Committee. Upon termination of the Employment Term, Executive shall resume service as anon-employee member of the Board.          2. Compensation. (a) Base Salary. During the Employment Term, the Companyshall pay Executive a base salary (the “Salary”) at the gross rate of $90,000 per month,payable in accordance with the Company’s payroll practices as in effect for senior executives.          (b) Board Compensation and Stock Ownership Requirements. During the Employment Term,(i) Executive shall continue to receive annual restricted stock grants equivalent to those awardedto non-employee members of the Board, (ii) Executive shall continue to vest in his outstandingequity awards as if he remained a non-employee member of the Board during the Employment Term and(iii) the payment of the annual cash retainer to Executive for his Board service shall be proratedto reflect only Executive’s service as a non-employee member of the Board. During the EmploymentTerm, Executive shall remain subject to the stock ownership requirements applicable to non-employeemembers of the Board, but not to the stock ownership requirements applicable to executives of theCompany.          (c) Benefits. During the Employment Term, Executive shall be eligible to participatein the employee benefit plans generally available to senior executives of the Company, to theextent Executive meets the eligibility requirements of any such plans, and, in any event, subjectto the terms of the applicable plans; provided, however, that (i) except asprovided in this Agreement, Executive shall not be entitled to receive any severance benefits orparticipate in the Company’s equity compensation program generally available to senior executivesof the Company and (ii) in lieu of Executive’s participation in the Company’s group medical planduring all or any portion of the Employment Term, Executive may elect that the Company reimburseExecutive for the premiums paid by Executive for the medical coverage of Executive and hisdependents under the plan or policy in effect for their benefit as of the Effective Date.Executive shall be entitled to take time off for vacation or illness in accordance with theCompany’s policy for senior executives and to receive all other fringe benefits as are from time totime made generally available to senior executives of the Company. Nothing herein shall affect theCompany’s right to alter, suspend, amend or discontinue any and all of its benefit plans, fringebenefits or policies, in whole or in part, at any time with or without notice in accordance withapplicable law.          (d) Legal Fees. The Company shall reimburse Executive for all reasonable legal feesand expenses incurred by Executive in connection with the negotiation and review of this Agreementand any documents ancillary thereto.          (e) Expense Reimbursement. During the Employment Term, the Company shall reimburseExecutive, in accordance with the Company’s policies and procedures, for all expenses incurred byExecutive in the performance of Executive’s duties hereunder. Without limiting the foregoing, theCompany shall reimburse Executive for all travel expenses (including transportation, food andlodging) incurred by Executive for travel between Chicago, Illinois and Charlotte, North Carolina.          3. Federal and State Withholding. The Company shall deduct from the amounts payableto Executive pursuant to this Agreement the amount of all required federal, state and localwithholding taxes in accordance with Executive’s Form W-4 on file with the Company, and allapplicable federal employment taxes.
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          4. Indemnification. To the fullest extent permitted by the indemnification provisionsof the laws of the state or jurisdiction of the Company’s incorporation in effect from time totime, and subject to the conditions thereof, the Company shall (i) indemnify Executive, as adirector and officer of the Company or a trustee or fiduciary of an employee benefit plan of theCompany against all liabilities and reasonable expenses that Executive may incur in any threatened,pending, or completed action, suit or proceeding, whether civil, criminal or administrative, orinvestigative and whether formal or informal, because Executive is or was a director or officer ofthe Company or a trustee or fiduciary of such employee benefit plan, and (ii) pay for or reimbursethe reasonable expenses upon submission of appropriate documentation incurred by Executive in thedefense of any proceeding to which Executive is a party because Executive is or was a director orofficer of the Company or a trustee or fiduciary of such employee benefit plan, including anadvancement of such expenses to the extent permitted by applicable law, subject to Executive’sexecution of any legally required repayment undertaking. The preceding indemnification right shallbe in addition to, and not in lieu of, any rights to indemnification to which Executive may beentitled under the certificate of incorporation and bylaws of the Company in effect from time totime and the Indemnification Agreement, dated June 1, 2010, between Executive and the Company. Theindemnification rights of Executive in this Section 4 are referred to below as the“Indemnification Provisions.” The rights of Executive under the Indemnification Provisionsshall survive the cessation of Executive’s employment with the Company. The Company shall maintaina directors’ and officers’ liability insurance policy, or an equivalent errors and omissionsliability insurance policy, covering Executive with scope, exclusions, amounts and deductibles noless favorable to the insured than those applicable to the Company’s senior officers and directorson the Effective Date, or any more favorable as may be available to any other director or seniorexecutive of the Company, while Executive is employed with the Company and thereafter until thesixth anniversary of Executive’s termination date.          5. Notices. All notices and other communications required or permitted hereundershall be in writing and shall be deemed given when (a) delivered personally or by overnight courierto the following address of the other parties hereto (or such other address for such parties asshall be specified by notice given pursuant to this Section) or (b) sent by facsimile to thefollowing facsimile number of the other parties hereto (or such other facsimile number for suchparties as shall be specified by notice given pursuant to this Section), with the confirmatory copydelivered by overnight courier to the address of such parties pursuant to this Section 5.          If to the Company, to:Horizon Lines, Inc.4064 Colony Road, Suite 200Charlotte, North Carolina 28211Facsimile: (704) 973-7010Attention: Board of Directors, Chairman          with a copy to:
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Horizon Lines, Inc.4064 Colony Road, Suite 200Charlotte, North Carolina 28211Facsimile: (704) 973-7010Attention: General Counsel          If to Executive, to:Stephen H. Fraser111 Carriage RoadNorth Barrington, Illinois 60010          with a copy to:Sidley Austin LLPOne S. DearbornChicago, IL 60603Facsimile: 312-853-7036Attention: Matthew E. Johnson          6. Severability. Whenever possible, each provision of this Agreement shall beinterpreted in such manner as to be effective and valid under applicable law, but if any provisionof this Agreement is held to be invalid, illegal or unenforceable in any respect under applicablelaw or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affectthe validity, legality or enforceability of any other provision of this Agreement or the validity,legality or enforceability of such provision in any other jurisdiction, but this Agreement shall bereformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceableprovision had never been contained herein.          7. Entire Agreement. This Agreement constitutes the entire agreement andunderstanding between the parties with respect to the subject matter hereof and supersedes andpreempts any prior understandings, agreements or representations by or between the parties, writtenor oral, which may have related in any manner to the subject matter hereof.          8. Successors and Assigns. This Agreement shall be enforceable by Executive andExecutive’s heirs, executors, administrators and legal representatives, and by the Company and itssuccessors and assigns. Executive may not assign this Agreement and any such assignment shall benull and void.          9. Governing Law. This Agreement shall be governed by and construed and enforced inaccordance with the internal laws of the State of Illinois without regard to principles of conflictof laws. To the extent that any party attempts to bring an action in court, Executive and theCompany stipulate that personal jurisdiction over them in the state courts of Illinois is properand agree that venue shall lie solely in the courts of Illinois over any such action.          10. Section 409A of the Code. This Agreement is intended to comply with therequirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”),and shall be interpreted and construed consistently with such intent. The payments to Executive
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pursuant to this Agreement are also intended to be exempt from Section 409A of the Code to themaximum extent possible as short-term deferrals pursuant to Treasury regulation §1.409A-1(b)(4).In the event the terms of this Agreement would subject Executive to taxes or penalties underSection 409A of the Code (“409A Penalties”), the Company and Executive shall cooperatediligently to amend the terms of the Agreement to avoid such 409A Penalties, to the extentpossible. Any reimbursement or advancement payable to Executive pursuant to this Agreement shallbe conditioned on the submission by Executive of all expense reports reasonably required by theCompany under any applicable expense reimbursement policy, and shall be paid to Executive within 30days following receipt of such expense reports, but in no event later than the last day of thecalendar year following the calendar year in which Executive incurred the reimbursable expense.Any amount of expenses eligible for reimbursement, or in-kind benefit provided, during a calendaryear shall not affect the amount of expenses eligible for reimbursement, or in-kind benefit to beprovided, during any other calendar year. The right to any reimbursement or in-kind benefitpursuant to this Agreement shall not be subject to liquidation or exchange for any other benefit.          11. Amendment and Waiver. The provisions of this Agreement may be amended or waivedonly by the written agreement of the Company and Executive, and no course of conduct or failure ordelay in enforcing the provisions of this Agreement shall affect the validity, binding effect orenforceability of this Agreement.          12. Counterparts. This Agreement may be executed in two or more counterparts, each ofwhich shall be deemed to be an original and all of which together shall constitute one and the sameinstrument.[SIGNATURE PAGE TO FOLLOW]
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          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date firstwritten above.      **HORIZON LINES, INC.**