CAPITAL CONSTRUCTION FUND AGREEMENT

Exhibit 10.36

Contract No. MA/CCF-607

CAPITAL CONSTRUCTION FUND AGREEMENT

WITH

HORIZON LINES, LLC

This CAPITAL CONSTRUCTION FUND AGREEMENT (the “Agreement”), entered into as of the 29 ^th day of March, 2004, by and between the UNITED STATES OF AMERICA, represented by the Secretary of Transportation, acting by and through the Maritime Administrator, (the “Maritime Administrator”) and HORIZON LINES, LLC, a company duly organized and existing under the laws of the State of Delaware (the “Party”), a citizen of the United States of America.

WHEREAS:

1. The Party has applied for the establishment of a Capital Construction Fund (the “Fund”) under Section 607 of the Merchant Marine Act, 1936, as amended (the “Act”);

2. The Party is the owner or lessee or has contracted for the construction of one or more “Eligible Vessels” as defined in Section 607(k) of the Act, which vessels are listed in Schedule A hereof;

3. The Party has a program for the construction or acquisition of “Qualified Agreement Vessels” as defined in Section 607(k) of the Act, which program is described in Schedule B hereof;

4. The Maritime Administrator and the Party desire to enter into an Agreement for the purpose of providing replacement vessels, additional vessels, or reconstructed vessels, built in the

United States and documented under the laws of the United States for operation in the United States foreign, Great Lakes, or noncontiguous domestic trade;

5. The Maritime Administrator has determined that the Party qualifies for an Agreement under the Act and the “Rules and Regulations” as hereinafter defined; and

6. The Maritime Administrator has authorized the award of an Agreement upon the terms and conditions set forth herein subject to the Act, as it may be amended from time to time, and such rules and regulations as are now or shall from time to time be prescribed by the Secretary of Transportation and/or his delegate, either alone or jointly with the Secretary of the Treasury, as necessary to carry out the powers, duties, and functions vested in them by the Act (the “Rules and Regulations”).

NOW, THEREFORE, in consideration of the premises and of the other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, the Maritime Administrator and the Party hereby agree as follows:

(A) A Fund is hereby established for the purposes set forth in Article 2 hereof, pursuant to the terms and conditions prescribed in this Agreement, the Act, and the Rules and Regulations.

(B) The Fund shall be established in one or more of the depositories listed in Schedule C hereof.

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The Fund established hereunder shall be utilized to provide for replacement vessels, additional vessels, or reconstructed vessels, built in the United States and documented under the laws of the United States for operation in the United States foreign, Great Lakes, or noncontiguous domestic trade, and to provide for “Qualified Withdrawals” as defined in Section 607(f) of the Act, to accomplish the program set forth in Schedule B hereof.

This Agreement shall continue until terminated under Article 4.

(A) This Agreement may be terminated at any time under any of the following circumstances:

(1) Upon written mutual agreement by the parties;

(2) Upon written notice by the Party that a change has been made in the Rules and Regulations which would have a substantial effect upon the rights or obligations of the Party.

(B) This Agreement shall terminate upon completion of the program as set forth in Schedule B, unless otherwise mutually agreed by the parties.

(C) Upon termination of this Agreement pursuant to paragraphs (A) and/or (B) hereof all amounts remaining in the Fund shall be treated as if withdrawn in a “Non-qualified Withdrawal” as defined in Section 607(h) of the Act as of the date of termination of this Agreement.

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(A) Subject to any restrictions contained in the Act, the Rules and Regulations, or this Agreement, the Party may deposit, for each taxable year to which this Agreement applies, amounts representing:

(1) Taxable income attributable to the operation of the vessels listed in Schedule A or B hereof;

(2) The depreciation allowable under Section 167 of the Internal Revenue Code of 1986 on the vessels listed in Schedule A or B hereof;

(3) The net proceeds from the sale or other disposition of any of the vessels listed in Schedule A or B hereof; and

(4) The net proceeds from insurance or indemnity attributable to the vessels listed in Schedule A or B hereof.

(B) The Party shall deposit for each taxable year to which this Agreement applies amounts representing:

(1) All receipts from the investment or reinvestment of amounts held in the Fund, except that the Party shall not be permitted to deposit more than is necessary to complete its program set out in Schedule B hereof; and

(2) The net proceeds from the mortgage of any vessel listed in Schedule B hereof for which qualified withdrawals from the Funds have been made.

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(C) Notwithstanding any provision or provisions of sub. (A) or (B) of the paragraph 5, to the contrary, the Party shall make the minimum deposits set forth in Schedule D hereof at the time and in such amounts as any be set forth therein. The Party specifically agrees to deposit up to one hundred percent of allowable taxable income attributable to the operation of agreement vessels in order to meet its obligations under this paragraph.

(D) In the event that any leased vessel listed in Schedule A hereof is included in another capital construction fund agreement, the maximum amount of depreciation which the Party may deposit in respect to that vessel shall be calculated by using the allowable percentage of the depreciation ceiling listed for that vessel in Schedule A hereof.

(A) Except as otherwise required by the rules and regulations the Party may make such qualified withdrawals as shall be necessary to fulfill the obligations set forth in Schedule B hereof without the consent of the Maritime Administrator.

(B) Any other withdrawal from the Fund shall be made only upon the prior written consent of the Maritime Administrator.

(A) The Party, as its discretion, may invest assets held in the Fund in accordance with the Act and the Rules and Regulations.

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(B) The Party agrees, when investing assets held in the Fund, to make such investments as will insure that sufficient cash is available at the time qualified withdrawals are required in accordance with the program described in Schedule B hereof.

(A) The Party agrees not to assign, pledge, or otherwise encumber, either directly or indirectly or through any reorganization, merger, or consolidation, all or any part of this Agreement, the Fund, or any assets in the Fund without the prior written consent of the Maritime Administrator; provided, however, the Party may transfer the assets of the Fund, in whole or in part, to an investment trustee, as provided in the rules and regulations.

(B) T