Document:

Exhibit 10.2

 

Exhibit 10.2

Execution Copy

Horizon Lines, Inc.

4.25% Convertible Senior Notes due 2012

Registration Rights Agreement

August 8, 2007

Goldman, Sachs & Co.

Banc of America Securities LLC

Wachovia Capital Markets, LLC

85 Broad Street

New York, New York 10004

Ladies and Gentlemen:

     Horizon Lines, Inc., a Delaware corporation (the “Company”), proposes to issue and sell to the
Purchasers (as defined herein) upon the terms set forth in the Purchase Agreement (as defined
herein) its 4.25% Convertible Senior Notes due 2012 (the “Securities”). As an inducement to the
Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the
obligations of the Purchasers thereunder, the Company agrees with the Purchasers for the benefit of
Holders (as defined herein) from time to time of the Registrable Securities (as defined herein) as
follows:

     1. Definitions.

     (a) Capitalized terms used herein without definition shall have the meanings ascribed to
them in the Purchase Agreement. As used in this Agreement, the following defined terms shall have
the following meanings:

     “Affiliate” of any specified person means any other person which, directly or indirectly, is
in control of, is controlled by, or is under common control with such specified person. For
purposes of this definition, control of a person means the power, direct or indirect, to direct or
cause the direction of the management and policies of such person whether by contract or otherwise;
and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

     “Closing Date” means the First Time of Delivery as defined in the Purchase Agreement.

     “Commission” means the United States Securities and Exchange Commission, or any other federal
agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant
statute for the particular purpose.

     “Common Stock” means the Company’s common stock, par value $0.01 per share.

 

 

     “DTC” means The Depository Trust Company.

     “Effective Failure” has the meaning assigned thereto in Section 7(b) hereof.

     “Effectiveness Period” has the meaning assigned thereto in Section 2(b)(i) hereof.

     “Effective Time” means the time at which the Commission declares the Shelf Registration
Statement effective or at which the Shelf Registration Statement otherwise becomes effective.

     “EDGAR” has the meaning assigned thereto in Section 3(b) hereof.

     “Electing Holder” has the meaning assigned thereto in Section 3(a)(iii) hereof.

     “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

     “Holder” means any person that is the record owner of Registrable Securities (and includes any
person that has a beneficial interest in any Registrable Security in book-entry form).

     “Indemnified Person” has the meaning assigned thereto in Section 5(a).

     “Indenture” means the Indenture, dated as of August 8, 2007, between the Company and The Bank
of New York Trust Company, N.A., as amended and supplemented from time to time in accordance with
its terms.

     "Issuer Free Writing Prospectus” has the meaning set forth in Rule 433 under the Securities
Act.

     “Liquidated Damages” has the meaning assigned thereto in Section 7(a) hereof.

     “Managing Underwriters” means the investment banker or investment bankers and manager or
managers that shall administer an underwritten offering, if any, conducted pursuant to Section 6
hereof.

     “NASD Rules” means the Rules of the National Association of Securities Dealers, Inc., as
amended from time to time.

     “Notice and Questionnaire” means a Notice of Registration Statement and Selling Securityholder
Questionnaire substantially in the form of Appendix A hereto.

     The term “person” means an individual, partnership, corporation, trust or unincorporated
organization, or a government or agency or political subdivision thereof.

     “Prospectus” means the prospectus (including, without limitation, any preliminary prospectus,
any final prospectus and any prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon Rule 430A under
the Securities Act) included in the Shelf Registration Statement, as amended

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or supplemented by any prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Securities covered by the Shelf Registration Statement and by all other
amendments and supplements to such prospectus, including all material incorporated by reference in
such prospectus and all documents filed after the date of such prospectus by the Company under the
Exchange Act and incorporated by reference therein.

     “Purchase Agreement” means the purchase agreement, dated as of August 1, 2007, between the
Purchasers and the Company relating to the Securities.

     “Purchasers” means the Purchasers named in Schedule I to the Purchase Agreement.

     “Registrable Securities” means all or any portion of the Securities issued on the date hereof
(or pursuant to the exercise of the purchasers’ over-allotment option) under the Indenture in
registered form and the shares of Common Stock issuable upon conversion of such Securities;
provided, however, that a security ceases to be a Registrable Security when it is no longer a
Restricted Security.

     “Registration Default” has the meaning assigned thereto in Section 7(a) hereof.

     “Restricted Security” means any Security or share of Common Stock issuable upon conversion
thereof except any such Security or share of Common Stock that (i) has been effectively registered
under the Securities Act and sold in a manner contemplated by the Shelf Registration Statement,
(ii) has been transferred in compliance with Rule 144 under the Securities Act (or any successor
provision thereto) or is transferable pursuant to paragraph (k) of such Rule 144 (or any successor
provision thereto) or (iii) has otherwise been transferred and a new Security or share of Common
Stock not subject to transfer restrictions under the Securities Act has been delivered by or on
behalf of the Company in accordance with the Indenture.

     “Rules and Regulations” means the published rules and regulations of the Commission
promulgated under the Securities Act or the Exchange Act, as in effect at any relevant time.

     “Securities Act” means the United States Securities Act of 1933, as amended.

     “Shelf Registration” means a registration effected pursuant to Section 2 hereof.

     “Shelf Registration Statement” means a “shelf” registration statement filed under the
Securities Act providing for the registration of, and the sale on a continuous or delayed basis by
the Holders of, the Registrable Securities pursuant to Rule 415 under the Securities Act and/or any
similar rule that may be adopted by the Commission, filed by the Company pursuant to the provisions
of Section 2 of this Agreement, including the Prospectus contained therein, any amendments and
supplements to such registration statement, including post-effective amendments, and all exhibits
and all material incorporated by reference in such registration statement.

     “Suspension Period” has the meaning assigned thereto in Section 2(c).

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     “Trust Indenture Act” means the Trust Indenture Act of 1939, or any successor thereto, and the
rules, regulations and forms promulgated thereunder, as the same shall be amended from time to
time.

     The term “underwriter” means any underwriter of Registrable Securities in connection with an
offering thereof under a Shelf Registration Statement.

     (b) Wherever there is a reference in this Agreement to a percentage of the “principal amount”
of Registrable Securities or to a percentage of Registrable Securities, Common Stock constituting
Registrable Securities shall be treated as representing the principal amount of Securities that was
surrendered for conversion or exchange in order to receive such number of shares of Common Stock.

     2. Shelf Registration.

     (a) The Company shall use its commercially reasonable efforts to cause a Shelf Registration
Statement relating to the offer and sale of the Registrable Securities by the Holders from time to
time in accordance with the methods of distribution elected by such Holders and set forth in such
Shelf Registration Statement to be declared effective under the Securities Act no later than 180
calendar days following the Closing Date; provided, however, that the Company may, upon written
notice to all Holders, postpone having the Shelf Registration Statement declared effective for a
reasonable period not to exceed 90 days if the Company possesses material non-public information,
the disclosure of which would have a material adverse effect on the Company and its subsidiaries
taken as a whole; provided, further, however, that no Holder shall be entitled to be named as a
selling securityholder in the Shelf Registration Statement or to use the Prospectus forming a part
thereof for resales of Registrable Securities unless such Holder is an Electing Holder.

     (b) The Company shall use its commercially reasonable efforts:

     (i) to keep the Shelf Registration Statement continuously effective under the
Securities Act in order to permit the Prospectus forming a part thereof to be usable by
Holders until the earliest of (1) the sale of all Registrable Securities registered under
the Shelf Registration Statement; (2) the expiration of the period referred to in Rule
144(k) of the Securities Act, or any successor provision, with respect to all Registrable
Securities held by Persons that are not Affiliates of the Company; and (3) two years from
the Effective Time (such period being referred to herein as the “Effectiveness Period”);

     (ii) after the Effective Time of the Shelf Registration Statement, subject to Section
3(a)(ii) hereof, as promptly as practicable upon the request of any Holder of Registrable
Securities that is not then an Electing Holder, to take any action reasonably necessary to
enable such Holder to use the Prospectus forming a part thereof for resales of Registrable
Securities, including, without limitation, any action necessary to identify such Holder as a
selling securityholder in the Shelf Registration Statement; and

     (iii) if at any time the Securities, pursuant to Article 12 of the Indenture, are
convertible into securities other than Common Stock, to cause, or to cause any

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successor under the Indenture to cause, such securities to be included in the Shelf
Registration Statement no later than the later of (A) 180 calendar days following the
Closing Date and (B) the date on which the Securities are convertible into such securities.

The Company shall be deemed not to have used its commercially reasonable efforts to keep the Shelf
Registration Statement effective during the requisite period if the Company voluntarily takes any
action that would result in Holders of Registrable Securities covered thereby not being able to
offer and sell any of such Registrable Securities during that period, unless such action is (A)
required by applicable law and the Company thereafter promptly complies with the requirements of
Section 3(j) hereof or (B) permitted pursuant to Section 2(c) below.

     (c) The Company may suspend the use of the Prospectus, without incurring any obligation to pay
Liquidated Damages, for a period not to exceed 45 days in any 90-day period or an aggregate of 90
days in any 12-month period (each a “Suspension Period”) if the Board of Directors of the Company
shall have determined in good faith that because of valid business reasons (not including avoidance
of the Company’s obligations hereunder), including the acquisition or divestiture of assets,
pending corporate developments, public filings with the Commission and similar events, it is in the
best interests of the Company to suspend such use, and prior to suspending such use the Company
provides the Holders with written notice of such suspension, which notice need not specify the
nature of the event giving rise to such suspension.

     3. Registration Procedures. In connection with the Shelf Registration Statement, the
following provisions shall apply:

     (a) (i) Not less than 30 calendar days prior to the Effective Time of the Shelf Registration
Statement, the Company shall use its commercially reasonable efforts to mail the Notice and
Questionnaire to each of the Holders of Registrable Securities. No Holder shall be entitled to be
named as a selling securityholder in the Shelf Registration Statement as of the Effective Time, and
no Holder shall be entitled to use the Prospectus forming a part thereof for resales of Registrable
Securities at any time, unless such Holder has returned a completed and signed Notice and
Questionnaire to the Company by the date five business days prior to such Effective Time; provided,
however, Holders of Registrable Securities shall have at least 20 calendar days from the date on
which the Notice and Questionnaire is first mailed to such Holders to return a completed and signed
Notice and Questionnaire to the Company.

     (ii) After the Effective Time of the Shelf Registration Statement, the Company shall,
upon the request of any Holder of Registrable Securities that is not then an Electing
Holder, promptly send a Notice and Questionnaire to such Holder and thereafter the Company
will, within 30 days after the date such completed and signed Notice and Questionnaire has
been delivered to the Company, file a supplement to the Prospectus relating to the Shelf
Registration Statement, or, if required, file a post-effective amendment or a new Shelf
Registration Statement in order to permit resales of such Holder’s Registrable Securities;
provided, however, if the Company receives the Notice and Questionnaire during a Suspension
Period, or the Company initiates a Suspension Period within 30 days after receipt of the
applicable Notice and Questionnaire, then the

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Company will make the required filing within 30 days after the end of the Suspension Period;
provided, further, however, in no event, will the Company be required to file more than one
supplement to the Prospectus per 30-day period in order to name as a selling securityholder
any Holder that has provided the Company with a completed Notice and Questionnaire after the
deadline set forth in Section 3(a)(i) hereof to be included as a selling securityholder in
the initial Prospectus. If the Company files a post-effective amendment or a new Shelf
Registration Statement pursuant to the requirements of this Section 3(a)(ii), then it will
use reasonable efforts to cause the post-effective amendment or new Shelf Registration
Statement to become effective under the Securities Act as promptly as practicable, but in
any event by the 90th day after the filing date required by this Section 3(a)(ii); provided,
however, if a post-effective amendment or a new Shelf Registration Statement is required in
order to permit resales by Holders seeking to include Registrable Securities in the Shelf
Registration Statement after the Effective Time of the initial Shelf Registration Statement,
the Company will not be required to file more than one post-effective amendment or new Shelf
Registration Statement for such purpose in any 90-day period. For the avoidance of doubt
the Company shall not be required to take any action to name such Holder as a selling
securityholder in the Shelf Registration Statement or to enable such Holder to use the
Prospectus forming a part thereof for resales of Registrable Securities until such Holder
has returned a completed and signed Notice and Questionnaire to the Company.

     (iii) The term “Electing Holder” shall mean any Holder of Registrable Securities that
has returned a completed and signed Notice and Questionnaire to the Company in accordance
with Section 3(a)(i) or 3(a)(ii) hereof.

     (iv) Each Electing Holder agrees to furnish promptly to the Company all information
required to be disclosed in order to make information previously furnished to the Company by
the Holder not materially misleading and any other information regarding such Holder and the
distribution of such Holder’s Registrable Securities as the Company may from time to time
reasonably request in writing.

     (b) Unless such document is available on the Electronic Data Gathering Analysis and Retrieval
System of the Commission (“EDGAR”), the Company shall furnish to each Electing Holder upon request,
promptly after the Effective Time, a copy of the Shelf Registration Statement initially filed with
the Commission, and shall furnish to such Holders upon request, prior to the filing thereof with
the Commission, copies of each amendment thereto and each amendment or supplement, if any, to the
Prospectus included therein, and shall use its commercially reasonable efforts to reflect in each
such document, at the Effective Time or when so filed with the Commission, as the case may be, such
comments as such Holders and their respective counsel reasonably may propose.

     (c) The Company shall promptly take such action as may be necessary so that (i) each of the
Shelf Registration Statement and any amendment thereto and the Prospectus forming a part thereof
and any amendment or supplement thereto (and each report or other document incorporated therein by
reference in each case) complies in all material respects with the Securities Act and the Exchange
Act and the respective rules and regulations thereunder, (ii) each of the Shelf Registration
Statement and any amendment thereto does not, when it

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becomes effective, contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein not misleading and
(iii) each of the Prospectus forming a part of the Shelf Registration Statement, and any amendment
or supplement to such Prospectus, does not at any time during the Effectiveness Period include an
untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading;
provided, however, that the Company shall not be required to take such action in respect of the
Shelf Registration Statement or any amendment thereto or of the Prospectus or any amendment or
supplement to the Prospectus during any Suspension Period.

     (d) The Company shall promptly advise each Electing Holder, and shall confirm such advice in
writing if so requested by any such Electing Holder:

     (i) when a Shelf Registration Statement and any amendment thereto has been filed and
when it has become effective, in the case of the initial Shelf Registration Statement (not
including any post-effective amendments thereto), in each case by making a public
announcement thereof by release made to Reuters Economic Services and Bloomberg Business
News (it being understood that only one such release is required in the case of an automatic
Shelf Registration Statement);

     (ii) of any request by the Commission for amendments or supplements to the Shelf
Registration Statement or the Prospectus included therein or for additional information;

     (iii) of the issuance by the Commission of any stop order suspending the effectiveness
of the Shelf Registration Statement or the initiation of any proceedings for such purpose;

     (iv) of the receipt by the Company of any notification with respect to the suspension
of the qualification of the securities included in the Shelf Registration Statement for sale
in any jurisdiction or the initiation of any proceeding for such purpose; and

     (v) of the occurrence of any event or the existence of any state of facts that requires
the making of any changes in the Shelf Registration Statement or the Prospectus included
therein so that, as of such date, such Shelf Registration Statement and Prospectus do not
contain an untrue statement of a material fact and do not omit to state a material fact
required to be stated therein or necessary to make the statements therein (in the case of
the Prospectus, in light of the circumstances under which they were made) not misleading
(which advice shall be accompanied by an instruction to such Holders to suspend the use of
the Prospectus until the requisite changes have been made); provided, however, that no
notice by the Company shall be required pursuant to this clause (iv) in the event that the
Company either promptly files a Prospectus supplement to update the Prospectus or a Form 8-K
or other appropriate report that is incorporated by reference into the Shelf Registration
Statement, which, in either case, contains the requisite information that results in such
Shelf Registration

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Statement no longer containing any untrue statement of material fact or omitting to state a
material fact necessary to make the statements therein not misleading).

     (e) The Company shall use its commercially reasonable efforts to prevent the issuance, and if
issued to obtain the withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Shelf Registration Statement or, if any such order of suspension is made
effective during or results in any Suspension Period, at the earliest practicable moment after the
end of such Suspension Period.

     (f) The Company shall furnish to each Electing Holder upon written request of such Holder,
without charge, at least one copy of the Shelf Registration Statement and all post-effective
amendments thereto, and, if such documents are not available on EDGAR, all reports, schedules,
other documents and exhibits that are filed with or incorporated by reference in the Shelf
Registration Statement.

     (g) The Company shall, during the Effectiveness Period, deliver to each Electing Holder,
without charge, as many copies of the Prospectus (including each preliminary Prospectus) included
in the Shelf Registration Statement and any amendment or supplement thereto as such Electing Holder
may reasonably request; and the Company consents (except during the periods specified in Section
2(c) above or during the continuance of any event or the existence of any state of facts described
in Section 3(d)(iii), (iv) or (v) above) to the use of the Prospectus and any amendment or
supplement thereto by each of the Electing Holders in connection with the offering and sale of the
Registrable Securities covered by the Prospectus and any amendment or supplement thereto during the
Effectiveness Period.

     (h) Prior to any offering of Registrable Securities pursuant to the Shelf Registration
Statement, the Company shall use its commercially reasonable efforts to (i) register or qualify or
cooperate with the Electing Holders and their respective counsel in connection with the
registration or qualification of such Registrable Securities for offer and sale under the
securities or “blue sky” laws of such jurisdictions within the United States as any Electing Holder
may reasonably request, (ii) keep such registrations or qualifications in effect and comply with
such laws so as to permit the continuance of offers and sales in such jurisdictions for so long as
may be necessary to enable any Electing Holder or underwriter, if any, to complete its distribution
of Registrable Securities pursuant to the Shelf Registration Statement, (iii) take any and all
other actions necessary or advisable to enable the disposition in such jurisdictions of such
Registrable Securities, and (iv) obtain the consent or approval of each governmental agency or
authority, whether federal, state or local, which may be required to effect the Shelf Registration
or the offering or sale in connection therewith or to enable the selling securityholders to offer,
or to consummate the disposition of, their Registrable Securities; provided, however, that in no
event shall the Company be obligated to (A) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required to so qualify but for this
Section 3(h) or (B) file any general consent to service of process or become subject to taxation in
any jurisdiction where it is not as of the date hereof so subject.

     (i) Unless any Registrable Securities shall be in book-entry or global certificate only form,
the Company shall use its commercially reasonable efforts to cooperate with the Electing Holders to
facilitate the timely preparation and delivery of certificates representing Registrable

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Securities to be sold pursuant to the Shelf Registration Statement, which certificates, if so
required by any securities exchange upon which any Registrable Securities are listed, shall be
penned, lithographed or engraved, or produced by any combination of such methods, on steel engraved
borders, and which certificates shall be free of any restrictive legends and in such permitted
denominations and registered in such names as Electing Holders may request in connection with the
sale of Registrable Securities pursuant to the Shelf Registration Statement.

     (j) Upon the occurrence of any event or the existence of any state of facts contemplated by
paragraph 3(d)(iv) above, the Company shall promptly prepare a post-effective amendment to any
Shelf Registration Statement or an amendment or supplement to the related Prospectus or file any
other required document so that, as thereafter delivered to purchasers of the Registrable
Securities included therein, the Prospectus will not include an untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however, that the Company shall
not be required to take such action in respect of the Shelf Registration Statement or any amendment
thereto or of the Prospectus or any amendment or supplement to the Prospectus during any Suspension
Period. If the Company notifies the Electing Holders of the occurrence of any event or the
existence of any state of facts contemplated by Section 2(c) or paragraph 3(d)(v) above, the
Electing Holder shall suspend the use of the Prospectus until the requisite changes to the
Prospectus have been made and shall keep confidential such communications received by it from the
Company, unless disclosure is required to be made in connection with a court proceeding or required
by law, or such records, information or documents become available to the public generally or
through a third party without an accompanying obligation of confidentiality.

     (k) Not later than the Effective Time of the Shelf Registration Statement, the Company shall
provide a CUSIP number for the Registrable Securities that are debt securities.

     (l) The Company shall comply with all applicable Rules and Regulations, and to make generally
available to its securityholders as soon as practicable, but in any event not later than eighteen
months after (i) the effective date (as defined in Rule 158(c) under the Securities Act) of the
Shelf Registration Statement, (ii) the effective date of each post-effective amendment to the Shelf
Registration Statement, and (iii) the date of each filing by the Company with the Commission of an
Annual Report on Form 10-K that is incorporated by reference in the Shelf Registration Statement,
an earning statement of the Company and its subsidiaries complying with Section 11(a) of the
Securities Act and the rules and regulations of the Commission thereunder (including, at the option
of the Company, Rule 158).

     (m) Not later than the Effective Time of the Shelf Registration Statement, the Company shall
cause the Indenture to be qualified under the Trust Indenture Act; in connection with such
qualification, the Company shall cooperate with the Trustee under the Indenture and the Holders (as
defined in the Indenture) to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and the
Company shall execute, and shall use all reasonable efforts to cause the Trustee to execute, all
documents that may be required to effect such changes and all other forms and documents required to
be filed with the Commission to enable such Indenture to be so qualified in a timely manner. In
the event that any such amendment or modification referred

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to in this Section 3(m) involves the appointment of a new trustee under the Indenture, the Company
shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture.

     (n) In the event of an underwritten offering conducted pursuant to Section 6 hereof, the
Company shall, if requested by Electing Holders in writing, promptly include or incorporate in a
Prospectus supplement or post-effective amendment to the Shelf Registration Statement such
information as the Managing Underwriters of such offering reasonably agree should be included
therein and to which the Company does not reasonably object and shall make all required filings of
such Prospectus supplement or post-effective amendment as soon as practicable after it is notified
of the matters to be included or incorporated in such Prospectus supplement or post-effective
amendment.

     (o) The Company shall enter into such customary agreements (including an underwriting
agreement in customary form in the event of an underwritten offering conducted pursuant to Section
6 hereof) and take all other appropriate action in order to expedite and facilitate the
registration and disposition of the Registrable Securities, and in connection therewith, if an
underwriting agreement is entered into, cause the same to contain indemnification provisions and
procedures substantially identical to those set forth in Section 5 hereof with respect to all
parties to be indemnified pursuant to Section 5 hereof.

     (p) The Company shall:

     (i)(A) make reasonably available for inspection by the Electing Holders, any
underwriter participating in any disposition pursuant to the Shelf Registration Statement,
and any attorney, accountant or other agent retained by such Electing Holders or any such
underwriter all relevant financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and (B) cause the Company’s officers,
directors and employees to supply all information reasonably requested by such Electing
Holders or any such underwriter, attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as is customary for similar due diligence
examinations; provided, however, that such persons shall first (x) agree in writing with the
Company that all records, information and documents that are designated by the Company, in
good faith, as confidential shall be kept confidential by such Electing Holders and any such
underwriter, attorney, accountant or agent, unless such disclosure is required to be made in
connection with a court proceeding or required by law, or such records, information or
documents become available to the public generally or through a third party without an
accompanying obligation of confidentiality; and that they shall use such records,
information and documents solely for the purposes of exercising rights under this Agreement
and (y) acknowledge that transactions in the Company’s securities are subject to the laws
and regulations governing insider trading; and provided further that, if the foregoing
inspection and information gathering would otherwise disrupt the Company’s conduct of its
business, such inspection and information gathering shall, to the greatest extent possible,
be coordinated on behalf of the Electing Holders and the other parties entitled thereto by
one counsel designated by and on behalf of the Electing Holders and other parties;

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     (ii) in connection with any underwritten offering conducted pursuant to Section 6
hereof, make such representations and warranties to the Electing Holders participating in
such underwritten offering and to the Managing Underwriters, in form, substance and scope as
are customarily made by the Company to underwriters in primary underwritten offerings of
equity and convertible debt securities and covering matters including, but not limited to,
those set forth in the Purchase Agreement;

     (iii) in connection with any underwritten offering conducted pursuant to Section 6
hereof, the Company shall use its commercially reasonable efforts to obtain opinions and
letters of counsel to the Company (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the Managing Underwriters) addressed to each Electing
Holder participating in such underwritten offering and the underwriters, covering such
matters as are customarily covered in opinions requested in primary underwritten offerings
of equity and convertible debt securities and such other matters as may be reasonably
requested by such Managing Underwriter (it being agreed that the matters to be covered by
such opinions and letters shall include, without limitation, a statement by such counsel
that nothing came to the attention of such counsel in the course of their review of the
Shelf Registration Statement and the Prospectus, including the documents incorporated by
reference therein (other than the financial statements or other financial data therein, as
to which such counsel need express no opinion or belief) that has caused such counsel to
believe that, as of the date of the opinion and as of the Effective Time of the Shelf
Registration Statement or most recent post-effective amendment thereto, as the case may be,
the Shelf Registration Statement or such post-effective amendment containing any untrue
statement of a material fact or the omission of any material fact required to be stated
therein or necessary to make the statements therein not misleading;

     (iv) in connection with any underwritten offering conducted pursuant to Section 6
hereof to which the Company has agreed, the Company shall use its commercially reasonable
efforts to obtain “cold comfort” letters and updates thereof from the independent public
accountants of the Company (and, if necessary, from the independent public accountants of
any subsidiary of the Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in the Shelf Registration
Statement), addressed to each Electing Holder participating in such underwritten offering
(if such Electing Holder has provided such letter, representations or documentation, if any,
required for such cold comfort letter to be so addressed) and the underwriters, in customary
form and covering matters of the type customarily covered in “cold comfort” letters in
connection with primary underwritten offerings;

     (v) in connection with any underwritten offering conducted pursuant to Section 6 hereof
to which the Company has agreed, deliver such documents and certificates as may be
reasonably requested by the Electing Holders participating in such underwritten offering
they hold a majority in principal amount of the Registrable Securities being sold in such
and the Managing Underwriters, if any, including, without limitation, certificates to
evidence compliance with Section 3(j) hereof and with any

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conditions contained in the underwriting agreement or other agreements entered into by the
Company.

     (q) The Company will use its commercially reasonable efforts to cause the Common Stock
issuable upon conversion of the Securities to be listed on the New York Stock Exchange or other
stock exchange or trading system on which the Common Stock primarily trades on or prior to the
Effective Time of the Shelf Registration Statement hereunder.

     (r) In the event that any broker-dealer registered under the Exchange Act shall be an
"affiliate” (as defined in Rule 2720(b)(1) of the NASD Rules (or any successor provision thereto))
of the Company or has a “conflict of interest” (as defined in Rule 2720(b)(7) of the NASD Rules (or
any successor provision thereto)) and such broker-dealer shall underwrite, participate as a member
of an underwriting syndicate or selling group or assist in the distribution of any Registrable
Securities covered by the Shelf Registration Statement, whether as a Holder of such Registrable
Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying with the
requirements of the NASD Rules, including, without limitation, by (A) engaging a “qualified
independent underwriter” (as defined in Rule 2720(b)(15) of the NASD Rules (or any successor
provision thereto)) to participate in the preparation of the registration statement relating to
such Registrable Securities, to exercise usual standards of due diligence in respect thereto and to
recommend the public offering price of such Registrable Securities, (B) indemnifying such qualified
independent underwriter to the extent of the indemnification of underwriters provided in Section 5
hereof, and (C) providing such information to such broker-dealer as may be required in order for
such broker-dealer to comply with the requirements of the NASD Rules.

     (s) The Company shall use its commercially reasonable efforts to take all other steps
necessary to effect the registration, offering and sale of the Registrable Securities covered by
the Shelf Registration Statement contemplated hereby.

     4. Registration Expenses. Except as otherwise provided in Section 3, the Company shall bear
all fees and expenses incurred in connection with the performance of its obligations under Sections
2, 3 and 6 hereof and shall bear or reimburse the Electing Holders for the reasonable fees and
disbursements of a single counsel selected by a plurality of all Electing Holders who own an
aggregate of not less than 25% of the Registrable Securities covered by the Shelf Registration
Statement to act as counsel therefore in connection therewith. Each Electing Holder shall pay all
underwriting discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Electing Holder’s Registrable Securities pursuant to the Shelf Registration
Statement.

     5. Indemnification and Contribution.

     (a) Indemnification by the Company. Upon the registration of the Registrable Securities
pursuant to Section 2 hereof, the Company shall indemnify and hold harmless each Electing Holder
and each underwriter, selling agent or other securities professional, if any, which facilitates the
disposition of Registrable Securities, and each of their respective officers and directors and each
person who controls such Electing Holder, underwriter, selling agent or other

12

 

securities professional within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act (each such person being sometimes referred to as an “Indemnified Person”) against any
losses, claims, damages or liabilities, joint or several, to which such Indemnified Person may
become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Shelf Registration Statement under
which such Registrable Securities were registered under the Securities Act, or any Prospectus or
any Issuer Free Writing Prospectus contained therein or furnished by the Company to any Indemnified
Person, or any amendment or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Company hereby agrees to reimburse such
Indemnified Person for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable to any such Indemnified Person in any such case to
the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in such Shelf
Registration Statement, Prospectus or Issuer Free Writing Prospectus, or amendment or supplement,
in reliance upon and in conformity with written information furnished to the Company by such
Indemnified Person expressly for use therein.

     (b) Indemnification by the Electing Holders and any Agents and Underwriters. Each Electing
Holder agrees, as a consequence of the inclusion of any of such Electing Holder’s Registrable
Securities in such Shelf Registration Statement, and each underwriter, selling agent or other
securities professional, if any, which facilitates the disposition of Registrable Securities shall
agree, as a consequence of facilitating such disposition of Registrable Securities, severally and
not jointly, to (i) indemnify and hold harmless the Company, its directors, officers who sign any
Shelf Registration Statement and each person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses,
claims, damages or liabilities to which the Company or such other persons may become subject, under
the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in such Shelf Registration Statement, Prospectus or Issuer Free
Writing Prospectus, or any amendment or supplement, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the Company by or on behalf
of such Electing Holder, underwriter, selling agent or other securities professional expressly for
use therein, and (ii) reimburse the Company and such other persons for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending any such action or
claim as such expenses are incurred.

     (c) Notices of Claims, Etc. Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified

13

 

party shall, if a claim in respect thereof is to be made against an indemnifying party under this
Section 5, notify such indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under the indemnification provisions of or contemplated by
subsection (a) or (b) above. In case any such action shall be brought against any indemnified
party and it shall notify an indemnifying party of the commencement thereof, such indemnifying
party shall be entitled to participate therein and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof, such indemnifying
party shall not be liable to such indemnified party under this Section 5 for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such indemnified party,
in connection with the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with respect to, any pending
or threatened action or claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party to such action or
claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the
indemnified party from all liability arising out of such action or claim and (ii) does not include
a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of
any indemnified party.

     (d) Contribution. If the indemnification provided for in this Section 5 is unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of
any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative fault of the indemnifying party and the
indemnified party in connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and indemnified party
shall be determined by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or by such indemnified party, and the parties’
relative intent, knowledge, access to information and opportunity to correct or prevent such
statement or omission. The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata allocation (even if the
Electing Holders or any underwriters, selling agents or other securities professionals or all of
them were treated as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in this Section 5(d). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with investigating or
defending any such action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to

14

 

contribution from any person who was not guilty of such fraudulent misrepresentation. The
obligations of the Electing Holders and any underwriters, selling agents or other securities
professionals in this Section 5(d) to contribute shall be several in proportion to the percentage
of principal amount of Registrable Securities registered or underwritten, as the case may be, by
them and not joint.

     (e) Notwithstanding any other provision of this Section 5, in no event will any (i) Electing
Holder be required to undertake liability to any person under this Section 5 for any amounts in
excess of the dollar amount of the proceeds to be received by such Holder from the sale of such
Holder’s Registrable Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Shelf Registration Statement under which such Registrable Securities are
to be registered under the Securities Act and (ii) underwriter, selling agent or other securities
professional be required to undertake liability to any person hereunder for any amounts in excess
of the discount, commission or other compensation payable to such underwriter, selling agent or
other securities professional with respect to the Registrable Securities underwritten by it and
distributed to the public.

     (f) The obligations of the Company under this Section 5 shall be in addition to any liability
which the Company may otherwise have to any Indemnified Person and the obligations of any
Indemnified Person under this Section 5 shall be in addition to any liability which such
Indemnified Person may otherwise have to the Company. The remedies provided in this Section 5 are
not exclusive and shall not limit any rights or remedies which may otherwise be available to an
indemnified party at law or in equity.

     6. Underwritten Offering. Any Holder of Registrable Securities who desires to do so may sell
Registrable Securities (in whole or in part) in an underwritten offering; provided that (i) the
Electing Holders of at least 33-1/3% in aggregate principal amount of the Registrable Securities
then covered by the Shelf Registration Statement shall request such an offering and (ii) at least
such aggregate principal amount of such Registrable Securities shall be included in such offering;
and provided further that the Company shall not be obligated to cooperate with more than one
underwritten offering during the Effectiveness Period. Upon receipt of such a request, the Company
shall provide all Holders of Registrable Securities written notice of the request, which notice
shall inform such Holders that they have the opportunity to participate in the offering. In any
such underwritten offering, the investment banker or bankers and manager or managers that will
administer the offering will be selected by, and the underwriting arrangements with respect thereto
(including the size of the offering) will be approved by, the holders of a majority of the
Registrable Securities to be included in such offering; provided, however, that such investment
bankers and managers and underwriting arrangements must be reasonably satisfactory to the Company.
No Holder may participate in any underwritten offering contemplated hereby unless (a) such Holder
agrees to sell such Holder’s Registrable Securities to be included in the underwritten offering in
accordance with any approved underwriting arrangements, (b) such Holder completes and executes all
reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up
letters and other documents required under the terms of such approved underwriting arrangements,
and (c) if such Holder is not then an Electing Holder, such Holder returns a completed and signed
Notice and Questionnaire to the Company in accordance with Section 3(a)(ii) hereof within a
reasonable amount of time before such underwritten offering. The Holders participating in any
underwritten offering shall

15

 

be responsible for any underwriting discounts and commissions and fees and, subject to Section 4
hereof, expenses of their own counsel. The Company shall pay all expenses customarily borne by
issuers in an underwritten offering, including but not limited to filing fees, the fees and
disbursements of its counsel and independent public accountants and any printing expenses incurred
in connection with such underwritten offering. Notwithstanding the foregoing or the provisions of
Section 3(n) hereof, upon receipt of a request from the Managing Underwriter or a representative of
holders of a majority of the Registrable Securities to be included in an underwritten offering to
prepare and file an amendment or supplement to the Shelf Registration Statement and Prospectus in
connection with an underwritten offering, the Company may delay the filing of any such amendment or
supplement for up to 90 days if the Board of Directors of the Company shall have determined in good
faith that the Company has a bona fide business reason for such delay.

     7. Liquidated Damages.

     (a) Notwithstanding any postponement of effectiveness permitted by Section 2(a) hereof, if on
or prior to the 180th day following the Closing Date, a Shelf Registration Statement has not become
effective (each, a “Registration Default”), the Company shall be required to pay liquidated damages
(“Liquidated Damages”), from and including the day following such Registration Default until such
Shelf Registration Statement is either so filed or so filed and subsequently declared effective or
the expiration of the Effectiveness Period, as applicable, at a rate per annum equal to an
additional one-quarter of one percent (0.25%) of the principal amount of Registrable Securities, to
and including the 90th day following such Registration Default and one-half of one percent (0.50%)
thereof from and after the 91st day following such Registration Default until the earlier of (1)
the time such Shelf Registration Statement is declared effective or (2) the expiration of the
Effectiveness Period; provided, however, no Liquidated Damages shall accrue under this Section 7(a)
during any Suspension Period.

     (b) In the event that (i) the Shelf Registration Statement ceases to be effective, (ii) the
Company suspends the use of the Prospectus pursuant to Section 2(c) or 3(j) hereof, (iii) the
Holders are not authorized to use the Prospectus pursuant to Section 3(g) hereto or (iv) the
Holders are otherwise prevented or restricted by the Company from effecting sales pursuant to the
Shelf Registration Statement (an “Effective Failure”) for more than 45 days, whether or not
consecutive, in any 90-day period, or for more than 90 days, whether or not consecutive, during any
12-month period, then the Company shall pay Liquidated Damages at a rate per annum equal to an
additional one-quarter of one percent (0.25%) of the principal amount of Registrable Securities
from the 46th day of the applicable 90-day period or one-half of one percent (0.50%) of the
principal amount of Registrable Securities from the 91st day of the applicable 12-month period, as
the case may be, that any such Effective Failure has existed until the earlier of (1) the time the
Holders of Registrable Securities are again able to make sales under the Shelf Registration
Statement or (2) the expiration of the Effectiveness Period; provided, however, no Liquidated
Damages shall accrue under this Section 7(b) (A) with respect to the Registrable Securities of any
Holder that is not an Electing Holder or (B) during any Suspension Period.

     (c) Any amounts to be paid as Liquidated Damages pursuant to paragraphs (a) or (b) of this
Section 7 shall be paid in cash semi-annually in arrears, with the first semi-annual

16

 

payment due on
the first Interest Payment Date (as defined in the Indenture), as
applicable, following the date of such Registration Default or Effective Failure, as applicable. Such
Liquidated Damages will accrue (1) in respect of the applicable Registrable Securities at the rates
set forth in paragraphs (a) or (b) of this Section 7, as applicable, on the principal amount of
such Registrable Securities.

     (d) Except as provided in Section 8(b) hereof, the Liquidated Damages as set forth in this
Section 7 shall be the exclusive monetary remedy available to the Holders of Registrable Securities
for such Registration Default or Effective Failure. In no event shall the Company be required to
pay Liquidated Damages in excess of the applicable maximum amount of one-half of one percent
(0.50%) set forth above, regardless of whether one or multiple Registration Defaults or Effective
Failures exist.

     8. Miscellaneous.

     (a) Other Registration Rights. The Company may grant registration rights that would permit
any person that is a third party the right to piggy-back on any Shelf Registration Statement,
provided that if the Managing Underwriter of any underwritten offering conducted pursuant to
Section 6 hereof notifies the Company and the Electing Holders that the total amount of securities
which the Electing Holders and the holders of such piggy-back rights intend to include in any Shelf
Registration Statement is so large as to materially threaten the success of such offering
(including the price at which such securities can be sold), then the amount, number or kind of
securities to be offered for the account of holders of such piggy-back rights will be reduced to
the extent necessary to reduce the total amount of securities to be included in such offering to
the amount, number and kind recommended by the Managing Underwriter prior to any reduction in the
amount of Registrable Securities to be included in such Shelf Registration Statement.

     (b) Specific Performance. The parties hereto acknowledge that there would be no adequate
remedy at law if the Company fails to perform any of its obligations hereunder and that the
Purchasers and the Holders from time to time may be irreparably harmed by any such failure, and
accordingly agree that the Purchasers and such Holders, in addition to any other remedy to which
they may be entitled at law or in equity and without limiting the remedies available to the
Electing Holders under Section 7 hereof, shall be entitled to compel specific performance of the
obligations of the Company under this Registration Rights Agreement in accordance with the terms
and conditions of this Registration Rights Agreement, in any court of the United States or any
State thereof having jurisdiction.

     (c) Amendments and Waivers. This Agreement, including this Section 8(c), may be amended, and
waivers or consents to departures from the provisions hereof may be given, only by a written
instrument duly executed by the Company and the holders of a majority in aggregate principal amount
of Registrable Securities then outstanding. Each Holder of Registrable Securities outstanding at
the time of any such amendment, waiver or consent or thereafter shall be bound by any amendment,
waiver or consent effected pursuant to this Section 8(c), whether or not any notice, writing or
marking indicating such amendment, waiver or consent appears on the Registrable Securities or is
delivered to such Holder.

17

 

     (d) Notices. All notices and other communications provided for or permitted hereunder shall
be given as provided in the Indenture; provided, that the Company may deliver notices and other
communications provided for or permitted hereunder to any Electing Holder to its address as set
forth in its Notice and Questionnaire.

     (e) Parties in Interest. The parties to this Agreement intend that all Holders of Registrable
Securities shall be entitled to receive the benefits of this Agreement and that any Electing Holder
shall be bound by the terms and provisions of this Agreement by reason of such election with
respect to the Registrable Securities which are included in a Shelf Registration Statement. All
the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and
shall be enforceable by the respective successors and assigns of the parties hereto and any Holder
from time to time of the Registrable Securities to the aforesaid extent. In the event that any
transferee of any Holder of Registrable Securities shall acquire Registrable Securities, in any
manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall,
without any further writing or action of any kind, be entitled to receive the benefits of and, if
an Electing Holder, be conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement to the aforesaid extent.

     (f) Counterparts. This Agreement may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same agreement.

     (g) Headings. The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.

     (h) Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.

     (i) Severability. In the event that any one or more of the provisions contained herein, or
the application thereof in any circumstances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.

     (j) Survival. The respective indemnities, agreements, representations, warranties and other
provisions set forth in this Agreement or made pursuant hereto shall remain in full force and
effect, regardless of any investigation (or any statement as to the results thereof) made by or on
behalf of any Electing Holder, any director, officer or partner of such Holder, any agent or
underwriter, any director, officer or partner of such agent or underwriter, or any controlling
person of any of the foregoing, and shall survive the transfer and registration of the Registrable
Securities of such Holder.

18

 

     Please confirm that the foregoing correctly sets forth the agreement between the Company and
you.

	 	 	 	 	 
	 	Very truly yours,

Horizon Lines, Inc.

 	 
	 	By:  	/s/ Robert S. Zuckerman
 	 
	 	 	Name:  	Robert S. Zuckerman 	 
	 	 	Title:  	Secretary 	 
	 

	 	 	 	 	 
	 	Accepted as of the date hereof:

Goldman, Sachs & Co.

 	 
	 	By:  	/s/ Goldman, Sachs & Co.
 	 
	 	 	(Goldman, Sachs & Co.) 	 
	 	 	
On behalf of each of the Purchasers 	 
	 

19

 

Appendix A

Horizon Lines, Inc.

INSTRUCTION TO DTC PARTICIPANTS

(Date of Mailing)

URGENT — IMMEDIATE ATTENTION REQUESTED

DEADLINE FOR RESPONSE: [DATE]

          The Depository Trust Company (“DTC”) has identified you as a DTC Participant through which
beneficial interests in the Horizon Lines, Inc. (the “Company”) 4.25% Convertible Senior Notes due
2012 (the “Securities”) are held.

          The Company is in the process of registering the Securities under the Securities Act of 1933
for resale by the beneficial owners thereof. In order to have their Securities included in the
registration statement, beneficial owners must complete and return the enclosed Notice of
Registration Statement and Selling Securityholder Questionnaire.

          It is important that beneficial owners of the Securities receive a copy of the enclosed
materials as soon as possible as their rights to have the Securities included in the
registration statement depend upon their returning the Notice and Questionnaire by [Deadline for
response]. Please forward a copy of the enclosed documents to each beneficial owner that holds
interests in the Securities through you. If you require more copies of the enclosed materials or
have any questions pertaining to this matter, please contact [Name, address and telephone number of
contact at the Issuer].Exhibit 10.3

 

Exhibit 10.3

EXECUTION COPY

GOLDMAN, SACHS & CO. | ONE NEW YORK PLAZA | NEW YORK, NEW YORK 10004 |TEL: (212)
902-1000

Opening Transaction

	 	 	 
	To:

	 	Horizon Lines, Inc.

4064 Colony Road, Suite 200

Charlotte, North Carolina 28211
	 
	 	 
	A/C:

	 	 028696441
	 
	 	 
	From:

	 	Goldman, Sachs & Co.
	 
	 	 
	Re:

	 	Convertible Bond Hedge Transaction
	 
	 	 
	Ref. No:

	 	SDB506480167
	 
	 	 
	Date:

	 	August 1, 2007

Dear Sir(s):

     The purpose of this communication (this “Confirmation”) is to set forth the terms and
conditions of the above-referenced transaction entered into on the Trade Date specified below (the
“Transaction”) between Goldman, Sachs & Co. (“Dealer”) and Horizon Lines, Inc. (“Counterparty”).
This communication constitutes a “Confirmation” as referred to in the ISDA Master Agreement
specified below.

     1. This Confirmation is subject to, and incorporates, the definitions and provisions of the
2000 ISDA Definitions (including the Annex thereto) (the “2000 Definitions”) and the definitions
and provisions of the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”, and
together with the 2000 Definitions, the “Definitions”), in each case as published by the
International Swaps and Derivatives Association, Inc. (“ISDA”). In the event of any inconsistency
between the 2000 Definitions and the Equity Definitions, the Equity Definitions will govern.
Certain defined terms used herein have the meanings assigned to them in the First Supplemental
Indenture to be dated as of August 8, 2007 between Counterparty and Bank of New York Trust Company,
N.A., as trustee (the “Indenture”) relating to the USD 300,000,000 principal amount of 4.25%
convertible senior notes due 2012 (the “Convertible Notes”). In the event of any inconsistency
between the terms defined in the Indenture and this Confirmation, this Confirmation shall govern.
For the avoidance of doubt, (i) the Transaction shall be the only transaction under the Agreement
and (ii) references herein to sections of the Indenture are based on the draft of the Indenture
most recently reviewed by the parties at the time of execution of this Confirmation. If any
relevant sections of the Indenture are changed, added or renumbered between the execution of this
Confirmation and the execution of the Indenture, the parties will amend this Confirmation in good
faith to preserve the economic intent of the parties. The parties further acknowledge that
references to the Indenture herein are references to the Indenture as in effect on the date of its
execution and if the Indenture is amended following its execution, any such amendment will be
disregarded for purposes of this Confirmation unless the parties agree otherwise in writing. The
Transaction is subject to early unwind if the closing of the Convertible Notes is not consummated
for any reason, as set forth below in Section 8(k).

     Each party is hereby advised, and each such party acknowledges, that the other party has
engaged in, or refrained from engaging in, substantial financial transactions and has taken other
material actions in reliance upon the parties’ entry into the Transaction to which this
Confirmation relates on the terms and conditions set forth below.

     This Confirmation evidences a complete and binding agreement between Dealer and Counterparty
as to the terms of the Transaction to which this Confirmation relates. This Confirmation shall be
subject to

 

 

an agreement (the “Agreement”) in the form of the 1992 ISDA Master Agreement
(Multicurrency—Cross Border) as if Dealer and Counterparty had executed an agreement in such form
on the date hereof (but without any Schedule except for (i) the election of Loss and Second Method,
New York law (without regard to the conflicts of law principles) as the governing law and US
Dollars (“USD”) as the Termination Currency, (ii) the election that the “Cross Default” provisions
of Section 5(a)(vi) shall apply to Counterparty with a “Threshold Amount” of USD 15 million) and
(iii) the amendment of Section 5(a)(vi) to delete the words “or becoming capable at such time of
being declared,”.

     All provisions contained in, or incorporated by reference to, the Agreement will govern this
Confirmation except as expressly modified herein. In the event of any inconsistency between this
Confirmation and either the Definitions or the Agreement, this Confirmation shall govern.

     2. The Transaction constitutes a Share Option Transaction for purposes of the Equity
Definitions. The terms of the particular Transaction to which this Confirmation relates are as
follows:

	 	 	 	 	 
	General Terms:	 	 
	 
	 	 	 	 
	 

	 	Trade Date:
	 	August 1, 2007
	 
	 	 	 	 
	 

	 	Effective Date:
	 	August 8, 2007
	 
	 	 	 	 
	 

	 	Option Style:
	 	Modified American, as
described under
“Procedures for Exercise”
below.
	 
	 	 	 	 
	 

	 	Option Type:
	 	Call
	 
	 	 	 	 
	 

	 	Seller:
	 	Dealer
	 
	 	 	 	 
	 

	 	Buyer:
	 	Counterparty
	 
	 	 	 	 
	 

	 	Shares:
	 	The Common Stock of
Counterparty, par value
USD0.01 per share (Ticker
Symbol: “HRZ”).
	 
	 	 	 	 
	 

	 	Number of Options:
	 	The number of Convertible
Notes in denominations of
USD1,000 principal amount
issued by Counterparty on
the closing date for the
initial issuance of the
Convertible Notes;
provided that the Number
of Options shall be
automatically increased as
of the date of exercise by
Goldman, Sachs & Co., as
representative of the
Initial Purchasers (as
defined in the Purchase
Agreement), of their
option pursuant to Section
2 of the Purchase
Agreement dated as of
August 1, 2007 between
Counterparty and Goldman,
Sachs & Co., as
representative of the
Initial Purchasers party
thereto (the “Purchase
Agreement”) by the number
of Convertible Notes in
denominations of USD1,000
principal amount issued
pursuant to such exercise
(such Convertible Notes,
the “Additional
Convertible Notes”). For
the avoidance of doubt,
the Number of Options
outstanding shall be
reduced by each exercise
of Options hereunder.
	 
	 	 	 	 
	 

	 	Option Entitlement:
	 	As of any date, a number
of Shares per Option equal
to the “Applicable
Conversion Rate” (as
defined in the Indenture,
but without regard to any
adjustments to the
Applicable Conversion Rate
pursuant to Section
12.05(h) of the Indenture)
as of such date.
	 
	 	 	 	 
	 

	 	Strike Price:
	 	As of any date, an amount
in USD, rounded to the

2

 

	 	 	 	 	 
	 

	 	 	 	nearest cent (with 0.5
cents being rounded
upwards), equal to
USD1,000 divided by the
Option Entitlement as of
such date.
	 
	 	 	 	 
	 

	 	Number of Shares:
	 	The product of the Number
of Options, the Option
Entitlement and the
Applicable Percentage.
	 
	 	 	 	 
	 

	 	Applicable Percentage:
	 	 40%
	 
	 	 	 	 
	 

	 	Premium:
	 	USD $19,105,800.00
(Premium per Option USD $
63.6860); provided that if
the Number of Options is
increased pursuant to the
proviso to the definition
of “Number of Options”
above, an additional
Premium equal to the
product of the number of
Options by which the
Number of Options is so
increased and the Premium
per Option shall be paid
on the Additional Premium
Payment Date.
	 
	 	 	 	 
	 

	 	Premium Payment Date:
	 	The Effective Date
	 
	 	 	 	 
	 

	 	Additional Premium
Payment Date:
	 	The closing date for the
purchase and sale of the
Additional Convertible
Notes.
	 
	 	 	 	 
	 

	 	Exchange:
	 	New York Stock Exchange
	 
	 	 	 	 
	 

	 	Related Exchange:
	 	All Exchanges
	 
	 	 	 	 
	Procedures for Exercise:	 	 
	 
	 	 	 	 
	 

	 	Exercise Date:
	 	Each Conversion Date.
	 
	 	 	 	 
	 

	 	Conversion Date:
	 	Each “Conversion Date” (as
defined in the Indenture)
occurring during the
Exercise Period for
Convertible Notes (such
Convertible Notes, each in
denominations of USD1,000
principal amount, the
“Relevant Convertible
Notes” for such Conversion
Date). For the avoidance
of doubt, if a “Conversion
Notice” (as defined in the
Indenture) is retracted
for any Convertible Notes
pursuant to the terms of
the Indenture, a
Conversion Date shall not
have occurred with respect
to such Convertible Notes,
and such Convertible Notes
shall not constitute
Relevant Convertible Notes
for such Conversion Date,
subject to the last
sentence of “Notice of
Exercise” below.
	 
	 	 	 	 
	 

	 	Exercise Period:
	 	The period from and
excluding the Trade Date
to and including the
Expiration Date.
	 
	 	 	 	 
	 

	 	Expiration Date:
	 	The earlier of (i) the
last day on which any
Convertible Notes remain
outstanding and (ii) the
fourth “Scheduled Trading
Day” (as defined in the
Indenture) immediately
preceding the “Maturity
Date” (as defined in the
Indenture).
	 
	 	 	 	 
	 

	 	Automatic Exercise on
Conversion Dates:
	 	

On each Conversion Date, a
number of Options equal to
the number of Relevant
Convertible Notes for such
Conversion Date in
denominations of USD1,000
principal amount shall be
automatically exercised,
subject to “Notice of
Exercise” below.

3

 

	 	 	 	 	 
	 

	 	Notice Deadline:
	 	In respect of any exercise
of Options hereunder, the
Scheduled Trading Day
immediately preceding the
first Scheduled Trading
Day of the relevant
“Observation Period” (as
defined in the Indenture),
subject to “Notice of
Exercise” below.
	 
	 	 	 	 
	 

	 	Notice of Exercise:
	 	Notwithstanding anything
to the contrary in the
Equity Definitions, Dealer
shall have no obligation
to make any payment or
delivery in respect of any
exercise of Options
hereunder unless
Counterparty notifies
Dealer in writing prior to
5:00 P.M., New York City
time, on the Notice
Deadline in respect of
such exercise, of (i) the
number of Relevant
Convertible Notes being
converted on the related
Conversion Date, (ii) the
scheduled settlement date
under the Indenture for
the Relevant Convertible
Notes for such Conversion
Date, (iii) the first
Scheduled Trading Day of
the relevant Observation
Period, (iv) the Cash
Percentage (as defined in
the Indenture), and (v)
the delivery of any Jones
Act Notice, to the extent
such notice is delivered
to holders of Relevant
Convertible Notes for such
Conversion Date (and, if
any Jones Act Notice is so
delivered, Counterparty
shall notify Dealer prior
to the Notice Deadline of
the number, if any, of
Convertible Notes that
Counterparty had
previously notified Dealer
were being converted
pursuant to clause (i)
above that are not
Relevant Convertible Notes
by reason of the
retraction of the related
Conversion Notice pursuant
to the Indenture). “Jones
Act Notice” means any
notice to holders of
Convertible Notes pursuant
to Section 12.02(c) of the
Indenture. Notwithstanding
the foregoing, in the case
of any exercise of Options
hereunder in connection
with the conversion of any
Relevant Convertible Notes
for any Conversion Dates
occurring during the
period starting on the
65th Scheduled
Trading Day prior to the
Maturity Date and ending
on the Maturity Date (the
“Final Conversion
Period”), (a) the Notice
Deadline shall be 12:00
P.M. (New York City time)
on the Scheduled Trading
Day immediately following
the relevant Exercise Date
and the content of such
notice shall be as set
forth in clauses (i) and
(ii) above, and (b)
Counterparty shall notify
Dealer of (x) the
applicable Cash Percentage
on the date it notifies
the Trustee (as defined in
the Indenture) thereof,
(y) the delivery of any
Jones Act Notice (if any
such notice is delivered),
on the date it gives
holders such Jones Act
Notice, and (z) if any
Jones Act Notice is so
delivered, the number, if
any, of Convertible Notes
that Counterparty had
previously notified Dealer
were being converted
pursuant to clause (i)
above that are not
Relevant Convertible Notes
by reason of the
retraction of the related
Conversion Notice pursuant
to the Indenture, on the

4

 

	 	 	 	 	 
	 

	 	 	 	date it receives notice of
such retraction, but in
the case
of any of either
(x), (y) or (z) no later
than the first Exchange
Business Day following the
last day of the
“Conversion Retraction
Period” (as defined in the
Indenture) for the Final
Conversion Period.
Notwithstanding any
election or notice
pursuant to the terms of
the Convertible Notes to
the contrary, the Cash
Percentage for any
Relevant Convertible Notes
shall be deemed to be zero
for purposes of the
Transaction (including,
without limitation, for
purposes of determining
the Delivery Obligation)
unless, in the Conversion
Notice relating to such
Relevant Convertible Notes
(or, if the Conversion
Dates for such Relevant
Convertible Notes occur
during the Final
Conversion Period, in the
notice to Dealer
specifying the Cash
Percentage for such
Relevant Convertible
Notes), Counterparty makes
the representations,
warranties and agreements
set forth in Section
7(a)(i) hereof as of the
date of such notice. For
the avoidance of doubt, if
Counterparty fails to give
such notice when due in
respect of any exercise of
Options hereunder,
Dealer’s obligation to
make any payment or
delivery in respect of
such exercise shall be
permanently extinguished,
and late notice shall not
cure such failure. If
Counterparty notifies
Dealer that any
Convertible Note is being
converted and such
Convertible Note is not
being converted, or fails
to notify Dealer of the
retraction of the
Conversion Notice with
respect to any Convertible
Note that Counterparty had
previously notified Dealer
was being converted, (i)
such Convertible Note
shall be treated for all
purposes under this
Transaction as if it had
been converted as
described in
Counterparty’s notice to
Dealer, (ii) the Delivery
Obligation shall be
calculated as if a
Convertible Note had been
converted pursuant to the
Indenture and (iii) the
Calculation Agent shall
thereafter treat
conversions of outstanding
Convertible Notes as
resulting in Relevant
Convertible Notes under
the Transaction in its
commercially reasonably
discretion using a “first
in, first out”
methodology.
	 
	 	 	 	 
	Settlement Terms:	 	 
	 
	 	 	 	 
	 

	 	Settlement Date:
	 	For any Exercise Date, the
settlement date for the
Shares and/or cash to be
delivered in respect of
the Relevant Convertible
Notes for the relevant
Conversion Date under the
terms of the Indenture;
provided that the
Settlement Date shall not
be prior to the latest of
(i) the date one
Settlement Cycle following
the final day of the
relevant Observation
Period, (ii) the Exchange
Business Day immediately
following the date on
which Counterparty gives
notice to Dealer of such
Settlement Date prior to
5:00 P.M., New York City
time, and (iii) the
Exchange Business Day
immediately following the

5

 

	 	 	 	 	 
	 

	 	 	 	date Counterparty provides
the Notice of Delivery
Obligation prior to 5:00
P.M., New York City time.
	 
	 	 	 	 
	 

	 	Delivery Obligation:
	 	In lieu of the obligations
set forth in Sections 8.1
and 9.1 of the Equity
Definitions, and subject
to “Notice of Exercise”
above, in respect of any
Exercise Date, Dealer will
deliver to Counterparty on
the related Settlement
Date (the “Delivery
Obligation”) (i) a number
of Shares equal to the
product of (x) the
Applicable Percentage and
(y) the aggregate number
of Deliverable Shares (as
defined in the Indenture),
if any, that Counterparty
is obligated to deliver to
the holder(s) of the
Relevant Convertible Notes
for such Conversion Date
pursuant to Section
12.02(a) of the Indenture
(except that such
aggregate number of Shares
shall be determined
without taking into
consideration any rounding
pursuant to Section 12.04
of the Indenture and shall
be rounded down to the
nearest whole number) and
cash in lieu of fractional
shares, if any, resulting
from such rounding, and/or
(ii) cash in an amount
equal to the product of
(x) the Applicable
Percentage and (y) the
amount of cash, if any, in
excess of the aggregate
principal amount of the
Relevant Convertible Notes
for such Conversion Date
that Counterparty is
obligated to pay to the
holder(s) of such Relevant
Convertible Notes in lieu
of delivering such
Deliverable Shares
pursuant to Section
12.02(a) of the Indenture
(such Shares and/or cash
deliverable to the
holder(s) of the Relevant
Convertible Notes,
collectively, the
“Convertible Obligation”);
provided that the
Convertible Obligation
shall be determined
excluding any Shares and
cash that Counterparty is
obligated to deliver to
holder(s) of the Relevant
Convertible Notes as a
direct or indirect result
of any adjustments to the
Applicable Conversion Rate
pursuant to Section
12.05(h) of the Indenture
and any interest payment
that the Counterparty is
(or would have been)
obligated to deliver to
holder(s) of the Relevant
Convertible Notes for such
Conversion Date; and
provided further that, if
the Convertible Obligation
includes any amount of
Shares or cash that
Counterparty is obligated
to deliver to holder(s) of
the Relevant Convertible
Notes as a direct or
indirect result of any
adjustments to the
Applicable Conversion Rate
pursuant to Section
12.01(e) of the Indenture,
the Delivery Obligation
shall be such that the
fair value of the Delivery
Obligation, as determined
by the Calculation Agent
in a commercially
reasonable manner, equals
the lesser of (i) the fair
value of the Convertible
Obligation, as determined
by the Calculation Agent
in a commercially
reasonable manner, and
(ii) the amount that would
be payable by Dealer to
Counterparty pursuant to
Section 6 of the Agreement
if the Settlement Date
were the Early Termination
Date in

6

 

	 	 	 	 	 
	 

	 	 	 	respect of an
Additional Termination
Event (with Counterparty
as the sole Affected
Party) under a
hypothetical transaction
with the same terms as the
Transaction, but (x) with
a Number of Options equal
to the number of Relevant
Convertible Notes for such
Conversion Date and (y)
such amount payable
determined as if Section
12.01(e) of the Indenture
were deleted (and any
Delivery Obligation
determined pursuant to
clause (ii) above shall
include proportions of
Shares and/or cash
determined by the
Calculation Agent applying
the applicable Cash
Percentage). For the
avoidance of doubt, if the
“Daily Conversion Value”
(as defined in the
Indenture) for each of the
VWAP Trading Days (as
defined in the Indenture)
occurring in the relevant
Observation Period is less
than or equal to USD
20.00, Dealer will have no
delivery obligation
hereunder in respect of
the related Exercise Date.
	 
	 	 	 	 
	 

	 	Notice of Delivery
Obligation:
	 	No later than the Exchange
Business Day immediately
following the last day of
the relevant Observation
Period), Counterparty
shall give Dealer notice
of the final number of
Shares and/or the amount
of cash comprising the
relevant Convertible
Obligation; provided that,
with respect to any
Exercise Date occurring
during the Final
Conversion Period,
Counterparty may provide
Dealer with a single
notice of the aggregate
number of Shares and/or
amount of cash comprising
the Convertible
Obligations for all
Exercise Dates occurring
during such period (it
being understood, for the
avoidance of doubt, that
the requirement of
Counterparty to deliver
such notice shall not
limit Counterparty’s
obligations with respect
to Notice of Exercise or
Dealer’s obligations with
respect to Delivery
Obligation, each as set
forth above, in any way).
	 
	 	 	 	 
	 

	 	Other Applicable
Provisions:
	 	To the extent Dealer is
obligated to deliver
Shares hereunder, the
provisions of Sections
9.1(c), 9.8, 9.9, 9.10,
9.11 and 9.12 of the
Equity Definitions will be
applicable as if “Physical
Settlement” applied to the
Transaction; provided that
the Representation and
Agreement contained in
Section 9.11 of the Equity
Definitions shall be
modified by excluding any
representations therein
relating to restrictions,
obligations, limitations
or requirements under
applicable securities laws
that exist as a result of
the fact that Buyer is the
issuer of the Shares.
	 
	 	 	 	 
	 

	 	Restricted Certificated
Shares:
	 	Notwithstanding anything
to the contrary in the
Equity Definitions, Dealer
may, in whole or in part,
deliver Shares in
certificated form
representing the Number of
Shares to be Delivered to
Counterparty in lieu of
delivery through the
Clearance System.
	 
	 	 	 	 
	Adjustments:	 	 
	 
	 	 	 	 
	 

	 	Method of Adjustment:
	 	Notwithstanding Section
11.2 of the Equity

7

 

	 	 	 	 	 
	 

	 	 	 	Definitions, upon the
occurrence of any event or
condition set forth in
Sections 12.05(a), (b),
(c), (d), (e) or (f) of
the Indenture, the
Calculation Agent shall
make the corresponding
adjustment in respect of
any one or more of the
Number of Options, the
Option Entitlement and any
other variable relevant to
the exercise, settlement
or payment of the
Transaction, to the extent
an analogous adjustment is
made under the Indenture.
Immediately upon the
occurrence of any
“Adjustment Event” (as
defined in the Indenture)
Counterparty shall notify
the Calculation Agent of
such Adjustment Event; and
once the adjustments to be
made to the terms of the
Indenture and the
Convertible Notes in
respect of such Adjustment
Event have been
determined, Counterparty
shall immediately notify
the Calculation Agent in
writing of the details of
such adjustments.
	 
	 	 	 	 
	Extraordinary Events:	 	 
	 
	 	 	 	 
	 

	 	Merger Events:
	 	Notwithstanding Section
12.1(b) of the Equity
Definitions, a “Merger
Event” means the
occurrence of any event or
condition set forth in
Section 12.12 of the
Indenture.
	 
	 	 	 	 
	 

	 	Consequences of Merger
Events:
	 	Notwithstanding Section
12.2 of the Equity
Definitions, upon the
occurrence of a Merger
Event, the Calculation
Agent shall make the
corresponding adjustment
in respect of any
adjustment under the
Indenture to any one or
more of the nature of the
Shares, the Number of
Options, the Option
Entitlement and any other
variable relevant to the
exercise, settlement or
payment for the
Transaction, to the extent
an analogous adjustment is
made under the Indenture
in respect of such Merger
Event; provided that such
adjustment shall be made
without regard to any
adjustment to the
Applicable Conversion Rate
for the issuance of
additional Shares as set
forth in Section 12.05(h)
of the Indenture.
	 
	 	 	 	 
	 

	 	Notice of Merger
Consideration and
Consequences:
	 	
Upon the occurrence of a
Merger Event that causes
the Shares to be converted
into the right to receive
more than a single type of
consideration (determined
based in part upon any
form of stockholder
election), Counterparty
shall reasonably promptly
(but in any event prior to
the Merger Date) notify
the Calculation Agent of
(i) the weighted average
of the types and amounts
of consideration received
by the holders of Shares
entitled to receive cash,
securities or other
property or assets with
respect to or in exchange
for such Shares in any
Merger Event who
affirmatively make such an
election and (ii) the
details of the adjustment
made under the Indenture
in respect of such Merger
Event.

8

 

	 	 	 	 	 
	 

	 	Nationalization,

Insolvency or Delisting:
	 	
Cancellation and Payment
(Calculation Agent
Determination); provided
that in addition to the
provisions of Section
12.6(a)(iii) of the Equity
Definitions, it will also
constitute a Delisting if
the Exchange is located in
the United States and the
Shares are not immediately
re-listed, re-traded or
re-quoted on any of the
New York Stock Exchange,
the NASDAQ Global Select
Market or the NASDAQ
Global Market (or their
respective successors); if
the Shares are immediately
re-listed, re-traded or
re-quoted on any such
exchange or quotation
system, such exchange or
quotation system shall
thereafter be deemed to be
the Exchange.

	 	 	 	 	 
	 

	 	Additional Disruption Events:	 	 
	 
	 	 	 	 
	 

	 	     (a) Change in Law:
	 	Applicable
	 
	 	 	 	 
	 

	 	     (b) Insolvency Filing:
	 	Applicable
	 
	 	 	 	 
	 

	 	     (c) Hedging Disruption:
	 	Applicable
	 
	 	 	 	 
	 

	 	     (d) Increased Cost of Hedging:
	 	Applicable
	 
	 	 	 	 
	 

	 	Hedging Party:
	 	Dealer
	 
	 	 	 	 
	 

	 	Determining Party:
	 	Dealer
	 
	 	 	 	 
	 

	 	Non-Reliance:
	 	Applicable
	 
	 	 	 	 
	 

	 	Agreements and Acknowledgments	 	 
	 
	 	 	 	 
	 

	 	Regarding Hedging Activities:
	 	Applicable
	 
	 	 	 	 
	 

	 	Additional Acknowledgments:
	 	Applicable
	 
	 	 	 	 
	 

	 	3. Calculation Agent:
	 	Dealer
	 
	 	 	 	 
	 

	 	4. Account Details:	 	 

  Dealer Payment Instructions:

Chase Manhattan Bank New York

For A/C Goldman, Sachs & Co.

A/C #930-1-011483

ABA: 021-000021

  Counterparty Payment Instructions:

To be provided by Counterparty.

	 	5.	 	Offices:
	 
	 	 	 	The Office of Dealer for the Transaction is: One New York Plaza, New
York, New York 10004
	 
	 	 	 	The Office of Counterparty for the Transaction is: 4064 Colony Road,
Suite 200, Charlotte, North Carolina 28211
	 
	 	6.	 	Notices: For purposes of this Confirmation:
	 
	 	(a)	 	Address for notices or communications to Counterparty:

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	To:
	 	Horizon Lines, Inc.	 	 
	 

	 	 	 	 	 	 4064 Colony Road, Suite 200	 	 
	 

	 	 	 	 	 	Charlotte, North Carolina 28211	 	 

9

 

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	Attn:
	 	M. Mark Urbania, Senior Vice President and Chief Financial Officer	 	 
	 

	 	 	 	Telephone:
	 	(704) 973-7049	 	 
	 

	 	 	 	Facsimile:
	 	(704) 973-7010	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	With a copy to:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Attn:
	 	Robert S. Zuckerman, Vice President and General Counsel	 	 
	 

	 	 	 	Telephone:
	 	(704) 973-7012	 	 
	 

	 	 	 	Facsimile:
	 	(704) 973-7010	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	(b)	 	Address for notices or communications to Dealer:
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	Goldman, Sachs & Co.

One New York Plaza

New York, NY 10004

Attn: Equity Operations: Options and Derivatives

Telephone: (212) 902-1981

Facsimile: (212) 428-1980/1983
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	With a copy to:

Attn: Tracey McCabe

Equity Capital Markets

Telephone: (212) 357-0428

Facsimile: (212) 902-3000

     7. Representations, Warranties and Agreements:

     (a) In addition to the representations and warranties in the Agreement and those contained
elsewhere herein, Counterparty represents and warrants to and for the benefit of, and agrees with,
Dealer as follows:

     (i) On the Trade Date, (A) none of Counterparty and its officers and directors is
aware of any material nonpublic information regarding Counterparty or the Shares and (B)
all reports and other documents filed by Counterparty with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
when considered as a whole (with the more recent such reports and documents deemed to amend
inconsistent statements contained in any earlier such reports and documents), do not
contain any untrue statement of a material fact or any omission of a material fact required
to be stated therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading.

     (ii) On the Trade Date, neither Counterparty nor any “affiliate” or “affiliated
purchaser” (each as defined in Rule 10b-18 of the Exchange Act (“Rule 10b-18”)) shall
directly or indirectly (including, without limitation, by means of any cash-settled or
other derivative instrument other than the Transaction) purchase, offer to purchase, place
any bid or limit order that would effect a purchase of, or commence any tender offer
relating to, any Shares (or an equivalent interest, including a unit of beneficial interest
in a trust or limited partnership or a depository share) or any security convertible into
or exchangeable or exercisable for Shares.

     (iii) Without limiting the generality of Section 13.1 of the Equity Definitions,
Counterparty acknowledges that Dealer is not making any representations or warranties with
respect to the treatment of the Transaction under any accounting standards including FASB
Statements 128, 133 ( as amended), 149 or 150, EITF Issue No. 00-19, 01-6 or 03-6 (or any
successor issue statements) or under FASB’s Liabilities & Equity Project.

     (iv) Without limiting the generality of Section 3(a)(iii) of the Agreement, the
Transaction will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.

10

 

     (v) Prior to the Trade Date, Counterparty shall deliver to Dealer a resolution of
Counterparty’s board of directors authorizing the Transaction and such other certificate or
certificates as Dealer shall reasonably request.

     (vi) Counterparty is not entering into this Confirmation to create actual or apparent
trading activity in the Shares (or any security convertible into or exchangeable for
Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any
security convertible into or exchangeable for Shares) or to otherwise violate the Exchange
Act.

     (vii) Counterparty is not, and after giving effect to the transactions contemplated
hereby will not be, required to register as, an “investment company” as such term is
defined in the Investment Company Act of 1940, as amended.

     (viii) On each of the Trade Date, the Premium Payment Date and the Additional Premium
Payment Date, if any, Counterparty is not “insolvent” (as such term is defined under
Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the United States Code) (the
“Bankruptcy Code”)) and Counterparty would be able to purchase the Shares hereunder in
compliance with the laws of the jurisdiction of Counterparty’s incorporation..

     (ix) The representations and warranties of Counterparty set forth in Section 3 of the
Agreement and Section 1 of the Purchase Agreement are true and correct as of the Trade
Date, the Effective Date and the Additional Premium Payment Date and are hereby deemed to
be repeated to Dealer as if set forth herein.

     (b) Each of Dealer and Counterparty agrees and represents that it is an “eligible contract
participant” as defined in Section 1a(12) of the U.S. Commodity Exchange Act, as amended.

     (c) Each of Dealer and Counterparty acknowledges that the offer and sale of the Transaction to
it is intended to be exempt from registration under the Securities Act of 1933, as amended (the
“Securities Act”), by virtue of Section 4(2) thereof. Accordingly, Counterparty represents and
warrants to Dealer that (i) it has the financial ability to bear the economic risk of its
investment in the Transaction and is able to bear a total loss of its investment and its
investments in and liabilities in respect of the Transaction, which it understands are not readily
marketable, are not disproportionate to its net worth, and it is able to bear any loss in
connection with the Transaction, including the loss of its entire investment in the Transaction,
(ii) it is an “accredited investor” as that term is defined in Regulation D as promulgated under
the Securities Act, (iii) it is entering into the Transaction for its own account and without a
view to the distribution or resale thereof, (iv) the assignment, transfer or other disposition of
the Transaction has not been and will not be registered under the Securities Act and is restricted
under this Confirmation, the Securities Act and state securities laws, and (v) its financial
condition is such that it has no need for liquidity with respect to its investment in the
Transaction and no need to dispose of any portion thereof to satisfy any existing or contemplated
undertaking or indebtedness and is capable of assessing the merits of and understanding (on its own
behalf or through independent professional advice), and understands and accepts, the terms,
conditions and risks of the Transaction.

     (d) Each of Dealer and Counterparty agrees and acknowledges that Dealer is a “financial
institution,” “swap participant” and/or “financial participant” within the meaning of Sections
101(22), 101(53C) and 101(22A) of Title 11 of the United States Code (the “Bankruptcy Code”). The
parties hereto further agree and acknowledge (A) that this Confirmation is (i) a “securities
contract,” as such term is defined in Section 741(7) of the Bankruptcy Code, with respect to which
each payment and delivery hereunder is a “settlement payment,” as such term is defined in Section
741(8) of the Bankruptcy Code, and (ii) a “swap agreement,” as such term is defined in Section
101(53B) of the Bankruptcy Code, with respect to which each payment and delivery hereunder is a
“transfer,” as such term is defined in Section 101(54) of the Bankruptcy Code, and (B) that Dealer
is entitled to the protections afforded by, among other sections, Sections 362(b)(6), 362(b)(17),
546(e), 546(g), 555 and 560 of the Bankruptcy Code.

     (e) Each party acknowledges and agrees to be bound by Rules 2860(b)(3) and (b)(4) of the
National Association of Securities Dealers, Inc. applicable to transactions in options, and further
agrees not to violate the position and exercise limits set forth therein.

11

 

     (f) Counterparty shall deliver to Dealer an opinion of counsel, dated as of the Trade Date and
reasonably acceptable to Dealer in form and substance, with respect to the matters set forth in
Section 3(a) of the Agreement.

     8. Other Provisions:

     (a) Right to Extend. Dealer may postpone any Settlement Date or any other date of valuation
or delivery by Dealer, with respect to some or all of the relevant Options (in which event the
Calculation Agent shall make appropriate adjustments to the Delivery Obligation), if Dealer
determines, in its reasonable discretion, that such extension is reasonably necessary or
appropriate to preserve Dealer’s hedging or hedge unwind activity hereunder in light of existing
liquidity conditions in the cash market, the stock borrow market or other relevant market or to
enable Dealer to effect purchases of Shares in connection with its hedging, hedge unwind or
settlement activity hereunder in a manner that would, if Dealer were Counterparty or an affiliated
purchaser of Counterparty, be in compliance with applicable legal, regulatory or self-regulatory
requirements, or with related policies and procedures applicable to Dealer.

     (b) Additional Termination Events. The occurrence of (i) an event of default with respect to
Counterparty under the terms of the Convertible Notes as set forth in Section 5.01 of the
Indenture, or (ii) an Amendment Event shall be an Additional Termination Event with respect to
which the Transaction is the sole Affected Transaction and Counterparty is the sole Affected Party,
and Dealer shall be the party entitled to designate an Early Termination Date pursuant to Section
6(b) of the Agreement.

     “Amendment Event” means that Counterparty amends, modifies, supplements or obtains a waiver in
respect of any term of the Indenture or the Convertible Notes governing the principal amount,
coupon, maturity, repurchase obligation of Counterparty, redemption right of Counterparty, any term
relating to conversion of the Convertible Notes (including changes to the conversion price,
conversion settlement dates or conversion conditions), or any term that would require consent of
the holders of not less than 100% of the principal amount of the Convertible Notes to amend, in
each case without the prior consent of Dealer.

     (c) Alternative Calculations and Payment on Early Termination and on Certain Extraordinary
Events. If Dealer shall owe Counterparty any amount pursuant to Section 12.2 of the Equity
Definitions and “Consequences of Merger Events” above, or Sections 12.3, 12.6, 12.7 or 12.9 of the
Equity Definitions (except in the event of a Merger Event, Insolvency, or Nationalization, in which
the consideration or proceeds to be paid to holders of Shares consists solely of cash) or pursuant
to Section 6(d)(ii) of the Agreement (except in the event of an Event of Default in which
Counterparty is the Defaulting Party or a Termination Event in which Counterparty is the Affected
Party, that resulted from an event or events within Counterparty’s control) (a “Payment
Obligation”), Counterparty shall have the right, in its sole discretion, to require Dealer to
satisfy any such Payment Obligation by the Share Termination Alternative (as defined below) by
giving irrevocable telephonic notice to Dealer, confirmed in writing within one Scheduled Trading
Day, between the hours of 9:00 A.M. and 4:00 P.M. New York City time on the Merger Date,
Announcement Date or Early Termination Date, as applicable (“Notice of Share Termination”). If no
Notice of Share Termination is received by Dealer within the time specified in the preceding
sentence, Dealer shall have the right, in its sole discretion, to satisfy the Payment Obligation by
the Share Termination Alternative by promptly giving Counterparty a Notice of Share Termination.
Upon delivery of a Notice of Share Termination by either party, the following provisions shall
apply on the Scheduled Trading Day immediately following the Merger Date, Announcement Date or
Early Termination Date, as applicable:

	 	 	 
	Share Termination Alternative:

	 	Applicable and means that Dealer
shall deliver to Counterparty the
Share Termination Delivery Property
on the date on which the Payment
Obligation would otherwise be due
pursuant to Section 12.7 or 12.9 of
the Equity Definitions or Section
6(d)(ii) of the Agreement, as
applicable (the “Share Termination
Payment Date”), in satisfaction of
the Payment Obligation.
	 
	 	 
	Share Termination Delivery Property:

	 	

A number of Share Termination
Delivery Units, as calculated by the

12

 

	 	 	 
	 

	 	Calculation Agent, equal to the
Payment Obligation divided by the
Share Termination Unit Price. The
Calculation Agent shall adjust the
Share Termination Delivery Property
by replacing any fractional portion
of the aggregate amount of a
security therein with an amount of
cash equal to the value of such
fractional security based on the
values used to calculate the Share
Termination Unit Price.
	 
	 	 
	Share Termination Unit Price:

	 	The value of property contained in
one Share Termination Delivery Unit
on the date such Share Termination
Delivery Units are to be delivered
as Share Termination Delivery
Property, as determined by the
Calculation Agent in its reasonable
discretion by commercially
reasonable means and notified by the
Calculation Agent to Dealer at the
time of notification of the Payment
Obligation.
	 
	 	 
	Share Termination Delivery Unit:

	 	In the case of a Termination Event,
Event of Default or Delisting, one
Share or, in the case of an
Insolvency, Nationalization or
Merger Event, one Share or a unit
consisting of the number or amount
of each type of property received by
a holder of one Share (without
consideration of any requirement to
pay cash or other consideration in
lieu of fractional amounts of any
securities) in such Insolvency,
Nationalization or Merger Event. If
such Insolvency, Nationalization or
Merger Event involves a choice of
consideration to be received by
holders, such holder shall be deemed
to have elected to receive the
maximum possible amount of cash.
	 
	 	 
	Failure to Deliver:

	 	Applicable
	 
	 	 
	Other applicable provisions:

	 	If Share Termination Alternative is
applicable, the provisions of
Sections 9.8, 9.9, 9.11 and 9.12 of
the Equity Definitions will be
applicable as if “Physical
Settlement” applied to the
Transaction, except that all
references to “Shares” shall be read
as references to “Share Termination
Delivery Units”; provided that the
Representation and Agreement
contained in Section 9.11 of the
Equity Definitions shall be modified
by excluding any representations
therein relating to restrictions,
obligations, limitations or
requirements under applicable
securities laws as a result of the
fact that Buyer is the issuer of any
Share Termination Delivery Units (or
any part thereof).

The parties hereby agree that, notwithstanding anything to the contrary herein or in the Agreement,
following the payment of the Premium, in the event that an Early Termination Date (whether as a
result of an Event of Default or a Termination Event) occurs or is designated with respect to the
Transaction or the Transaction is terminated or cancelled pursuant to Article 12 of the Equity
Definitions and, as a result, Counterparty would owe to Dealer an amount calculated under Section
6(e) of the Agreement or Article 12 of the Equity Definitions, such amount shall be deemed to be
zero.

     (d) Disposition of Hedge Shares. Counterparty hereby agrees that if, in the good faith
reasonable judgment of Dealer, the Shares (the “Hedge Shares”) acquired by Dealer for the purpose
of hedging its obligations pursuant to the Transaction cannot be sold in the U.S. public market by
Dealer without registration under the Securities Act, Counterparty shall, at its election: (i) in
order to allow Dealer to sell the Hedge Shares in a registered offering, make available to Dealer
an effective registration statement under the Securities Act to cover the resale of such Hedge
Shares and (A) enter into an agreement, in form and substance satisfactory to Dealer, substantially
in the form of an underwriting agreement for a registered offering, (B) provide accountant’s
“comfort” letters in customary form for registered offerings of equity securities, (C) provide
disclosure opinions of nationally recognized outside counsel to Counterparty reasonably acceptable
to Dealer, (D) provide other customary opinions, certificates and closing documents customary in
form for registered offerings of equity securities and (E) afford Dealer a reasonable opportunity
to conduct a “due diligence” investigation with respect to Counterparty customary in scope for
underwritten offerings of equity securities; provided, however, that if Dealer, in its reasonable
discretion, is not satisfied with access to due diligence materials, the results of its due
diligence

13

 

investigation, or the procedures and documentation for the registered offering referred
to above, then clause (ii) or clause (iii) of this Section 8(d) shall apply at the election of
Counterparty; (ii) in order to allow Dealer to sell the Hedge Shares in a private placement, to
enter into a private placement agreement substantially similar to private placement purchase
agreements customary for private placements of equity securities, in form and substance
satisfactory to Dealer, including customary representations, covenants, blue sky and other
governmental filings and/or registrations, indemnities to Dealer, due diligence rights (for Dealer
or any designated buyer of the Hedge Shares from Dealer), opinions and certificates and such other
documentation as is customary for private placements agreements, all reasonably acceptable to
Dealer (in which case, the Calculation Agent shall make any adjustments to the terms of the
Transaction that are necessary, in its reasonable judgment, to compensate Dealer for any discount
from the public market price of the Shares incurred on the sale of Hedge Shares in a private
placement); or (iii) purchase the Hedge Shares from Dealer at the VWAP Price on such Exchange
Business Days, and in the amounts, requested by Dealer.

     (e) Repurchase Notices. Counterparty shall, on any day on which Counterparty effects any
repurchase of Shares, promptly give Dealer a written notice of such repurchase (a “Repurchase
Notice”) on such day if, following such repurchase, the Notice Percentage as determined on such day
is (i) greater than 6% and (ii) greater by 0.5% than the Notice Percentage included in the
immediately preceding Repurchase Notice (or, in the case of the first such Repurchase Notice,
greater than the Notice Percentage as of the date hereof). The “Notice Percentage” as of any day
is the fraction, expressed as a percentage, the numerator of which is the Number of Shares and the
denominator of which is the number of Shares outstanding on such day. In the event that
Counterparty fails to provide Dealer with a Repurchase Notice on the day and in the manner
specified in this Section 8(e) then Counterparty agrees to indemnify and hold harmless Dealer, its
affiliates and their respective directors, officers, employees, agents and controlling persons
(Dealer and each such person being an “Indemnified Party”) from and against any and all losses,
claims, damages and liabilities (or actions in respect thereof), joint or several, to which such
Indemnified Party may become subject under applicable law or as a result of any provisions in the
Certificate (as defined below), including without limitation, Section 16 of the Exchange Act,
relating to or arising out of such failure. If for any reason the foregoing indemnification is
unavailable to any Indemnified Party or insufficient to hold harmless any Indemnified Party, then
Counterparty shall contribute, to the maximum extent permitted by law, to the amount paid or
payable by the Indemnified Party as a result of such loss, claim, damage or liability. In
addition, Counterparty will reimburse any Indemnified Party for all expenses (including reasonable
counsel fees and expenses) as they are incurred (after notice to Counterparty) in connection with
the investigation of, preparation for or defense or settlement of any pending or threatened claim
or any action, suit or proceeding arising therefrom, whether or not such Indemnified Party is a
party thereto and whether or not such claim, action, suit or proceeding is initiated or brought by
or on behalf of
Counterparty. This indemnity shall survive the completion of the Transaction contemplated by
this Confirmation and any assignment and delegation of the Transaction made pursuant to this
Confirmation or the Agreement shall inure to the benefit of any permitted assignee of Dealer.

     (f) Transfer and Assignment. Counterparty shall have the right to assign its rights and
obligations under the Transaction with the written consent of Dealer, such consent not to be
unreasonably withheld. Dealer may condition such consent on (i) receipt by Dealer of opinions and
documents reasonably satisfactory to Dealer in connection with such assignment, (ii) such
assignment being effected on terms reasonably satisfactory to Dealer with respect to any legal and
regulatory requirements relevant to the Dealer, and (iii) Counterparty continuing to be obligated
to provide notices hereunder relating to the Convertible Notes and continuing to be obligated with
respect to “Disposition of Hedge Shares” and “Repurchase Notices” above; provided that the transfer
or assignment (or the absence of such transfer or assignment) of any other transaction between the
parties shall not be the basis on which Dealer may withhold such consent. Dealer may transfer or
assign without any consent of Counterparty its rights and obligations hereunder, in whole or in
part, to any nationally recognized (in the United States) bank or dealer or affiliate thereof, or
any such bank or dealer or affiliate whose obligations hereunder would be guaranteed by a person,
in either case, of credit quality equivalent to or better than Dealer (or its guarantor); provided
that at any time at which any Excess Ownership Position occurs, if Dealer, in its discretion, is
unable to effect a transfer or assignment to a third party in accordance with the requirements set
forth above after using its commercially reasonable efforts on pricing terms reasonably acceptable
to Dealer such that an

14

 

Excess Ownership Position no longer exists, Dealer may designate any
Scheduled Trading Day as an Early Termination Date with respect to a portion (the “Terminated
Portion”) of the Transaction, such that such Excess Ownership Position no longer exists. In the
event that Dealer so designates an Early Termination Date with respect to a portion of the
Transaction, a payment or delivery shall be made pursuant to Section 6 of the Agreement and Section
8(c) of this Confirmation as if (i) an Early Termination Date had been designated in respect of a
Transaction having terms identical to the Terminated Portion of the Transaction, (ii) Counterparty
shall be the sole Affected Party with respect to such partial termination and (iii) such portion of
the Transaction shall be the only Terminated Transaction. “Excess Ownership Position” means any of
the following: (i) the Beneficial Ownership of Dealer Group is equal to or greater than 8.5% of the
outstanding Shares, (ii) Dealer or any “affiliate” or “associate” of Dealer would own in excess of
13% of the outstanding Shares for purposes of Section 203 of the Delaware General Corporation Law,
(iii) the Maritime Law Ownership Percentage of the Maritime Law Dealer Group would be equal to or
greater than 4% of the outstanding Shares, or (iv) the aggregate percentage of non-U.S. citizen
owners (as determined pursuant to Counterparty’s Amended and Restated Certificate of Incorporation
(the “Certificate”)) of Shares shall equal or exceed 18% of the outstanding Shares. “Beneficial
Ownership” means the “beneficial ownership” (within the meaning of Section 13 of the Exchange Act
and the rules promulgated thereunder) of Shares by Dealer or any affiliate of Dealer subject to
aggregation with Dealer under such Section 13 and rules (collectively, “Dealer Group”). “Maritime
Law Ownership Percentage” means the ownership, as construed under the Maritime Laws, of Shares by
Dealer or any person whose ownership would be aggregated with that of Dealer or Dealer’s parent
entity under the Maritime Laws (collectively, the “Maritime Law Dealer Group”). “Maritime Laws”
means, collectively and without duplication, Chapters 121 and 505 of Title 46 of the United States
Code and any successor statute thereto, and the regulations promulgated under such Title or
successor statute or, to the extent remaining in force, under any predecessor statute, in each case
as amended or supplemented from time to time, or any “Maritime Laws” as defined in the Certificate.
Counterparty shall promptly notify Dealer if at any time either (i) any purported transfer of any
shares of any class or series of capital stock of Counterparty is void and ineffective pursuant to
paragraph 4(a) of Article V of the Certificate or (ii) any shares of any class or series of capital
stock of Counterparty are “Excess Shares” pursuant to paragraph 5 of Article V of the Certificate.
Counterparty shall provide Dealer with a copy of any filings submitted to any regulatory authority
relating to Counterparty’s or Counterparty’s stockholders’ citizenship under the Maritime Laws so
long as Dealer (or any assignee of Dealer) has agreed to keep any such filings and the information
contained therein confidential on terms reasonably acceptable to Counterparty and Dealer.
Counterparty acknowledges that it will not treat Dealer (or any affiliate of Dealer) as the owner,
for purposes of the Maritime Laws or Article V of the Certificate, of any Shares by virtue of any
swap transactions relating to Shares that Dealer (or any affiliate of Dealer) may enter into in
connection with its hedging activities in respect of the
Transaction or otherwise in the course of its business, so long as such swap transactions may
only be cash settled and do not require any party to such swap transactions to own or hold any
Shares
according to their terms and do not provide Dealer (or any such affiliate) with any
contractual rights to acquire Shares or exercise voting rights with respect to any Shares.

     (g) Staggered Settlement. Dealer may, by notice to Counterparty prior to any Settlement Date
(a “Nominal Settlement Date”), elect to deliver the Shares on one or more dates (each, a “Staggered
Settlement Date”) or at two or more times on the Nominal Settlement Date as follows:

     (i) in such notice, Dealer will specify to Counterparty the related Staggered
Settlement Dates (each of which will be on or prior to such Nominal Settlement Date by, but
not prior to the earlier of the relevant Conversion Date and the first day of the relevant
Observation Period) or delivery times and how it will allocate the Shares it is required to
deliver under “Delivery Obligation” (above) among the Staggered Settlement Dates or
delivery times; and

     (ii) the aggregate number of Shares that Dealer will deliver to Counterparty hereunder
on all such Staggered Settlement Dates and delivery times will equal the number of Shares
that Dealer would otherwise be required to deliver on such Nominal Settlement Date.

     (h) Disclosure. Effective from the date of commencement of discussions concerning the
Transaction, Counterparty and each of its employees, representatives, or other agents may disclose
to any and all persons, without limitation of any kind, the tax treatment and tax structure of the
Transaction and all materials of any kind (including opinions or other tax analyses) that are
provided to Counterparty relating

15

 

to such tax treatment and tax structure.

     (i) No Netting and Set-off. The provisions of Section 2(c) of the Agreement shall not apply
to the Transaction. Each party waives any and all rights it may have to set-off delivery or
payment obligations it owes to the other party under the Transaction against any delivery or
payment obligations owed to it by the other party, whether arising under the Agreement, under any
other agreement between parties hereto, by operation of law or otherwise.

     (j) Equity Rights. Dealer acknowledges and agrees that this Confirmation is not intended to
convey to it rights with respect to the Transaction that are senior to the claims of common
stockholders in the event of Counterparty’s bankruptcy. For the avoidance of doubt, the parties
agree that the preceding sentence shall not apply at any time other than during Counterparty’s
bankruptcy to any claim arising as a result of a breach by Counterparty of any of its obligations
under this Confirmation or the Agreement. For the avoidance of doubt, the parties acknowledge that
this Confirmation is not secured by any collateral that would otherwise secure the obligations of
Counterparty herein under or pursuant to any other agreement.

     (k) Early Unwind. In the event the sale by Counterparty of the Convertible Notes is not
consummated with the Initial Purchasers pursuant to the Purchase Agreement for any reason by the
close of business in New York on August 8, 2007 (or such later date as agreed upon by the parties,
which in no event shall be later than August 10, 2007) (August 8, 2007 or such later date being the
“Early Unwind Date”), the Transaction shall automatically terminate (the “Early Unwind”) on the
Early Unwind Date and the Transaction and all of the respective rights and obligations of Dealer
and Counterparty thereunder shall be cancelled and terminated. Following such termination and
cancellation, each party shall be released and discharged by the other party from, and agrees not
to make any claim against the other party with respect to, any obligations or liabilities of either
party arising out of, and to be performed in connection with, the Transaction either prior to or
after the Early Unwind Date. Dealer and Counterparty represent and acknowledge to the other that
upon an Early Unwind, all obligations with respect to the Transaction shall be deemed fully and
finally discharged.

     (l) Termination Amounts. Notwithstanding anything to the contrary in the Agreement or the
Equity Definitions, any determination of Loss or any amount payable upon cancellation or
termination of the Transaction pursuant to Article 12 of the Equity Definitions shall, in a
commercially reasonable manner, take into account any costs or losses incurred by Dealer or any of
its affiliates in connection with Dealer’s (or such affiliate’s) hedging activities in respect of
the Transaction as a result of the provisions of Article V of the Certificate (whether before or in
connection with the termination or cancellation of the Transaction).

     (m) Governing Law. The Agreement, this Confirmation and all matters arising in connection
with the Agreement and this Confirmation shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York (without reference to its choice of laws
doctrine, other than Title 14 of the New York General Obligations Law).

     (n) Waiver of Jury Trial. Each party waives, to the fullest extent permitted by applicable
law, any right it may have to a trial by jury in respect of any suit, action or proceeding relating
to the Transaction. Each party (i) certifies that no representative, agent or attorney of the
other party has represented, expressly or otherwise, that such other party would not, in the event
of such a suit, action or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges
that it and the other party have been induced to enter into the Transaction by, among other things,
the mutual waivers and certifications provided herein.

     (o) Submission to Jurisdiction. Section 13(b) of the Agreement is deleted in its entirety and
replaced by the following:

     “Each party hereby irrevocably and unconditionally submits for itself and its property in any
legal action or proceeding by the other party against it relating to this Agreement and/or any
Transaction, or for recognition and enforcement of any judgment in respect thereof, to the
exclusive jurisdiction of the Supreme Court of the State of New York, sitting in New York County,
the courts of the United States of America for the Southern District of New York and appellate
courts from any thereof. Nothing in any Confirmation or this Agreement precludes either party from
bringing Proceedings in any other jurisdiction if (A) the courts of the State of New York or the
United States of America

16

 

 for the Southern District of New York lack jurisdiction over the parties
or the subject matter of the Proceedings or declines to accept the Proceedings on the grounds of
lacking such jurisdiction; (B) the Proceedings are commenced by a party for the purpose of
enforcing against the other party’s property, assets or estate any decision or judgment rendered by
any court in which Proceedings may be brought as provided hereunder; (C) the Proceedings are
commenced to appeal any such court’s decision or judgment to any higher court with competent
appellate jurisdiction over that court’s decisions or judgments if that higher court is located
outside the State of New York or Borough of Manhattan, such as a federal court of appeals or the
U.S. Supreme Court; or (D) any suit, action or proceeding has been commenced in another
jurisdiction by or against the other party or against its property, assets or estate and, in order
to exercise or protect its rights, interests or remedies under this Agreement or any Confirmation,
the party (1) joins, files a claim, or takes any other action, in any such suit, action or
proceeding, or (2) otherwise commences any Proceeding in that other jurisdiction as the result of
that other suit, action or proceeding having commenced in that other jurisdiction.”

     (p) Counterparts. This Confirmation may be executed in several counterparts, each of which
shall be deemed an original but all of which together shall constitute one and the same instrument.

17

 

     Counterparty hereby agrees (a) to check this Confirmation carefully and immediately upon
receipt so that errors or discrepancies can be promptly identified and rectified and (b) to confirm
that the foregoing (in the exact form provided by Dealer) correctly sets forth the terms of the
agreement between Dealer and Counterparty with respect to the Transaction, by manually signing this
Confirmation or this page hereof as evidence of agreement to such terms and providing the other
information requested herein and immediately returning an executed copy to Dealer, Equity
Derivatives Documentation Department, Facsimile No. (212) 428-1980/83.

	 	 	 	 	 	 	 
	 

	 	Yours faithfully,

	 
	 	 	 	 	 	 
	 

	 	GOLDMAN, SACHS & CO.
	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Authorized Signatory
	 	 

Agreed and
Accepted By:

HORIZON LINES, INC.

	 	 	 	 	 
	By:

	 	/s/ Robert S. Zuckerman
 

Name: Robert S. Zuckerman

Title: Secretary

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