Department of Justice has authority to
assert and compromise pursuant to 28 C.F.R. Part O, Subpart I, § 0.45(d).

6. Conditioned upon Horizon’s full payment of the Settlement Amount and
Attorney’s Fees and Costs as provided in paragraph 4 above, Relator, for himself
and for his heirs, successors, attorneys, agents, and assigns, fully and finally
releases Horizon, as well as its current and former parent corporations, direct
and indirect subsidiaries, divisions, affiliates, current and former owners,
directors, officers, and employees, and the successors and assigns of any of
them from any claims, causes of action, liabilities, losses, and damages
(including, but not limited to attorney’s fees, costs, and expenses of every
kind and however denominated, except as provided in paragraph 4) arising out of
any conduct, event, matter, or thing whatsoever occurring prior to the Effective
Date of this Agreement, including, but not limited to, any conduct related to
the Civil Action, and the investigation, litigation, and resolution thereof.

7. Notwithstanding the releases given in paragraphs 5 and 6 above, or any other
term of this Agreement, the following claims of the United States are
specifically reserved and are not released:

 

  a. Any liability arising under Title 26, U.S. Code (Internal Revenue Code);

 

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Settlement Agreement among the United States, Horizon Lines LLC, and William B.
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  b. Any criminal liability;

 

  c. Except as explicitly stated in this Agreement, any administrative
liability, including the suspension and debarment rights of any federal agency;

 

  d. Any liability to the United States (or its agencies) for any conduct other
than the Covered Conduct;

 

  e. Any liability based upon obligations created by this Agreement;

 

  f. Any liability for express or implied warranty claims or other claims for
defective or deficient products or services, including quality of goods and
services;

 

  g. Any liability for failure to deliver goods or services due;

 

  h. Any liability for personal injury or property damage or for other
consequential damages arising from the Covered Conduct; or

 

  i. Any liability of individuals (including current or former directors,
officers, employees, agents, or shareholders of Horizon) who receive written
notification that they are the target of a criminal investigation (as defined in
the United States Attorneys’ Manual), are indicted or charged, or who enter into
a plea agreement, related to the Covered Conduct.

8. Relator and his heirs, successors, attorneys, agents, and assigns shall not
object to this Agreement but agree and confirm that this Agreement is fair,
adequate, and

 

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Settlement Agreement among the United States, Horizon Lines LLC, and William B.
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reasonable under all the circumstances, pursuant to 31 U.S.C. § 3730(c)(2)(B).
Conditioned upon Relator’s receipt of the Settlement Amount payments described
in paragraph 3 above, Relator and his heirs, successors, attorneys, agents, and
assigns fully and finally release, waive, and forever discharge the United
States, its agencies, officers, agents, employees, and servants, from any claims
arising from the filing of the Civil Action against Horizon, or under 31 U.S.C.
§ 3730 against Horizon, and from any claims to a share of the proceeds of this
Agreement.

9. Horizon has provided annual audited financial statements and quarterly
unaudited financial statements certified in accordance with Sarbanes-Oxley and
filed with the Securities Exchange Commission (Financial Statements) and other
financial materials to the United States, and the United States has relied on
the accuracy and completeness of those Financial Statements and other financial
materials in reaching this Agreement. Horizon warrants that the Financial
Statements are complete, accurate, and current. If the United States learns of
any asset(s) in which Horizon had an interest at the time of this Agreement that
were not disclosed in the Financial Statements, or if the United States learns
of any misrepresentation by Horizon on, or in connection with, the Financial
Statements, and if such nondisclosure or misrepresentation changes the estimated
net worth set forth in the Financial Statements by 10 percent or more, the
United States may at its option: (a) rescind this Agreement and file suit based
on the Covered Conduct, or (b) let the Agreement stand and collect the full
Settlement Amount plus 100 percent of the value of the net worth of Horizon’s
previously-undisclosed asset(s). Horizon agrees not to contest any collection
action undertaken by the United States pursuant to this provision, and
immediately to pay the United States all reasonable costs incurred in such an
action, including attorney’s fees and expenses.

 

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Settlement Agreement among the United States, Horizon Lines LLC, and William B.
Stallings

 

10. In the event that the United States, pursuant to paragraph 9 (concerning
disclosure of assets) above, opts to rescind this Agreement, Horizon agrees not
to plead, argue, or otherwise raise any defenses under the theories of statute
of limitations, laches, estoppel, or similar theories, to any civil or
administrative claims that (a) are filed by the United States within 90 calendar
days of written notification to Horizon that this Agreement has been rescinded,
and (b) relate to the Covered Conduct, except to the extent these defenses were
available on January 15, 2013.

11. Horizon waives and shall not assert any defenses Horizon may have to any
criminal prosecution or administrative action relating to the Covered Conduct
that may be based in whole or in part on a contention that, under the Double
Jeopardy Clause in the Fifth Amendment to the Constitution, or under the
Excessive Fines Clause in the Eighth Amendment to the Constitution, this
Agreement bars a remedy sought in such criminal prosecution or administrative
action. Nothing in this paragraph or any other provision of this Agreement
constitutes an agreement by the United States concerning the characterization of
the Settlement Amount for purposes of the Internal Revenue laws, Title 26 of the
United States Code.

12. Horizon, as well as its current and former parent corporations, direct and
indirect subsidiaries, divisions, affiliates, current and former owners,
directors, officers, and employees, and the successors and assigns of any of
them, fully and finally release the United States, its agencies, officers,
agents, employees, and servants, from any claims (including attorney’s fees,
costs, and expenses of every kind and however denominated)

 

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Settlement Agreement among the United States, Horizon Lines LLC, and William B.
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that and of them has asserted, could have asserted, or may assert in the future
against the United States, its agencies, officers, agents, employees, and
servants, related to the Covered Conduct and the United States’ investigation
and prosecution thereof.

13. Horizon, as well as its current and former parent corporations, direct and
indirect subsidiaries, divisions, affiliates, current and former owners,
directors, officers, and employees, and the successors and assigns of any of
them, fully and finally release Relator, his heirs, successors, attorneys,
agents, and assigns, from any claims, causes of action, liabilities, losses, and
damages (including, but not limited to attorney’s fees, costs, and expenses of
every kind and however denominated) arising out of any conduct, event, matter,
or thing whatsoever occurring prior to the Effective Date of this Agreement,
including, but not limited to, any conduct related to the Civil Action, and the
investigation, litigation, and resolution thereof.

14. a. Unallowable Costs Defined: All costs (as defined in the Federal
Acquisition Regulation, 48 C.F.R. § 31.205-47) incurred by or on behalf of
Horizon, and its present or former officers, directors, employees, shareholders,
and agents in connection with:

 

  (1) the matters covered by this Agreement and any related plea agreement;

 

  (2) the United States’ audit(s) and civil and any criminal investigation(s) of
the matters covered by this Agreement;

 

  (3) Horizon’s investigation, defense, and corrective actions undertaken in
response to the United States’ audit(s) and civil and any criminal
investigation(s) in connection with the matters covered by this Agreement
(including attorney’s fees);

 

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Settlement Agreement among the United States, Horizon Lines LLC, and William B.
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  (4) the negotiation and performance of this Agreement and any plea agreement;

 

  (5) the payment Horizon makes to the United States pursuant to this Agreement
and any payments that Horizon may make to Relator, including costs and
attorney’s fees,

are unallowable costs for government contracting purposes (hereinafter referred
to as Unallowable Costs).

b. Future Treatment of Unallowable Costs: Unallowable Costs will be separately
determined and accounted for by Horizon, and Horizon shall not charge such
Unallowable Costs directly or indirectly to any contract with the United States.

c. Treatment of Unallowable Costs Previously Submitted for Payment: Within 90
days of the Effective Date of this Agreement, Horizon shall identify and repay
by adjustment to future claims for payment or otherwise any Unallowable Costs
included in payments previously sought by Horizon, or any of its subsidiaries or
affiliates from the United States. Horizon agrees that the United States, at a
minimum, shall be entitled to recoup from Horizon any overpayment plus
applicable interest and penalties as a result of the inclusion of such
Unallowable Costs on previously-submitted requests for payment The United
States, including the Department of Justice and/or the affected agencies,
reserves its rights to audit, examine, or re-examine Horizon’s books and records
and to disagree with any calculations submitted by Horizon, or any of its
subsidiaries or affiliates regarding any Unallowable Costs included in payments
previously sought by Horizon, or the effect of any such Unallowable Costs on the
amount of such payments.

 

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Settlement Agreement among the United States, Horizon Lines LLC, and William B.
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15. Horizon warrants that it has reviewed its financial situation and that it
currently is solvent within the meaning of 11 U.S.C. §§ 547(b)(3) and
548(a)(l)(B)(ii)(I), and anticipates that it will remain solvent following
payment to the United States of the Settlement Amount. Further, the Parties
warrant that, in evaluating whether to execute this Agreement, they (a) have
intended that the mutual promises, covenants, and obligations set forth
constitute a contemporaneous exchange for new value given to Horizon, within the
meaning of 11 U.S.C. § 547(c)(1), and (b) conclude that these mutual promises,
covenants, and obligations do, in fact, constitute such a contemporaneous
exchange. Further, the Parties warrant that the mutual promises, covenants, and
obligations set forth herein are intended to and do, in fact, represent a
reasonably equivalent exchange of value that is not intended to hinder, delay,
or defraud any entity to which Horizon was or became indebted to on or after the
date of this transfer, within the meaning of 11 U.S.C. § 548(a)(1).

16. If within 91 days of the Effective Date of this Agreement or of any payment
made under this Agreement, Horizon commences, or a third party commences, any
case, proceeding, or other action under any law relating to bankruptcy,
insolvency, reorganization, or relief of debtors (a) seeking to have any order
for relief of Horizon’s debts, or seeking to adjudicate Horizon as bankrupt or
insolvent; or (b) seeking appointment of a receiver, trustee, custodian, or
other similar official for Horizon or for all or any substantial part of
Horizon’s assets, Horizon agrees as follows:

a. Horizon’s obligations under this Agreement may not be avoided pursuant to 11
U.S.C. § 547, and Horizon shall not argue or otherwise take the position in any
such case, proceeding, or action that: (i) Horizon’s obligations under this
Agreement may be avoided under 11 U.S.C. § 547; (ii) Horizon was insolvent at
the time this Agreement was entered into, or became insolvent as a result of the
payment made to the United States; or (iii) the mutual promises, covenants, and
obligations set forth in this Agreement do not constitute a contemporaneous
exchange for new value given to Horizon.

 

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Settlement Agreement among the United States, Horizon Lines LLC, and William B.
Stallings

 

b. If Horizon’s obligations under this Agreement are avoided for any reason,
including, but not limited to, through the exercise of a trustee’s avoidance
powers under the Bankruptcy Code, the United States, at its sole option, may
rescind the releases in this Agreement and bring any civil and/or administrative
claim, action, or proceeding against Horizon for the claims that would otherwise
be covered by the releases provided in paragraphs 5 and 6 above. Horizon agrees
that (i) any such claims, actions, or proceedings brought by the United States
are not subject to an “automatic stay” pursuant to 11 U.S.C. § 362(a) as a
result of the action, case, or proceedings described in the first clause of this
paragraph, and Horizon shall not argue or otherwise contend that the United
States’ claims, actions, or proceedings are subject to an automatic stay;
(ii) Horizon shall not plead, argue, or otherwise raise any defenses under the
theories of statute of limitations, laches, estoppel, or similar theories, to
any such civil or administrative claims, actions, or proceeding that are brought
by the United States within 90 calendar days of written notification to Horizon
that the releases have been rescinded pursuant to this paragraph, except to the
extent such defenses were available on the Effective Date of

 

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Settlement Agreement among the United States, Horizon Lines LLC, and William B.
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the Agreement; and (iii) the United States has a valid claim against Horizon in
the amount of $10,500,000, and the United States may pursue its claim in the
case, action, or proceeding referenced in the first clause of this paragraph, as
well as in any other case, action, or proceeding, subject to furnishing Horizon
with a credit for any Settlement Funds paid by Horizon to the United States
under this Agreement that are not otherwise deemed by the court as an invalid or
preferential transfer.

c. Horizon acknowledges that its agreements in this paragraph are provided in
exchange for valuable consideration provided in this Agreement.

17. This Agreement is intended to be for the benefit of the Parties only.

18. Upon receipt of the initial payment described in paragraph 1 above, the
Parties shall promptly sign and file in the Civil Action a Joint Stipulation of
Dismissal of the Civil Action pursuant to Rule 41(a)(1) of the Covered Conduct
with prejudice and any remaining claims without prejudice, with such dismissal
subject to the terms and conditions of this Agreement.

19. Each Party shall bear its own legal and other costs incurred in connection
with this matter, including the preparation and performance of this Agreement.

20. Each Party and signatory to this Agreement represents that it freely and
voluntarily enters into this Agreement without any degree of duress or
compulsion.

21. This Agreement is governed by the laws of the United States. The exclusive
jurisdiction and venue for any dispute relating to this Agreement is the United
States District Court for the Middle District of Florida. For purposes of
construing this Agreement, this Agreement shall be deemed to have been drafted
by all Parties to this Agreement and shall not, therefore, be construed against
any Party for that reason in any subsequent dispute.

 

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Settlement Agreement among the United States, Horizon Lines LLC, and William B.
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22. This Agreement constitutes the complete agreement among the Parties. This
Agreement may not be amended except by written consent of the Parties.

23. The undersigned counsel represent and warrant that they are fully authorized
to execute this Agreement on behalf of the persons and entities indicated below.

24. This Agreement may be executed in counterparts, each of which constitutes an
original and all of which constitute one and the same Agreement.

25. This Agreement is binding on the Parties’ successors, transferees, heirs,
and assigns.

26. All Parties consent to the United States’ disclosure of this Agreement, and
information about this Agreement, to the public.

27. This Agreement is effective on the date of signature of the last signatory
to the Agreement (Effective Date of this Agreement). Facsimiles of signatures
shall constitute acceptable, binding signatures for purposes of this Agreement.

UNITED STATES OF AMERICA

 

DATED:   2/28/2014     BY:   LOGO [g689343ex10_1pg14.jpg]  

 

     

 

        Andrew A. Steinberg        

Trial Attorney

Commercial Litigation Branch, Civil Division

United States Department of Justice

Counsel for the United States of America

 

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Settlement Agreement among the United States, Horizon Lines LLC, and William B.
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HORIZON LINES, LLC — DEFENDANT

 

DATED:   3/5/14     BY:   LOGO [g689343ex10_1pg15a.jpg]  

 

     

 

        Michael T. Avara        

Executive Vice President and

Chief Financial Officer for Horizon Lines, LLC

DATED:   3/5/2014     BY:   LOGO [g689343ex10_1pg15b.jpg]  

 

     

 

        Amy B. Manning         Counsel for Horizon Lines, LLC

WILLIAM B. STALLINGS – RELATOR

 

DATED:   2-20-14     BY:   LOGO [g689343ex10_1pg15c.jpg]  

 

     

 

        William B. Stallings DATED:   2/20/14     BY:   LOGO
[g689343ex10_1pg15d.jpg]  

 

     

 

        Charles P. Pillans, III         Counsel for William B. Stallings

 

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