<PAGE>

                                                                   EXHIBIT 10(k)


                                    AMENDMENT

                                       OF

                                AIRBORNE EXPRESS

                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

     THIS AMENDMENT (this "Amendment") to the Airborne Express Supplemental
Executive Retirement Plan (the "Plan") is adopted by AIRBORNE EXPRESS, INC., a
Delaware corporation (the "Airborne Express"), on August 15, 2001.

                                    RECITALS

     A.   Airborne Express, which was previously know as Airborne Freight
Corporation, originally adopted the Plan effective January 1, 1992. The Plan was
subsequently restated effective January 1, 2000.

     B.   Airborne Express is a wholly-owned subsidiary of Airborne, Inc., a
Delaware corporation ("Airborne").

     C.   Each of the Participants in the Plan has an agreement with Airborne
and the Participant's employer (the "Employer") under which the Participant will
be entitled to certain benefits if his or her employment with the Employer
terminates under certain circumstances following or in anticipation of a change
of control of Airborne. These include benefits computed on the basis of assumed
continued participation in the Plan for an additional period following
termination of employment.

     D.   Article 11 of the restated Plan contains provisions under which a
Participant will be entitled to additional benefits if his or her employment
with the Employer terminates under certain circumstances following or in
anticipation of a change of control of Airborne Express. These provisions were
included in the restated Plan in error, since they are redundant and/or
inconsistent with the provisions of the individual change-of-control agreement
that each Participant has entered into with Airborne and his or her Employer.

     E.   Airborne Express desires to reform the terms of the restated Plan,
effective as of January 1, 2000, to remove the provisions of Article 11 that
were erroneously included therein.

     F.   Airborne Express also desires to amend the terms of the restated Plan,
effective as of December 26, 2000, to reflect the reorganization of the
operations of Airborne Express into a holding company structure, with Airborne
Express as a wholly-owned subsidiary of Airborne, and to make certain other
changes thereto.

     NOW, THEREFORE, the restated Plan is hereby amended and reformed, effective
as of the respective dates set forth in the foregoing Recitals, to read as set
forth in Exhibit A attached hereto.

     IN WITNESS WHEREOF, Airborne Express has caused this Amendment to be
executed by a duly authorized officer.

                                       AIRBORNE EXPRESS, INC.

                                   By  /s/ Lanny H. Michael
                                     -------------------------------------------
                                       Print Name:  Lanny H. Michael
                                                    ----------------------------
                                       Title:  Senior Vice President and CFO
                                                      --------------------------

<PAGE>


                           [LOGO] AIRBORNE EXPRESS(R)


                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
                                     (SERP)



                       Restated Effective January 1, 2000





                                    EXHIBIT A

<PAGE>

                                Table of Contents

<TABLE>
<S>                                                                          <C>
TABLE OF CONTENTS............................................................  1

PURPOSE......................................................................  2

HISTORY AND EFFECTIVE DATES..................................................  2

ARTICLE 1. - DEFINITIONS.....................................................  3

ARTICLE 2. - ELIGIBILITY AND PARTICIPATION...................................  6

ARTICLE 3. - RETIREMENT......................................................  6

ARTICLE 4. - DISABILITY......................................................  7

ARTICLE 5. - DEATH BENEFIT...................................................  8

ARTICLE 6. - TERMINATION OF EMPLOYMENT.......................................  9

ARTICLE 7. - DEMOTIONS AND OTHER EMPLOYMENT STATUS CHANGES...................  9

ARTICLE 8. - COMPANY/PARTICIPANT LIABILITY...................................  9

ARTICLE 9. - NO GUARANTEE OF EMPLOYMENT...................................... 10

ARTICLE 10. - PLAN AMENDMENT AND TERMINATION................................. 10

ARTICLE 11. - CHANGE OF CONTROL.............................................. 10

ARTICLE 12. - OTHER BENEFITS AND AGREEMENTS.................................. 11

ARTICLE 13. - RESTRICTIONS ON ALIENATION OF BENEFITS......................... 11

ARTICLE 14. - ADMINISTRATION OF THE PLAN..................................... 11

ARTICLE 15. - CLAIMS PROCEDURES.............................................. 12

ARTICLE 16. - TRUST.......................................................... 13

ARTICLE 17. - MISCELLANEOUS.................................................. 13
</TABLE>

                                       1

<PAGE>

                                AIRBORNE EXPRESS

                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



                                     Purpose

The purpose of the Airborne Supplemental Executive Retirement Plan is to provide
eligible employees of Airborne Express and other subsidiaries of Airborne with
supplemental retirement benefits that will assist them in maintaining an
accustomed standard of living, and contribute to attracting and retaining
executives of the highest quality.



                           History and Effective Dates

This Plan is a restatement of the Airborne Express Supplemental Executive
Retirement Plan (SERP), originally effective January 1, 1992. Unless otherwise
noted, the effective date of this restated Plan shall be January 1, 2000 for all
purposes. This restated Plan includes amendments adopted effective as of
December 26, 2000, to reflect the reorganization of the operations of Airborne
Express into a holding company structure, with Airborne Express as a
wholly-owned subsidiary of Airborne, and to make certain other conforming
changes to the terms of the prior restated Plan.

The terms of this restated Plan and the benefits provided hereunder shall
supersede the predecessor plan in all respects for anyone separating from
service on or after the effective date of this restated program. Participants
that separated from service prior to the January 1, 2000 receive benefits
determined under the terms of the prior document and shall not be affected by
this restatement.

                                       2

<PAGE>

                            Article 1. - Definitions

For purposes hereof, unless otherwise clearly apparent from the context, the
following phrases and terms shall have the indicated meanings:

1.1   "Actuarial Equivalent" shall mean an amount of a series of payments that,
      at a given point in time, is determined to have the same or equivalent
      value, at that point in time, as another given amount or another given
      series of payments, taking into consideration the time value of money,
      mortality and such other actuarial factors as may be appropriate (such
      determination to be made, to the extent applicable, on the basis of the
      same actuarial assumptions as used in the Basic Plan for purposes of
      adjusting between alternate forms of annuity distributions).

1.2   "Age at Retirement" shall mean the Participant's whole age as of his or
      her last birthday that precedes or coincides with the Participant's date
      of retirement.

1.3   "Airborne" shall mean Airborne, Inc., a Delaware corporation.

1.4   "Airborne Express" shall mean Airborne Express, Inc., a Delaware
      corporation.

1.5   "Alternate Benefit Forms" shall mean any Actuarial Equivalent alternate
      form of payment that is available under the Basic Plan.

1.6   "Basic Plan" shall mean the Airborne Express Retirement Income Plan
      (f.k.a. the Airborne Express Minimum Monthly Retirement Income Plan), as
      now or hereafter amended.

1.7   "Board" shall mean the Board of Directors of Airborne.

1.8   "Cause" is defined in Section 6.4 of this Plan

1.9   "Committee" shall mean the administrative committee appointed to manage
      and administer this Plan in accordance with the provisions of Article 14.

1.10  "Company" shall mean Airborne Express and any other direct or indirect
      subsidiaries of Airborne that are selected by the Board to participate in
      this Plan.

1.11  "Considered Compensation" shall mean the total of all payments made to a
      Participant on account of employment with the Company for services
      rendered, including any amounts of salary or bonus that the Participant
      may from time to time elect to defer under the Company's Capital
      Accumulation Plan (or any similar successor plan or plans) or under any
      cafeteria plan (within the meaning of Section 125 of the Internal Revenue
      Code of 1986, as amended) or any nonqualified deferred compensation plan
      from time to time maintained by the Company, but excluding:

      (a)  Payments arising from any stock bonus, stock option, stock
           appreciation rights or restricted stock plan;

      (b)  Payments from any qualified or nonqualified employee benefit plan of
           the Company (other than the Management Incentive Compensation Plan or
           any similar successor bonus plan or plans); and

      (c)  Cost of living differentials, automobile allowances, payment for
           moving expenses, expatriate premiums, shelter allowances and post
           differentials.

                                       3

<PAGE>

      Considered Compensation in a particular period shall include salary and
      bonus payments actually received in that period as well as any amounts
      of salary that would have been received in that period had payment not
      been deferred through participation in the Company's Capital
      Accumulation Plan (or any similar successor plan or plans) or in a
      cafeteria plan or nonqualified deferred compensation plan of the
      Company.

1.12  "Disability" shall mean a condition which qualifies for receipt of
      disability income payments under the Disability Plan.

1.13  "Disability Offset Amount" shall mean the sum of the following:

      (a)  "Retirement Offset Amount" as defined in this Article 1, with the
           exception that "(b) The Participant's Primary Social Security
           Benefits" shall be replaced with "the annual amount of any disability
           income payments received by a Participant or his or her family
           members under the Social Security Act"; and

      (b)  The annual amount of disability income payments received by the
           Participant under the Disability Plan.

1.14  "Disability Plan" shall mean the long-term disability plan of the Company,
      as now or hereafter amended, including any similar successor plan.

1.15  "Early Retirement Date" shall mean the earliest date that a Participant
      would be entitled to elect early retirement and receive an immediate
      benefit under the terms of the Basic Plan.

1.16  "Final Average Earnings" shall mean the average annual Considered
      Compensation of a Participant over the five consecutive calendar years
      during the current and preceding ten calendar years where such average is
      highest. At any point in time, Final Average Earnings shall be computed to
      the date of determination by taking into account actual year to date
      Considered Compensation during the current calendar year (without being
      annualized) and the ten preceding calendar years.

1.17  "Normal Retirement Date" shall mean the first day of the month following
      the month in which a Participant attains age 62.

1.18  "Participant" shall mean an officer of the Company designated for
      participation in the Plan in the manner provided in Section 2.1.

1.19  "Plan" shall mean this Airborne Express Supplemental Executive Retirement
      Plan.

1.20  "Primary Social Security Benefit" shall mean the annual primary insurance
      amount that a Participant would receive on retirement at age 65 under the
      Federal Social Security Act, determined as follows:

      (a)  At the retirement of the Participant on or after age 65, the Primary
           Social Security Benefit shall be the Participant's primary insurance
           amount as calculated under the Federal Social Security Act.

      (b)  At the retirement of the Participant prior to age 65, the Primary
           Social Security Benefit shall be calculated as the Participant's age
           65 primary insurance amount assuming he or she survived to age 65 and
           had no further earnings, adjusted for early commencement at the rate
           of 5/9 of 1% per month.

      In all cases, the Participant's curren and prior wages will be assumed to
      have been at or above the applicable wage base in each year and all
      applicable amounts shall be calculated using the Social Security Act laws
      and limits in effect for the year in which benefits commence. The Primary
      Social Security Benefit amount shall be determined as described above
      without regard to the Participant's actual timing of receipt of the
      benefit amount.

                                       4

<PAGE>

1.21  "Retirement Offset Amount" shall mean the sum of the following:

      (a)  The annual benefit a Participant would be due to receive under the
           terms of the Basic Plan if the Participant retired and elected
           immediate commencement of his or her benefit in the form of a single
           life annuity (such annual benefit to be computed before reduction by
           the "Profit Sharing Plan Annuity Benefit," as that term is defined in
           the Basic Plan);

      (b)  The Participant's Primary Social Security Benefit.

      The amount to be offset under clause (a) above shall be determined based
      on the Participant's Final Average Earnings and service as of the date of
      the determination.

1.22  "Target Benefit" shall mean the full potential formula benefit available
      to Participants at each possible age of retirement, prior to the
      application of any applicable offset amounts. Amounts are expressed as a
      percentage of a Participant's Final Average Earnings.

            ---------------------------------------------------------
                  Age at Retirement               Target Benefit
            ---------------------------------------------------------
                        62 +                            65%
            ---------------------------------------------------------
                         61                             56%
            ---------------------------------------------------------
                         60                             45%
            ---------------------------------------------------------
                         59                             38%
            ---------------------------------------------------------
                         58                             31%
            ---------------------------------------------------------
                         57                             24%
            ---------------------------------------------------------
                         56                             17%
            ---------------------------------------------------------
                         55                             10%
            ---------------------------------------------------------
                    54 or younger                       0%
            ---------------------------------------------------------

1.23  "Trust" shall mean the Airborne Express Executive Deferral Plan and
      Supplemental Executive Retirement Plan Trust or any successor thereof.

1.24  "Vested Accrued Benefit" shall, at any point in time, mean the
      Participant's Target Benefit multiplied by the applicable Vesting Percent
      from the following table.

        --------------------------------------------------------------------
               Vesting "Points"                     Vesting Percent
          ("Points" = Age + Service)
        --------------------------------------------------------------------
                     80 +                                 100%
        --------------------------------------------------------------------
                      79                                  98%
        --------------------------------------------------------------------
                      78                                  96%
        --------------------------------------------------------------------
                      77                                  94%
        --------------------------------------------------------------------
                      76                                  92%
        --------------------------------------------------------------------
                      75                                  90%
        --------------------------------------------------------------------
                  74 or lower                 Reduced an additional 2% for
                                                  each Point below 75.
        --------------------------------------------------------------------

      In determining Points for purposes of this section, Age shall mean the
      Participant's "Age at Retirement" and Service shall mean "Years of
      Service" as of the Participant's date of retirement. For purposes of
      referencing the above schedule, fractional Points that result from partial
      years of Credited Service shall be disregarded.

1.25  "Vesting Percent" shall mean the applicable percentage as determined from
      the definition of "Vested Accrued Benefit".

                                       5

<PAGE>

1.26  "Year of Service" shall mean the Participant's Credited Service as
      determined under the Basic Plan, and to the extent provided in Section
      4.3, shall include periods of deemed service during which a Participant
      receives payments under the Disability Plan.

                   Article 2. - Eligibility and Participation

2.1   Eligibility. An employee shall become eligible to participate in this Plan
      -----------
      when he/she either (a) becomes an officer of the Company, performs
      services in the USA or performs services outside the USA under an
      expatriate agreement, and is designated by the Chief Executive Officer of
      Airborne and approved by the Committee, or (b) is specifically nominated
      for participation by the Board. Participation shall be limited to a select
      group of management and highly compensated employees of the Company.

2.2   Participation. Upon satisfaction of the eligibility requirements, and
      -------------
      approval by the Committee, an executive of the Company shall become a
      Participant effective as of the date specified in the nomination document.

2.3   Termination of Benefits. Notwithstanding any other provision of this Plan,
      -----------------------
      if a Participant under this Plan acts in a manner that the Committee, in
      its sole and absolute discretion, determines to be hostile to the best
      interests of the Company, all rights of the Participant and his or her
      spouse, if any, to receive further benefits under this Plan shall
      terminate, except to the extent such termination may be prohibited by
      applicable law. Acts hostile to the best interests of the Company shall
      include, without limitation, the following: disclosure of any confidential
      information or trade secrets to a competitor of the Company; employment by
      a competitor of the Company within thirty-six (36) months following
      termination of the Participant's employment with the Company; and
      commission of any act that would constitute Cause for termination under
      Section 6.4. For purposes of this Section, a Participant shall include
      either a current or a former employee of the Company.

                             Article 3. - Retirement

3.1   Normal Retirement Benefit. Upon retirement from the Company at or after
      -------------------------
      his or her Normal Retirement Date, a Participant shall be entitled to
      receive an annual retirement benefit equal to his or her Vested Accrued
      Benefit as of the date of retirement reduced by the Retirement Offset
      Amount.

3.2   Early Retirement Benefit. A Participant who retires prior to his or her
      ------------------------
      Early Retirement Date shall not be entitled to any benefit under this
      Plan. A Participant who retires after that date but prior to his or her
      Normal Retirement Date shall, subject to Section 3.4, be entitled to
      receive an annual retirement benefit equal to the Vested Accrued Benefit
      as of the date of retirement reduced by the Retirement Offset Amount.

3.3   Form and Time of Retirement Payments. For all purposes under this Plan,
      ------------------------------------
      the normal form of benefit and the available alternate benefit forms shall
      be those provided under the Basic Plan. Not later than 30 days prior to a
      Participant's actual retirement, a Participant may request, by written
      application to the Committee, one of the following special benefit forms
      which are also available under this Plan. If married, the consent of the
      Participant's spouse shall be required for a distribution in any form
      other than a qualified joint and 50% survivor annuity. It is the sole
      discretion of the Committee to determine whether to permit a requested
      alternate form of distribution.

      Single Lump Sum Distribution - A single payment equal in value to the
      Actuarial Equivalent present value of the benefit otherwise due to the
      Participant.

      A One Year or Five Year Deferred Lump Sum - The same as the Single Lump
      Sum Distribution except such amount shall be paid to the Participant (or
      his/her beneficiary in the event of death prior to receipt of the payment)
      up to 1 year or 5 years following the date the benefit would otherwise
      commence and will be adjusted for the passage of time at the interest rate
      used for determining Actuarial Equivalent benefits.

                                       6

<PAGE>

     Five Year Installment - The Single Lump Sum Distribution amount shall be
     amortized and paid out in substantially equal annual payments to the
     Participant (or his/her beneficiary in the event of death prior to full
     payment) over the 5 year period beginning on the date the benefit would
     otherwise commence, using the interest rate used for determining Actuarial
     Equivalent benefits.

     Subject to Sections 2.3 and 6.4, any payment shall commence on the first
     day of the second month following the month in which the Participant
     retires or is disabled. The Company may withhold from any payment any
     income tax or other amounts as required by law or any other amounts as
     mutually agreed by the Participant and the Committee. Annuity payments
     shall not be adjusted on account of a Participant's deferral of retirement
     past his or her Normal Retirement Date, except to the extent such
     adjustment results from changes in a Participant's Final Average Earnings,
     Vesting Percent or Retirement Offset Amount. In the event the Participant
     does not affirmatively elect an alternative benefit form in writing prior
     to retirement or disability, the Participant shall receive a single life
     annuity, or, if married, a qualified joint and 50% survivor annuity.

3.4  Early Retirement for the Convenience of the Company. In the event that a
     ---------------------------------------------------
     Participant, at the written request of the Company, retires after his or
     her Early Retirement Date but prior to his or her Normal Retirement Date,
     the Committee, in its sole and absolute discretion, may elect to treat the
     Vesting Percent and/or the Age at Retirement for the purpose of computing
     the Vested Accrued Benefit and the Target Benefit.

                             Article 4. - Disability

4.1  Disability Benefit. If a Participant suffers a Disability after his or her
     ------------------
     Early Retirement Date but prior to his or her Normal Retirement Date for
     which he or she receives disability income payments under the Disability
     Plan, the Participant shall be entitled to receive an annual disability
     benefit under this Plan equal to his or her Vested Accrued Benefit
     determined as of the date of the onset of the Disability, reduced by the
     Disability Offset Amount. However, for purposes of this Section, the Vested
     Accrued Benefit shall be determined as if the Participant were retiring at
     his or her Normal Retirement Date.

4.2  Form and Duration of Disability Payments. The annual disability benefit
     ----------------------------------------
     under Section 4.1 shall be payable in equal monthly installments commencing
     with the month in which payments commence under the Disability Plan and
     continuing until the earliest of the following dates:

     (a)  The date the Participant returns to active employment with either the
          Company or another employer;

     (b)  The date the disability income payments cease under the Disability
          Plan; or

     (c)  The Participant's Normal Retirement Date or date of death.

The form of the benefit will be handled in the same manner as for a retirement
under Section 3.

4.3  Benefits on Cessation of Disability Payments. After a Participant's
     --------------------------------------------
     disability benefits cease pursuant to Section 4.2, the Participant shall be
     entitled to benefits under this Plan determined as follows:

     (a)  If the Participant's disability benefits cease because the Participant
          returns to active employment with the Company, or if they cease
          pursuant to Section 4.2(b) and the Participant returns to active
          employment with the Company within six (6) months following such
          cessation, then (i) the Participant shall be credited with Years of
          Service for the period during which disability benefits were provided
          under this Plan; and (ii) the Participant shall thereafter be entitled
          to receive such benefits, if any, as are available under the other
          provisions of this Plan.

                                        7

<PAGE>

     (b)  If the Participant's disability benefits cease because the Participant
          returns to active employment with another employer, or if they cease
          pursuant to Section 4.2(b) and the Participant does not return to
          active employment with the Company within six (6) months following
          such cessation, then (i) the Participant shall, for purposes of this
          Plan, be considered to have terminated employment as of the date of
          onset of his or her Disability and shall be credited with no further
          Years of Service after that date; and (ii) the Participant shall
          thereafter be entitled to receive such benefits, if any, as are
          available under the other provisions of this Plan.

     (c)  If the Participant's disability benefits cease because the Participant
          reaches his or her Normal Retirement Date or dies, then (i) the
          Participant shall be credited with Years of Service for the period
          during which disability benefits were provided under this Plan; and
          (ii) the Participant shall be entitled to receive the benefit
          specified in Section 3.1, as if he or she had retired on that date, or
          the Participant's spouse shall be entitled to receive any death
          benefit specified in Section 5.1, as the case may be. Such benefit
          shall be computed as of the Participant's Normal Retirement Date or
          date of death, as the case may be, based on the Participant's Final
          Average Earnings as of the date of onset of the Participant's
          Disability, without reduction for disability benefits paid under this
          Plan. Such benefit shall be paid at the time and in the annuity form
          specified in Section 3.3 or Section 5.1, as the case may be, except
          that, in the case of payments pursuant to Section 3.3, if any
          Disability income payments continue to be paid following the
          Participant's Normal Retirement Date, the annuity payments shall be
          offset by such amounts so long as they continue to be paid.

4.4  Disability After Normal Retirement Date. If a Participant suffers a
     ---------------------------------------
     Disability after his or her Normal Retirement Date but prior to actual
     retirement, the Participant shall be deemed to have retired as of the date
     of onset of the Disability and shall thereafter be entitled to receive the
     benefit specified in Section 3.1. Such benefit shall be computed as of the
     Participant's deemed date of retirement. Such benefit shall be paid at the
     time and in the annuity form specified in Section 3.3, except that, if any
     Disability income payments are paid following the Participant's deemed
     retirement, the annuity payments shall be offset by such amounts so long as
     they continue to be paid.

4.5  Disability Prior to Early Retirement Date. A Participant who suffers a
     -----------------------------------------
     Disability prior to his or her Early Retirement Date shall not be entitled
     to receive any disability benefit under this Plan.

                           Article 5. - Death Benefit

5.1  Death After Early Retirement Date. If a Participant dies after separating
     ---------------------------------
     from service and has made an election to receive benefits under Article 3
     of this Plan, the benefits due upon the death of the Participant shall be
     entirely based upon the form of benefit so elected. If a Participant dies
     after his or her Early Retirement Date but before electing to receive any
     benefits under Article 3 of this Plan, and, if the Participant has a
     surviving spouse to whom the Participant was married for at least twelve
     (12) months prior to the Participant's death, such spouse shall be entitled
     to receive an annual benefit, payable in equal monthly installments for the
     remainder of his or her life, equal to 50% of the annual retirement benefit
     that the Participant would have been entitled to receive under Section 3.2
     if the Participant had retired immediately prior to his or her death and
     such benefit had been paid pursuant to Section 3.3 in the form of a 50%
     joint and survivor annuity. If a Participant dies after his or her Early
     Retirement Date and before receiving any benefits under Article 3 of this
     Plan, but the Participant does not have a surviving spouse to whom the
     Participant was married for at least twelve (12) months prior to the
     Participant's death, no benefit shall be paid under this Plan to any person
     on account of the death of the Participant.

5.2  Death Before Early Retirement Date. If a Participant dies prior to his or
     ----------------------------------
     her Early Retirement Date, no benefit shall be paid to the surviving spouse
     of the Participant under this Plan.

                                        8

<PAGE>

                     Article 6. - Termination of Employment

6.1  Termination Prior to Early Retirement Date. If a Participant's employment
     ------------------------------------------
     with the Company is terminated voluntarily or involuntarily prior to the
     Participant's Early Retirement Date, then the Participant shall not be
     entitled to receive any benefits under this Plan.

6.2  Termination Without Cause After Early Retirement Date. If, following his or
     -----------------------------------------------------
     her Early Retirement Date, the Company terminates a Participant's
     employment without Cause, the Participant shall be entitled to receive (a)
     the benefits specified in Section 3.1, if such termination occurs on or
     after the Participant's Normal Retirement Date; or (b) the benefits
     specified in Section 3.2, if such termination occurs prior to the
     Participant's Normal Retirement Date.

6.3  Termination With Cause After Early Retirement Date. If, following his or
     --------------------------------------------------
     her Early Retirement Date, the Company terminates a Participant's
     employment with Cause, then the Participant shall not thereafter be
     entitled to any benefits under this Plan.

6.4  Definition of Cause. As used in this Article 6 and in Section 2.3 above,
     -------------------
     the term "Cause" shall include, without limitation, disloyalty, fraud,
     violation of any federal or state law involving the commission of a crime
     against the Company, commission of a felony, or commission of a gross
     misdemeanor which is determined by the Committee, in its sole and absolute
     discretion, to be of such gravity as to cause significant injury to the
     Company's business or reputation.

           Article 7. - Demotions and Other Employment Status Changes

7.1  Change in Employment Status. If a Participant becomes ineligible to
     ---------------------------
     participate in this Plan as a result of a change in employment status due
     to a demotion or other reason, the Participant's benefits under this Plan,
     if any, shall be determined at the sole discretion of the Committee.

                   Article 8. - Company/Participant Liability

8.1  General Assets. Amounts payable to a Participant shall be paid from the
     --------------
     general assets of the Company exclusively.

8.1  Company's Liability. The Company's liability for the payment of benefits
     -------------------
     shall be defined only by this Plan.

8.2  Limitation of Obligation. Except as expressly provided for in this Plan,
     ------------------------
     the Company shall have no obligation under this Plan to a Participant or
     his or her spouse, if any.

8.3  Participant Cooperation. A Participation must at all times cooperate with
     -----------------------
     the Company and the Committee and furnish all information requested by the
     Company or the Committee in order to facilitate the determination of
     benefits or the administration of this Plan. If a Participant fails
     promptly to cooperate or furnish requested information, the Committee, in
     its sole and absolute discretion, may withhold benefits from the
     Participant.

8.4  Unsecured General Creditor. A Participant and his or her spouse, if any,
     --------------------------
     shall not have, by reason of this Plan, any legal or equitable rights,
     claims or interests in any property or assets of the Company nor shall they
     be beneficiaries of, or have any legal or equitable rights, claims or
     interests in any life insurance policies or annuities or the proceeds
     therefrom owned, or which may be acquired, by the Company. Any and all of
     the Company's assets shall be, and remain, the general, unpledged,
     unrestricted assets of the Company. The

                                        9

<PAGE>

     Company's obligations under this Plan shall be merely those of an unfunded
     and unsecured promise of the Company to pay money in the future.

                     Article 9. - No Guarantee of Employment

9.1  No Guarantee of Employment. Nothing in this Plan shall alter in any manner
     --------------------------
     the employment relationship with a Participant, which is hereby
     acknowledged to be an "at will" employment relationship that can be
     terminated at any time for any reason, with or without cause, or for no
     reason, unless otherwise expressly provided in a written employment
     agreement between the Company and a Participant.

                  Article 10. - Plan Amendment and Termination

10.1 Amendment. The Board may amend this Plan at any time so long as the rights
     ---------
     required to be preserved on termination under Section 10.2 are not reduced.
     The Committee shall have the authority to approve Plan amendments that are
     administrative in nature. No amendment of this Plan or waiver of any of the
     specific provisions of this Plan shall be valid unless made pursuant to a
     duly executed written document.

10.2 Termination. The Board may terminate this Plan at any time, for any reason,
     -----------
     as follows:

     (a)  The Board shall inform the Committee of the termination and the
          effective date there of. The Committee shall give written notice to
          Participants. The effective date of the termination shall not be
          earlier than the first day of the month in which notice is given.

     (b)  After the effective date of termination, no further executives shall
          be selected for participation and no further benefits shall accrue for
          existing Participants.

     (c)  In the event of termination, the retirement benefits of each existing
          Participant shall be paid at the time and in the amount and form
          specified under the terms of this Plan as in effect before
          termination, except that the Participants' Vested Accrued Benefits
          shall be based on their Final Average Earnings and Years of Service as
          of the effective date of Plan termination. Notwithstanding the
          foregoing, retirement benefits may be provided in any alternative form
          that is the Actuarial Equivalent of the form in which the retirement
          benefits were payable under the terms of this Plan in effect before
          termination.

     (d)  Unless otherwise expressly provided at the time of termination of the
          Plan, no Participant shall be entitled to any benefit under this Plan
          on account of the onset of a Disability that commences following the
          effective date of Plan termination.

                         Article 11. - Change of Control

11.1 Change of Control. The Plan contains no change of control provisions.
     -----------------
     Additional benefits, if any, due to a Participant following a change of
     control may be set forth in a separate agreement between the Participant
     and the Company.

                                       10

<PAGE>

                   Article 12. - Other Benefits and Agreements

12.1 Coordination with Other Benefits. The benefits under this Plan for a
     --------------------------------
     Participant and his or her spouse, if any, are in addition to any other
     benefits available under any other plan or program for employees of the
     Company. This Plan shall supplement and shall not supersede, modify or
     amend any other such plan or program.

              Article 13. - Restrictions on Alienation of Benefits

13.1 Nonassignability. Neither a Participant nor any other person shall have any
     ----------------
     right to commute, sell, assign, transfer, pledge, anticipate, mortgage or
     otherwise encumber, transfer, hypothecate or convey, in advance of actual
     receipt, the amounts, if any, payable hereunder, or any part thereof. No
     part of the amounts payable hereunder shall, prior to actual payment, be
     subject to any claims of creditors and, in particular, they shall not be
     subject to attachment, garnishment, seizure or sequestration by any
     creditor for the payment of any debts, judgments, obligations, alimony or
     separate maintenance owed by a Participant or his or her spouse, if any.

                    Article 14. - Administration of the Plan

14.1 Committee Administration. The general administration of this Plan, as well
     ------------------------
     as construction and interpretation hereof, shall be the responsibility of
     the Committee, the number of members of which shall be designated from time
     to time by the Board and the members of which shall be appointed from time
     to time by, and shall serve at the pleasure of, the Board.

14.2 Committee Authority. The Committee shall have the exclusive right and
     -------------------
     authority--

     (a)  To from time to time establish rules, forms and procedures for the
          administration of this Plan;

     (b)  To interpret this Plan and to correct any defect, supply any
          information and reconcile any inconsistency in such manner and to such
          extent as the Committee, in its sole and absolute discretion, shall
          deem necessary or advisable to carry out the purpose of this Plan; and

     (c)  To make all other determinations that the Committee, in its sole and
          absolute discretion, shall deem necessary or advisable in connection
          with the administration of this Plan, including, without limitation,
          determination of (i) the benefit amounts to which a Participant is
          entitled (and the appropriate Final Average Earnings, Retirement
          Offset Amount, Disability Offset Amount, and/or Years of Service to be
          used in determining such benefit amounts); (ii) whether Cause existed
          for the termination of employment of a Participant; (iii) whether or
          not to consent to a Participant's early retirement pursuant to Section
          3.2, and (iv) whether benefits are to be withheld or terminated
          pursuant to Section 6.4 and/or Section 10.3.

     Subject to the claims procedures set forth in Article 15, all rules,
     procedures, interpretations and determinations made by the Committee in
     good faith shall be final, conclusive and binding upon all persons having
     or claiming to have any right or interest under this Plan.

14.3 Committee Indemnity. No member of the Committee shall be liable for any act
     -------------------
     or omission of any other member of the Committee, nor for any act or
     omission on his or her own part, excepting his or her own gross negligence.
     The Company shall indemnify and save harmless each member of the Committee
     against any and all expenses and liabilities arising out of his or her
     membership on the Committee, with the exception of expenses and liabilities
     arising out of his or her own gross negligence.

                                       11

<PAGE>

14.4 Company's Obligations to the Committee. To enable the Committee to perform
     --------------------------------------
     its functions, the Company shall supply full and timely information to the
     Committee on all matters relating to the compensation of Participants,
     their employment status, and such other pertinent facts as the Committee
     may require.

14.5 Legal, Accounting, Clerical, Actuarial and Other Services. The Committee
     ---------------------------------------------------------
     may authorize one or more of its members or any agent to act on its behalf
     and may contract for legal, accounting, clerical, actuarial and other
     services to carry out this Plan. All expenses of the Committee shall be
     paid by the Company.

                         Article 15. - Claims Procedures

15.1 Presentation of Claim. Any Participant or the surviving spouse, if any, of
     ---------------------
     a deceased Participant (such Participant or spouse being referred to below
     as a "Claimant") may deliver to the Committee a written claim for a
     determination with respect to the amounts distributable to such Claimant
     from this Plan. If such a claim relates to the contents of a notice
     received by the Claimant, the claim must be made within sixty (60) days
     after such notice was received by the Claimant. The claim must state with
     particularity the determination desired by the Claimant.

15.2 Notification of Decision. The Committee shall consider a Claimant's claim
     ------------------------
     within a reasonable time and shall notify the Claimant in writing:

     (a)  that the Claimant's requested determination has been made, and that
          the claim has been allowed in full; or

     (b)  that the Committee has reached a conclusion contrary, in whole or in
          part, to the Claimant's requested determination, and such notice must
          set forth in a manner calculated to be understood by the Claimant:

          (i)   the specific reason(s) for the denial of the claim, or any part
                of it;

          (ii)  specific reference(s) to pertinent provisions of this Plan upon
                which such denial was based;

          (iii) a description of any additional material or information
                necessary for the Claimant to perfect the claim, and an
                explanation of why such material or information is necessary;
                and

          (iv)  an explanation of the claim review procedure set forth in
                Section 10.3.

15.3 Review of Denied Claim. Within sixty (60) days after receiving a notice
     ----------------------
     from the Committee that a claim has been denied, in whole or in part, a
     Claimant (or the Claimant's duly authorized representative) may file with
     the Committee a written request for a review of the denial of the claim.
     Thereafter, but not later than ten (10) days after filing of the written
     request for review, the Claimant (or the Claimant's duly authorized
     representative):

     (a)  may review pertinent documents;

     (b)  may submit written comments or other documents; and/or

     (c)  may request a hearing, which request the Committee, in its sole and
          absolute discretion, may grant.

15.4 Decision on Review. The Committee shall render its decision on review
     ------------------
     promptly, and not later than sixty (60) days after the filing of a written
     request for review of the denial, unless a hearing is held or other special
     circumstances require additional time, in which case the Committee's
     decision must be rendered within one hundred twenty (120) days after such
     date. Such decision must be written in a manner calculated to be understood
     by the Claimant, and it must contain:

                                       12

<PAGE>

     (a)  specific reasons for the decision;

     (b)  specific reference(s) to the pertinent Plan provisions upon which the
          decision was based; and

     (c)  such other matters as the Committee deems relevant.

     Any decision on review made by the Committee in good faith shall be final,
     conclusive and binding upon the Claimant, unless the decision is determined
     to have been arbitrary and capricious.

                               Article 16. - Trust

16.1 Funding of Trust. The Company may from time to time transfer to the trustee
     ----------------
     of the Trust such assets as the Committee determines, in its sole and
     absolute discretion, should be transferred thereto.

16.2 Interrelationship of the Plan and the Trust. The provisions of this Plan
     -------------------------------------------
     shall govern the rights of a Participant to receive distributions pursuant
     to this Plan. The provisions of the Trust shall govern the rights of the
     Company, Participants and the creditors of the Company to the assets
     transferred to the Trust. The Company shall at all times remain liable to
     carry out its obligations under this Plan. The Company's obligations under
     this Plan may be satisfied with Trust assets distributed pursuant to the
     terms of the Trust.

                           Article 17. - Miscellaneous

17.1 Notice. Any notice required or permitted to be given under this Plan by a
     ------
     Participant or a Claimant shall be in writing and shall be hand delivered,
     or mailed via registered or certified mail, return receipt requested, to:

               AIRBORNE EXPRESS
               Senior Vice President, Human Resources
               3101 Western Avenue
               Seattle, Washington 98111
               (206) 281-4812

     Any notice to a Participant or his or her spouse, if any, required or
     permitted to be given under this Plan by the Committee or the Board shall
     be in writing and shall be hand delivered to the Participant or spouse, or
     mailed via registered or certified mail, return receipt requested, to the
     last known address for the Participant or spouse as shown on the records of
     Airborne Express.

17.2 Successors. This Plan shall be binding upon Airborne Express and its
     ----------
     successors and assigns, and upon a Participant, the Participant's spouse,
     if any, and their heirs, executors and administrators.

17.3 Governing Law. This Plan shall be governed by and construed under the laws
     -------------
     of the State of Washington.

17.4 Headings. The headings of the articles, sections and paragraphs of this
     --------
     Plan are for convenience only and shall not control or affect the meaning
     or construction of any of its provisions.

17.5 Validity. In the event any provision of this Plan shall be illegal or
     --------
     invalid for any reason, the illegality or invalidity of that provision
     shall not affect the remaining parts hereof, but this Plan shall be
     construed and enforced as if such illegal and invalid provision had never
     been inserted herein.

                                       13

<PAGE>

IN WITNESS WHEREOF, Airborne Express has signed this Plan this 15/th/ day of
August, 2001.

                                 AIRBORNE EXPRESS, INC.

                              By /s/ Lanny H. Michael
                                 ------------------------------------------
                                 Print Name: Lanny H. Michael
                                             ------------------------------
                                 Title:  Senior Vice President and CFO
                                        -----------------------------------

                                       14