EX-3

EXHIBIT 3(a)

              RESTATED CERTIFICATE OF INCORPORATION
                               OF
                         AIRBORNE, INC.


     FIRST.    1.1  The name of the corporation is

                         AIRBORNE, INC.

     SECOND.   2.1  The address of its registered office in the
State of Delaware is 1013 Centre Road, in the City of Wilmington,
County of New Castle. The name of its registered agent at such
address is The Prentice-Hall Corporation System, Inc.

     THIRD.    3.1  The nature of the business or purposes to be
conducted or promoted is:

                    3.1.1     To transport intrastate,
interstate, and/or foreign commerce by aircraft, motor, rail,
water vehicle and/or other means of transportation, passengers,
freight, securities and articles of merchandise of every nature
and description, either directly, indirectly or as agent or
principal; to engage in and carry on the business of receiving,
carrying, transporting, and delivering for compensation,
passengers, baggage, goods, wares, mail matter, packages,
freight, and merchandise of every kind and description, to, from
and between airports, air terminals, railroad stations,
terminals, or wharves, and to, from and between any other places
whatsoever, by fixed routes or otherwise either public, quasi-
public, or private; to engage in and carry on a general shipping
and forwarding business, a general transfer, express and baggage
business; to engage in and carry on a general taxi business; to
engage in and carry on a general trucking, contracting, cooperage
and stevedore business, to engage in and carry on a general
brokerage, factoring and import-export business; and to contract
with air carriers, railroads, warehouses, water carriers, motor
carriers and transportation lines or carriers of every kind, as
well as with corporation, copartnerships, business concerns of
every kind, individuals, and the public in general, covering,
relating, or incidental to any of the foregoing purposes.

                    3.1.2     It is the purpose of this
corporation to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law
of Delaware and none of the above-stated purposes shall be or be
deemed to be in limitation of such general purposes.

     FOURTH.   4.1  The total number of shares of all classes of
capital stock which the corporation shall have authority to issue
is one hundred twenty-six million (126,000,000), of which six
million (6,000,000) shares shall be Preferred Stock, without par
value, issuable in one or more series, and one hundred twenty
million (120,000,000) shares shall be Common Stock, par value One
Dollar ($1.00) per share, amounting in the aggregate to One
Hundred Twenty Million Dollars ($120,000,000).

               4.2  The Board of Directors is hereby expressly
authorized, at any time or from time to time, to divide any or
all of the shares of Preferred Stock into one or more series, and
in the resolution or resolutions establishing a particular
series, before issuance of any of the shares thereof, to fix and
determine the number of shares and the designation of such
series, so as to distinguish it from the shares of all other
series and classes, and to fix and determine the preferences,
voting rights, qualifications, privileges, limitations, options,
conversion rights, restrictions and other special or relative
rights of the Preferred Stock or of such series to the fullest
extent now or hereafter permitted by the laws of the State of
Delaware, including, but not limited to, the variations between
different series in the following respects:

                    4.2.1     The distinctive designation of such
series and the number of shares which shall constitute such
series, which number may be increased or decreased (but not below
the number of shares thereof then outstanding) from time to time
by the Board of Directors;

                    4.2.2     The annual dividend rate for such
series, and the date or dates from which dividends shall commence
to accrue;

                    4.2.3     The price or prices at which, and
the terms and conditions on which, the shares of such series may
be made redeemable;

                    4.2.4     The purchase or sinking fund
provisions, if any, for the purchase or redemption of shares of
such series;

                    4.2.5     The preferential amount or amounts
payable upon shares of such series in the event of the
liquidation, dissolution or winding up of the corporation;

                    4.2.6     The voting rights, if any, of
shares of such series;

                    4.2.7     The terms and conditions, if any,
upon which shares of such series may be converted and the class
or classes or series of shares of the corporation or other
securities into which such shares may be converted;

                    4.2.8     The relative seniority, parity or
junior rank of such series as to dividends or assets with respect
to any other classes or series of stock then or thereafter to be
issued; and

                    4.2.9     Such other terms, qualifications,
privileges, limitations, options, restrictions, and special or
relative rights and preferences, if any, of shares of such series
as the Board of Directors may, at the time of such resolution or
resolutions, lawfully fix and determine under the laws of the
State of Delaware.

               Unless otherwise provided in a resolution or
resolutions establishing any particular series, the aggregate
number of authorized shares of Preferred Stock may be increased
by an amendment of the Certificate of Incorporation approved
solely by a majority vote of the outstanding shares of Common
Stock (or solely with a lesser vote of the Common Stock, or
solely by action of the Board of Directors, if permitted by law
at the time).

               All shares of any one series shall be alike in
every particular, except with respect to the accrual of dividends
prior to the date of issuance.

        SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK

                         Section 1.  Designation and Number of
Shares. The shares of such series shall be designated as "Series
A Participating Cumulative Preferred Stock (without par value)"
(the "Series A Preferred Stock"). The number of shares initially
constituting the Series A Preferred Stock shall be 300,000;
provided, however, that, if more than a total of 300,000 shares
of Series A Preferred Stock shall be issuable by the corporation
upon the exercise of Rights (the "Rights") outstanding under the
Rights Agreement dated as of February 14, 1997 between Airborne
Freight Corporation, a Delaware corporation ("ABF"), and The Bank
of New York, a New York banking corporation, as Rights Agent (the
"Rights Agreement"), following the date (the "Effective Date") on
which the corporation succeeds to the rights and obligations of
ABF under the Rights Agreement in connection with the merger
pursuant to which ABF becomes a wholly-owned subsidiary of the
corporation, the Board of Directors of the corporation, pursuant
to Section 151(g) of the General Corporation Law of the State of
Delaware, shall direct by resolution or resolutions that a
certificate be properly executed, acknowledged, filed and
recorded, in accordance with the provisions of Section 103
thereof, providing for the total number of shares of Series A
Preferred Stock authorized to be issued to be increased (to the
extent that the Certificate of Incorporation then permits) to the
largest number of whole shares (rounded up to the nearest whole
number) issuable upon exercise of such Rights.

                         Section 2.  Dividends or Distributions.
(a) Subject to the prior and superior rights of the holders of
shares of any other series of Preferred Stock or other class of
capital stock of the corporation ranking prior and superior to
the shares of Series A Preferred Stock with respect to dividends,
the holders of shares of the Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of
Directors, out of the assets of the corporation legally available
therefor, (1) quarterly dividends payable in cash on the last day
of each fiscal quarter in each year, or such other dates as the
Board of Directors of the corporation shall approve (each such
date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or a fraction of a share of
Series A Preferred Stock, in the amount of $30 per whole share
(rounded to the nearest cent) less the amount of all cash
dividends declared on the Series A Preferred Stock pursuant to
the following clause (2) since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock (the
total of which shall not, in any event, be less than zero) and
(2) dividends payable in cash on the payment date for each cash
dividend declared on the Common Stock in an amount per whole
share (rounded to the nearest cent) equal to the Formula Number
(as hereinafter defined) then in effect times the cash dividends
then to be paid on each share of Common Stock. In addition, if
the corporation shall pay any dividend or make any distribution
on the Common Stock payable in assets, securities or other forms
of noncash consideration (other than dividends or distributions
solely in shares of Common Stock), then, in each such case, the
corporation shall simultaneously pay or make on each outstanding
whole share of Series A Preferred Stock a dividend or
distribution in like kind equal to the Formula Number then in
effect times such dividend or distribution on each share of the
Common Stock. As used herein, the "Formula Number" shall be 200;
provided, however, that, if at any time after the Effective Date,
the corporation shall (i) declare or pay any dividend on the
Common Stock payable in shares of Common Stock or make any
distribution on the Common Stock in shares of Common Stock, (ii)
subdivide (by a stock split or otherwise) the outstanding shares
of Common Stock into a larger number of shares of Common Stock or
(iii) combine (by a reverse stock split or otherwise) the
outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then in each such event the Formula
Number shall be adjusted to a number determined by multiplying
the Formula Number in effect immediately prior to such event by a
fraction, the numerator of which is the number of shares of
Common Stock that are outstanding immediately after such event
and the denominator of which is the number of shares of Common
Stock that are outstanding immediately prior to such event (and
rounding the result to the nearest whole number); and provided
further that, if at any time after the Effective Date, the
corporation shall issue any shares of its capital stock in a
merger, reclassification, or change of the outstanding shares of
Common Stock, then in each such event the Formula Number shall be
appropriately adjusted to reflect such merger, reclassification
or change so that each share of Preferred Stock continues to be
the economic equivalent of a Formula Number of shares of Common
Stock prior to such merger, reclassification or change.

                              (b)  The corporation shall declare
a dividend or distribution on the Series A Preferred Stock as
provided in Section 2(a) immediately prior to or at the same time
it declares a dividend or distribution on the Common Stock (other
than a dividend or distribution solely in shares of Common
Stock); provided, however, that, in the event no dividend or
distribution (other than a dividend or distribution in shares of
Common Stock) shall have been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of
$30 per share on the Series A Preferred Stock shall nevertheless
be payable on such subsequent Quarterly Dividend Payment Date.
The Board of Directors may fix a record date for the
determination of holders of shares of Series A Preferred Stock
entitled to receive a dividend or distribution declared thereon,
which record date shall be the same as the record date for any
corresponding dividend or distribution on the Common Stock.

                              (c)  Dividends shall begin to
accrue and be cumulative on outstanding shares of Series A
Preferred Stock from and after the Quarterly Dividend Payment
Date next preceding the date of original issue of such shares of
Series A Preferred Stock; provided, however, that dividends on
such shares which are originally issued after the record date for
the determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend and on or prior to
the next succeeding Quarterly Dividend Payment Date shall begin
to accrue and be cumulative from and after such Quarterly
Dividend Payment Date. Notwithstanding the foregoing, dividends
on shares of Series A Preferred Stock which are originally issued
prior to the record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive a
quarterly dividend on the first Quarterly Dividend Payment Date
shall be calculated as if cumulative from and after the last day
of the fiscal quarter next preceding the date of original
issuance of such shares. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Preferred
Stock in an amount less than the total amount of such dividends
at the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the
time outstanding.

                              (d)  So long as any shares of the
Series A Preferred Stock are outstanding, no dividends or other
distributions shall be declared, paid or distributed, or set
aside for payment or distribution, on the Common Stock unless, in
each case, the dividend required by this Section 2 to be declared
on the Series A Preferred Stock shall have been declared.

                              (e)  The holders of the shares of
Series A Preferred Stock shall not be entitled to receive any
dividends or other distributions except as provided herein.

                         Section 3.  Voting Rights.  The holders
of shares of Series A Preferred Stock shall have the following
voting rights:

                              (a)  Each holder of Series A
Preferred Stock shall be entitled to a number of votes equal to
the Formula Number then in effect, for each share of Series A
Preferred Stock held of record on each matter on which holders of
the Common Stock or stockholders generally are entitled to vote,
multiplied by the maximum number of votes per share which any
holder of the Common Stock or stockholders generally then have
with respect to such matter (assuming any holding period or other
requirement to vote a greater number of shares is satisfied).

                              (b)  Except as otherwise provided
herein or by applicable law, the holders of shares of Series A
Preferred Stock and the holders of shares of Common Stock shall
vote together as one class for the election of directors of the
corporation and on all other matters submitted to a vote of
stockholders of the corporation.

                              (c)  If, at the time of any annual
meeting of stockholders for the election of directors, the
equivalent of six quarterly dividends (whether or not
consecutive) payable on any share or shares of Series A Preferred
Stock are in default, the number of directors constituting the
Board of Directors of the corporation shall be increased by two.
In addition to voting together with the holders of Common Stock
for the election of other directors of the corporation, the
holders of record of the Series A Preferred Stock, voting
separately as a class to the exclusion of the holders of Common
Stock, shall be entitled at said meeting of stockholders (and at
each subsequent annual meeting of stockholders), unless all
dividends in arrears have been paid or declared and set apart for
payment prior thereto, to vote for the election of two directors
of the corporation, the holders of any Series A Preferred Stock
being entitled to cast a number of votes per share of Series A
Preferred Stock equal to the Formula Number. Until the default in
payments of all dividends which permitted the election of said
directors shall cease to exist, any director who shall have been
so elected pursuant to the next preceding sentence may be removed
at any time, either with or without cause, only by the
affirmative vote of the holders of the shares of Series A
Preferred Stock at the time entitled to cast a majority of the
votes entitled to be cast for the election of any such director
at a special meeting of such holders called for that purpose, and
any vacancy thereby created may be filled by the vote of such
holders. If and when such default shall cease to exist, the
holders of the Series A Preferred Stock shall be divested of the
foregoing special voting rights, subject to revesting in the
event of each and every subsequent like default in payments of
dividends. Upon the termination of the foregoing special voting
rights, the terms of office of all persons who may have been
elected directors pursuant to said special voting rights shall
forthwith terminate, and the number of directors constituting the
Board of Directors shall be reduced by two. The voting rights
granted by this Section 3(c) shall be in addition to any other
voting rights granted to the holders of the Series A Preferred
Stock in this Section 3.

                              (d)  Except as provided herein, in
Section 11 or by applicable law, holders of Series A Preferred
Stock shall have no special voting rights and their consent shall
not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for authorizing
or taking any corporate action.

                         Section 4.  Certain Restrictions. (a)
Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares
of Series A Preferred Stock outstanding shall have been paid in
full, the corporation shall not

                                   (i)  declare or pay dividends
on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Preferred Stock;

                                   (ii) declare or pay dividends
on or make any other distributions on any shares of stock ranking
on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and
all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders
of all such shares are then entitled;

                                   (iii)     redeem or purchase
or otherwise acquire for consideration shares of any stock
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock;
provided that the corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for
shares of any stock of the corporation ranking junior (either as
to dividends or upon dissolution, liquidation or winding up) to
the Series A Preferred Stock; or

                                   (iv) purchase or otherwise
acquire for consideration any shares of Series A Preferred Stock,
or any shares of stock ranking on a parity with the Series A
Preferred Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective
series or classes.

                              (b)  The corporation shall not
permit any subsidiary of the corporation to purchase or otherwise
acquire for consideration any shares of stock of the corporation
unless the corporation could, under paragraph (a) of this Section
4, purchase or otherwise acquire such shares at such time and in
such manner.

                         Section 5.  Liquidation Rights.  Upon
the liquidation, dissolution or winding up of the corporation,
whether voluntary or involuntary, no distribution shall be made
(1) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to
the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received an
amount equal to the accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (x) $100 per
whole share or (y) an aggregate amount per share equal to the
Formula Number then in effect times the aggregate amount to be
distributed per share to holders of Common Stock or (2) to the
holders of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series
A Preferred Stock and all other such parity stock in proportion
to the total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up.

                         Section 6.  Consolidation, Merger, etc.
In case the corporation shall enter into any consolidation,
merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, then in any such case the
then outstanding shares of Series A Preferred Stock shall at the
same time be similarly exchanged or changed into an amount per
share equal to the Formula Number then in effect times the
aggregate amount of stock, securities, cash or any other property
(payable in kind), as the case may be, into which or for which
each share of Common Stock is exchanged or changed. In the event
both this Section 6 and Section 2 appear to apply to a
transaction, this Section 6 will control.

                         Section 7.  No Redemption; No Sinking
Fund. (a) The shares of Series A Preferred Stock shall not be
subject to redemption by the corporation or at the option of any
holder of Series A Preferred Stock except as set forth in Section
5 of Article Fourth of the Restated Certificate of Incorporation
of the corporation; provided, however, that the corporation may
purchase or otherwise acquire outstanding shares of Series A
Preferred Stock in the open market or by offer to any holder or
holders of shares of Series A Preferred Stock.

                              (b)  The shares of Series A
Preferred Stock shall not be subject to or entitled to the
operation of a retirement or sinking fund.

                         Section 8.  Ranking.  The Series A
Preferred Stock shall rank junior to all other series of
Preferred Stock of the corporation unless the Board of Directors
shall specifically determine otherwise in fixing the powers,
preferences and relative, participating, optional and other
special rights of the shares of such series and the
qualifications, limitations and restrictions thereof.

                         Section 9.  Fractional Shares. The
Series A Preferred Stock shall be issuable upon exercise of the
Rights issued pursuant to the Rights Agreement in whole shares or
in any fraction of a share that is one one-hundredth of a share
or any integral multiple of such fraction which shall entitle the
holder, in proportion to such holder's fractional shares, to
receive dividends, exercise voting rights, participate in
distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock. In lieu of fractional
shares, the corporation, prior to the first issuance of a share
or a fraction of a share of Series A Preferred Stock, may elect
(a) to make a cash payment as provided in the Rights Agreement
for fractions of a share other than one one-hundredths of a share
or any integral multiple thereof or (b) to issue depository
receipts evidencing such authorized fraction of a share of Series
A Preferred Stock pursuant to an appropriate agreement between
the corporation and a depository selected by the corporation;
provided that such agreement shall provide that the holders of
such depository receipts shall have all the rights, privileges
and preferences to which they are entitled as holders of the
Series A Preferred Stock.

                         Section 10.  Reacquired Shares.  Any
shares of Series A Preferred Stock purchased or otherwise
acquired by the corporation in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock, without designation as to
series until such shares are once more designated as part of a
particular series by the Board of Directors pursuant to the
provisions of Section 4.2 of this Article Fourth.

                         Section 11.  Amendment.  None of the
powers, preferences and relative, participating, optional and
other special rights of the Series A Preferred Stock as provided
herein or in the Certificate of Incorporation shall be amended in
any manner which would alter or change the powers, preferences,
rights or privileges of the holders of Series A Preferred Stock
so as to affect them adversely without the affirmative vote of
the holders of at least 66-2/3% of the outstanding shares of
Series A Preferred Stock, voting as a separate class; provided,
however, that no such amendment approved by the holders of at
least 66-2/3% of the outstanding shares of Series A Preferred
Stock shall be deemed to apply to the powers, preferences, rights
or privileges of any holder of shares of Series A Preferred Stock
originally issued upon exercise of the Rights after the time of
such approval without the approval of such holder.

                    4.3  Except for and subject to those rights
expressly granted to the holders of Preferred Stock or any series
thereof by resolution or resolutions adopted by the Board of
Directors pursuant to Section 4.2 of this Article Fourth and
except as may be provided by the laws of the State of Delaware,
the holders of Common Stock shall have exclusively all other
rights of shareholders.

                    4.4.1     The Bylaws shall divide the
directors into three classes and prescribe the tenure of office
of the several classes; but such Bylaws shall not provide for the
election of any class for a period shorter than from the time of
election following the division into classes until the next
annual meeting, and thereafter for a period shorter than the
interval between annual meetings or for a period longer than
three years and shall provide that the term of the office of at
least one class shall expire each year.  At all elections of
directors, voting shall be by class.

                    4.4.2     At all elections of directors of
the corporation, each holder of shares of Common Stock shall be
entitled to as many votes as shall equal the number of votes
which (except for such provision as to cumulative voting) he
would be entitled to cast for the election of directors with
respect to his shares of stock multiplied by the number of
directors to be elected, and he may cast all of such votes for a
single director or may distribute them among the number to be
voted for, or for any two or more of them as he may see fit.

     FIFTH.    The corporation is to have perpetual existence.

     SIXTH.    6.1  In furtherance and not in limitation of the
powers conferred by statute, the board of directors is expressly
authorized:

                    6.1.1     To make, alter or repeal the bylaws
of the corporation.

                    6.1.2     To authorize and cause to be
executed mortgages and liens upon the real and personal property
of the corporation.

                    6.1.3     To set apart out of any of the
funds of the corporation available for dividends a reserve or
reserves for any proper purpose and to abolish any such reserve
in the manner in which it was created.

                    6.1.4     By a majority of the whole board,
to designate one or more committees, each committee to consist of
two or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at
any meeting of the committee. Any such committee, to the extent
provided in the resolution or in the bylaws of the corporation,
shall have and may exercise the powers of the board of directors
in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to
all papers which may require it; provided, however, the by-laws
may provide that in the absence or disqualification of any member
of such committee or committees, the member or members thereof
present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in
the place of any such absent or disqualified member.

                    6.1.5     When and as authorized by the
affirmative vote of the holders of a majority of the stock issued
and outstanding having voting power given at a stockholders'
meeting duly called upon such notice as is required by statute,
or when authorized by the written consent of the holders of a
majority of the voting stock issued and outstanding, to sell,
lease or exchange all or substantially all of the property and
assets of the corporation, including its good will and its
corporate franchises, upon such terms and conditions and for such
consideration, which may consist in whole or in part of money or
property including shares of stock in, and/or other securities
of, any other corporation or corporations, as its board of
directors shall deem expedient and for the best interests of the
corporation.

     SEVENTH.  7.1  Whenever a compromise or arrangement is
proposed between this corporation and its creditors or any class
of them and/or between this corporation and its stockholders or
any class of them, any court of equitable jurisdiction within the
State of Delaware may, on the application in a summary way of
this corporation or of any creditor or stockholder thereof, or on
the application of any receiver or receivers appointed for this
corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for this corporation under
the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or
stockholders or class of stockholders of this corporation, as the
case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the
case may be, agree to any compromise or arrangement and to any
reorganization of this corporation as a consequence of such
compromise or arrangement, the said compromise or arrangement and
the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders
or class of stockholders, of this corporation, as the case may
be, and also on this corporation.

     EIGHTH.   8.1  Meetings of shareholders may be held within
or without the State of Delaware as the Bylaws may provide.
Notwithstanding any provision of law, no action may be taken by
the shareholders, including without limitation amendment of this
Certificate or of the Bylaws, except at a meeting duly called in
accordance with the Bylaws.

               8.2  The books of this corporation may be kept
(subject to any provision contained in the statutes) outside the
State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Bylaws of
the corporation. Election of Directors need not be by written
ballot unless the Bylaws of the corporation shall so provide.

     NINTH.    9.1  The corporation shall at all times indemnify
its officers and directors from and against all expenses and
liabilities of whatsoever nature to the full extent permitted by
Delaware law, and without limiting the generality of the
foregoing, shall indemnify any director or officer or any former
director or former officer or any person who may have served at
its request as a director or officer of another corporation, and
the heirs, personal representatives and estates of each of them,
against all costs and expenses including attorneys' fees
reasonably incurred by him or imposed on him in connection with
any action, proceeding or investigation of whatsoever nature,
civil, administrative or criminal (including any shareholder's
action and any other action in which the corporation is a party,
plaintiff or defendant) in which he is or may be made a party or
is proceeded against or involved by reason of any action
whatsoever alleged to have been taken by him or omitted by him as
such director or officer, and against any liabilities, judgments,
fines, penalties or damages imposed against him in such action,
proceeding or investigation, or sums paid in settlement or
compromise thereof with the approval of the Board of Directors;
provided, that the provisions of this paragraph shall not apply
unless such person acted in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation, and
shall not apply if such person shall be duly and finally adjudged
(1) to be guilty of willful misconduct, bad faith or gross
negligence in the performance of his duties to the corporation,
in a derivative action or one brought by the corporation, or (2)
to be guilty of willful misconduct or bad faith, if such action
or proceeding is brought by a third party.

               9.2  Expenses incurred in defending such action,
proceeding or investigation may be paid by the corporation in
advance of the final disposition thereof as authorized by the
Board of Directors in the specific case and upon receipt of an
undertaking by or on behalf of the director or officer to repay
such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation.

               9.3  The corporation shall have power to purchase
and maintain insurance on behalf of any person who is or was an
officer, director, employee or agent of the corporation, or is or
was serving at the request of the corporation as an officer,
director, employee and agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
whatsoever asserted against him and incurred by him in any such
capacity or arising out of his status as such, and against any
and all expenses in connection therewith, whether or not the
corporation would have the power to indemnify him against such
liability under the provisions of this certificate of
incorporation or under Delaware law.

          TENTH.    10.1  The corporation reserves the right to
amend, alter, change or repeal any provision contained in this
certificate of incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.

          ELEVENTH. 11.1  A higher than majority shareholder vote
for certain Business Combinations shall be required as follows
(all capitalized terms being used as subsequently defined
herein):

                    (a)  In addition to any affirmative vote
required by law or the Certificate of Incorporation, and except
as otherwise expressly provided in Section 11.2 of this Article
Eleventh:

                         (1)  any merger or consolidation of the
corporation or any Subsidiary with (A) any Interested Shareholder
or with (B) any other corporation (whether or not itself an
Interested Shareholder) which is, or after such merger or
consolidation would be, an Affiliate or Associate of an
Interested Shareholder;

                         (2)  any sale, lease, exchange,
mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions) to or with any
Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder of any assets of the corporation or any
Subsidiary having an aggregate Fair Market Value of $10,000,000
or more;

                         (3)  the issuance or sale by the
corporation or any Subsidiary (in one transaction or a series of
transactions) of any securities of the corporation or any
Subsidiary to any Interested Shareholder or any Affiliate or
Associate of any Interested Shareholder in exchange for cash,
securities or other consideration (or a combination thereof)
having an aggregate Fair Market Value of $10,000,000 or more;

                         (4)  the adoption of any plan or
proposal for the liquidation or dissolution of the corporation
proposed by or on behalf of any Interested Shareholder or any
Affiliate or associate of any Interested Shareholder; or

                         (5)  any reclassification of securities
(including any reverse stock split), or recapitalization of the
corporation, or any merger or consolidation of the corporation
with any of it Subsidiaries or any transaction (whether or not
with or into or otherwise involving an Interested Shareholder)
which has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity securities or securities convertible into equity
securities of the corporation or any Subsidiary which is directly
or indirectly owned by any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder; shall
require the affirmative vote of the holders of at least 80% of
the voting power of the then outstanding shares of common stock
of the corporation entitled to vote in an annual election of
directors, and at least 80% of the voting power of all shares of
all classes of capital stock of the corporation entitled to vote
in an annual election of directors (all such stock of all classes
constituting the "Voting Stock"), voting together as a single
class. Such affirmative vote shall be required notwithstanding
the fact that no vote may be required, or that a lesser
percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.

                    (b)  The term "Business Combination" as used
in this Article Eleventh shall mean any transaction which is
referred to in any one or more of clauses (1) through (5) of
paragraph (a) of Section 11.1 of this Article Eleventh.

               11.2 The provisions of Section 11.1 of this
Article Eleventh shall not be applicable to any Business
Combination, and such Business Combination shall require only
such affirmative vote (if any) as is required by law, any other
provision of the Certificate of such corporation or any agreement
with any national securities exchange, if all of the conditions
specified in either of the following paragraphs (a) or (b) are
met:

                    (a)  The Business Combination shall have been
approved by a majority of the Continuing Directors; or

                    (b)  All of the following six conditions
shall have been met:

                         (1)  The transaction constituting the
Business Combination shall provide for a consideration to be
received by holders of Common Stock in exchange for their stock,
and the aggregate amount of the cash and the Fair Market Value as
of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders
of Common Stock in such Business Combination shall be at least
equal to the highest of the following:

                              (A)  (if applicable) the highest
per share price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid in order to acquire any
shares of Common Stock beneficially owned by the Interested
Shareholder which were acquired (i) within the two-year period
immediately prior to the first public announcement of the
proposed Business Combination (the "Announcement Date") or (ii)
in the transaction in which it became an Interested Shareholder,
whichever is higher; and

                              (B)  the Fair Market Value per
share of Common Stock on the Announcement Date or on the date on
which the Interested Shareholder became an Interested Shareholder
(the "Determination Date"), whichever is higher.

                         (2)  If the transaction constituting the
Business Combination shall provide for a consideration to be
received by holders of any class of outstanding Voting Stock
other than Common Stock, the aggregate amount of the cash and the
Fair Market Value as of the date of the consummation of the
Business Combination of consideration other than cash to be
received per share by holders of shares of such Voting Stock
shall be at least equal to the highest of the following (it being
intended that the requirements of this clause (b)(2) shall be
required to be met with respect to every class of outstanding
Voting Stock, whether or not the Interested Shareholder
beneficially owns any shares of a particular class of Voting
Stock):

                              (A)  (if applicable) the highest
per share price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid in order to acquire any
shares of such class of Voting Stock beneficially owned by the
Interested Shareholder which were acquired (i) within the two-
year period immediately prior to the Announcement Date or (ii) in
the transaction in which it became an Interested Shareholder,
whichever is higher;

                              (B)  (if applicable) the highest
preferential amount per share to which the holders of shares of
such class of Voting Stock are entitled in the event of any
voluntary or involuntary liquidation, dissolution or winding up
of the corporation; and

                              (C)  the Fair Market Value per
share of such class of Voting Stock on the Announcement Date or
on the Determination Date, whichever is higher.

                         (3)  The consideration to be received by
holders of a particular class of outstanding Voting Stock
(including Common Stock) shall be in cash or in the same form as
was previously paid in order to acquire shares of such class of
Voting Stock which are beneficially owned by the Interested
Shareholder. If the Interested Shareholder beneficially owns
shares of any class of Voting Stock which were acquired with
varying forms of consideration, the form of consideration to be
received by holders of such class of Voting Stock shall be either
cash or the form used to acquire the largest number of shares of
such class of Voting Stock beneficially owned by it.

                         (4)  After such Interested Shareholder
has become an Interested Shareholder and prior to the
consummation of such Business Combination: (A) there shall have
been (i) no reduction in the annual rate of dividends paid on the
Common Stock (except as necessary to reflect any subdivision of
the Common Stock), except as approved by a majority of the
Continuing Directors, and (ii) an increase in such annual rate of
dividends (as necessary to prevent any such reduction) in the
event of any reclassification (including any reverse stock
split), recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of
outstanding shares of the Common Stock, unless the failure so to
increase such annual rate is approved by a majority of the
Continuing Directors; and (B) such Interested Shareholder shall
not have become the beneficial owner of any additional shares of
Voting Stock except as part of the transaction in which it became
an Interested Shareholder.

                         (5)  After such Interested Shareholder
has become an Interested Shareholder, such Interested Shareholder
shall not have received the benefit, directly or indirectly
(except proportionately as a shareholder), of any loans,
advances, guarantees, pledges or other financial assistance or
any tax credits or other tax advantages provided by the
corporation, whether in anticipation of or in connection with
such Business Combination or otherwise.

                         (6)  A proxy or information statement
describing the proposed Business Combination and complying with
the requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to
public shareholders of the corporation at least 30 days prior to
the consummation of such Business Combination (whether or not
such proxy or information statement is required to be mailed
pursuant to such Act or subsequent provisions).

               11.3 For the purposes of this Article Eleventh:

                    (a)  A "person" shall mean any individual,
firm, corporation or other entity.

                    (b)  "Interested Shareholder" at any
particular time shall mean any person (other than the corporation
or any Subsidiary) who or which:

                         (1)  is at such time the beneficial
owner, directly or indirectly, of more than 20% of the voting
power of the outstanding Voting Stock;

                         (2)  is at such time a director of the
corporation and at any time within the two-year period
immediately prior to such time was the beneficial owner, directly
or indirectly, of more than 20% of the voting power of the then
outstanding Voting Stock; or

                         (3)  is at such time an assignee of or
has otherwise succeeded to the beneficial ownership of any shares
of Voting Stock which were at any time within the two-year period
immediately prior to such time beneficially owned by any
Interested Shareholder, if such assignment or succession shall
have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act of 1933.

                    (c)  A person shall be a "beneficial owner"
of any shares of Voting Stock:

                         (1)  which such person or any of its
Affiliates or Associates beneficially owns, directly or
indirectly;

                         (2)  which such person or any of its
Affiliates or Associates has (A) the right to acquire (whether or
not such right is exercisable immediately) pursuant to any
agreement, arrangements or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement,
arrangement or understanding; or

                         (3)  which are beneficially owned,
directly or indirectly, by any other person with which such
person or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.

                    (d)  For the purposes of determining whether
a person is an Interested Shareholder pursuant to paragraph (b)
of this Section 11.3, the number of shares of Voting Stock deemed
to be outstanding shall include shares deemed owned by an
Interested Shareholder through application of paragraph (c) of
this Section 11.3 but shall not include any other shares of
Voting Stock which may be issuable pursuant to any agreement,
arrangements or understanding, or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise.

                    (e)  "Affiliate" or "Associate" shall have
the respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange
Act of 1934, as in effect on March 1, 1984 (the term "registrant"
in said Rule 12b-2 meaning in this case the corporation).

                    (f)  "Subsidiary" means any corporation of
which a majority of any class of equity security is owned,
directly or indirectly, by the corporation; provided, however,
that for the purposes of the definition of Interested Shareholder
set forth in paragraph (b) of this Section 11.3, the term
"Subsidiary" shall mean only a corporation of which a majority of
each class of equity security is owned, directly or indirectly,
by the corporation.

                    (g)  "Continuing Director" means any member
of the Board of Directors of the corporation who is unaffiliated
with, and not a representative of, the Interested Shareholder and
was a member of the Board of Directors prior to the time that the
Interested Shareholder became an Interested Shareholder, and any
successor of a Continuing Director who is unaffiliated with and
not a representative of, the Interested Shareholder and is
recommended to succeed a Continuing Director by a majority of the
Continuing Directors then on the Board of Directors.

                    (h)  "Fair Market Value" means:  (1) in the
case stock of the corporation, the highest closing sale price
during a 30-day period immediately preceding the date in question
of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks ("Composite Tape"), or, if such stock is
not quoted on the Composite Tape, on the New York Stock Exchange
(NYSE), or, if such stock is not listed on the NYSE, on the
principal United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is listed,
or, if such stock is not listed on any such exchange, the highest
closing sale price or closing bid quotation (whichever is higher,
if both are reported) with respect to a share of such stock
during the 30-day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ") or any system then in use, or if no
such quotations are available, the fair market value on the date
in question of a share of such stock as determined by the Board
of Directors in good faith; (2) in the case of securities, other
than stock of the corporation, which are registered under Section
12 of the 1934 Act, the mean (average) of the closing sale prices
for the five business days prior to the date in question for such
securities on the Composite Tape, or if such securities are not
listed on the NYSE, on the principal United States securities
exchange registered under the 1934 Act on which such securities
are listed, or, if such securities are not listed on any such
exchange but are listed on the NASDAQ national list or national
market system, the average closing sale price or closing bid
quotation (whichever is higher, if both are reported) for the
five business days prior to the date in question, as quoted on
the NASDAQ system, or if such securities are not so listed or
such quotations are not available, then the Market Value of such
securities as determined by the Board of Directors in good faith;
and (3) in the case of property other than cash or securities of
the type described above, the fair market value of such property
on the date in question as determined by the Board of Directors
in good faith.

                    (i)  In the event of any Business Combination
in which the corporation survives, the phrase "consideration
other than cash to be received" as used in paragraph (b) of
Section 11.2 of this Article Eleventh shall include the shares of
Common Stock and/or the shares of any other class of outstanding
Voting Stock retained by the holders of such shares.

               11.4 The Board of Directors shall have the power
and duty to determine for the purpose of this Article Eleventh,
on the basis of information known to them after reasonable
inquiry (a) whether a person is an Interested Shareholder, (b)
the number of shares of Voting Stock beneficially owned by any
person, (c) whether a person is an Affiliate or Associate of
another, and (d) whether the assets which are the subject of any
business transaction which may be a Business Combination have, or
the consideration to be received for the issuance or transfer of
securities by the corporation or any Subsidiary in any
transaction which may be a Business Combination has, an aggregate
Fair Market Value of $10,000,000 or more. Any such determination
made in good faith shall be binding and conclusive on all
parties.

               11.5 Nothing contained in this Article Eleventh
shall be construed to relieve any Interested Shareholder from any
fiduciary obligation imposed by law.

               11.6 Notwithstanding any other provisions hereof
or of law, the Certificate of Incorporation or the Bylaws of the
corporation, the affirmative vote of the holders of at least 80%
of the voting power of the then outstanding shares of Common
Stock, and at least 80% of the voting power of all of the then
outstanding shares of Voting Stock, voting together as a single
class, shall be required to amend or repeal, or to adopt any
provision inconsistent with this Article Eleventh.

     TWELFTH.  12.1  No director of the corporation shall be
personally liable to the corporation or its stockholders for
monetary damages for breach of his or her fiduciary duty as a
director; provided, however, that this Article Twelfth shall not
eliminate or limit the liability of a director to the extent
provided by applicable law (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174
of the General Corporation Law of the State of Delaware (or
successor provision), or (iv) for any transaction from which the
director derived an improper personal benefit. No amendment to or
repeal of this Article Twelfth shall apply to or have any effect
on the liability or alleged liability of any director of the
corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.

     DATED as of the 15th day of December, 2000.

                              AIRBORNE FREIGHT CORPORATION,
                              Incorporator



                              By  /s/   David C. Anderson
                                   David C. Anderson
                                   Corporate Secretary

EX-10

EXHIBIT 10(o)

August 14, 2000

Mr. Richard Corrado
3529 264th Avenue SE
Samammish,  WA  98075

Dear Mr. Corrado,

     Airborne Freight Corporation (the "Company") and its Board
of Directors are not necessarily opposed to any merger proposal
or acquisition attempt by third parties.  We recognize, and
insist that our executives recognize, that in such matters our
responsibility is to serve the best interests of our
shareholders in maximizing the worth and potential of their
investment.  However, the Company, as a publicly held
corporation, must be aware that insofar as it may be the
subject of acquisition attempts, such attempts do raise the
possibility of a change in control of the Company.  It further
recognizes that such a possibility can breed uncertainties as
to the continued tenure and fair treatment of key executives
regardless of their value to the corporation and their
individual merit.  The company is concerned that the
possibility of acquisition attempts and a change in control can
have an adverse effect on its retention of key management
personnel, and that such acquisition attempts can make it
difficult for such personnel to function most effectively in
the best interests of the Company and its shareholders.  In
light of these concerns, the Company's Board of Directors has
determined that it is appropriate to offer additional security
to certain key management personnel to better enable them to
function effectively without distraction in the event that
uncertainties as to the future control of the Company should
arise.

     Therefore, to induce you to remain in the employ of the
Company and to encourage high level of effective management in
the best interests of the Company and shareholders, this letter
agreement sets forth certain benefits which the Company agrees
will be provided to you if your employment with the Company
should be terminated other than for cause, or by death,
disability or normal retirement, subsequent to a "change in
control" of the Company as defined and set forth in this
Agreement.  As the purpose of this Agreement is to provide you
with stability of job tenure without being discriminated
against because of activities on behalf of the Company and its
shareholders in the face of a possible "change in control" or
in the alternative to provide you with certain defined
severance benefits in the face of termination without cause or
upon discriminatory treatment after a "change in control," the
provisions of this Agreement with regard to benefits shall not
apply unless and until a "change in control" occurs.  Further,
the benefits set forth in paragraph 7 of this Agreement will
not be provided if you cease to be in the Company's employ,
even after a "change of control" and during the term of this
Agreement, because of death, normal retirement, disability,
"for cause," or because of voluntary termination by you without
"good reason" as they are defined herein.

     1.   Term.  This Agreement will at all times have a two-
year term.  At such time as either you or the Company give
written notice to the other party that this Agreement is to be
terminated (such notice on your part to have no force or effect
unless given by you no later than two years after a "change in
control"), then this Agreement will expire two years from
receipt of the notice.  In any event, this Agreement will
terminate at your normal retirement date as defined herein.

     2.   Change in Control.  For the purposes of invoking your
benefits under this Agreement, a "change in control" shall mean
the occurrence of any one of the following actions or events:

          (a)  The acquisition by any person of the power,
directly or indirectly, to exercise a controlling influence
over the management or policies of the Company (either alone or
pursuant to an arrangement or understanding with one or more
other persons), whether through the ownership of voting
securities, through one or more intermediary persons, by
contract, or otherwise; or

          (b)  The acquisition by a person who is not a U.S.
citizen (either alone or pursuant to an arrangement or
understanding with one or more other persons) of the ownership
or power to vote 25% or more of the outstanding voting
securities of the Company; or

          (c)  The acquisition by a person who is a U.S.
citizen (either alone or pursuant to an arrangement or
understanding with one ore more other persons) of the ownership
or power to vote 35% or more of the outstanding voting
securities of the Company; or

          (d)  If during a period of six years after the
acquisition by any person, directly or indirectly, of the
ownership or power to vote 10% or more of the outstanding
voting securities of the Company, the individuals who prior to
such acquisition were Directors of the Company ("Prior
Directors") shall cease to constitute a majority of the Board
of Directors, unless the nomination of each new Director was
approved by a vote of a majority of the Prior Directors;

     The term "person" for purposes of this paragraph shall
include a natural person, corporation, partnership,
association, joint-stock company, trust fund, or organized
group of persons.

     3.   Death, Retirement and Disability.  In the event of
your death, normal retirement, disability or voluntary
termination without good reason during the term hereof and
following a "change in control," you or your estate will be
entitled to receive only those applicable benefits under any
plans, programs and policies in effect with regard to the
executives or salaried employees of the Company.  For purposes
of this Agreement, normal retirement and disability are defined
as follows:

          (a)  Normal Retirement:  Termination by the Company
or you of your employment based on normal retirement shall mean
termination at age 65 or such earlier or later age set in
accordance with the retirement policy then generally in effect
with regard to the Company's salaried employees which is not
discriminatory as to you.  Normal retirement shall also include
retirement in accordance with any early or deferred retirement
age or date established with your consent.

          (b)  Disability:  Disability as grounds for
termination shall mean physical or mental illness resulting in
your absence from your duties with the Company on a full time
basis for 120 consecutive days following the exhaustion of all
current and accrued sick leave and vacation (as provided by
Company policy to all salaried employees on a nondiscriminatory
basis).  If within thirty (30) days after written notice of
proposed termination for disability is given by the Company,
you have not returned to the full time performance of your
duties, the Company may terminate your employment by giving
written Notice of Termination for "Disability."

     4.   Other Termination Following a Change in Control.  If
a "change in control" occurs and you are subsequently
terminated as an employee by the Company during the term of
this Agreement (except for normal retirement, disability or for
cause as herein after defined) or if you terminate your employment
for good reason, as hereinafter defined, you will be entitled
to receive the benefits set forth in paragraph 7 hereof.

     5.   Cause.  After a "change in control," the Company may
terminate your employment for "cause" without liability under
the benefit provisions hereof only upon:

          (a)  The willful and continued failure by you to
substantially perform your duties with the Company (other than
any such failure resulting from your incapacity due to physical
or mental illness), after a demand for substantial performance
is delivered to you by the Board which specifically identifies
the manner in which the Board believes that you have not
substantially performed your duties, or

          (b)  The willful engaging by you in gross misconduct
demonstrably injurious to the Company.

     For the purpose of this paragraph, no act, or failure to
act, on your part shall be considered "willful" if done, or
omitted to be done, by you in good faith and in the reasonable
belief that your act or omission was in the best interests of
the Company.  You shall not be deemed to have been terminated
for cause unless and until you receive a copy of a resolution
duly adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Board at a meeting of
the Board called and held for that purpose (after reasonable
notice to you and an opportunity for you, together with your
counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set
forth in clauses (a) or (b) of the first sentence of this
paragraph and specifying the particulars thereof.

      If your employment is terminated for cause, the Company
shall pay you your then current full base salary plus vacation
and any other compensation actually accrued through the date of
termination, and the Company shall have no further obligation
to you.

     6.   Good Reason.  You may regard your employment as
constructively terminated by the Company, and yourself
terminate your employment for "good reason" following a "change
in control" and during the term hereof, receiving the benefits
set forth in paragraph 7, upon the happening of one or more of
the following events which will constitute good reason for your own
termination of your employment:

          (a)  Without your express written consent, the
assignment to you of any duties not customarily performed by
officers of the Company and inconsistent with your position as
an officer prior to a "change in control," or the failure of
the Company to maintain you in an officer position; or to
provide you with the normal prerequisites of an officer of the
Company, including but not limited to an office and appropriate
support services;

          (b)  A reduction by the Company in your base salary
as in effect prior to a "change in control" unless such
reduction is applied to all officers of the company and does
not exceed the average percentage reduction in base salary for
all officers of the Company, with a maximum permissible
reduction of 25%, or the failure by the Company to increase
such base salary each year following a "change in control" by
an amount which equals at least one-half (), on a percentage
basis, the average percentage increase in base salary for all
officers of the Company, and its subsidiaries, or any parent or
successor the Company during the prior two full calendar years;

          (c)  A failure by the Company to maintain any of the
employee benefits to which you are entitled prior to a "change
in control" at a level equal to or greater than that in effect
prior to a "change in control," through the continuation of the
same or substantially similar plans, programs and policies, or
the taking of any action by the Company which would adversely
affect your participation in or materially reduce your benefits
under any such plans, programs or policies or deprive you of
any fringe benefits enjoyed by you prior to a "change in
control," unless such a reduction in benefits is
nondiscriminatory as to you and is applied generally.

          (d)  The failure by the Company to provide you with
the number of paid vacation days to which you would be entitled
as a salaried employee of the Company, its subsidiaries or
affiliates, or any parent or successor of the Company on a
nondiscriminatory basis.

          (e)  The Company's requiring you to be based anywhere
other than your current location except for required travel on
the Company's business to an extent substantially consistent
with your present business travel obligations; or the
relocation of your offices outside of their current location
without your consent.

          (f)  Any purported termination of your employment by
the Company which is not effected pursuant to the notice of
termination and procedures required by the specific provision
relied upon (i.e., Disability, or Cause), or normal retirement
as defined in paragraph 3 hereof, or any purported termination
for which the grounds relied upon are not valid.

     Upon the happening of one or more of these events, should
you choose to regard your employment as constructively
terminated, delivery of a written notice of termination setting
forth the "good reason" therefor will entitle you to the
benefits as set forth in paragraph 7 hereof.

     7.   Compensation Upon Termination Without Cause or
Termination for Good Reason.  If after a "change in control"
and during the term hereof, you are terminated by the Company
other than by reason of normal retirement, disability or for
cause under the definitions and procedures as set forth herein,
or you choose to terminate your employment for good reason as
set forth herein, then the Company shall pay to you the
following amounts:

          (a)  Your full base salary through the date of any
Notice of Termination plus payment for all accrued vacation,
and any deferred compensation to which you are entitled for the
year most recently ended and the pro rata share of any such
compensation which would be due in the year of termination, up
to the date of termination, to the extent not already paid;
plus

          (b)  An amount equal to:

               (i)  The sum of your annual base salary at the
rate in effect as of your termination plus the amount of any
additional compensation awarded you for the year most recently
ended (whether or not fully paid), including any sums awarded
under a Management Incentive Compensation Plan, multiplied by:

               (ii)  The number two.  If your normal retirement
date is less than two (2) years from your termination date,
then the multiplier shall be that fraction remaining until your
normal retirement date rounded to the nearest tenth (i.e., 18
months equals 1.5, 8 months equals .7).

               (iii)  With regard to the Company's Profit
Sharing Plan and Minimum Monthly Income Retirement Plan, the
Company shall pay a lump sum equal to the amount forfeited by
you, if any, under such plan which would have vested if your
employment had continued for the remaining term of this
Agreement.

               (iv)  The Company shall maintain in full force
and effect for the remaining term of this Agreement prior to
your normal retirement date, all other employee benefit plans,
programs and policies (including any life or health insurance
plans) in which you were entitled to participate immediately
prior to your termination, provided that your continued
participation is possible under the general terms and
provisions of such plans, programs and policies.  In the event
that your participation in any such plan, program or policy is
not possible under its terms and conditions, the Company shall
arrange to provide you with benefits substantially similar to
those which you would have been entitled to receive under each
plan, program or policy.  At the end of the period of coverage,
you will have the option to have assigned to you at no cost and
with no apportionment of prepaid premiums, any assignable
insurance policy owned by the Company and relating to you and
to take advantage of any conversion privileges pertinent to the
benefits available under Company policies.

               (v)  In addition to the payment of benefits to
which you are entitled under the qualified retirement plans
maintained by the Company in which you are a participant on the
date of your termination, the Company shall pay you in cash at
age 65 or such earlier retirement date permitted under the plan
or plans as you may elect, an amount equal to the sum of the
following:  (a) the amount which would have been contributed to
your Profit Sharing Plan account had you continued in the
employ of the Company for an additional two years [prior to
your normal retirement date] at your base salary rate as of the
date of termination and based on the average profit-sharing
contribution allocated to your account for the three years
preceding your termination, which amount shall be adjusted for
an increase or decrease in value in the same percentage as the
increase or decrease in your Profit Sharing account between the
date of your termination and the date of payment; and (b) the
difference between the actuarial equivalent of the amount which
you are entitled to receive, if any, under the Minimum Monthly
Retirement Income Plan and the amount which you would have
received from such plan if you had continued in the employ of
the Company for an additional two years [prior to your normal
retirement date].  If your normal retirement date would occur
during that two-year period, then the amount of such additional
compensation shall be calculated on the basis that your
employment continued to that date.  For the purposes of the
calculation of benefits under the Minimum Monthly Retirement
Income Plan, the "actuarial equivalent" shall be determined by
assuming your survival to age 80.

               (vi)  At your option, in lieu of shares of
common stock of the Company, without par value ("Company
Shares") issuable upon exercise of options ("Options"), if any,
granted to you under the Airborne Key Employee's Stock Option
and Stock Appreciation Rights Plans (to which options employee
waives all rights upon the making of the payment referred to
below), you shall receive an amount in cash equal to the
difference between the exercise prices of all Options held by
you whether or not then fully exercisable, and the higher of
(a) the mean between the closing bid and asked prices on the
New York Stock Exchange on the date of termination or (b) the
highest price per Company Share actually paid in connection
with any change in control of the Company.

     8.   Payments and Disputes.  For purposes of this
Agreement, your date of termination will be the date written
notice of termination is given by the Company to you.  If
termination is under circumstances invoking the benefits or
paragraph 7, then the sums specified therein will be paid no
more than ten (10) working days after the date of termination,
except that the portion of the payment bases upon the amounts
payable under the Management Incentive Compensation Plan and
the Profit Sharing Plan shall be paid no later than ten (10)
working days after the amounts payable under such plans have
been determined following availability of results necessary for
computation of such amounts.

     In the event that the Company wishes to contest or dispute
a termination for "good reason" by you, it must give written
notice of such dispute within the five day period after the
date of termination.  If you wish to contest or dispute a
termination by the Company, or any failure to make payments
claimed to be due hereunder, you must give written notice of
such dispute within thirty days of receiving a Notice of
Termination [or, if no Notice is provided, within thirty days
of your actual termination by the Company].  In the event of a
dispute, the Company shall continue to pay your full base
salary and continue all your employee benefits in force until
final resolution of any such dispute by mutual agreement or the
final judgment, decree or order of a court of competent
jurisdiction (including any appeals, if such are perfected).
You may, at your or the Company's option, be suspended from all
duties during the pendency of such a contest or dispute.  If
you prevail in any such contest or dispute, the Company shall
thereupon be liable for the full amounts due under paragraph 7
as of the date of termination after adjustments for amounts
already paid.

     The Company will pay all fees and expenses, including full
attorneys' fees, incurred by you in good faith in contesting or
disputing any termination after a "change in control" or in
seeking to obtain or enforce any right or benefit provided by
this Agreement.

     In the event that any payments due hereunder shall be
delayed for any reason for more than ten working days from the
date of termination (or availability of results under the
Management Incentive Compensation Plan and Profit Sharing Plan
as above provided), the amounts due shall bear the maximum
legal rate of interest until paid.

     Notwithstanding the provisions as to time of payment as
above set forth, you may at your sole option elect to have some
or all of such amounts due you deferred to date or dates of
your choosing over a period not to exceed two years, in which
event the unpaid balances shall not bear interest during the
deferred period elected by you.

     9.   Mitigation.  You shall not be required to mitigate
the amount of any payment due under paragraph 7 by seeking
other employment.  If you should accept a position with another
employer after your date of termination and during the period
of provision of benefits under paragraph 7, then the Company
shall have no further liability for the provision of benefits
or further payments under section (b)(iv) of paragraph 7, and
the remaining term of this Agreement for purposes of Section
(b)(v) of paragraph 7 will terminate as of the date of your new
employment.

     10.  Covenant for Confidentiality and Not to Compete.  You
agree that as an executive of the Company, with important
responsibilities for and knowledge of its operations, your
services are a valuable asset to the Company and that you have
access to business information of material importance to the
Company.  Therefore, to protect the Company's interest in you
and in the integrity and success of its operations, you agree
that during the term of this Agreement while employed by the
Company you will keep all Company information confidential and
will not enter into the employment of, or invest in or
contribute to, participate in the activities of, or act as
consultant to or advise any enterprise in whatever form
organized and carried on which is directly competitive with any
business activity then conducted or planned by the Company or
its subsidiaries, provided, however, that you may make
investments in publicly traded securities of any issuer if the
securities owned represent less than 1% of the class of such
securities of such issuer then issued and outstanding.  You
further agree that for a period of one year following the
termination of your employment with the Company you will continue
to keep all Company information confidential and that you will
not enter into the employment in an executive or consultant
capacity or serve on the Board of Directors of any enterprise
in whatever form organized and carried on which is directly
competitive with any business activity then conducted by the
Company or its subsidiaries within the continental United States.

     11.  Successors; Binding Agreement.

          (a)  This Agreement shall be binding upon any
successor (whether director or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company.  As used herein,
"Company" shall mean the Company as hereinbefore defined and
any successor to its business or assets as aforesaid.

          (b)  This Agreement shall inure to the benefit of and
be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees.  If you should die while any amounts are
still payable to you hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other
designee or, if there be not such designee, to your estate.

     12.  Notice.  For the purpose of this Agreement, notices
and all other communications provided for in the Agreement
shall be in writing and shall be deemed to have been duly given
when delivered by United States certified mail, return receipt
requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement,
provided that all notices to the Company shall be directed to
the attention of the Chief Executive Officer of the Company or
to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.

     13.  Miscellaneous.  No provisions of this Agreement may
be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by you
and the Chief Executive Officer of the Company or such officer
as may be specifically designated by the Board of Directors of
the Company.  No waiver by either party hereto at any time of
any breach of, or lack of compliance with, any conditions or
provision of this Agreement shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same or at any
prior or subsequent time.

     No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth
expressly in this Agreement.  The validity, interpretation,
construction and performance of this Agreement shall be
governed by the laws of the State of Washington.

     14.  Validity.  The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or
enforceability of any other provisions of this Agreement, which
shall remain in full force and effect.

     15.  Counterparts.  This Agreement is to be executed in
counterparts, each of which shall be deemed to be an original.

     If this letter correctly sets forth our agreements, sign
and return to the Company the enclosed copy of this letter,
retaining your copy for your files.

                         AIRBORNE FREIGHT CORPORATION



                         By /s/Robert S. Cline
                           Robert S. Cline, Chairman



                         Employee /s/Richard Corrado

EX-10

EXHIBIT 10(q)

                        JOINDER AGREEMENT

     THIS JOINDER AGREEMENT dated as of December 26, 2000, by
AIRBORNE EXPRESS, INC., formerly known as AIRBORNE FREIGHT
CORPORATION, as the original borrower (the "Original Borrower"),
WACHOVIA BANK, N.A., as agent (the "Administrative Agent"), and
Airborne, Inc., as the new borrower (the "New Borrower").

     1.   The Original Borrower is a party to that certain
$275,000,000 Credit Agreement dated as of July 27, 2000, among
the Original Borrower, the Administrative Agent and certain other
lenders party thereto from time to time (as amended or otherwise
modified from time to time, the "Credit Agreement"; capitalized
terms not defined herein have the meaning set forth in the Credit
Agreement).  Contemporaneously with the Reorganization, and as a
condition to the Reorganization Effective Date, the parties
hereto agree as follows:

     2.   The New Borrower hereby agrees to become a party to the
Credit Agreement and each other Loan Document to which the
Original Borrower was a party (other than the Notes) and hereby
assumes all of the Original Borrower's indebtedness, obligations,
and liabilities thereunder, including, without limitation, with
respect to the Loans, interest thereon, and fees payable with
respect thereto, all as set forth in the terms of the Credit
Agreement and the other Loan Documents. The New Borrower, as the
"Borrower" under the Credit Agreement, hereby makes all of the
representations and warranties set forth in the Credit Agreement
and each of the Loan Documents, mutatis mutandis, to the extent
relating to the Borrower, and agrees to perform all of the
"Borrower's" covenants and be subject to all terms and conditions
applicable to the "Borrower" under the Credit Agreement and the
other Loan Documents.

     3.   The Original Borrower is hereby released as the
"Borrower" under the Credit Agreement and the other Loan
Documents to which it is a party as the "Borrower" thereunder.
The Original Borrower hereby agrees to become a party to the
Contribution Agreement as a guarantor and a contributing party
and hereby assumes all of the indebtedness, obligations, and
liabilities of a Guarantor and Contributing Party thereunder,
including, without limitation, with respect to the Loans,
interest thereon, and fees payable with respect thereto, as set
forth in the terms of the Contribution Agreement.

     4.   Contemporaneously with the execution and delivery of
this Joinder Agreement, (i) the New Borrower hereby agrees to
execute and deliver to the Administrative Agent new Notes to
replace the Notes issued by the Original Borrower under the
Credit Agreement as evidence of the New Borrower's assumption of
the Loans, and (ii) the Original Borrower hereby agrees to
execute and deliver to the Administrative Agent a Subsidiary
Guaranty. By the execution and delivery of this Joinder Agreement
the parties hereto agree that the execution and delivery of this
Joinder Agreement shall not cause a novation with respect to the
Loans notwithstanding (i) the assumption by the New Borrower of
the Original Borrower's Loans and other indebtedness, obligations
and liabilities under the Credit Agreement and the other Loan
Documents, (ii) the New Borrower's issuance of new Notes
replacing the Original Borrower's Notes, and (iii) the release of
the Original Borrower as the "Borrower" under the Credit
Agreement. Nothing in this Joinder Agreement shall release or be
deemed to release any other guarantor under a Subsidiary
Guarantor with respect to the Loans assumed by the New Borrower.

     IN WITNESS WHEREOF, the parties hereto have caused this
Joinder Agreement to be duly executed and delivered as of the day
and year first above written.


                              AIRBORNE EXPRESS, INC., formerly
					known as
                              AIRBORNE FREIGHT CORPORATION, as
                              the Original Borrower


                              By   /s/ Lanny H. Michael
                                     Title:    Senior Vice
                                     President and Chief
                                     Financial Officer


                              AIRBORNE, INC., as the New Borrower


                              By   /s/ Lanny H. Michael
                                     Title:    Senior Vice
                                     President and Chief
                                     Financial Officer


                              WACHOVIA BANK, N.A.,
                              as Administrative Agent


                              By   /s/ C. Reid Harden
                                     Title:    Vice President

EX-10

EXHIBIT 10(s)

                 RECEIVABLES PURCHASE AGREEMENT

                  Dated as of December 28, 2000

                              Among

                      AIRBORNE CREDIT, INC.

                          as the Seller

                               and

                     AIRBORNE EXPRESS, INC.

                         as the Servicer

                               and

              BLUE RIDGE ASSET FUNDING CORPORATION

                        as the Purchaser

                               and

                       WACHOVIA BANK, N.A.

                   as the Administrative Agent






                 RECEIVABLES PURCHASE AGREEMENT

     THIS RECEIVABLES PURCHASE AGREEMENT, dated as of December
28, 2000 is entered into by and among:

     (a)  Airborne Credit, Inc., a Virginia corporation
("Seller"),

     (b)  Airborne Express, Inc., (the "Originator") a Delaware
corporation, as initial Servicer ("Servicer", the Servicer
together with Seller, the "Seller Parties" and each, a "Seller
Party"),

     (c)  Blue Ridge Asset Funding Corporation, a Delaware
corporation ("Blue Ridge"), and

     (d)  Wachovia Bank, N.A., as administrative agent for Blue
Ridge and its assigns under the Transaction Documents and under
the Liquidity Agreement (together with its successors and assigns
in such capacity, the "Administrative Agent").

     Unless defined elsewhere herein, capitalized terms used in
this Agreement shall have the meanings assigned to such terms in
Exhibit I.

                     PRELIMINARY STATEMENTS

     Seller desires to transfer and assign Receivable Interests
from time to time.

     Blue Ridge shall purchase Receivable Interests from Seller
from time to time either by issuing its Commercial Paper or by
availing itself of a Liquidity Funding to the extent available.

     Wachovia Bank, N.A. has been requested and is willing to act
as Administrative Agent on behalf of Blue Ridge and its assigns
in accordance with the terms hereof.

                            ARTICLE I

                      PURCHASE ARRANGEMENTS

     Section 1.1    Purchase Facility.

     (a)  Upon the terms and subject to the conditions of this
Agreement (including, without limitation, Article VI), from time
to time prior to the Facility Termination Date, Seller may
request that Blue Ridge purchase from Seller undivided ownership
interests in the Receivables and the associated Related Security
and Collections, and Blue Ridge shall make such Purchase;
provided that no Purchase shall be made by Blue Ridge if, after
giving effect thereto, either (i)the Aggregate Invested Amount
would exceed the Purchase Limit, or (ii) the aggregate of the
Receivable Interests would exceed 100%.  It is the intent of Blue
Ridge to fund the Purchases by the issuance of Commercial Paper.
If for any reason Blue Ridge is unable, or determines that it is
undesirable, to issue Commercial Paper to fund or maintain its
investment in the Receivable Interests, or is unable for any
reason to repay such Commercial Paper upon the maturity thereof,
Blue Ridge will avail itself of a Liquidity Funding to the extent
available.  If Blue Ridge funds or refinances its investment in a
Receivable Interest through one or more Liquidity Fundings,
commencing on the date of such Liquidity Funding, in lieu of
paying CP Costs on the Invested Amount pursuant to Article III
hereof, Seller will pay Yield thereon at the Alternate Base Rate
or the Eurodollar Rate (Reserve Adjusted), selected in accordance
with Article IV hereof.  Nothing herein shall be deemed to
constitute a commitment of Blue Ridge to issue Commercial Paper.

     (b)  Seller may, upon at least 30 Business Days' notice to
the Administrative Agent, terminate in whole or reduce in part,
the unused portion of the Purchase Limit; provided that each
partial reduction of the Purchase Limit shall be in an amount
equal to $10,000,000 (or a larger integral multiple of $1,000,000
if in excess thereof).

     Section 1.2    Incremental Purchases.

     Seller shall provide the Administrative Agent with at least
two (2) Business Days' prior written notice in a form set forth
as Exhibit II hereto of each Incremental Purchase (each, a
"Purchase Notice").  Each Purchase Notice shall be subject to
Section 6.2 hereof and, except as set forth below, shall be
irrevocable (subject to the proviso below) and shall specify the
requested Purchase Price (which shall not be less than $1,000,000
or a larger integral multiple of $100,000) and the Purchase Date
(which, in the case of any Incremental Purchase after the initial
Purchase hereunder, shall only be on a Settlement Date).
Following receipt of a Purchase Notice, the Administrative Agent
will determine whether Blue Ridge will fund the requested
Incremental Purchase through the issuance of Commercial Paper or
through a Liquidity Funding; provided, however that if the
Administrative Agent shall determine that Blue Ridge will fund
such Incremental Purchase through a Liquidity Funding, it shall
notify the Seller of such determination and the Seller may cancel
such Purchase Notice.  On each Purchase Date, upon satisfaction
of the applicable conditions precedent set forth in Article VI,
unless otherwise instructed in the applicable Purchase Notice
Blue Ridge shall deposit to the Facility Account an amount equal
to the requested Purchase Price.

     Section 1.3    Decreases.

     Seller shall provide the Administrative Agent with prior
written notice in conformity with the Required Notice Period (a
"Reduction Notice") of any proposed reduction of Aggregate
Invested Amount.  Such Reduction Notice shall designate (a) the
date (the "Proposed Reduction Date") upon which any such
reduction of Aggregate Invested Amount shall occur (which date
shall give effect to the applicable Required Notice Period), and
(b) the amount of Aggregate Invested Amount to be reduced, which
shall be applied to reduce the Invested Amount of Receivable
Interests selected by the Administrative Agent (the "Aggregate
Reduction").  Only one (1) Reduction Notice shall be outstanding
at any time.

     Section 1.4    Deemed Collections; Purchase Limit.

     (a)  If on any day:

          (i)  the Outstanding Balance of any Receivable is
     reduced as a result of any defective, rejected or returned
     goods or services, any cash discount or any other adjustment
     by the Servicer, the Originator or any Affiliate thereof, or
     as a result of any tariff or other governmental or
     regulatory action, or

          (ii) the Outstanding Balance of any Receivable is
     reduced or canceled as a result of a setoff in respect of
     any claim by the Obligor thereof (whether such claim arises
     out of the same or a related or an unrelated transaction),
     or

          (iii)     the Outstanding Balance of any Receivable is
     reduced on account of the obligation of the Seller, the
     Servicer, the Originator or any Affiliate thereof to pay to
     the related Obligor any rebate or refund, or

          (iv) the Outstanding Balance of any Receivable is less
     than the amount included in calculating the Net Pool Balance
     for purposes of any Monthly Report (for any reason other
     than receipt of Collections or such Receivable becoming a
     Defaulted Receivable), or

          (v)  any of the representations or warranties of Seller
     set forth in Section 5.1(g), (i), (j), (r), (s), (t) or (u)
     were not true when made with respect to any Receivable, or

          (vi) any Receivable is repurchased by the Originator
     pursuant to the Receivables Sale Agreement,

then, on such day, Seller shall (x) be deemed to have received a
Collection of such Receivable (A) in the case of clauses (i)-(iv)
above, in the amount of such reduction or cancellation or the
difference between the actual Outstanding Balance and the amount
included in calculating such Net Pool Balance, as applicable; and
(B) in the case of clause (v) above, in the amount of the
Outstanding Balance of such Receivable as of the date on which
such representation or warranty was made and (y) pay to the
Administrative Agent's Account the amount of any such Collection
deemed to have been received on the date such Collection is so
deemed to have been received.

     (b)  Seller shall ensure that the Aggregate Invested Amount
at no time exceeds the lesser of (i) the Net Pool Balance and
(ii) the Purchase Limit.  If at any time the Aggregate Invested
Amount exceeds the Purchase Limit, Seller shall pay to the
Administrative Agent not later than two (2) Business Days after
the first day such excess exists an amount to be applied to
reduce the Aggregate Invested Amount (as allocated by the
Administrative Agent), such that after giving effect to such
payment the Aggregate Invested Amount is less than or equal to
the Purchase Limit.

     (c)  Seller shall also ensure that the Receivable Interests
shall at no time exceed in the aggregate 100%.  If the aggregate
of the Receivable Interests exceeds 100%, Seller shall pay to the
Administrative Agent not later than two (2) Business Days after
the first day such excess exists an amount to be applied to
reduce the Aggregate Invested Amount (as allocated by the
Administrative Agent), such that after giving effect to such
payment the aggregate of the Receivable Interests equals or is
less than 100%.

     Section 1.5    Payment Requirements and Computations.

     All amounts to be paid or deposited by any Seller Party
pursuant to any provision of this Agreement shall be paid or
deposited in accordance with the terms hereof no later than 2:00
p.m. (New York time)] on the day when due in immediately
available funds, and if not received before 2:00 p.m. (New York
time)] shall be deemed to be received on the next succeeding
Business Day.  If such amounts are payable to the Administrative
Agent for the account of Blue Ridge, they shall be paid to the
Administrative Agent's Account, for the account of Blue Ridge
until otherwise notified by the Administrative Agent.  Upon
notice to Seller, the Administrative Agent may debit the Facility
Account for all amounts due and payable hereunder.  All
computations of CP Costs, Yield, per annum fees calculated as
part of any CP Costs, per annum fees hereunder and per annum fees
under the Fee Letter shall be made on the basis of a year of 360
days for the actual number of days elapsed.  If any amount
hereunder shall be payable on a day which is not a Business Day,
such amount shall be payable on the next succeeding Business Day.

                           ARTICLE II

                    PAYMENTS AND COLLECTIONS

     Section 2.1    Payments of Recourse Obligations.

     Seller hereby promises to pay the following (collectively,
the "Recourse Obligations"):

     (a)  all amounts due and owing under Section 1.3 or 1.4 on
the dates specified therein;

     (b)  the fees set forth in the Fee Letter on the dates
specified therein;

     (c)  all accrued and unpaid Yield on the Receivable
Interests accruing Yield at the Alternate Base Rate or the
Default Rate on each Settlement Date applicable thereto;

     (d)  all accrued and unpaid Yield on the Receivable
Interests accruing Yield at the Eurodollar Rate (Reserve
Adjusted), on the last day of each Tranche Period applicable
thereto;

     (e)  all accrued and unpaid CP Costs on the Receivable
Interests funded with Commercial Paper on each Settlement Date;
and

     (f)  all Broken Funding Costs and Indemnified Amounts upon
demand.

     Section 2.2    Collections Prior to the Facility Termination
Date.

     (a)  Prior to the Facility Termination Date, any Deemed
Collections received by the Servicer and Blue Ridge's Portion of
any Collections received by the Servicer shall be set aside and
held in trust by the Servicer for the payment of any accrued and
unpaid Aggregate Unpaids or for a Reinvestment as provided in
this Section 2.2.  If at any time any Collections are received by
the Servicer prior to the Facility Termination Date, Seller
hereby requests and Blue Ridge hereby agrees to make subject to
the terms and conditions set forth in the Agreement,
simultaneously with such receipt, a reinvestment (each, a
"Reinvestment") with Blue Ridge's Portion of the balance of each
and every Collection received by the Servicer such that after
giving effect to such Reinvestment, the Invested Amount of such
Receivable Interest immediately after such receipt and
corresponding Reinvestment shall be equal to the amount of
Invested Amount immediately prior to such receipt.

     (b)  On each Settlement Date prior to the Facility
Termination Date, the Servicer shall remit to the Administrative
Agent's Account the amounts set aside during the preceding
Settlement Period that have not been subject to a Reinvestment
and apply such amounts (if not previously paid in accordance with
Section 2.1) to the Aggregate Unpaids in the order specified:

     first, ratably to the payment of all accrued and unpaid CP
Costs, Yield and Broken Funding Costs (if any) that are then due
and owing,

     second, to the accrued and unpaid Servicing Fee (so long as
Servicer is not the Originator or an Affiliate of the Originator)

     third, ratably to the payment of all accrued and unpaid fees
under the Fee Letter (if any) that are then due and owing,

     fourth, if required under Section 1.3 or 1.4, to the ratable
reduction of Aggregate Invested Amount,

     fifth, for the ratable payment of all other unpaid Recourse
Obligations, if any, that are then due and owing,

     sixth, to the accrued and unpaid Servicing Fee (so long as
Servicer is the Originator or an Affiliate of the Originator)

     seventh, the balance, if any, to Seller or otherwise in
accordance with Seller's instructions.

     Section 2.3    Application of Collections.

     On the Facility Termination Date and on each day thereafter,
the Servicer shall set aside and hold in trust, for the Secured
Parties, all Collections received on each such day.  On and after
the Facility Termination Date, the Servicer shall, on each
Settlement Date and on each other Business Day specified by the
Administrative Agent (a) remit to the Administrative Agent's
Account the amounts set aside pursuant to the immediately
preceding sentence, and (b) apply such amounts to reduce the
Aggregate Unpaids as follows:

     first, to the reimbursement of the Administrative Agent's
costs of collection and enforcement of this Agreement,

     second, ratably to the payment of all accrued and unpaid CP
Costs, Yield and Broken Funding Costs,

     third, to the accrued and unpaid Servicing Fee (so long as
the Servicer is not the Originator or an Affiliate of the
Originator);

     fourth, ratably to the payment of all accrued and unpaid
fees under the Fee Letter,

     fifth, to the ratable reduction of Aggregate Invested
Amount,

     sixth, for the ratable payment of all other Aggregate
Unpaids,

     seventh, to the accrued and unpaid Servicing Fee (so long as
the Servicer is the Originator or an Affiliate of the
Originator); and

     eighth, after the Final Payout Date, to Seller.

     Section 2.4    Payment Recission.

     No payment of any of the Aggregate Unpaids shall be
considered paid or applied hereunder to the extent that, at any
time, all or any portion of such payment or application is
rescinded by application of law or judicial authority, or must
otherwise be returned or refunded for any reason.  Seller shall
remain obligated for the amount of any payment or application so
rescinded, returned or refunded, and shall promptly pay to the
Administrative Agent (for application to the Person or Persons
who suffered such recission, return or refund) the full amount
thereof, plus interest thereon at the Default Rate from the date
of any such recission, return or refunding.

     Section 2.5    Clean Up Call.

     In addition to Seller's rights pursuant to Section 1.3,
Seller shall have the right (after providing written notice to
the Administrative Agent in accordance with the Required Notice
Period), at any time following the reduction of the Aggregate
Invested Amount to a level that is less than 10.0% of the
original Purchase Limit, to repurchase all, but not less than
all, of the then outstanding Receivable Interests.  The purchase
price in respect thereof shall be an amount equal to the
Aggregate Unpaids through the date of such repurchase, payable in
immediately available funds to the Administrative Agent's
Account.  Such repurchase shall be without representation,
warranty or recourse of any kind by, on the part of, or against
Blue Ridge or the Administrative Agent.

                           ARTICLE III

                    COMMERCIAL PAPER FUNDING

     Section 3.1    CP Costs.

     Seller shall pay CP Costs with respect to the Invested
Amount of all Receivable Interests funded through the issuance of
Commercial Paper.  Each Receivable Interest that is funded with
Pooled Commercial Paper will accrue CP Costs each day on a pro
rata basis, based upon the percentage share that the Invested
Amount in respect of such Receivable Interest represents in
relation to all assets held by Blue Ridge and funded
substantially with related Pooled Commercial Paper.

     Section 3.2    Calculation of CP Costs.

     Not later than the 3rd Business Day immediately preceding
each Monthly Reporting Date, Blue Ridge shall calculate the
aggregate amount of CP Costs applicable to its Receivable
Interests for the Calculation Period then most recently ended and
shall notify Seller of such aggregate amount.

     Section 3.3    CP Costs Payments.

     On each Settlement Date, Seller shall pay to the
Administrative Agent (for the benefit of Blue Ridge) an aggregate
amount equal to all accrued and unpaid CP Costs in respect of the
Invested Amount of all Receivable Interests funded with
Commercial Paper for the Calculation Period then most recently
ended in accordance with Article II.

     Section 3.4    Default Rate.

     From and after the occurrence of an Amortization Event, all
Receivable Interests shall accrue Yield at the Default Rate.

                           ARTICLE IV

                       LIQUIDITY FUNDINGS

     Section 4.1    Liquidity Fundings.

     Prior to the occurrence of an Amortization Event, the
outstanding Invested Amount of each Receivable Interest funded
with a Liquidity Funding shall accrue Yield for each day during
its Tranche Period at either the Eurodollar Rate (Reserve
Adjusted) or the Alternate Base Rate in accordance with the terms
and conditions hereof.  Until Seller gives the required notice to
the Administrative Agent of another Yield Rate in accordance with
Section 4.4, the initial Yield Rate for any Receivable Interest
funded with a Liquidity Funding shall be the Alternate Base Rate
(unless the Default Rate is then applicable).  If any undivided
interest in a Receivable Interest initially funded with
Commercial Paper is sold to the Liquidity Banks pursuant to the
Liquidity Agreement, such undivided interest in such Receivable
Interest shall be deemed to have a Tranche Period commencing on
the date of such sale.

     Section 4.2    Yield Payments.

     On the Settlement Date for each Receivable Interest that is
funded with a Liquidity Funding, Seller shall pay to the
Administrative Agent (for the benefit of the Liquidity Banks) an
aggregate amount equal to the accrued and unpaid Yield thereon
for the entire Tranche Period of each such Liquidity Funding in
accordance with Article II.

     Section 4.3    Selection and Continuation of Tranche
Periods.

     (a)  Tranche Periods for the Receivable Interests funded
with Liquidity Fundings shall be selected from time to time (i)
prior to the occurrence of an Amortization Event, by Seller with
consultation from (and approval by) the Administrative Agent
provided that if at any time any Liquidity Funding is
outstanding, Seller shall always request Tranche Periods such
that at least one Tranche Period shall end on the date specified
in clause (A) of the definition of Settlement Date and (ii) from
and after the occurrence of an Amortization Event, by the
Administrative Agent;

     (b)  The Administrative Agent or, prior to the occurrence of
an Amortization Event, Seller (with the consent of the
Administrative Agent), upon notice to the other received at least
three (3) Business Days prior to the end of a Tranche Period (the
"Terminating Tranche") for any Liquidity Funding, may, effective
on the last day of the Terminating Tranche:  (i) divide any such
Liquidity Funding into multiple Liquidity Fundings, (ii) combine
any such Liquidity Funding with one or more other Liquidity
Fundings that have a Terminating Tranche ending on the same day
as such Terminating Tranche or (iii) combine any such Liquidity
Funding with a new Liquidity Funding to be made by the Liquidity
Banks on the day such Terminating Tranche ends.

     Section 4.4    Liquidity Funding Yield Rates.

     Subject to Sections 4.5 and 4.6, Seller may select the
Eurodollar Rate (Reserve Adjusted) or the Alternate Base Rate for
each Liquidity Funding.  Seller shall by 12:00 noon (New York
time):  (a) at least three (3) Business Days prior to the
expiration of any Terminating Tranche with respect to which the
Eurodollar Rate (Reserve Adjusted) is being requested as a new
Yield Rate and (b) at least one (1) Business Day prior to the
expiration of any Terminating Tranche with respect to which the
Alternate Base Rate is being requested as a new Yield Rate, give
the Administrative Agent irrevocable notice of the new Yield Rate
for the Liquidity Funding associated with such Terminating
Tranche.  Until Seller gives notice to the Administrative Agent
of another Yield Rate, the initial Yield Rate for any Receivable
Interest assigned or participated to the Liquidity Banks pursuant
to the Liquidity Agreement shall be the Alternate Base Rate
(unless the Default Rate is then applicable).

     Section 4.5    Suspension of the Eurodollar Rate (Reserve
Adjusted).

     (a)  If any Liquidity Bank notifies the Administrative Agent
that it has determined that funding its ratable share of the
Liquidity Fundings at a Eurodollar Rate (Reserve Adjusted) would
violate any applicable law, rule, regulation, or directive of any
governmental or regulatory authority, whether or not having the
force of law, or that (i) deposits of a type and maturity
appropriate to match fund its Liquidity Funding at such
Eurodollar Rate (Reserve Adjusted) are not available or (ii) such
Eurodollar Rate (Reserve Adjusted) does not accurately reflect
the cost of acquiring or maintaining a Liquidity Funding at such
Eurodollar Rate (Reserve Adjusted), then the Eurodollar Rate
(Reserve Adjusted) shall be suspended and the Alternate Base Rate
shall apply to any Liquidity Funding accruing Yield at such
Eurodollar Rate (Reserve Adjusted).

     (b)  If less than all of the Liquidity Banks give a notice
to the Administrative Agent pursuant to Section 4.5(a), each
Liquidity Bank which gave such a notice shall be obliged, at the
request of Seller, Blue Ridge or the Administrative Agent, to
assign all of its rights and obligations hereunder to (i) another
Liquidity Bank or (ii) another funding entity nominated by Seller
or the Administrative Agent that is an Eligible Assignee willing
to participate in the Liquidity Agreement through the Liquidity
Termination Date in the place of such notifying Liquidity Bank;
provided that (i) the notifying Liquidity Bank receives payment
in full of all Aggregate Unpaids owing to it (whether due or
accrued), and (ii) the replacement Liquidity Bank otherwise
satisfies the requirements of the Liquidity Agreement.

     Section 4.6    Default Rate.

     From and after the occurrence of an Amortization Event, all
Liquidity Fundings shall accrue Yield at the Default Rate.

                            ARTICLE V

                 REPRESENTATIONS AND WARRANTIES

     Section 5.1    Representations and Warranties of the Seller
Parties.

     Each Seller Party hereby represents and warrants to the
Administrative Agent and Blue Ridge, as to itself, as of the date
hereof and as of the date of each Incremental Purchase and the
date of each Reinvestment that:

     (a)  Existence and Power.  Such Seller Party's jurisdiction
of organization is correctly set forth in the preamble to this
Agreement.  Such Seller Party is duly organized under the laws of
that jurisdiction and no other state or jurisdiction, and such
jurisdiction must maintain a public record showing the
organization to have been organized.  Such Seller Party is
validly existing and in good standing under the laws of its state
of organization.  Such Seller Party is duly qualified to do
business and is in good standing as a foreign entity, and has and
holds all organizational power and all governmental licenses,
authorizations, consents and approvals required to carry on its
business in each jurisdiction in which its business is conducted
except where the failure to so qualify or so hold could not
reasonably be expected to have a Material Adverse Effect.

     (b)  Power and Authority; Due Authorization, Execution and
Delivery.  The execution and delivery by such Seller Party of
this Agreement and each other Transaction Document to which it is
a party, and the performance of its obligations hereunder and
thereunder and, in the case of Seller, Seller's use of the
proceeds of Purchases made hereunder, are within its corporate
powers and authority and have been duly authorized by all
necessary corporate action on its part.  This Agreement and each
other Transaction Document to which such Seller Party is a party
has been duly executed and delivered by such Seller Party.

     (c)  No Conflict.  The execution and delivery by such Seller
Party of this Agreement and each other Transaction Document to
which it is a party, and the performance of its obligations
hereunder and thereunder do not contravene or violate (i) its
certificate or articles of incorporation or by-laws, (ii) any
law, rule or regulation applicable to it, (iii) any restrictions
under any agreement, contract or instrument to which it is a
party or by which it or any of its property is bound, or (iv) any
order, writ, judgment, award, injunction or decree binding on or
affecting it or its property, and do not result in the creation
or imposition of any Adverse Claim on assets of such Seller Party
or its Subsidiaries (except as created hereunder) except, in any
case, where such contravention or violation could not reasonably
be expected to have a Material Adverse Effect; and no transaction
contemplated hereby requires compliance with any bulk sales act
or similar law.

     (d)  Governmental Authorization.  Other than the filing of
the financing statements required hereunder, no authorization or
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for the due
execution and delivery by such Seller Party of this Agreement and
each other Transaction Document to which it is a party and the
performance of its obligations hereunder and thereunder.

     (e)  Actions, Suits.  There are no actions, suits or
proceedings pending, or to the best of such Seller Party's
knowledge, threatened, against or affecting such Seller Party, or
any of its properties, in or before any court, arbitrator or
other body, that could reasonably be expected to have a Material
Adverse Effect.  Such Seller Party is not in default with respect
to any order of any court, arbitrator or governmental body.

     (f)  Binding Effect.  This Agreement and each other
Transaction Document to which such Seller Party is a party
constitute the legal, valid and binding obligations of such
Seller Party enforceable against such Seller Party in accordance
with their respective terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization or
other similar laws relating to or limiting creditors' rights
generally and by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at
law).

     (g)  Accuracy of Information.  All information heretofore
furnished by such Seller Party or any of its Affiliates to the
Administrative Agent or Blue Ridge for purposes of or in
connection with this Agreement, any of the other Transaction
Documents or any transaction contemplated hereby or thereby is,
and all such information hereafter furnished by such Seller Party
or any of its Affiliates to the Administrative Agent or Blue
Ridge will be, true and accurate in every material respect on the
date such information is stated or certified and does not and
will not contain any material misstatement of fact or omit to
state a material fact or any fact necessary to make the
statements contained therein not misleading.

     (h)  Use of Proceeds.  No proceeds of any Purchase hereunder
will be used (i) for a purpose that violates, or would be
inconsistent with, (A) Section 7.2(e) of this Agreement or (B)
Regulation T, U or X promulgated by the Board of Governors of the
Federal Reserve System from time to time or (ii) to acquire any
security in any transaction which is subject to Section 12, 13 or
14 of the Securities Exchange Act of 1934, as amended.

     (i)  Good Title.  Seller is the legal and beneficial owner
of the Receivables and Related Security with respect thereto,
free and clear of any Adverse Claim, except as created by the
Transaction Documents.  There have been duly filed all financing
statements or other similar instruments or documents necessary
under the UCC (or any comparable law) of all appropriate
jurisdictions to perfect Seller's ownership interest in each
Receivable, its Collections and the Related Security.

     (j)  Perfection.  This Agreement is effective to create a
valid security interest in favor of the Administrative Agent for
the benefit of the Secured Parties in the Purchased Assets to
secure payment of the Aggregate Unpaids, free and clear of any
Adverse Claim except as created by the Transactions Documents.
There have been duly filed all financing statements or other
similar instruments or documents necessary under the UCC (or any
comparable law) of all appropriate jurisdictions to perfect the
Administrative Agent's, for the benefit of the Secured Parties,
security interest in the Purchased Assets.  Such Seller Party's
jurisdiction of organization is a jurisdiction whose law
generally requires information concerning the existence of a
nonpossessory security interest to be made generally available in
a filing, record or registration system as a condition or result
of such a security interest's obtaining priority over the rights
of a lien creditor which respect to collateral.

     (k)  Places of Business and Locations of Records.  The
principal places of business and chief executive office of such
Seller Party and the offices where it keeps all of its Records
are located at the address(es) listed on Exhibit III or such
other locations of which the Administrative Agent has been
notified in accordance with Section 7.2(a) in jurisdictions where
all action required by Section 13.3(a) has been taken and
completed.  Seller's Federal Employer Identification Number is
correctly set forth on Exhibit III.

     (l)  Collections.  The conditions and requirements set forth
in Section 7.1(j) and Section 8.2 have at all times been
satisfied and duly performed.  The names, addresses and
jurisdictions of organization of all Collection Banks, together
with the account numbers of the Blocked Accounts of Seller at
each Collection Bank and the post office box number of each Lock-
Box, are listed on Exhibit IV.  Seller has not granted any
Person, other than the Administrative Agent as contemplated by
this Agreement, dominion and control of any Lock-Box or Blocked
Account, or the right to take dominion and control of any such
Lock-Box or Blocked Account at a future time or upon the
occurrence of a future event.

     (m)  Material Adverse Effect.  (i) The initial Servicer
represents and warrants that since September 30, 2000, no event
has occurred that would have a material adverse effect on the
financial condition or operations of the initial Servicer and its
Subsidiaries or the ability of the initial Servicer to perform
its obligations under this Agreement, and (ii) Seller represents
and warrants that since the date of this Agreement, no event has
occurred that would have a material adverse effect on (A) the
financial condition or operations of Seller, (B) the ability of
Seller to perform its obligations under the Transaction
Documents, or (C) the collectibility of the Receivables generally
or any material portion of the Receivables.

     (n)  Names.  The name in which Seller has executed this
Agreement is identical to the name of Seller as indicated on the
public record of its state of organization which shows Seller to
have been organized.  In the past five (5) years, Seller has not
used any corporate names, trade names or assumed names other than
the name in which it has executed this Agreement.

     (o)  Ownership of Seller.  The Performance Guarantor owns,
directly or indirectly, 100% of the issued and outstanding
capital stock of Seller, free and clear of any Adverse Claim.
Such capital stock is validly issued, fully paid and
nonassessable, and there are no options, warrants or other rights
to acquire securities of Seller.

     (p)  Not a Holding Company or an Investment Company.  Such
Seller Party is not a "holding company" or a "subsidiary holding
company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or any successor
statute.  Such Seller Party is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or
any successor statute.

     (q)  Compliance with Law.  Such Seller Party has complied in
all respects with all applicable laws, rules, regulations,
orders, writs, judgments, injunctions, decrees or awards to which
it may be subject, except where the failure to so comply could
not reasonably be expected to have a Material Adverse Effect.
Each Receivable, together with the Contract related thereto, does
not contravene any laws, rules or regulations applicable thereto
(including, without limitation, laws, rules and regulations
relating to truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection
practices and privacy), and no part of such Contract is in
violation of any such law, rule or regulation, except where such
contravention or violation could not reasonably be expected to
have a Material Adverse Effect.

     (r)  Compliance with Credit and Collection Policy.  Such
Seller Party has complied in all material respects with the
Credit and Collection Policy with regard to each Receivable and
the related Contract, and has not made any change to such Credit
and Collection Policy, except for such changes made in accordance
with Section 7.1(a)(vii).

     (s)  Payments to Originator.  With respect to each
Receivable transferred to Seller under the Receivables Sale
Agreement, Seller has given reasonably equivalent value to the
Originator in consideration therefor and such transfer was not
made for or on account of an antecedent debt.  No transfer by the
Originator of any Receivable under the Receivables Sale Agreement
is or may be voidable under any section of the Bankruptcy Reform
Act of 1978 (11 U.S.C.  101 et seq.), as amended.

     (t)  Enforceability of Contracts.  Each Contract with
respect to each Receivable is effective to create, and has
created, a legal, valid and binding obligation of the related
Obligor to pay the Outstanding Balance of the Receivable created
thereunder and any accrued interest thereon, enforceable against
the Obligor in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to or limiting
creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in
equity or at law).

     (u)  Eligible Receivables.  Each Receivable included in the
Net Pool Balance as an Eligible Receivable on the date of any
Monthly Report was an Eligible Receivable on such date.

     (v)  Purchase Limit and Maximum Receivable Interests.
Immediately after giving effect to each Incremental Purchase
hereunder, the Aggregate Invested Amount is less than or equal to
the Purchase Limit and the aggregate of the Receivable Interests
does not exceed 100%.

     (w)  Accounting.  The manner in which such Seller Party
accounts for the transactions contemplated by this Agreement and
the Receivables Sale Agreement does not jeopardize the true sale
analysis.

     (x)  Taxes.  Such Seller Party has filed all tax returns and
reports required by law to be filed by it and has paid all taxes
and governmental charges due and owing, except any such taxes
which are not yet owing or are being diligently contested in good
faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP have been set aside on its books.

ARTICLE VI

                     CONDITIONS OF PURCHASES

     Section 6.1    Conditions Precedent to Initial Incremental
Purchase.

     The initial Incremental Purchase of a Receivable Interest
under this Agreement is subject to the conditions precedent that
(a) the Administrative Agent shall have received on or before the
date of such Purchase those documents listed on Schedule A and
(b) the Administrative Agent shall have received all fees and
expenses required to be paid on such date pursuant to the terms
of this Agreement and the Fee Letter.

     Section 6.2    Conditions Precedent to All Purchases and
Reinvestments.

     Each Incremental Purchase and each Reinvestment shall be
subject to the further conditions precedent that (a) in the case
of each such Purchase:  (i) the Servicer shall have delivered to
the Administrative Agent on or prior to the date of such
Purchase, in form and substance satisfactory to the
Administrative Agent, all Monthly Reports as and when due under
Section 8.5 and (ii) upon the Administrative Agent's request, the
Servicer shall have delivered to the Administrative Agent at
least three (3) days prior to such Purchase an interim Monthly
Report showing the amount of Eligible Receivables; (b) the
Administrative Agent shall have received no later than 30 days
after the date hereof executed Blocked Account Agreements with
each Blocked Account Bank and such other approvals, opinions or
documents as it may reasonably request and (c) on each Purchase
Date, the following statements shall be true (and acceptance of
the proceeds of such Incremental Purchase or Reinvestment shall
be deemed a representation and warranty by Seller that such
statements are then true):

          (i)  the representations and warranties set forth in
     Section 5.1 are true and correct on and as of the date of
     such Incremental Purchase or Reinvestment as though made on
     and as of such Purchase Date;

          (ii) no event has occurred and is continuing, or would
     result from such Incremental Purchase or Reinvestment, that
     will constitute an Amortization Event, and no event has
     occurred and is continuing, or would result from such
     Incremental Purchase or Reinvestment, that would constitute
     an Unmatured Amortization Event; and

          (iii)     the Aggregate Invested Amount does not exceed
     the Purchase Limit and the aggregate Receivable Interests do
     not exceed 100%.

It is expressly understood that each Reinvestment shall, unless
otherwise directed by the Administrative Agent or Blue Ridge,
occur automatically on each day that the Servicer shall receive
any Collections without the requirement that any further action
be taken on the part of any Person and notwithstanding the
failure of Seller to satisfy any of the foregoing conditions
precedent in respect of such Reinvestment.  The failure of Seller
to satisfy any of the foregoing conditions precedent in respect
of any Reinvestment shall give rise to a right of the
Administrative Agent, which right may be exercised at any time on
demand of the Administrative Agent, to rescind the related
purchase and direct Seller to pay to the Administrative Agent's
Account, for the benefit of Blue Ridge, an amount equal to the
Collections prior to the Facility Termination Date that shall
have been applied to the affected Reinvestment.

                           ARTICLE VII

                            COVENANTS

     Section 7.1    Affirmative Covenants of the Seller Parties.

     Until the date on which the Aggregate Unpaids have been
indefeasibly paid in full and this Agreement terminates in
accordance with its terms, each Seller Party hereby covenants, as
to itself, as set forth below:

     (a)  Financial Reporting.  The Performance Guarantor will
maintain, for itself and each of its Subsidiaries, a system of
accounting established and administered in accordance with GAAP,
and furnish or cause to be furnished to the Administrative Agent:

          (i)  Annual Reporting.  Within 90 days after the close
     of its fiscal year, audited, financial statements (which
     shall include balance sheets, statements of income and
     retained earnings and statements of cash flows) for the
     Performance Guarantor and its Subsidiaries for such fiscal
     year certified by Deloitte & Touche LLP or by any other
     nationally recognized independent public accountants, which
     certifications shall be free of exceptions and
     qualifications not acceptable to the Administrative Agent.

          (ii) Quarterly Reporting.  Within 45 days after the
     close of the first three (3) quarterly periods of its fiscal
     year, balance sheets of the Performance Guarantor and its
     Subsidiaries as at the close of each such period and
     statements of income and retained earnings and a statement
     of cash flows for each such Person for the period from the
     beginning of such fiscal year to the end of such quarter,
     all certified by its chief financial officer.

          (iii)     Compliance Certificate.  Together with the
     financial statements required hereunder, a compliance
     certificate in substantially the form of Exhibit V signed by
     the Performance Guarantor's Authorized Officer and dated the
     date of such annual financial statement or such quarterly
     financial statement, as the case may be.

          (iv) Shareholders Statements and Reports.  Promptly
     upon the furnishing thereof to the shareholders of the
     Performance Guarantor or its Subsidiaries copies of all
     financial statements, reports and proxy statements so
     furnished.

          (v)  S.E.C. Filings.  Promptly upon the filing thereof,
     copies of all registration statements and annual, quarterly,
     monthly or other regular reports which the Performance
     Guarantor or its Subsidiaries or any of its Affiliates files
     with the Securities and Exchange Commission.

          (vi) Copies of Notices.  Promptly upon its receipt of
     any notice, request for consent, financial statements,
     certification, report or other communication under or in
     connection with any Transaction Document from any Person
     other than the Administrative Agent or Blue Ridge, copies of
     the same.

          (vii)     Change in Credit and Collection Policy.  At
     least thirty (30) days prior to the effectiveness of any
     material change in the Credit and Collection Policy, a
     notice (A) indicating such change and (B) if such proposed
     change would be reasonably likely to adversely affect the
     collectibility of the Receivables or decrease the credit
     quality of any newly created Receivables, requesting the
     Administrative Agent's consent thereto.

          (viii)    Other Information.  Promptly, from time to
     time, such other information, documents, records or reports
     relating to the Receivables or the condition or operations,
     financial or otherwise, of such Seller Party as the
     Administrative Agent may from time to time reasonably
     request in order to protect the interests of the
     Administrative Agent, for the benefit of Blue Ridge, under
     or as contemplated by this Agreement.

     (b)  Notices.  Such Seller Party will notify the
Administrative Agent in writing of any of the following promptly
upon learning of the occurrence thereof, describing the same and,
if applicable, the steps being taken with respect thereto:

          (i)  Amortization Events or Unmatured Amortization
     Events.  The occurrence of each Amortization Event and each
     Unmatured Amortization Event, by a statement of an
     Authorized Officer of such Seller Party.

          (ii) Judgments and Proceedings.  (A) (1) The entry of
     any judgment or decree against the Performance Guarantor,
     the Servicer or any of their respective Subsidiaries if the
     aggregate amount of all judgments and decrees then
     outstanding against the Performance Guarantor, the Servicer
     and their respective Subsidiaries exceeds $10,000,000 after
     deducting (I) the amount with respect to which the
     Performance Guarantor, the Servicer or any such Subsidiary,
     as the case may be, is insured and with respect to which the
     insurer has assumed responsibility in writing, and (II) the
     amount for which the Performance Guarantor, the Servicer or
     any such Subsidiary is otherwise indemnified if the terms of
     such indemnification are satisfactory to the Administrative
     Agent, and (2) the institution of any litigation,
     arbitration proceeding or governmental proceeding against
     the Performance Guarantor or the Servicer which,
     individually or in the aggregate, could reasonably be
     expected to have a Material Adverse Effect; and (B) the
     entry of any judgment or decree or the institution of any
     litigation, arbitration proceeding or governmental
     proceeding against Seller.

          (iii)     Material Adverse Effect.  The occurrence of
     any event or condition that has had, or could reasonably be
     expected to have, a Material Adverse Effect.

          (iv) Termination Date.  The occurrence of the
     "Termination Date" under and as defined in the Receivables
     Sale Agreement.

          (v)  Defaults Under Other Agreements.  The occurrence
     of a default or an event of default under any other material
     financing arrangement pursuant to which such Seller Party is
     a debtor or an obligor.

          (vi) Notices under Receivables Sale Agreement.  Copies
     of all notices delivered under the Receivables Sale
     Agreement.

          (vii)     Downgrade of Performance Guarantor or
     Originator.  Any downgrade in the rating of any Indebtedness
     of the Performance Guarantor or Originator by S&P or
     Moody's, setting forth the Indebtedness affected and the
     nature of such change.

     (c)  Compliance with Laws and Preservation of Corporate
Existence.  Such Seller Party will comply in all respects with
all applicable laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be
subject, except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect.   Such
Seller Party will preserve and maintain its corporate existence,
rights, franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified in good standing
as a foreign corporation in each jurisdiction where its business
is conducted, except where the failure to so preserve and
maintain or qualify or remain qualified could not reasonably be
expected to have a Material Adverse Effect.

     (d)  Audits.  Such Seller Party will furnish to the
Administrative Agent from time to time such information with
respect to it and the Receivables as the Administrative Agent may
reasonably request.  Such Seller Party will, from time to time
during regular business hours as requested by the Administrative
Agent upon reasonable notice and at the sole cost of such Seller
Party, permit the Administrative Agent, or its agents or
representatives (and shall cause the Originator to permit the
Administrative Agent or its agents or representatives):  (i) to
examine and make copies of and abstracts from all Records in the
possession or under the control of such Person relating to the
Purchased Assets, including, without limitation, the related
Contracts, and (ii) to visit the offices and properties of such
Person for the purpose of examining such materials described in
clause (i) above, and to discuss matters relating to such
Person's financial condition or the Purchased Assets or any
Person's performance under any of the Transaction Documents or
any Person's performance under the Contracts and, in each case,
with any of the officers or employees of Seller or the Servicer
having knowledge of such matters (each of the foregoing
examinations and visits, a "Review"); provided, however, that, so
long as no Amortization Event has occurred and is continuing, (A)
the Seller Parties shall only be responsible for the costs and
expenses of one (1) Review in any one calendar year, and (B) the
Administrative Agent will not request more than two (2) Reviews
in any one calendar year.

     (e)  Keeping and Marking of Records and Books.

          (i)  The Servicer will (and will cause the Originator
     to) maintain and implement administrative and operating
     procedures (including, without limitation, an ability to
     recreate records evidencing Receivables in the event of the
     destruction of the originals thereof), and keep and maintain
     all documents, books, records and other information
     reasonably necessary or advisable for the collection of all
     Receivables (including, without limitation, records adequate
     to permit the immediate identification of each new
     Receivable and all Collections of and adjustments to each
     existing Receivable).  The Servicer will (and will cause the
     Originator to) give the Administrative Agent notice of any
     material change in the administrative and operating
     procedures referred to in the previous sentence.

          (ii) Such Seller Party will (and will cause the
     Originator to):  (A) on or prior to the date hereof, mark
     its master data processing records and other books and
     records relating to the Receivables with a legend,
     acceptable to the Administrative Agent, describing the
     Administrative Agent's security interest, for the benefit of
     the Secured Parties, in the Purchased Assets and (B) upon
     the request of the Administrative Agent following the
     occurrence of an Amortization Event:  (x) mark each Contract
     with a legend describing the Administrative Agent's security
     interest and (y) deliver to the Administrative Agent all
     Contracts (including, without limitation, all multiple
     originals of any such Contract constituting an instrument, a
     certificated security or chattel paper) relating to the
     Receivables.

     (f)  Compliance with Contracts and Credit and Collection
Policy.  Such Seller Party will (and will cause the Originator
to) timely and fully (i) perform and comply with all provisions,
covenants and other promises required to be observed by it under
the Contracts related to the Receivables, and (ii) comply in all
respects with the Credit and Collection Policy in regard to each
Receivable and the related Contract.

     (g)  Performance and Enforcement of Receivables Sale
Agreement.  Seller will, and will require the Originator to,
perform each of their respective obligations and undertakings
under and pursuant to the Receivables Sale Agreement, will
purchase Receivables thereunder in strict compliance with the
terms thereof and will vigorously enforce the rights and remedies
accorded to Seller under the Receivables Sale Agreement.  Seller
will take all actions to perfect and enforce its rights and
interests (and the rights and interests of the Administrative
Agent, as Seller's assignee) under the Receivables Sale Agreement
as the Administrative Agent may from time to time reasonably
request, including, without limitation, making claims to which it
may be entitled under any indemnity, reimbursement or similar
provision contained in the Receivables Sale Agreement.

     (h)  Ownership.  Seller will (or will cause the Originator
to) take all necessary action to (i) vest legal and equitable
title to the Purchased Assets purchased under the Receivables
Sale Agreement irrevocably in Seller, free and clear of any
Adverse Claims (other than Adverse Claims in favor of the
Administrative Agent, for the benefit of the Secured Parties)
including, without limitation, the filing of all financing
statements or other similar instruments or documents necessary
under the UCC (or any comparable law) of all appropriate
jurisdictions to perfect Seller's interest in such Purchased
Assets and such other action to perfect, protect or more fully
evidence the interest of Seller therein as the Administrative
Agent may reasonably request), and (ii) establish and maintain,
in favor of the Administrative Agent, for the benefit of the
Secured Parties, a valid and perfected first priority security
interest in all Purchased Assets, free and clear of any Adverse
Claims, including, without limitation, the filing of all
financing statements or other similar instruments or documents
necessary under the UCC (or any comparable law) of all
appropriate jurisdictions to perfect the Administrative Agent's
(for the benefit of the Secured Parties) security interest in the
Purchased Assets and such other action to perfect, protect or
more fully evidence the interest of the Administrative Agent for
the benefit of the Secured Parties as the Administrative Agent
may reasonably request.

     (i)  Reliance.  Seller acknowledges that the Administrative
Agent and Blue Ridge are entering into the transactions
contemplated by this Agreement in reliance upon Seller's identity
as a legal entity that is separate from the Originator.
Therefore, from and after the date of execution and delivery of
this Agreement, Seller shall take all reasonable steps,
including, without limitation, all steps that the Administrative
Agent or Blue Ridge may from time to time reasonably request, to
maintain Seller's identity as a separate legal entity and to make
it manifest to third parties that Seller is an entity with assets
and liabilities distinct from those of the Originator and any
Affiliates thereof (other than Seller) and not just a division of
the Originator or any such Affiliate.  Without limiting the
generality of the foregoing and in addition to the other
covenants set forth herein, Seller will:

          (i)  conduct its own business in its own name and
     require that all full-time employees of Seller, if any,
     identify themselves as such and not as employees of the
     Originator (including, without limitation, by means of
     providing appropriate employees with business or
     identification cards identifying such employees as Seller's
     employees);

          (ii) compensate all employees, consultants and agents
     directly, from Seller's own funds, for services provided to
     Seller by such employees, consultants and agents and, to the
     extent any employee, consultant or agent of Seller is also
     an employee, consultant or agent of the Originator or any
     Affiliate thereof, allocate the compensation of such
     employee, consultant or agent between Seller and the
     Originator or such Affiliate, as applicable, on a basis that
     reflects the services rendered to Seller and the Originator
     or such Affiliate, as applicable;

          (iii)     clearly identify its offices (by signage or
     otherwise) as its offices and, if such office is located in
     the offices of the Originator, Seller shall lease such
     office at a fair market rent;

          (iv) have a separate telephone number, which will be
     answered only in its name and separate stationery and
     checks, if it uses any, in its own name;

          (v)  conduct all transactions with the Originator and
     the Servicer (including, without limitation, any delegation
     of its obligations hereunder as Servicer) strictly on an
     arm's-length basis, allocate all overhead expenses
     (including, without limitation, telephone and other utility
     charges) for items shared between Seller and the Originator
     on the basis of actual use to the extent practicable and, to
     the extent such allocation is not practicable, on a basis
     reasonably related to actual use;

          (vi) at all times have a Board of Directors consisting
     of three members, at least one member of which is an
     Independent Director;

          (vii)     observe all corporate formalities as a
     distinct entity, and ensure that all corporate actions
     relating to (A) the selection, maintenance or replacement of
     the Independent Director, (B) the dissolution or liquidation
     of Seller or (C) the initiation of, participation in,
     acquiescence in or consent to any bankruptcy, insolvency,
     reorganization or similar proceeding involving Seller, are
     duly authorized by unanimous vote of its Board of Directors
     (including the Independent Director);

          (viii)    maintain Seller's books and records separate
     from those of the Originator and any Affiliate thereof and
     otherwise readily identifiable as its own assets rather than
     assets of the Originator or any Affiliate thereof;

          (ix) prepare its financial statements separately from
     those of the Originator and insure that any consolidated
     financial statements of the Originator or any Affiliate
     thereof that include Seller and that are filed with the
     Securities and Exchange Commission or any other governmental
     agency have notes clearly stating that Seller is a separate
     corporate entity and that its assets will be available first
     and foremost to satisfy the claims of the creditors of
     Seller;

          (x)  except as herein specifically otherwise provided,
     maintain the funds or other assets of Seller separate from,
     and not commingled with, those of the Originator or any
     Affiliate thereof and only maintain bank accounts or other
     depository accounts to which Seller alone is the account
     party, into which Seller and Servicer, for the account of
     Seller, make deposits and from which Seller alone (or the
     Administrative Agent hereunder) has the power to make
     withdrawals;

          (xi) pay all of Seller's operating expenses from
     Seller's own assets (except for certain payments by the
     Originator or other Persons pursuant to allocation
     arrangements that comply with the requirements of this
     Section 7.1(i));

          (xii)     operate its business and activities such
     that:  it does not engage in any business or activity of any
     kind, or enter into any transaction or indenture, mortgage,
     instrument, agreement, contract, lease or other undertaking,
     other than the transactions contemplated and authorized by
     this Agreement and the Receivables Sale Agreement; and does
     not create, incur, guarantee, assume or suffer to exist any
     indebtedness or other liabilities, whether direct or
     contingent, other than (1) as a result of the endorsement of
     negotiable instruments for deposit or collection or similar
     transactions in the ordinary course of business, (2) the
     incurrence of obligations under this Agreement, (3) the
     incurrence of obligations, as expressly contemplated in the
     Receivables Sale Agreement, to make payment to the
     Originator thereunder for the purchase of Receivables from
     the Originator under the Receivables Sale Agreement, and (4)
     the incurrence of operating expenses in the ordinary course
     of business of the type otherwise contemplated by this
     Agreement;

          (xiii)    maintain its corporate charter in conformity
     with this Agreement, such that it does not amend, restate,
     supplement or otherwise modify its Certificate of
     Incorporation or By-Laws in any respect that would impair
     its ability to comply with the terms or provisions of any of
     the Transaction Documents, including, without limitation,
     Section 7.1(i) of this Agreement;

          (xiv)     maintain the effectiveness of, and continue
     to perform under the Receivables Sale Agreement and the
     Performance Undertaking, such that it does not amend,
     restate, supplement, cancel, terminate or otherwise modify
     the Receivables Sale Agreement or the Performance
     Undertaking, or give any consent, waiver, directive or
     approval thereunder or waive any default, action, omission
     or breach under the Receivables Sale Agreement or the
     Performance Undertaking or otherwise grant any indulgence
     thereunder, without (in each case) the prior written consent
     of the Administrative Agent;

          (xv) maintain its corporate separateness such that it
     does not merge or consolidate with or into, or convey,
     transfer, lease or otherwise dispose of (whether in one
     transaction or in a series of transactions, and except as
     otherwise contemplated herein) all or substantially all of
     its assets (whether now owned or hereafter acquired) to, or
     acquire all or substantially all of the assets of, any
     Person, nor at any time create, have, acquire, maintain or
     hold any interest in any Subsidiary.

          (xvi)     maintain at all times the Required Capital
     Amount (as defined in the Receivables Sale Agreement) and
     refrain from making any dividend, distribution, redemption
     of capital stock or payment of any subordinated indebtedness
     which would cause the Required Capital Amount to cease to be
     so maintained; and

          (xvii)    take such other actions as are necessary on
     its part to ensure that the facts and assumptions set forth
     in the opinion issued by Riddell Williams P.S. counsel for
     Seller, in connection with the closing or initial Purchase
     under this Agreement and relating to substantive
     consolidation issues, and in the certificates accompanying
     such opinion, remain true and correct in all material
     respects at all times.

     (j)  Collections.  Such Seller Party will cause (i) all
Collections to be sent to a Blocked Account or a Lock-Box and
cause all such Collections to be deposited in one of the Blocked
Accounts, (ii) from  no later than 30 days after the date hereof,
each Blocked Account shall be subject at all times to a Blocked
Account Agreement that is in full force and effect, and (iii) a
Delivery Order to be executed and delivered with respect to each
Lock-Box.  In the event any payments relating to the Purchased
Assets are remitted directly to Seller or any Affiliate of
Seller, Seller will deposit (or will cause all such payments to
be deposited) directly to a Blocked Account within two (2)
Business Days following receipt thereof, and, at all times prior
to such remittance, Seller will itself hold or, if applicable,
will cause such payments to be held in trust for the exclusive
benefit of the Administrative Agent and Blue Ridge.  Seller will
maintain exclusive ownership, dominion and control (subject to
the terms of this Agreement) of each Lock-Box and Blocked Account
and shall not grant the right to take dominion and control of any
Lock-Box or Blocked Account at a future time or upon the
occurrence of a future event to any Person, except to the
Administrative Agent as contemplated by this Agreement.

     (k)  Taxes.  Such Seller Party will file all tax returns and
reports required by law to be filed by it and will promptly pay
all taxes and governmental charges at any time owing, except any
such taxes which are not yet delinquent or are being diligently
contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set
aside on its books.  Seller will pay when due any taxes payable
in connection with the Receivables, exclusive of taxes on or
measured by income or gross receipts of the Administrative Agent
or Blue Ridge.

     (l)  Payment to the Originator.  With respect to any
Receivable purchased by Seller from the Originator, such sale
shall be effected under, and in strict compliance with the terms
of, the Receivables Sale Agreement, including, without
limitation, the terms relating to the amount and timing of
payments to be made to the Originator in respect of the purchase
price for such Receivable.

     Section 7.2    Negative Covenants of the Seller Parties.

     Until the date on which the Aggregate Unpaids have been
indefeasibly paid in full and this Agreement terminates in
accordance with its terms, each Seller Party hereby covenants, as
to itself, that:

     (a)  Name Change, Offices and Records.  Such Seller Party
will not change its name, identity or structure (within the
meaning of any applicable enactment of the UCC), relocate its
chief executive office at any time while the location of its
chief executive office is relevant to perfection of the
Administrative Agent's security interest, for the benefit of the
Secured Parties, in the Receivables, Related Security and
Collections, or change any office where Records are kept unless
it shall have:  (i) given the Administrative Agent at least forty-
five (45) days' prior written notice thereof and (ii) delivered
to the Administrative Agent all financing statements, instruments
and other documents requested by the Administrative Agent in
connection with such change or relocation.

     (b)  Change in Payment Instructions to Obligors.  Except as
may be required by the Administrative Agent pursuant to Section
8.2(b), such Seller Party will not add or terminate any bank as a
Blocked Account Bank, or make any change in the instructions to
Obligors regarding payments to be made to any Lock-Box or Blocked
Account, unless the Administrative Agent shall have received, at
least ten (10) days before the proposed effective date therefor,
(i) written notice of such addition, termination or change and
(ii) with respect to the addition of a Blocked Account Bank or a
Blocked Account or Lock-Box, an executed Blocked Account
Agreement with respect to the new Blocked Account and an executed
Delivery Order with respect to the new Lock-Box; provided,
however, that the Servicer may make changes in instructions to
Obligors regarding payments if such new instructions require such
Obligor to make payments to another existing Blocked Account.

     (c)  Modifications to Contracts and Credit and Collection
Policy.  Such Seller Party will not, and will not permit the
Originator to, change the character of its business or make any
change to the Credit and Collection Policy except in compliance
with the provisions of Section 7.1(a)(vii).  Except as provided
in Section 8.2(d), the Servicer will not, and will not permit the
Originator to, extend, amend or otherwise modify the terms of any
Receivable or any Contract related thereto other than in
accordance with the Credit and Collection Policy.

     (d)  Sales, Liens.  Seller will not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or grant
any option with respect to, or create or suffer to exist any
Adverse Claim upon (including, without limitation, the filing of
any financing statement) or with respect to, any of the Purchased
Assets, or assign any right to receive income with respect
thereto (other than, in each case, the creation of a security
interest therein in favor of the Administrative Agent, for the
benefit of the Secured Parties, as provided for herein), and
Seller will defend the right, title and interest of the Secured
Parties in, to and under any of the foregoing property, against
all claims of third parties claiming through or under Seller or
the Originator.  Seller will not create or suffer to exist any
mortgage, pledge, security interest, encumbrance, lien, charge or
other similar arrangement on any of its inventory.

     (e)  Use of Proceeds.  Seller will not use the proceeds of
the Purchases for any purpose other than (i) paying for
Receivables and Related Security under and in accordance with the
Receivables Sale Agreement, including without limitation, making
payments on the Subordinated Notes to the extent permitted
thereunder and under the Receivables Sale Agreement, (ii) paying
its ordinary and necessary operating expenses when and as due,
and (iii) making Restricted Junior Payments to the extent
permitted under this Agreement.

     (f)  Termination Date Determination.  Seller will not
designate the Termination Date, or send any written notice to the
Originator in respect thereof, without the prior written consent
of the Administrative Agent, except with respect to the
occurrence of such Termination Date arising pursuant to Section
5.1(d) of the Receivables Sale Agreement.

     (g)  Restricted Junior Payments.  Seller will not make any
Restricted Junior Payment if after giving effect thereto,
Seller's Net Worth (as defined in the Receivables Sale Agreement)
would be less than the Required Capital Amount (as defined in the
Receivables Sale Agreement).  From and after the occurrence of an
Unmatured Amortization Event, Seller will not make any Restricted
Junior Payment.

     (h)  Seller Indebtedness.  Seller will not incur or permit
to exist any Indebtedness or liability on account of deposits
except:  (i) the Aggregate Unpaids, (ii) the Subordinated Loans
(as defined in the Receivables Sale Agreement, and (iii) other
current accounts payable arising in the ordinary course of
business and not overdue.

     (i)  Prohibition on Additional Negative Pledges.  No Seller
Party will enter into or assume any agreement (other than this
Agreement and the other Transaction Documents) prohibiting the
creation or assumption of any Adverse Claim upon the Purchased
Assets except as contemplated by the Transaction Documents, or
otherwise prohibiting or restricting any transaction contemplated
hereby or by the other Transaction Documents, and no Seller Party
will enter into or assume any agreement creating any Adverse
Claim upon the Subordinated Notes (as defined in the Receivables
Sale Agreement).

     (j)  Net Pool Balance.  At no time prior to the Facility
Termination Date shall Seller permit the Net Pool Balance to be
less than an amount equal to the sum of (i) the Aggregate
Invested Amount and (ii) the Required Reserve.

     (k)  Prohibition on Additional Activities.  The Seller shall
not engage in any activities other than those contemplated by
this Agreement and the Transaction Documents as such other
activities are reasonably incidental hereto and thereto.

ARTICLE VIII

                  ADMINISTRATION AND COLLECTION

     Section 8.1    Designation of Servicer.

     (a)  The servicing, administration and collection of the
Receivables shall be conducted by such Person (the "Servicer") so
designated from time to time in accordance with this Section 8.1.
Originator. is hereby designated as, and hereby agrees to perform
the duties and obligations of, the Servicer pursuant to the terms
of this Agreement.  The Administrative Agent may at any time
after the occurrence of an Amortization Event designate as
Servicer any Person to succeed Originator or any successor
Servicer, provided that the Rating Agency Condition is satisfied.

     (b)  Without the prior written consent of the Administrative
Agent and the Required Liquidity Banks, Originator shall not be
permitted to delegate any of its duties or responsibilities as
Servicer to any Person other than (i) Seller and (ii) with
respect to certain Defaulted Receivables, outside collection
agencies in accordance with its customary practices.  Seller
shall not be permitted to further delegate to any other Person
any of the duties or responsibilities of the Servicer delegated
to it by Originator.  If at any time the Administrative Agent
shall designate as Servicer any Person other than Originator, all
duties and responsibilities theretofore delegated by Originator
to Seller may, at the discretion of the Administrative Agent, be
terminated forthwith on notice given by the Administrative Agent
to Originator and to Seller.

     (c)  Notwithstanding the foregoing subsection (b):  (i)
Originator shall be and remain primarily liable to the
Administrative Agent and Blue Ridge for the full and prompt
performance of all duties and responsibilities of the Servicer
hereunder and (ii) the Administrative Agent and Blue Ridge shall
be entitled to deal exclusively with Originator in matters
relating to the discharge by the Servicer of its duties and
responsibilities hereunder.  The Administrative Agent and Blue
Ridge shall not be required to give notice, demand or other
communication to any Person other than Originator in order for
communication to the Servicer and its sub-servicer or other
delegate with respect thereto to be accomplished.  Originator, at
all times that it is the Servicer, shall be responsible for
providing any sub-servicer or other delegate of the Servicer with
any notice given to the Servicer under this Agreement.

     Section 8.2    Duties of Servicer.

     (a)  The Servicer shall take or cause to be taken all such
actions as may be necessary or advisable to collect each
Receivable from time to time, all in accordance with applicable
laws, rules and regulations, with reasonable care and diligence,
and in accordance with the Credit and Collection Policy.

     (b)  The Servicer will instruct all Obligors to pay all
Collections directly to a Lock-Box or a Blocked Account.  The
Servicer shall cause to be established and maintained one or more
Lock-Boxes and Blocked Accounts in the name of the Seller and
shall effect a Blocked Account Agreement substantially in the
form of Exhibit VI with each bank party to a Blocked Account at
any time and shall cause a Delivery Order to be executed and
delivered with respect to each Lock-Box at any time.  In the case
of any remittances received in any Lock-Box or Blocked Account
that shall have been identified, to the satisfaction of the
Servicer, to not constitute Collections or other proceeds of the
Receivables or the Related Security, the Servicer shall promptly
remit such items to the Person identified to it as being the
owner of such remittances.  From and after the date the
Administrative Agent delivers to any Blocked Account Bank a
Collection Notice pursuant to Section 8.3, or delivers to the US
Postal Service a Delivery Order relating to a Lock-Box, the
Administrative Agent may request that the Servicer, and the
Servicer thereupon promptly shall instruct all Obligors with
respect to the Receivables, to remit all payments thereon to a
new depositary account or Lock-Box specified by the
Administrative Agent and, at all times thereafter, Seller and the
Servicer shall not deposit or otherwise credit, and shall not
permit any other Person to deposit or otherwise credit to such
new depositary account any cash or payment item other than
Collections or, if a Delivery Order has been presented with
respect to a Lock-Box, Seller and Servicer shall not remove any
receipts from such Lock-Box, but the Administrative Agent or its
designee shall remove all such receipts from such Lock-Box.

     (c)  The Servicer shall administer the Collections in
accordance with the procedures described herein and in Article
II.  The Servicer shall set aside and hold in trust for the
account of Seller and Blue Ridge their respective shares of the
Collections in accordance with Article II.  The Servicer shall,
upon the request of the Administrative Agent, segregate, in a
manner acceptable to the Administrative Agent, all cash, checks
and other instruments received by it from time to time
constituting Collections from the general funds of the Servicer
or Seller prior to the remittance thereof in accordance with
Article II.  If the Servicer shall be required to segregate
Collections pursuant to the preceding sentence, the Servicer
shall segregate and deposit with a bank designated by the
Administrative Agent such allocable share of Collections of
Receivables set aside for Blue Ridge on the first Business Day
following receipt by the Servicer of such Collections, duly
endorsed or with duly executed instruments of transfer.

     (d)  The Servicer may, in accordance with the Credit and
Collection Policy, extend the maturity of any Receivable or
adjust the Outstanding Balance of any Receivable as the Servicer
determines to be appropriate to maximize Collections thereof;
provided, however, that such extension or adjustment shall not
alter the status of such Receivable as a Delinquent Receivable or
Defaulted Receivable or limit the rights of the Administrative
Agent or Blue Ridge under this Agreement.  Notwithstanding
anything to the contrary contained herein, the Administrative
Agent shall have the absolute and unlimited right after the
earlier to occur of an Unmatured Amortization Event and an
Amortization Event to direct the Servicer to commence or settle
any legal action with respect to any Receivable or to foreclose
upon or repossess any Related Security.

     (e)  The Servicer shall hold in trust for Seller and the
Administrative Agent and Blue Ridge all Records that (i) evidence
or relate to the Receivables, the related Contracts and Related
Security or (ii) are otherwise necessary or desirable to collect
the Receivables and shall, as soon as practicable upon demand of
the Administrative Agent, deliver or make available to the
Administrative Agent all such Records, at a place selected by the
Administrative Agent.  The Servicer shall, as soon as practicable
following receipt thereof turn over to Seller any cash
collections or other cash proceeds received with respect to
Indebtedness not constituting Receivables.  The Servicer shall,
from time to time at the request of the Administrative Agent or
Blue Ridge, furnish to Blue Ridge (promptly after any such
request) a calculation of the amounts set aside for Blue Ridge
pursuant to Article II.

     (f)  Any payment by an Obligor in respect of any
indebtedness owed by it to Originator or Seller shall, except as
otherwise specified by such Obligor or otherwise required by
contract or law and unless otherwise instructed by the
Administrative Agent, be applied as a Collection of any
Receivable of such Obligor (starting with the oldest such
Receivable) to the extent of any amounts then due and payable
thereunder before being applied to any other receivable or other
obligation of such Obligor.

     Section 8.3    Collection Notices and Delivery Orders.

     The Administrative Agent is authorized at any time after the
occurrence of an Amortization Event to date and to deliver to the
Blocked Account Banks the Collection Notices and deliver to the
US Postal Service the Delivery Orders.  Seller hereby transfers
to the Administrative Agent for the benefit of Blue Ridge,
effective when the Administrative Agent delivers such notice, the
exclusive ownership and control of each Lock-Box and the Blocked
Accounts.  In case any authorized signatory of Seller whose
signature appears on a Blocked Account Agreement or a Delivery
Order shall cease to have such authority before the delivery of
such notice, such Collection Notice or Delivery Order, as the
case may be, shall nevertheless be valid as if such authority had
remained in force.  Seller hereby authorizes the Administrative
Agent, and agrees that the Administrative Agent shall be entitled
(a) at any time after delivery of the Collection Notices and/or
the Delivery Orders, to endorse Seller's name on checks and other
instruments representing Collections, (b) at any time after the
occurrence of an Amortization Event, to enforce the Receivables,
the related Contracts and the Related Security, and (c) at any
time after the occurrence of an Amortization Event, to take such
action as shall be necessary or desirable to cause all cash,
checks and other instruments constituting Collections of
Receivables to come into the possession of the Administrative
Agent rather than Seller.

     Section 8.4    Responsibilities of Seller.

     Anything herein to the contrary notwithstanding, the
exercise by the Administrative Agent, on behalf of Blue Ridge, of
the Administrative Agent's rights hereunder shall not release the
Servicer, the Originator or Seller from any of their duties or
obligations with respect to any Receivables or under the related
Contracts.  The Administrative Agent and Blue Ridge shall have no
obligation or liability with respect to any Receivables or
related Contracts, nor shall any of them be obligated to perform
the obligations of Seller or the Originator thereunder.

     Section 8.5    Monthly Reports.

     The Servicer shall prepare and forward to the Administrative
Agent (a) on each Monthly Reporting Date, a Monthly Report and an
electronic file of the data contained therein and (b) at such
times as the Administrative Agent shall request, a listing by
Obligor of all Receivables together with an aging of such
Receivables.

     Section 8.6    Servicing Fee.

     As compensation for the Servicer's servicing activities on
their behalf, the Servicer shall be paid the Servicing Fee in
arrears on each Settlement Date out of Collections.

                           ARTICLE IX

                       AMORTIZATION EVENTS

     Section 9.1    Amortization Events.

     The occurrence of any one or more of the following events
shall constitute an Amortization Event:

     (a)  Any Seller Party or the Performance Guarantor shall
fail to make any payment or deposit required to be made by it
under the Transaction Documents when due and, for any such
payment or deposit which is not in respect of principal, such
failure continues for five (5) consecutive Business Days.

     (b)  Any representation, warranty, certification or
statement made by the Performance Guarantor or any Seller Party
in any Transaction Document to which it is a party or in any
other document delivered pursuant thereto shall prove to have
been materially incorrect when made or deemed made.

     (c)  Any Seller Party shall fail to perform or observe any
covenant contained in Section 7.2 or 8.5 when due.

     (d)  Any Seller Party or the Performance Guarantor shall
fail to perform or observe any other term, covenant or agreement
under any Transaction Documents and such failure shall continue
for ten (10) days.

     (e)  Failure of Seller to pay any Indebtedness (other than
the Aggregate Unpaids) when due or the default by Seller in the
performance of any term, provision or condition contained in any
agreement under which any such Indebtedness was created or is
governed, the effect of which is to cause, or to permit the
holder or holders of such Indebtedness to cause, such
Indebtedness to become due prior to its stated maturity; or any
such Indebtedness of Seller shall be declared to be due and
payable or required to be prepaid (other than by a regularly
scheduled payment) prior to the date of maturity thereof.

     (f)  Failure of the Performance Guarantor or any of its
Subsidiaries to pay Indebtedness in excess of $5,000,000 (or
$10,750 in the case of Seller) in aggregate principal amount
(hereinafter, "Material Indebtedness") when due, the effect of
which is to cause, or to permit the holder or holders of such
Material Indebtedness to cause, such Material Indebtedness to
become due prior to its stated maturity; or any Material
Indebtedness of the Performance Guarantor or any of its
Subsidiaries shall be declared to be due and payable or required
to be prepaid (other than by a regularly scheduled payment) prior
to the date of maturity thereof.

     (g)  An Event of Bankruptcy shall occur with respect to the
Performance Guarantor, any Seller Party or any of their
respective Subsidiaries.

     (h)  As at the end of any Calculation Period:

          (i)  the three-month rolling average Delinquency Ratio
     shall exceed 2.75%,

          (ii) the three-month rolling average Default Ratio
     shall exceed 2.50%, or

          (iii)     the three-month rolling average Dilution
     Ratio shall exceed 3.00%.

     (i)  A Change of Control.

     (j)  (i) One or more final judgments for the payment of
money in an aggregate amount of $10,750 or more shall be entered
against Seller or (ii) one or more final judgments for the
payment of money in an amount in excess of $10,000,000,
individually or in the aggregate, shall be entered against the
Performance Guarantor, the Originator or any of their
Subsidiaries (other than Seller) on claims not covered by
insurance or as to which the insurance carrier has denied its
responsibility, and such judgment shall continue unsatisfied and
in effect for thirty (30) consecutive days without a stay of
execution.

     (k)  The Termination Date under the Receivables Sale
Agreement shall occur or the Originator shall for any reason
cease to transfer, or cease to have the legal capacity to
transfer, or otherwise be incapable of transferring Receivables
to Seller under the Receivables Sale Agreement.

     (l)  This Agreement shall terminate in whole or in part
(except in accordance with its terms), or shall cease to be
effective or to be the legally valid, binding and enforceable
obligation of Seller, or any Obligor shall directly or indirectly
contest in any manner such effectiveness, validity, binding
nature or enforceability, or the Administrative Agent, for the
benefit of the Secured Parties, shall cease to have a valid and
perfected first priority security interest in the Purchased
Assets.

     (m)  On any Settlement Date, after giving effect to the
turnover of Collections by the Servicer on such date and the
application thereof to the Aggregate Unpaids in accordance with
this Agreement, (i) the Receivables Interest shall exceed 100% or
(ii) the Aggregate Invested Amount shall exceed the Purchase
Limit.

     (n)  The Performance Undertaking shall cease to be effective
or to be the legally valid, binding and enforceable obligation of
Performance Guarantor, or Performance Guarantor shall directly or
indirectly contest in any manner such effectiveness, validity,
binding nature or enforceability of its obligations thereunder.

     (o)  The Internal Revenue Service shall file notice of a
lien pursuant to Section 6323 of the Tax Code with regard to any
of the Purchased Assets and such lien shall not have been
released within seven (7) days, or the PBGC shall, or shall
indicate its intention to, file notice of a lien pursuant to
Section 4068 of ERISA with regard to any of the Purchased Assets.

     (p)  Any Plan of the Performance Guarantor or any of its
ERISA Affiliates:

          (i)  shall fail to be funded in accordance with the
     minimum funding standard required by applicable law, the
     terms of such Plan, Section 412 of the Tax Code or Section
     302 of ERISA for any plan year or a waiver of such standard
     is sought or granted with respect to such Plan under
     applicable law, the terms of such Plan or Section 412 of the
     Tax Code or Section 303 of ERISA; or

          (ii) is being, or has been, terminated or the subject
     of termination proceedings under applicable law or the terms
     of such Plan; or

          (iii)     shall require the Performance Guarantor or
     any of its ERISA Affiliates to provide security under
     applicable law, the terms of such Plan, Section 401 or 412
     of the Tax Code or Section 306 or 307 of ERISA; or

          (iv) results in a liability to the Performance
     Guarantor or any of its ERISA Affiliates under applicable
     law, the terms of such Plan, or Title IV ERISA,

and there shall result from any such failure, waiver, termination
or other event a liability to the PBGC or a Plan that would have
a Material Adverse Effect.

     (q)  Any event shall occur which (i) materially and
adversely impairs the ability of the Originator to originate
Receivables of a credit quality that is at least equal to the
credit quality of the Receivables sold or contributed to Seller
on the date of this Agreement or (ii) has, or could be reasonably
expected to have a Material Adverse Effect.

     (r)  The Seller or the Originator shall become an
"investment company" within the meaning of the Investment Company
Act of 1940, as amended, or any successor statute.

     Section 9.2    Remedies.

     Upon the occurrence and during the continuation of an
Amortization Event, the Administrative Agent may, or upon the
direction of the Required Liquidity Banks shall, take any of the
following actions:  (a) replace the Person then acting as
Servicer if the Administrative Agent has not already done so, (b)
declare the Facility Termination Date to have occurred, whereupon
Reinvestments shall immediately terminate and the Facility
Termination Date shall forthwith occur, all without demand,
protest or further notice of any kind, all of which are hereby
expressly waived by each Seller Party; provided, however, that
upon the occurrence of an Event of Bankruptcy with respect to any
Seller Party, the Facility Termination Date shall automatically
occur, without demand, protest or any notice of any kind, all of
which are hereby expressly waived by each Seller Party, (c)
deliver the Collection Notices to the Blocked Account Banks, (d)
exercise all rights and remedies of a secured party upon default
under the UCC and other applicable laws, (e) deliver the Delivery
Orders to the US Postal Service, and (f) notify Obligors of the
Administrative Agent's security interest, for the benefit of the
Secured Parties, in the Receivables and other Purchased Assets.
The aforementioned rights and remedies shall be without
limitation, and shall be in addition to all other rights and
remedies of the Administrative Agent and Blue Ridge otherwise
available under any other provision of this Agreement, by
operation of law, at equity or otherwise, all of which are hereby
expressly preserved, including, without limitation, all rights
and remedies provided under the UCC, all of which rights shall be
cumulative.

                            ARTICLE X

                         INDEMNIFICATION

     Section 10.1   Indemnities by the Seller Parties.

     Without limiting any other rights that the Administrative
Agent or Blue Ridge may have hereunder or under applicable law,
(a) Seller hereby agrees to indemnify (and pay upon demand to)
the Administrative Agent, Blue Ridge, each of the Liquidity Banks
and each of the respective assigns, officers, directors, agents
and employees of the foregoing (each, an "Indemnified Party")
from and against any and all damages, losses, claims, taxes,
liabilities, costs, expenses and for all other amounts payable,
including reasonable attorneys' fees (which attorneys may be
employees of the Administrative Agent or another Indemnified
Party) and disbursements (all of the foregoing being collectively
referred to as "Indemnified Amounts") awarded against or incurred
by any of them arising out of or as a result of this Agreement or
the acquisition, either directly or indirectly, by Blue Ridge or
any of its Liquidity Banks of an interest in the Receivables, and
(b) the Servicer hereby agrees to indemnify (and pay upon demand
to) each Indemnified Party for Indemnified Amounts awarded
against or incurred by any of them arising out of the Servicer's
activities as Servicer hereunder excluding, however, in all of
the foregoing instances under the preceding clauses (a) and (b):

          (i)  Indemnified Amounts to the extent a final judgment
     of a court of competent jurisdiction holds that such
     Indemnified Amounts resulted from gross negligence or
     willful misconduct on the part of the Indemnified Party
     seeking indemnification;

          (ii) Indemnified Amounts to the extent the same
     includes losses in respect of Receivables that are
     uncollectible on account of the insolvency, bankruptcy or
     lack of creditworthiness of the related Obligor; or

          (iii)     taxes imposed by the jurisdiction in which
     such Indemnified Party's principal executive office is
     located, on or measured by the overall net income of such
     Indemnified Party to the extent that the computation of such
     taxes is consistent with the characterization for income tax
     purposes of the acquisition by Blue Ridge of Receivables as
     a loan or loans by Blue Ridge to Seller secured by the
     Receivables, the Related Security, the Blocked Accounts and
     the Collections;

provided, however, that nothing contained in this sentence shall
limit the liability of any Seller Party or limit the recourse of
Blue Ridge to any Seller Party for amounts otherwise specifically
provided to be paid by such Seller Party under the terms of this
Agreement.  Without limiting the generality of the foregoing
indemnification, Seller shall indemnify the Administrative Agent
and Blue Ridge for Indemnified Amounts (including, without
limitation, losses in respect of uncollectible receivables,
regardless of whether reimbursement therefor would constitute
recourse to Seller or the Servicer) relating to or resulting
from:

          (i)  any representation or warranty made by any Seller
     Party or the Originator (or any officers of any such Person)
     under or in connection with this Agreement, any other
     Transaction Document or any other information or report
     delivered by any such Person pursuant hereto or thereto,
     which shall have been false or incorrect when made or deemed
     made;

          (ii) the failure by Seller, the Servicer or the
     Originator to comply with any applicable law, rule or
     regulation with respect to any Receivable or Contract
     related thereto, or the nonconformity of any Receivable or
     Contract included therein with any such applicable law, rule
     or regulation or any failure of the Originator to keep or
     perform any of its obligations, express or implied, with
     respect to any Contract;

          (iii)     any failure of Seller, the Servicer or the
     Originator to perform its duties, covenants or other
     obligations in accordance with the provisions of this
     Agreement or any other Transaction Document;

          (iv) any products liability, personal injury or damage
     suit, or other similar claim arising out of or in connection
     with merchandise, insurance or services that are the subject
     of any Contract or any Receivable;

          (v)  any dispute, claim, offset or defense (other than
     discharge in bankruptcy of the Obligor) of the Obligor to
     the payment of any Receivable (including, without
     limitation, a defense based on such Receivable or the
     related Contract not being a legal, valid and binding
     obligation of such Obligor enforceable against it in
     accordance with its terms), or any other claim resulting
     from the sale of the merchandise or service related to such
     Receivable or the furnishing or failure to furnish such
     merchandise or services;

          (vi) the commingling of Collections of Receivables at
     any time with other funds;

          (vii)     any investigation, litigation or proceeding
     related to or arising from this Agreement or any other
     Transaction Document, the transactions contemplated hereby,
     the use of the proceeds of any Purchase, the Purchased
     Assets or any other investigation, litigation or proceeding
     relating to Seller, the Servicer or the Originator in which
     any Indemnified Party becomes involved as a result of any of
     the transactions contemplated hereby;

          (viii)    any inability to litigate any claim against
     any Obligor in respect of any Receivable as a result of such
     Obligor being immune from civil and commercial law and suit
     on the grounds of sovereignty or otherwise from any legal
     action, suit or proceeding;

          (ix) any Amortization Event of the type described in
     Section 9.1(g);

          (x)  any failure of Seller to acquire and maintain
     legal and equitable title to, and ownership of any of the
     Purchased Assets from the Originator, free and clear of any
     Adverse Claim (other than as created hereunder); or any
     failure of Seller to give reasonably equivalent value to the
     Originator under the Receivables Sale Agreement in
     consideration of the transfer by the Originator of any
     Receivable, or any attempt by any Person to void such
     transfer under statutory provisions or common law or
     equitable action;

          (xi) any failure to vest and maintain vested in the
     Administrative Agent for the benefit of Blue Ridge, or to
     transfer to the Administrative Agent for the benefit of the
     Secured Parties, a valid first priority perfected security
     interest in the Purchased Assets, free and clear of any
     Adverse Claim (except as created by the Transaction
     Documents);

          (xii)     the failure to have filed, or any delay in
     filing, financing statements or other similar instruments or
     documents under the UCC of any applicable jurisdiction or
     other applicable laws with respect to any Purchased Assets,
     and the proceeds thereof, whether at the time of any
     Purchase or at any subsequent time;

          (xiii)    any action or omission by any Seller Party
     which reduces or impairs the rights of the Administrative
     Agent or Blue Ridge with respect to any Purchased Assets or
     the value of any Purchased Assets;

          (xiv)     any attempt by any Person to void any
     Purchase or the Administrative Agent's security interest,
     for the benefit of the Secured Parties, in the Purchased
     Assets under statutory provisions or common law or equitable
     action; and

          (xv) the failure of any Receivable included in the
     calculation of the Net Pool Balance as an Eligible
     Receivable to be an Eligible Receivable at the time so
     included.

     Section 10.2   Increased Cost and Reduced Return.

     If after the date hereof, any Funding Source shall be
charged any fee, expense or increased cost on account of the
adoption of any applicable law, rule or regulation (including any
applicable law, rule or regulation regarding capital adequacy) or
any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or
administration thereof, or compliance with any request or
directive (whether or not having the force of law) of any such
authority, central bank or comparable agency (a "Regulatory
Change"):  (a) that subjects any Funding Source to any charge or
withholding on or with respect to any Funding Agreement or a
Funding Source's obligations under a Funding Agreement, or on or
with respect to the Receivables, or changes the basis of taxation
of payments to any Funding Source of any amounts payable under
any Funding Agreement (except for changes in the rate of tax on
the overall net income of a Funding Source or taxes excluded by
Section 10.1) or (b) that imposes, modifies or deems applicable
any reserve, assessment, insurance charge, special deposit or
similar requirement against assets of, deposits with or for the
account of a Funding Source, or credit extended by a Funding
Source pursuant to a Funding Agreement or (c) that imposes any
other condition the result of which is to increase the cost to a
Funding Source of performing its obligations under a Funding
Agreement, or to reduce the rate of return on a Funding Source's
capital as a consequence of its obligations under a Funding
Agreement, or to reduce the amount of any sum received or
receivable by a Funding Source under a Funding Agreement or to
require any payment calculated by reference to the amount of
interests or loans held or interest received by it, then, upon
demand by the Administrative Agent, Seller shall pay to the
Administrative Agent, for the benefit of the relevant Funding
Source, such amounts charged to such Funding Source or such
amounts to otherwise compensate such Funding Source for such
increased cost or such reduction.  Within 30 days after receipt
by the Administrative Agent of written notice from any Funding
Source that it has determined that a Regulatory Change has
occurred which will result in the imposition of any additional
costs or expenses under this Section 10.2, the Administrative
Agent shall provide written notice to Seller of such Regulatory
Change.

     Section 10.3   Other Costs and Expenses.

     Seller shall pay to the Administrative Agent and Blue Ridge
on demand all costs and out-of-pocket expenses in connection with
the preparation, execution, delivery and administration of this
Agreement, the transactions contemplated hereby and the other
documents to be delivered hereunder, including without
limitation, the cost of Blue Ridge's auditors auditing the books,
records and procedures of Seller, reasonable fees and out-of-
pocket expenses of legal counsel for Blue Ridge and the
Administrative Agent (which such counsel may be employees of Blue
Ridge or the Administrative Agent) with respect thereto and with
respect to advising Blue Ridge and the Administrative Agent as to
their respective rights and remedies under this Agreement.
Seller shall pay to the Administrative Agent on demand any and
all costs and expenses of the Administrative Agent and Blue
Ridge, if any, including reasonable counsel fees and expenses in
connection with the enforcement of this Agreement and the other
documents delivered hereunder and in connection with any
restructuring or workout of this Agreement or such documents, or
the administration of this Agreement following an Amortization
Event.  Seller shall reimburse Blue Ridge on demand for all other
costs and expenses incurred by Blue Ridge ("Other Costs"),
including, without limitation, the cost of auditing Blue Ridge's
books by certified public accountants, the cost of rating the
Commercial Paper by independent financial rating agencies, and
the reasonable fees and out-of-pocket expenses of counsel for
Blue Ridge or any counsel for any shareholder of Blue Ridge with
respect to advising Blue Ridge or such shareholder as to matters
relating to Blue Ridge's operations.

     Section 10.4   Allocations.

     Blue Ridge shall allocate the liability for Other Costs
among Seller and other Persons with whom Blue Ridge has entered
into agreements to purchase interests in or finance receivables
and other financial assets ("Other Customers").  If any Other
Costs are attributable to Seller and not attributable to any
Other Customer, Seller shall be solely liable for such Other
Costs.  However, if Other Costs are attributable to Other
Customers and not attributable to Seller, such Other Customer
shall be solely liable for such Other Costs.  All allocations to
be made pursuant to the foregoing provisions of this Article X
shall be made by Blue Ridge in its sole discretion and shall be
binding on Seller and the Servicer.

                           ARTICLE XI

                    THE ADMINISTRATIVE AGENT

     Section 11.1   Authorization and Action.

     Blue Ridge, on behalf of itself and its assigns, hereby
designates and appoints Wachovia to act as its agent under the
Liquidity Agreement, this Agreement and under each other
Transaction Document, and authorizes the Administrative Agent to
take such actions as agent on its behalf and to exercise such
powers as are delegated to the Administrative Agent by the terms
of the Liquidity Agreement, this Agreement and the other
Transaction Documents together with such powers as are reasonably
incidental thereto, including, without limitation, the power to
perfect all security interests granted under the Transaction
Documents.  The provisions of Section 6 of the Liquidity
Agreement are hereby incorporated by this reference with the same
force and effect as if fully set forth herein, and shall govern
the relationship between the Administrative Agent, on the one
hand, and Blue Ridge, on the other.

                           ARTICLE XII

                 ASSIGNMENTS AND PARTICIPATIONS

     Section 12.1   Assignments and Participations by Blue Ridge.

     Each of the parties hereto, on behalf of its successors and
assigns, hereby agrees and consents to the complete or partial
sale by Blue Ridge of all or any portion of its rights under,
interest in, title to and obligations under this Agreement to the
Liquidity Banks pursuant to the Liquidity Agreement, regardless
of whether such sale constitutes an assignment or the sale of a
participation in such rights and obligations.

     Section 12.2   Prohibition on Assignments by Seller Parties.

     No Seller Party may assign any of its rights or obligations
under this Agreement without (a)the prior written consent of the
Administrative Agent and Blue Ridge and (b) satisfying the Rating
Agency Condition.

                          ARTICLE XIII

                          MISCELLANEOUS

     Section 13.1   Waivers and Amendments.

     (a)  No failure or delay on the part of the Administrative
Agent or Blue Ridge in exercising any power, right or remedy
under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power, right or remedy
preclude any other further exercise thereof or the exercise of
any other power, right or remedy.  The rights and remedies herein
provided shall be cumulative and nonexclusive of any rights or
remedies provided by law.  Any waiver of this Agreement shall be
effective only in the specific instance and for the specific
purpose for which given.

     (b)  No provision of this Agreement may be amended,
supplemented, modified or waived except in writing in accordance
with the provisions of this Section 13.1(b).  Blue Ridge, Seller
and the Administrative Agent, at the direction of the Required
Liquidity Banks, may enter into written modifications or waivers
of any provisions of this Agreement, provided, however, that no
such modification or waiver shall:

          (i)  without the consent of Blue Ridge and each
     affected Liquidity Bank, (A) extend the Liquidity
     Termination Date or the date of any payment or deposit of
     Collections by Seller or the Servicer, (B) reduce the rate
     or extend the time of payment of Yield or any CP Costs (or
     any component of Yield or CP Costs), (C) reduce any fee
     payable to the Administrative Agent for the benefit of Blue
     Ridge, (D) change the Invested Amount of any Receivable
     Interest, (E) amend, modify or waive any provision of the
     definition of Required Liquidity Banks or this Section
     13.1(b), (F) consent to or permit the assignment or transfer
     by Seller of any of its rights and obligations under this
     Agreement, (G) change the definition of "Eligible
     Receivable," "Loss Reserve," "Dilution Reserve," "Yield
     Reserve," "Servicing Reserve," "Servicing Fee Rate,"
     "Required Reserve" or "Required Reserve Factor Floor" or (H)
     amend or modify any defined term (or any defined term used
     directly or indirectly in such defined term) used in clauses
     (A) through (G) above in a manner that would circumvent the
     intention of the restrictions set forth in such clauses; or

          (ii) without the written consent of the then
     Administrative Agent, amend, modify or waive any provision
     of this Agreement if the effect thereof is to affect the
     rights or duties of such Administrative Agent,

and any material amendment, waiver or other modification of this
Agreement shall require satisfaction of the Rating Agency
Condition.

     Section 13.2   Notices.

     Except as provided in this Section 13.2, all communications
and notices provided for hereunder shall be in writing (including
bank wire, telecopy or electronic facsimile transmission or
similar writing) and shall be given to the other parties hereto
at their respective addresses or telecopy numbers set forth on
the signature pages hereof or at such other address or telecopy
number as such Person may hereafter specify for the purpose of
notice to each of the other parties hereto.  Each such notice or
other communication shall be effective (a) if given by telecopy,
upon the receipt thereof, (b) if given by mail, three (3)
Business Days after the time such communication is deposited in
the mail with first class postage prepaid or (c) if given by any
other means, when received at the address specified in this
Section 13.2.  Seller hereby authorizes the Administrative Agent
to effect Purchases and Tranche Period and Yield Rate selections
based on telephonic notices made by any Person whom the
Administrative Agent in good faith believes to be acting on
behalf of Seller.  Seller agrees to deliver promptly to the
Administrative Agent a written confirmation of each telephonic
notice signed by an authorized officer of Seller; provided,
however, the absence of such confirmation shall not affect the
validity of such notice.  If the written confirmation differs
from the action taken by the Administrative Agent, the records of
the Administrative Agent shall govern absent manifest error.

     Section 13.3   Protection of Administrative Agent's Security
Interest.

     (a)  Seller agrees that from time to time, at its expense,
it will promptly execute and deliver all instruments and
documents, and take all actions, that may be necessary or
desirable, or that the Administrative Agent may request, to
perfect, protect or more fully evidence the Administrative
Agent's security interest, for the benefit of the Secured
Parties, in the Purchased Assets, or to enable the Administrative
Agent or Blue Ridge to exercise and enforce their rights and
remedies hereunder.  At any time, the Administrative Agent may,
or the Administrative Agent may direct Seller or the Servicer to,
notify the Obligors of Receivables, at Seller's expense, of the
ownership or security interests of the Administrative Agent, for
the benefit of the Secured Parties, under this Agreement and may
also direct that payments of all amounts due or that become due
under any or all Receivables be made directly to the
Administrative Agent or its designee.  Seller or the Servicer (as
applicable) shall, at the Administrative Agent's request,
withhold the identities of the Administrative Agent and Blue
Ridge in any such notification.

     (b)  If any Seller Party fails to perform any of its
obligations hereunder, the Administrative Agent or Blue Ridge may
(but shall not be required to) perform, or cause performance of,
such obligations, and the Administrative Agent's or Blue Ridge's
costs and expenses incurred in connection therewith shall be
payable by Seller as provided in Section 10.3.  Each Seller Party
irrevocably authorizes the Administrative Agent at any time and
from time to time in the sole discretion of the Administrative
Agent, and appoints the Administrative Agent as its attorney-in-
fact, to act on behalf of such Seller Party (i) to execute on
behalf of Seller as debtor and to file financing statements
necessary or desirable in the Administrative Agent's sole
discretion to perfect and to maintain the perfection and priority
of the interest of Blue Ridge in the Receivables and (ii) to file
a carbon, photographic or other reproduction of this Agreement or
any financing statement with respect to the Receivables as a
financing statement in such offices as the Administrative Agent
in its sole discretion deems necessary or desirable to perfect
and to maintain the perfection and priority of the Administrative
Agent's security interest in the Purchased Assets, for the
benefit of the Secured Parties.  This appointment is coupled with
an interest and is irrevocable.  From and after July 1, 2001:
(A) each of the Seller Parties hereby authorizes the
Administrative Agent to file financing statements and other
filing or recording documents with respect to the Receivables and
Related Security (including any amendments thereto, or
continuation or termination statements thereof), without the
signature or other authorization of such Seller Party, in such
form and in such offices as the Administrative Agent reasonably
determines appropriate to perfect or maintain the perfection of
the security interest of the Administrative Agent, for the
benefit of the Secured Parties, hereunder, (B) each of the Seller
Parties acknowledges and agrees that it is not authorized to, and
will not, file financing statements or other filing or recording
documents with respect to the Receivables or Related Security
(including any amendments thereto, or continuation or termination
statements thereof), without the express prior written approval
by the Administrative Agent, consenting to the form and substance
of such filing or recording document, and (C) each of the Seller
Parties approves, authorizes and ratifies any filings or
recordings made by or on behalf of the Administrative Agent in
connection with the perfection of the security interests in favor
of Seller or the Administrative Agent.

     Section 13.4   Confidentiality.

     (a)  Each of the Seller Parties shall maintain and shall
cause each of its employees and officers to maintain the
confidentiality of this Agreement and the other confidential or
proprietary information with respect to the Administrative Agent
and Blue Ridge and their respective businesses obtained by it or
them in connection with the structuring, negotiating and
execution of the transactions contemplated herein, except that
such Seller Party and its officers and employees may disclose
such information to such Seller Party's external accountants and
attorneys and as required by any applicable law or order of any
judicial or administrative proceeding.

     (b)  Anything herein to the contrary notwithstanding, each
Seller Party hereby consents to the disclosure of any nonpublic
information with respect to it (i) to the Administrative Agent,
the Liquidity Banks or Blue Ridge by each other, (ii) by the
Administrative Agent or Blue Ridge to any prospective or actual
assignee or participant of any of them and (iii) by the
Administrative Agent to any rating agency, Commercial Paper
dealer or provider of a surety, guaranty or credit or liquidity
enhancement to Blue Ridge or any entity organized for the purpose
of purchasing, or making loans secured by, financial assets for
which Wachovia acts as the agent and to any officers, directors,
employees, outside accountants and attorneys of any of the
foregoing, provided that each such Person is informed of the
confidential nature of such information.  In addition, Blue Ridge
and the Administrative Agent may disclose any such nonpublic
information pursuant to any law, rule, regulation, direction,
request or order of any judicial, administrative or regulatory
authority or proceedings (whether or not having the force or
effect of law).

     Section 13.5   Bankruptcy Petition.

     Seller, the Servicer, the Administrative Agent and each
Liquidity Bank hereby covenants and agrees that, prior to the
date that is one year and one day after the payment in full of
all outstanding senior indebtedness of Blue Ridge, it will not
institute against, or join any other Person in instituting
against, Blue Ridge any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United
States.

     Section 13.6   Limitation of Liability.

     Except with respect to any claim arising out of the willful
misconduct or gross negligence of Blue Ridge, the Administrative
Agent or any Liquidity Bank, no claim may be made by any Seller
Party or any other Person against Blue Ridge, the Administrative
Agent or any Liquidity Bank or their respective Affiliates,
directors, officers, employees, attorneys or agents for any
special, indirect, consequential or punitive damages in respect
of any claim for breach of contract or any other theory of
liability arising out of or related to the transactions
contemplated by this Agreement, or any act, omission or event
occurring in connection therewith; and each Seller Party hereby
waives, releases, and agrees not to sue upon any claim for any
such damages, whether or not accrued and whether or not known or
suspected to exist in its favor.

     Section 13.7   CHOICE OF LAW.

     THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF OTHER THAN SECTION 5-1401
OF THE GENERAL OBLIGATIONS LAW (EXCEPT IN THE CASE OF THE OTHER
TRANSACTION DOCUMENTS, TO THE EXTENT OTHERWISE EXPRESSLY STATED
THEREIN) AND EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE
OWNERSHIP INTEREST OF SELLER OR THE SECURITY INTEREST OF THE
ADMINISTRATIVE AGENT, FOR THE BENEFIT OF THE SECURED PARTIES, IN
ANY OF THE COLLATERAL IS GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK.

     Section 13.8   CONSENT TO JURISDICTION.

     EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK, IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
DOCUMENT EXECUTED BY SUCH PERSON PURSUANT TO THIS AGREEMENT, AND
EACH SUCH PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW
OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
ADMINISTRATIVE AGENT OR ANY PURCHASER TO BRING PROCEEDINGS
AGAINST ANY SELLER PARTY IN THE COURTS OF ANY OTHER JURISDICTION.
ANY JUDICIAL PROCEEDING BY ANY SELLER PARTY AGAINST THE
ADMINISTRATIVE AGENT OR ANY PURCHASER OR ANY AFFILIATE OF THE
ADMINISTRATIVE AGENT OR ANY PURCHASER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH
SELLER PARTY PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN
A COURT IN NEW YORK, NEW YORK.

     Section 13.9   WAIVER OF JURY TRIAL.

     EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY
DOCUMENT EXECUTED BY ANY SELLER PARTY PURSUANT TO THIS AGREEMENT
OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.

     Section 13.10  Integration; Binding Effect; Survival of
Terms.

     (a)  This Agreement and each other Transaction Document
contain the final and complete integration of all prior
expressions by the parties hereto with respect to the subject
matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof
superseding all prior oral or written understandings.

     (b)  This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns (including any trustee in bankruptcy).  This
Agreement shall create and constitute the continuing obligations
of the parties hereto in accordance with its terms and shall
remain in full force and effect until terminated in accordance
with its terms; provided, however, that the rights and remedies
with respect to (i) any breach of any representation and warranty
made by any Seller Party pursuant to Article V, (ii) the
indemnification and payment provisions of Article X, and Sections
13.4 and 13.5 shall be continuing and shall survive any
termination of this Agreement.

     (c)  Each of the Seller Parties, Blue Ridge and the
Administrative Agent hereby acknowledges and agrees that the
Liquidity Banks are hereby made express third party beneficiaries
of this Agreement and each of the other Transaction Documents.

     Section 13.11  Counterparts; Severability; Section
References.

     This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all
of which when taken together shall constitute one and the same
Agreement.  Delivery of an executed counterpart of a signature
page to this Agreement by facsimile shall be effective as
delivery of a manually executed counterpart to this Agreement.
Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.  Unless otherwise expressly
indicated, all references herein to "Article," "Section,"
"Schedule" or "Exhibit" shall mean articles and sections of, and
schedules and exhibits to, this Agreement.

     Section 13.12  Characterization.

     (a)  It is the intention of the parties hereto that each
Purchase hereunder shall constitute and be treated as an absolute
and irrevocable sale, which Purchase shall provide the Blue Ridge
with the full benefits of ownership of the applicable Receivable
Interest.  Except as specifically provided in this Agreement,
each sale of a Receivable Interest hereunder is made without
recourse to Seller; provided, however, that (i) Seller shall be
liable to Blue Ridge and the Administrative Agent for all
representations, warranties, covenants and indemnities made by
Seller pursuant to the terms of this Agreement, and (ii) such
sale does not constitute and is not intended to result in an
assumption by Blue Ridge or the Administrative Agent or any
assignee thereof of any obligation of Seller or the Originator or
any other person arising in connection with the Receivables, the
Related Security, or the related Contracts, or any other
obligations of Seller or the Originator.

     (b)  In addition to any ownership interest which the
Administrative Agent or Blue Ridge may from time to time acquire
pursuant hereto, Seller hereby grants to the Administrative
Agent, for the benefit of the Secured Parties, a valid and
perfected security interest in all of Seller's right, title and
interest in, to and under all Receivables now existing or
hereafter arising, the Collections, each Lock-Box, each Blocked
Account, all Related Security, all other rights and payments
relating to such Receivables, and all proceeds of any thereof
prior to all other liens on and security interests therein to
secure the prompt and complete payment of the Aggregate Unpaids.
The Administrative Agent, on behalf of Blue Ridge, shall have, in
addition to the rights and remedies that it may have under this
Agreement, all other rights and remedies provided to a secured
creditor under the UCC and other applicable law, which rights and
remedies shall be cumulative.


                    [signature pages follow]


     IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their duly authorized
officers or attorneys-in-fact as of the date hereof.

                         AIRBORNE CREDIT, INC.,
                         as Seller

                         By: /s/Diane M. Hackler
                         Name: Diane M. Hackler
                         Title: Vice President

                         Address:
                              3101 Western Avenue
                              P.O. Box 662
                              Seattle, WA 98111-0662
                              Attention: President
                         Telephone: (206) 281-1003
                         Telecopy: (206) 281-1444


                         AIRBORNE EXPRESS, INC.,
                         as Servicer

                         By: /s/Diane M. Hackler
                         Name: Diane M. Hackler
                         Title: Treasurer

                         Address:
                              3101 Western Avenue
                              P.O. Box 662
                              Seattle, WA 98111-0662
                              Attention: Chief Financial Officer
                         Telephone: (206) 281-1003
                         Telecopy: (206) 281-1444


                         BLUE RIDGE ASSET FUNDING CORPORATION

                         BY:  WACHOVIA BANK, N.A.,
                              AS ATTORNEY-IN-FACT

                         By: /s/Brian M. Mellone
                         Name: Brian M. Mellone
                         Title: Vice President

                         Address: c/o Wachovia Bank, N.A., as
                                  Administrative Agent
	                            191 Peachtree Street
                                  Mail Stop GA-423
					    Atlanta, GA 30303
                                  Attention:
	                            Asset-Backed Finance
                         Telephone:
                         Telecopy:


                         WACHOVIA BANK, N.A.,
                         as Administrative Agent

                         By: /s/Kenny Karpowicz
                         Name: Kenny Karpowicz
                         Title: Vice President

                         Address: 191 Peachtree Street
					    Mail Stop GA-423
					    Atlanta, GA 30303
                                  Attention:
	                            Asset-Backed Finance
                         Telephone:
                         Telecopy:


                            EXHIBIT I

                           DEFINITIONS

As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):

"Adjusted Dilution Ratio" means, at any time, the rolling average
of the Dilution Ratio for the twelve (12) Calculation Periods
then most recently ended.

"Administrative Agent" has the meaning set forth in the preamble
to this Agreement.

"Administrative Agent's Account" means account #8735-098787 at
Wachovia Bank, N.A., ABA #053100494.

"Adverse Claim" means a lien, security interest, charge or
encumbrance, or other right or claim in, of or on any Person's
assets or properties in favor of any other Person.

"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under
direct or indirect common control with, such Person or any
Subsidiary of such Person.  A Person shall be deemed to control
another Person if the controlling Person owns 10% or more of any
class of voting securities of the controlled Person or possesses,
directly or indirectly, the power to direct or cause the
direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.

"Aggregate Invested Amount" means, on any date of determination,
the aggregate Invested Amount of all Receivable Interests
outstanding on such date.

"Aggregate Reduction" has the meaning specified in Section 1.3.

"Aggregate Unpaids" means, at any time, an amount equal to the
sum of (i) the Aggregate Invested Amount, plus (ii) all Recourse
Obligations (whether due or accrued) at such time.

"Agreement" means this Receivables Purchase Agreement, as it may
be amended or modified and in effect from time to time.

"Alternate Base Rate" means for any day, the rate per annum equal
to the higher as of such day of (i) the Prime Rate, or (ii) one-
half of one percent (0.50%) above the Federal Funds Rate.  For
purposes of determining the Alternate Base Rate for any day,
changes in the Prime Rate or the Federal Funds Rate shall be
effective on the date of each such change.

"Amortization Event" has the meaning specified in Article IX.

"Authorized Officer" means, with respect to any Person, its
president, corporate controller, treasurer, chief executive
officer or chief financial officer.

"Bank of America Blocked Account" means that depositary account
number 1233386558 maintained in the name of the Seller with Bank
of America and in which any Collections are collected or
deposited.

"Bank of Boston Blocked Account" means that depositary account
number 580-35308 maintained in the name of the Seller with Bank
of Boston and in which any Collections are collected or
deposited.

"Blocked Account Agreement" means an agreement substantially in
the form of Exhibit VI among the Originator, Servicer, Seller,
the Administrative Agent and a Blocked Account Bank.

"Blocked Account Bank" means, at any time, any of the banks
holding one or more Blocked Accounts.

"Blocked Accounts" mean the Bank of America Blocked Account, the
Bank of Boston Blocked Account and the Wachovia Blocked Account.

"Blue Ridge" has the meaning set forth in the preamble to this
Agreement.

"Blue Ridge's Portion" means, on any date of determination, the
sum of the percentages represented by the Receivable Interests.

"Broken Funding Costs" means for any Receivable Interest which:
(i) has its Invested Amount reduced without compliance by Seller
with the notice requirements hereunder or (ii) does not become
subject to an Aggregate Reduction following the delivery of any
Reduction Notice or (iii) is assigned by Blue Ridge to the
Liquidity Banks under the Liquidity Agreement or terminated prior
to the date on which it was originally scheduled to end; an
amount equal to the excess, if any, of (A) the CP Costs or Yield
(as applicable) that would have accrued during the remainder of
the Tranche Periods or the tranche periods for Commercial Paper
determined by the Administrative Agent to relate to such
Receivable Interest (as applicable) subsequent to the date of
such reduction, assignment or termination (or in respect of
clause (ii) above, the date such Aggregate Reduction was
designated to occur pursuant to the Reduction Notice) of the
Invested Amount of such Receivable Interest if such reduction,
assignment or termination had not occurred or such Reduction
Notice had not been delivered, over (B) the sum of (x) to the
extent all or a portion of such Invested Amount is allocated to
another Receivable Interest, the amount of CP Costs or Yield
actually accrued during the remainder of such period on such
Invested Amount for the new Receivable Interest, and (y) to the
extent such Invested Amount is not allocated to another
Receivable Interest, the income, if any, actually received during
the remainder of such period by the holder of such Receivable
Interest from investing the portion of such Invested Amount not
so allocated.  All Broken Funding Costs shall be due and payable
hereunder upon demand.

"Business Day" means any day on which banks are not authorized or
required to close in New York, New York, Atlanta, Georgia, or
Columbus, Ohio, and The Depository Trust Company of New York is
open for business.

"Calculation Period" means a calendar month.

"Change of Control" means (a) the acquisition by any Person, or
two or more Persons acting in concert, of beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 20% or
more of the outstanding shares of voting stock of Originator, or
(b) Originator ceases to own 100% of the outstanding shares of
voting stock of Seller.

"Collection Notice" means a notice, in substantially the form of
Annex A to Exhibit VI, from the Administrative Agent to a Blocked
Account Bank.

"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds in respect of such
Receivable, including, without limitation, all Finance Charges or
other related amounts accruing in respect thereof and all cash
proceeds of Related Security with respect to such Receivable.

"Commercial Paper" means promissory notes of Blue Ridge issued by
Blue Ridge in the commercial paper market.

"Contingent Obligation" of a Person means any agreement,
undertaking or arrangement by which such Person assumes,
guarantees, endorses, contingently agrees to purchase or provide
funds for the payment of, or otherwise becomes or is contingently
liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other
financial condition of any other Person, or otherwise assures any
creditor of such other Person against loss, including, without
limitation, any comfort letter, operating agreement, take-or-pay
contract or application for a letter of credit.

"Contract" means, with respect to any Receivable, any and all
instruments, agreements, invoices or other writings pursuant to
which such Receivable arises or which evidences such Receivable.

"CP Costs" means, for each day, the sum of (i) discount or
interest accrued on Pooled Commercial Paper on such day, plus
(ii) any and all accrued commissions in respect of placement
agents and Commercial Paper dealers, and issuing and paying agent
fees incurred, in respect of such Pooled Commercial Paper for
such day, plus (iii) other costs associated with funding small or
odd-lot amounts with respect to all receivable purchase or
financing facilities which are funded by Pooled Commercial Paper
for such day, minus (iv) any accrual of income net of expenses
received on such day from investment of collections received
under all receivable purchase or financing facilities funded
substantially with Pooled Commercial Paper, minus (v) any payment
received on such day net of expenses in respect of Broken Funding
Costs related to the prepayment of any investment of Blue Ridge
pursuant to the terms of any receivable purchase or financing
facilities funded substantially with Pooled Commercial Paper.  In
addition to the foregoing costs, if Seller shall request any
Purchase during any period of time determined by the
Administrative Agent in its sole discretion, to result in
incrementally higher CP Costs applicable to such Purchase, the
principal associated with any such Purchase shall, during such
period, be deemed to be funded by Blue Ridge in a special pool
(which may include capital associated with other receivable
purchase or financing facilities) for purposes of determining
such additional CP Costs applicable only to such special pool and
charged each day during such period against such principal.

"Credit and Collection Policy" means Seller's reasonable and
customary credit and collection policies and practices relating
to Contracts and Receivables existing on the date hereof, as
modified from time to time in accordance with this Agreement.

"Cut-Off Date" means the last day of a Calculation Period.

"Days Sales Outstanding" means, as of any day, an amount equal to
the product of (x) 91, multiplied by (y) the amount obtained by
dividing (i) the aggregate outstanding balance of Receivables as
of the most recent Cut-Off Date, by (ii) the aggregate amount of
Receivables created during the three (3) Calculation Periods
including and immediately preceding such Cut-Off Date.

"Deemed Collections" means Collections deemed received by Seller
under Section 1.4(a).

"Default Horizon Ratio" means, as of any Cut-Off Date, the ratio
(expressed as a decimal) computed by dividing (i) the aggregate
sales generated by the Originator during the immediately
preceding four Calculation Periods ending on such Cut-Off Date,
by (ii) the Net Pool Balance as of such Cut-off Date.

"Default Rate" means a rate per annum equal to the sum of (i) the
Alternate Base Rate plus (ii) 2.00%, changing when and as the
Alternate Base Rate changes.

"Default Ratio" means, as of any Cut-Off Date, the ratio
(expressed as a percentage) computed by dividing (x) the total
amount of Receivables which became Defaulted Receivables during
the Calculation Period that includes such Cut-Off Date, by (y)
the aggregate sales generated by the Originator during the
Calculation Period occurring four months prior to the Calculation
Period ending on such Cut-Off Date.

"Defaulted Receivable" means a Receivable:  (i) as to which the
Obligor thereof has suffered an Event of Bankruptcy; (ii) which,
consistent with the Credit and Collection Policy, would be
written off Seller's books as uncollectible; (iii) as to which
payments have been extended, or the terms of payment thereof
rewritten, other than as permitted by Section 8.2(c); or (iv) as
to which any payment, or part thereof, remains unpaid for 121
days or more from the original invoice date of such Receivable.

"Delinquency Ratio" means, at any time, a percentage equal to (i)
the aggregate Outstanding Balance of all Receivables that were
Delinquent Receivables at such time divided by (ii) the aggregate
Outstanding Balance of all Receivables at such time.

"Delinquent Receivable" means a Receivable as to which any
payment, or part thereof, remains unpaid for 91-120 days from the
original invoice date of such Receivable.

"Delivery Order" means, with respect to any Lock-Box, a delivery
order, in substantially the form attached hereto as Exhibit X,
which permits the Person designated thereon to require delivery
to such Person of all items in such Lock-Box.

"Dilution" means the amount of any reduction or cancellation of
the Outstanding Balance of a Receivable as described in Section
1.4(a).

"Dilution Horizon Ratio" means as of any Cut-Off Date, a ratio
(expressed as a decimal), computed by dividing (i) the aggregate
dollar amount of Receivables generated by the Originator for the
two (2) most recent Settlement Periods by (ii) the Net Pool
Balance as of the most recent Cut-Off Date.

"Dilution Ratio" means, as of any Cut-Off Date, a ratio
(expressed as a percentage), computed by dividing (i) the total
amount of decreases in Outstanding Balances due to Dilutions
during the previous Calculation Period ending on such Cut-Off
Date, by (ii) the aggregate sales generated by the Originator
during the second preceding Calculation Period prior to the
Calculation Period ending on such Cut-Off Date.

"Dilution Reserve" means, for any Calculation Period, the product
(expressed as a percentage) of:

     (a)  the sum of (i) two (2) times the Adjusted Dilution
Ratio as of the immediately preceding Cut-Off Date, plus (ii) the
Dilution Volatility Component as of the immediately preceding Cut-
Off Date, times

     (b)  the Dilution Horizon Ratio as of the immediately
preceding Cut-Off Date.

"Dilution Volatility Component" means the product (expressed as a
percentage) of (i) the difference between (a) the highest three
(3)-month rolling average Dilution Ratio over the past 12
Calculation Periods and (b) the Adjusted Dilution Ratio, and (ii)
a fraction, the numerator of which is equal to the amount
calculated in (i)(a) of this definition and the denominator of
which is equal to the amount calculated in (i)(b) of this
definition.

"Dollar" means lawful currency of the United States of America.

"Downgraded Liquidity Bank" means a Liquidity Bank which has been
the subject of a Downgrading Event.

"Downgrading Event" with respect to any Person means the lowering
of the rating with regard to the short-term securities of such
Person to below (i) A-1 by S&P, or (ii) P-1 by Moody's.

"Eligible Assignee" means a commercial bank having a combined
capital and surplus of at least $250,000,000 with a rating of its
(or its holding company's) short-term securities equal to or
higher than (i) A-1 by S&P and (ii) P-1 by Moody's.

"Eligible Receivable" means, at any time, a Receivable:

     (a)  the Obligor of which (i) if a natural person, is a
resident of the United States or, if a corporation or other
business organization, has a billing address in the United
States; (ii) is not an Affiliate of any of Seller Parties or the
Originator; and (iii) is not a government or a governmental
subdivision or agency,

     (b)  [reserved],

     (c)  which is not a Defaulted Receivable;

     (d)  which is not a Delinquent Receivable on the date on
which it was acquired by the Seller from the Originator,

     (e)  which by its terms is due and payable within 60 days of
the original invoice date therefor,

     (f)  the original term of which has not been extended and
has not had its unpaid balance adjusted more than once,

     (g)  as to which perfection of the Administrative Agent's
security interest therein is governed by the laws of a
jurisdiction where the UCC is in force, and which is an "account"
within the meaning of Section 9-106 of the UCC of all applicable
jurisdictions,

     (h)  which is denominated and payable only in United States
dollars in the United States,

     (i)  which arises under a Contract in substantially the form
of one of the form contracts set forth on Exhibit IX hereto or
otherwise approved by the Administrative Agent in writing, which,
together with such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation of the
related Obligor enforceable against such Obligor in accordance
with its terms subject to no dispute, offset, counterclaim or
other defense,

     (j)  which arises under a Contract which (i) does not
require the Obligor under such Contract to consent to the
transfer, sale, pledge or assignment of the rights of the
Originator or any of its assignees under such Contract, (ii) does
not contain a confidentiality provision that purports to restrict
the ability of Blue Ridge to exercise its rights under this
Agreement and (iii) to the extent that such Contract contains a
confidentiality provision, permits disclosure of such Contract in
accordance with applicable law,

     (k)  the sale of an undivided interest in which does not
contravene or conflict with any law,

     (l)  which arises under a Contract that contains an
obligation to pay a specified sum of money, contingent only upon
the sale of goods or the provision of serves by the Originator,

     (m)  which, together with the Contract related thereto, does
not contravene any law, rule or regulation applicable thereto
(including, without limitation, any law, rule and regulation
relating to truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which no party to the
Contract related thereto is in violation of any such law, rule or
regulation in any material respect if such violation would impair
the collectibility of such Receivable,

     (n)  which satisfies in all material respects all applicable
requirements of the Credit and Collection Policy,

     (o)  which was generated in the ordinary course of the
Originator's business,

     (p)  which arises under a Contract solely from the sale of
goods or the provision of services to the related Obligor by the
Originator, and not by any other Person (in whole or in part),

     (q)  as to which the Administrative Agent has not notified
Seller that the Administrative Agent has determined that such
Receivable or class of Receivables is not acceptable as an
Eligible Receivable, including, without limitation, because such
Receivable arises under a Contract that is not acceptable to the
Administrative Agent,

     (r)  which is not subject to any dispute, counterclaim,
right of rescission, set-off, counterclaim or any other defense
(including defenses arising out of violations of usury laws) of
the applicable Obligor against the Originator or any other
Adverse Claim, and the Obligor thereon holds no right as against
the Originator to cause the Originator to repurchase the goods or
merchandise the sale of which shall have given rise to such
Receivable (except with respect to sale discounts effected
pursuant to the Contract, or defective goods returned in
accordance with the terms of the Contract); provided, however,
that if such dispute, offset, counterclaim or defense affects
only a portion of the Outstanding Balance of such Receivable,
then such Receivable may be deemed an Eligible Receivable to the
extent of the portion of such Outstanding Balance which is not so
affected, and provided, further, that Receivables of any Obligor
which has any accounts payable by the Originator or by a wholly-
owned Subsidiary of the Originator (thus giving rise to a
potential offset against such Receivables) may be treated as
Eligible Receivables to the extent that the Obligor of such
Receivables has agreed pursuant to a written agreement in form
and substance satisfactory to the Administrative Agent, that such
Receivables shall not be subject to such offset,]

     (s)  as to which the Originator has satisfied and fully
performed all obligations on its part with respect to such
Receivable required to be fulfilled by it, and no further action
is required to be performed by any Person with respect thereto
other than payment thereon by the applicable Obligor,

     (t)  as to which each of the representations and warranties
in this Agreement and the Transaction Documents is true and
correct, and

     (u)  all right, title and interest to and in which has been
validly transferred by the Originator directly to Seller under
and in accordance with the Receivables Sale Agreement, and Seller
has good and marketable title thereto free and clear of any
Adverse Claim.

"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any rule or regulation
issued thereunder.

"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Performance Guarantor
within the meaning of Section 414(b) or (c) of the Tax Code (and
Sections 414(m) and (o) of the Tax Code for purposes of
provisions relating to Section 412 of the Tax Code).

"Eurodollar Business Day" means any day on which dealings in
dollar deposits are carried on in the London interbank market.

"Eurodollar Rate" means for any Tranche Period of a Liquidity
Funding, the rate per annum determined on the basis of the
offered rate for deposits in Dollars of amounts equal or
comparable to the principal amount of the related funding under
the Liquidity Funding offered for a term comparable to such
Tranche Period, which rates appear on the Telerate Page 3750
effective as of 11:00 a.m., London time, two Eurodollar Business
Days prior to the first day of such Tranche Period, provided that
if no such offered rates appear on such page, the Eurodollar Rate
for such Tranche Period will be the arithmetic average (rounded
upwards, if necessary, to the next higher 1/100th of 1%) of rates
quoted by not less than two major banks in New York City,
selected by the Administrative Agent, at approximately 10:00
a.m., New York City time, two Eurodollar Business Days prior to
the first day of such Tranche Period, for deposits in Dollars
offered by leading European banks for a period comparable to such
Tranche Period in an amount comparable to the principal amount of
such funding under a Liquidity Funding.

"Eurodollar Rate (Reserve Adjusted)"  means with respect to any
Tranche Period of a Liquidity Funding, a rate per annum equal to
the quotient obtained (rounded upwards, if necessary, to the next
higher 1/100th of 1%) by dividing (i) the applicable Eurodollar
Rate for such Tranche Period by (ii) 1.0 minus the Eurodollar
Reserve Percentage.

"Eurodollar Reserve Percentage" means with respect to any Tranche
Period of a Liquidity Funding, the maximum reserve percentage, if
any, applicable to the Liquidity Bank under Regulation D during
such Tranche Period (or if more than one percentage shall be
applicable, the daily average of such percentages for those days
in such Tranche Period during which any such percentage shall be
applicable) for determining the Liquidity Bank's reserve
requirement (including any marginal, supplemental or emergency
reserves) with respect to liabilities or assets having a term
comparable to such Tranche Period consisting or included in the
computation of "Eurocurrency Liabilities" pursuant to Regulation
D.  Without limiting the effect of the foregoing, the Eurodollar
Reserve Percentage shall reflect any other reserves required to
be maintained by the Liquidity Bank by reason of any regulatory
change.

"Event of Bankruptcy" shall be deemed to have occurred with
respect to a Person if either:

     (a)  a case or other proceeding shall be commenced, without
the application or consent of such Person, in any court, seeking
the liquidation, reorganization, debt arrangement, dissolution,
winding up, or composition or readjustment of debts of such
Person, the appointment of a trustee, receiver, custodian,
liquidator, assignee, sequestrator or the like for such Person or
all or substantially all of its assets, or any similar action
with respect to such Person under any law relating to bankruptcy,
insolvency, reorganization, winding up or composition or
adjustment of debts, and such case or proceeding shall continue
undismissed, or unstayed and in effect, for a period of 60
consecutive days; or an order for relief in respect of such
Person shall be entered in an involuntary case under the federal
bankruptcy laws or other similar laws now or hereafter in effect;
or

     (b)  such Person shall commence a voluntary case or other
proceeding under any applicable bankruptcy, insolvency,
reorganization, debt arrangement, dissolution or other similar
law now or hereafter in effect, or shall consent to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee (other than a trustee under a deed of trust,
indenture or similar instrument), custodian, sequestrator (or
other similar official) for, such Person or for any substantial
part of its property, or shall make any general assignment for
the benefit of creditors, or shall be adjudicated insolvent, or
admit in writing its inability to pay its debts generally as they
become due, or, if a corporation or similar entity, its board of
directors shall vote to implement any of the foregoing.

"Facility Account" means Seller's account no. 8736000912 at
Wachovia.

"Facility Termination Date" means the earliest to occur of (i)
the day on which any of the conditions precedent set forth in
Section 6.2 are not satisfied, (ii) the Business Day immediately
prior to the occurrence of an Event of Bankruptcy with respect to
any Seller Party, (iii) the Business Day specified in a written
notice from the Administrative Agent following the occurrence of
any other Amortization Event, (iv) the date which is 30 Business
Days after the Administrative Agent's receipt of written notice
from Seller that it wishes to terminate the facility evidenced by
this Agreement, (v) the date that is three years from the
effective date of this Agreement, (vi) the Liquidity Termination
Date and (vii) the date on which the Purchaser shall become an
"investment company" within the meaning of the Investment Company
Act of 1940.

"Federal Bankruptcy Code" means Title 11 of the United States
Code entitled "Bankruptcy," as amended and any successor statute
thereto.

"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum for each day during such period (rounded
upwards if necessary, to the next higher 1/100th of 1%) equal to
(i) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the preceding Business Day) by the
Federal Reserve Bank of New York in the Composite Closing
Quotations for U.S. Government Securities; or (ii) if such rate
is not so published for any day which is a Business Day, the
average rate of the quotations at approximately 11:30 a.m. (New
York time) for such day on such transactions received by the
Administrative Agent from three federal funds brokers of
recognized standing selected by it.

"Fee Letter" means that certain letter agreement dated as of
December 28, 2000 among Seller, Originator and the Administrative
Agent, as it may be amended, restated or otherwise modified and
in effect from time to time.

"Final Payout Date" means the date on which all Aggregate Unpaids
have been paid in full and the Purchase Limit has been reduced to
zero.

"Finance Charges" means, with respect to a Contract, any finance,
interest, late payment charges or similar charges owing by an
Obligor pursuant to such Contract.

"Funding Agreement" means (i) this Agreement, (ii) the Liquidity
Agreement and (iii) any other agreement or instrument executed by
any Funding Source with or for the benefit of Blue Ridge.

"Funding Source" means (i) any Liquidity Bank or (ii) any
insurance company, bank or other funding entity providing
liquidity, credit enhancement or back-up purchase support or
facilities to Blue Ridge.

"GAAP" means generally accepted accounting principles in effect
in the United States of America as of the date of this Agreement.

"Incremental Purchase" means a purchase of one or more Receivable
Interests which increases the total outstanding Aggregate
Invested Amount hereunder.

"Indebtedness" of a Person means such Person's (i) obligations
for borrowed money, (ii) obligations representing the deferred
purchase price of property or services (other than accounts
payable arising in the ordinary course of such Person's business
payable on terms customary in the trade), (iii) obligations,
whether or not assumed, secured by liens or payable out of the
proceeds or production from property now or hereafter owned or
acquired by such Person, (iv) obligations which are evidenced by
notes, acceptances, or other instruments, (v) capitalized lease
obligations, (vi) net liabilities under interest rate swap,
exchange or cap agreements, (vii) Contingent Obligations and
(viii) liabilities in respect of unfunded vested benefits under
plans covered by Title IV of ERISA.

"Indemnified Amounts" has the meaning specified in Section 10.1.

"Indemnified Party" has the meaning specified in Section 10.1.

"Independent Director" shall mean a member of the Board of
Directors of Seller who is not at such time, and has not been at
any time during the preceding five (5) years:  (A) a director,
officer, employee or affiliate of the Performance Guarantor, the
Originator or any of their respective Subsidiaries or Affiliates
(other than Seller), or (B) the beneficial owner (at the time of
such individual's appointment as an Independent Director or at
any time thereafter while serving as an Independent Director) of
any of the outstanding common shares of Seller, the Originator,
or any of their respective Subsidiaries or Affiliates, having
general voting rights.

"Invested Amount" of any Receivable Interest means, at any time,
(A) the Purchase Price of such Receivable Interest, minus (B) the
sum of the aggregate amount of Collections and other payments
received by the Administrative Agent which in each case are
applied to reduce such Invested Amount in accordance with the
terms and conditions of this Agreement; provided that such
Invested Amount shall be restored (in accordance with Section
2.5) in the amount of any Collections or other payments so
received and applied if at any time the distribution of such
Collections or payments are rescinded, returned or refunded for
any reason.

"Liquidity Agreement" means that certain Liquidity Asset Purchase
Agreement dated as of December 28, 2000, by and among Blue Ridge,
the Administrative Agent and the banks from time to time party
thereto, as the same may be amended, restated and/or otherwise
modified from time to time in accordance with the terms thereof.

"Liquidity Bank" means each bank from time to time party to the
Liquidity Agreement (other than the Administrative Agent acting
in its capacity as the Administrative Agent thereunder).

"Liquidity Commitment" means, as to each Liquidity Bank, its
commitment under the Liquidity Agreement.  The Liquidity
Commitments, in the aggregate, shall equal 102% of the Purchase
Limit hereunder.

"Liquidity Funding" means a purchase by any Liquidity Bank
pursuant to its Liquidity Commitment of all or any portion of, or
any undivided interest in, a Receivable Interest.

"Liquidity Termination Date" means the earlier to occur of the
following:

     (a)  the date on which the Liquidity Banks' Liquidity
Commitments expire, cease to be available to Blue Ridge or
otherwise cease to be in full force and effect; or

     (b)  the date on which a Downgrading Event with respect to a
Liquidity Bank shall have occurred and been continuing for not
less than 45 days, and either (i) the Downgraded Liquidity Bank
shall not have been replaced by an Eligible Assignee pursuant to
the Liquidity Agreement, or (ii) the Liquidity Commitment of such
Downgraded Liquidity Bank shall not have been funded or
collateralized in such a manner that will avoid a reduction in or
withdrawal of the credit rating applied to the Commercial Paper
to which such Liquidity Agreement applies by any of the rating
agencies then rating such Commercial Paper.

"Lock-Box" means each locked postal box which is listed on
Exhibit IV.

"Loss Reserve" means, for any Calculation Period, the product
(expressed as a percentage) of (a) 2.0, times (b) the highest
three-month rolling average Default Ratio during the 12
Calculation Periods ending on the immediately preceding Cut-Off
Date, times (c) the Default Horizon Ratio as of the immediately
preceding Cut-Off Date.

"Material Adverse Effect" means a material adverse effect on (i)
the financial condition or operations of any Seller Party and its
Subsidiaries, (ii) the ability of any Seller Party to perform its
obligations under this Agreement or the Performance Guarantor to
perform its obligations under the Performance Undertaking (iii)
the legality, validity or enforceability of this Agreement or any
other Transaction Document, (iv) the Administrative Agent's
security interest, for the benefit of the Secured Parties, in the
Receivables generally or in any significant portion of the
Receivables, the Related Security or the Collections with respect
thereto, or (v) the collectibility of the Receivables generally
or of any material portion of the Receivables.

"Material Indebtedness" has the meaning set forth in Section
9.1(f).

"Monthly Report" means a report, in substantially the form of
Exhibit VIII hereto (appropriately completed), furnished by the
Servicer to the Administrative Agent pursuant to Section 8.5.

"Monthly Reporting Date" means the first Friday after the third
Monday of each calendar month after the date of this Agreement
(or if any such day is not a Business Day, the next succeeding
Business Day thereafter).

"Moody's" means Moody's Investors Service, Inc.

"Net Pool Balance" means, at any time, the aggregate Outstanding
Balance of all Eligible Receivables at such time reduced by the
aggregate amount by which the Outstanding Balance of all Eligible
Receivables of each Obligor and its Affiliates exceeds the
Obligor Concentration Limit for such Obligor.

"Obligor" means a Person obligated to make payments pursuant to a
Contract.

"Obligor Concentration Limit" means, at any time, in relation to
the aggregate Outstanding Balance of Receivables owed by any
single Obligor and its Affiliates (if any), the applicable
concentration limit shall be determined as follows: (a) for
Obligors who have short term unsecured debt ratings currently
assigned to them by S&P and Moody's (or in the absence thereof,
the equivalent long term unsecured senior debt ratings), the
applicable concentration limit shall be determined according to
the following table:

                                         Allowable % of
        S&P Rating      Moody's Rating      Eligible
                                           Receivables
           A-1+              P-1               10%
            A-1              P-1               8%
            A-2              P-2               6%
            A-3              P-3               3%
     Below A-3 or Not    Below P-3 or
      Rated by either    Not Rated by          3%
      S&P or Moody's    either S&P or
                           Moody's

provided, however, that (i) if any Obligor has a split rating,
the applicable rating will be the lower of the two, (ii) if any
Obligor is not rated by either S&P or Moody's, the applicable
Obligor Concentration Limit shall be the one set forth in the
last line of the table above, and (iii) subject to satisfaction
of the Rating Agency Condition and/or an increase in the
percentage set forth in clause (a)(i) of the definition of
"Required Reserve," upon the Seller's request from time to time,
the Administrative Agent may agree to a higher percentage of
Eligible Receivables for a particular Obligor and its Affiliates
(each such higher percentage, a "Special Concentration Limit"),
it being understood that any Special Concentration Limit may be
cancelled by the Administrative Agent upon not less than five (5)
Business Days' written notice to the Seller Parties.

"Originator" means Airborne Express, Inc., in its capacity as
seller under the Receivables Sale Agreement.

"Other Costs" has the meaning set forth in Section 10.3.

"Other Customers" has the meaning set forth in Section 10.4.

"Outstanding Balance" of any Receivable at any time means the
then outstanding principal balance thereof, excluding all late
payment charges, delinquency charges and extension or collection
fees.

"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.

"Pension Plan" means a pension plan (as defined in Section 3(2)
of ERISA) subject to Title IV of ERISA which the Performance
Guarantor or any of its ERISA Affiliates sponsors or maintains,
or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as
described in Section 4064(a) of ERISA) has made contributions at
any time during the immediately preceding five plan years.

"Performance Guarantor" means Airborne, Inc., a Delaware
corporation.

"Performance Undertaking" means that certain Performance
Undertaking, dated as of December 28, 2000 by Performance
Guarantor in favor of Seller, substantially in the form of
Exhibit VII, as the same may be amended, restated or otherwise
modified from time to time.

"Person" means an individual, partnership, corporation (including
a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture or
other entity, or a government or any political subdivision or
agency thereof.

"Plan" means an employee benefit plan (as defined in Section 3(3)
of ERISA) which the Performance Guarantor or any of its ERISA
Affiliates sponsors or maintains or to which the Performance
Guarantor or any of its ERISA Affiliates makes, is making, or is
obligated to make contributions and includes any Pension Plan,
other than a Plan maintained outside the United States primarily
for the benefit of Persons who are not U.S. residents.

"Pooled Commercial Paper" means all short-term Commercial Paper
issued by the Purchaser from time to time, subject to any pooling
arrangement by the Purchaser, but excluding short-term Commercial
Paper issued by the Purchaser both for a tenor and in an amount
specifically requested by any Person in connection with any
receivables purchase facility effected by the Purchaser.

"Prime Rate" means an interest rate per annum so denominated and
set by Wachovia from time to time as an interest rate basis for
the borrowings.  The Prime Rate is but one of several interest
rates used by Wachovia.  Wachovia lends at interest rates above
and below the Prime Rate.

"Proposed Reduction Date" has the meaning set forth in Section
1.3.

"Purchase" means an Incremental Purchase or a Reinvestment.

"Purchase Date" means each Business Day on which a Purchase is
made hereunder.

"Purchase Limit" means up to $200,000,000.

"Purchase Notice" has the meaning set forth in Section 1.2.

"Purchase Price" means, with respect to any Incremental Purchase
of a Receivable Interest, the amount paid to Seller for such
Receivable Interest which shall not exceed the least of (i) the
amount requested by Seller in the applicable Purchase Notice,
(ii) the unused portion of the Purchase Limit on the applicable
purchase date and (iii) the excess, if any, of the Net Pool
Balance (less the Required Reserve) on the applicable purchase
date over the aggregate outstanding amount of Aggregate Invested
Amount determined as of the date of the most recent Monthly
Report, taking into account such proposed Incremental Purchase.

"Purchased Assets" means all of Seller's right, title and
interest, whether now owned and existing or hereafter arising in
and to all of the Receivables, the Related Security, the
Collections and all proceeds of the foregoing.

"Purchaser" means Blue Ridge Asset Funding Corporation and its
successors and assigns.

"Rating Agency Condition" means that Blue Ridge has received
written notice from S&P and Moody's that an amendment, a change
or a waiver will not result in a withdrawal or downgrade of the
then current ratings on Blue Ridge's Commercial Paper.

"Receivable" means all indebtedness and other obligations owed to
Seller or the Originator (at the time it arises, and before
giving effect to any transfer or conveyance under the Receivables
Sale Agreement) or in which Seller or the Originator has a
security interest or other interest, including, without
limitation, any indebtedness, obligation or interest constituting
an account, chattel paper, instrument or general intangible,
arising in connection with the sale of goods or the rendering of
services by the Originator and further includes, without
limitation, the obligation to pay any Finance Charges with
respect thereto.  Indebtedness and other rights and obligations
arising from any one transaction, including, without limitation,
indebtedness and other rights and obligations represented by an
individual invoice, shall constitute a Receivable separate from a
Receivable consisting of the indebtedness and other rights and
obligations arising from any other transaction; provided further,
that any indebtedness, rights or obligations referred to in the
immediately preceding sentence shall be a Receivable regardless
of whether the account debtor or Seller treats such indebtedness,
rights or obligations as a separate payment obligation.

"Receivable Interest" means, at any time, an undivided percentage
ownership interest (computed as set forth below) associated with
a designated amount of Invested Amount, selected pursuant to the
terms and conditions hereof in (i) each Receivable arising prior
to the time of the most recent computation or recomputation of
such undivided interest, (ii) all Related Security with respect
to each such Receivable, and (iii) all Collections with respect
to, and other proceeds of, each such Receivable.  Each such
undivided percentage interest shall equal:


                          IA + RR
                            NPB

          where:

          IA   = the Invested Amount of such Receivable Interest.

          NPB  = the Net Pool Balance.

          RR   = the Required Reserve.

Such undivided percentage ownership interest shall be initially
computed on its date of purchase.  Thereafter, until the Facility
Termination Date, each Receivable Interest shall be automatically
recomputed (or deemed to be recomputed) on each day prior to the
Facility Termination Date.  The variable percentage represented
by any Receivable Interest as computed (or deemed recomputed) as
of the close of the business day immediately preceding the
Facility Termination Date shall remain constant at all times
thereafter.

"Receivables Sale Agreement" means that certain Receivables Sale
Agreement, dated as of December 28, 2000, among the Originator
and Seller, as the same may be amended, restated or otherwise
modified from time to time.

"Records" means, with respect to any Receivable, all Contracts
and other documents, books, records and other information
(including, without limitation, computer programs, tapes, disks,
punch cards, data processing software and related property and
rights) relating to such Receivable, any Related Security
therefor and the related Obligor.

"Recourse Obligations" has the meaning set forth in Section 2.1.

"Reduction Notice" has the meaning set forth in Section 1.3.

"Regulatory Change" has the meaning set forth in Section 10.2.

"Reinvestment" has the meaning set forth in Section 2.2.

"Related Security" means, with respect to any Receivable:

     (a)  all of Seller's interest in the inventory and goods
(including returned or repossessed inventory or goods), if any,
the sale of which by the Originator gave rise to such Receivable,
and all insurance contracts with respect thereto,

     (b)  all other security interests or liens and property
subject thereto from time to time, if any, purporting to secure
payment of such Receivable, whether pursuant to the Contract
related to such Receivable or otherwise, together with all
financing statements and security agreements describing any
collateral securing such Receivable,

     (c)  all guaranties, letters of credit, insurance and other
agreements or arrangements of whatever character from time to
time supporting or securing payment of such Receivable whether
pursuant to the Contract related to such Receivable or otherwise,

     (d)  all service contracts and other contracts and
agreements associated with such Receivable,

     (e)  all Records related to such Receivable,

     (f)  all of Seller's right, title and interest in, to and
under the Receivables Sale Agreement in respect of such
Receivable and all of Seller's right, title and interest in, to
and under the Performance Undertaking.

     (g)  all proceeds of any of the foregoing.

"Required Liquidity Banks" means, at any time, Liquidity Banks
with Liquidity Commitments in excess of 50% of the aggregate
amount of all Liquidity Commitments.

"Required Notice Period" means the number of days required notice
set forth below applicable to the Aggregate Reduction indicated
below:

           Aggregate Reduction    Required Notice
                                       Period

          up to 25% of the        2 Business Days
          Purchase Limit

          25% and up to 50% of    5 Business Days
          the Purchase Limit

          50% or more of the      10 Business Days
          Purchase Limit



"Required Reserve" means, on any day during a Calculation Period,
the product of (a) the greater of (i) the Required Reserve Factor
Floor and (ii) the sum of the Loss Reserve, the Yield Reserve,
the Dilution Reserve and the Servicing Reserve, times (b) the Net
Pool Balance as of such date.

"Required Reserve Factor Floor" means the sum of (a) 12.0% and
(b) the product of (i) the Adjusted Dilution Ratio and (ii) the
Dilution Horizon Ratio.

"Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any
class of capital stock of Seller now or hereafter outstanding,
except a dividend payable solely in shares of that class of stock
or in any junior class of stock of Seller, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any
class of capital stock of Seller now or hereafter outstanding,
(iii) any payment or prepayment of principal of, premium, if any,
or interest, fees or other charges on or with respect to, and any
redemption, purchase, retirement, defeasance, sinking fund or
similar payment and any claim for rescission with respect to the
Subordinated Loans (as defined in the Receivables Sale
Agreement), (iv) any payment made to redeem, purchase, repurchase
or retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class
of capital stock of Seller now or hereafter outstanding, and (v)
any payment of management fees by Seller (except for reasonable
management fees to the Originator or its Affiliates in
reimbursement of actual management services performed).

"Review" has the meaning specified in Section 7.1(d).

"S&P" means Standard and Poor's Ratings Services, a division of
The McGraw Hill Companies, Inc.

"Secured Parties" means the Indemnified Parties.

"Seller" has the meaning set forth in the preamble to this
Agreement.

"Seller Parties" has the meaning set forth in the preamble to
this Agreement.

"Servicer" means at any time the Person (which may be the
Administrative Agent) then authorized pursuant to Article VIII to
service, administer and collect Receivables.

"Servicing Fee" means, for each day in a Calculation Period:

     (a)  an amount equal to (i) 0.50% per annum or 1.0% if the
original Servicer is replaced (the "Servicing Fee Rate") times
(ii) the aggregate Outstanding Balance of all Receivables at the
close of business on the Cut-Off Date immediately preceding such
Calculation Period, times (iii) 1/360; or

     (b)  on and after the Servicer's reasonable request made at
any time when no Airborne affiliate is acting as Servicer
hereunder, an alternative amount specified by the successor
Servicer not exceeding (i) 110% of such successor Servicer's
reasonable costs and expenses of performing its obligations under
this Agreement during the preceding Calculation Period, divided
by (ii) the number of days in the current Calculation Period.

"Servicing Fee Rate" means 1.0% per annum.

"Servicing Reserve" means, for any Calculation Period, the
product (expressed as a percentage) of (a) the Servicing Fee
Rate, times (b) a fraction, the numerator of which is the highest
Days Sales Outstanding for the most recent 12 Calculation Periods
and the denominator of which is 360.

"Settlement Date" means (A) the 2nd Business Day after each
Monthly Reporting Date, and (B) the last day of the relevant
Tranche Period in respect of each Receivable Interest funded
through a Liquidity Funding, provided however, with respect to
any Tranche Period for any Receivable Interest funded through a
Liquidity Funding that is six months, the Settlement Date for
such Tranche Period shall occur on the last day of the third
(3rd) month of such Tranche Period and on the last day of such
Tranche Period.

"Settlement Period" means (A) in respect of each Receivable
Interest funded through the issuance of Commercial Paper, the
immediately preceding Calculation Period, and (B) in respect of
each Receivable Interest funded through a Liquidity Funding, the
entire Tranche Period of such Liquidity Funding.

"Subsidiary" of a Person means (i) any corporation more than 50%
of the outstanding securities having ordinary voting power of
which shall at the time be owned or controlled, directly or
indirectly, by such Person or by one or more of its Subsidiaries
or by such Person and one or more of its Subsidiaries, or (ii)
any partnership, association, limited liability company, joint
venture or similar business organization more than 50% of the
ownership interests having ordinary voting power of which shall
at the time be so owned or controlled.

"Tax Code" means the Internal Revenue Code of 1986, as the same
may be amended from time to time.

"Terminating Tranche" has the meaning set forth in Section
4.3(b).

"Tranche Period" means, with respect to any Receivable Interest
funded through a Liquidity Funding:

     (a)  if Yield for such Receivable Interest is calculated on
the basis of the Eurodollar Rate (Reserve Adjusted), a period of
one, two, three or six months, or such other period as may be
mutually agreeable to the Administrative Agent and Seller,
commencing on a Business Day selected by Seller or the
Administrative Agent pursuant to this Agreement.  Such Tranche
Period shall end on the day in the applicable succeeding calendar
month which corresponds numerically to the beginning day of such
Tranche Period, provided, however, that if there is no such
numerically corresponding day in such succeeding month, such
Tranche Period shall end on the last Business Day of such
succeeding month; or

     (b)  if Yield for such Receivable Interest is calculated on
the basis of the Alternate Base Rate, a period commencing on a
Business Day selected by the Administrative Agent, commencing on
the day such Liquidity Funding occurs, provided that no such
period shall exceed one month.

If any Tranche Period would end on a day which is not a Business
Day, such Tranche Period shall end on the next succeeding
Business Day, provided, however, that in the case of Tranche
Periods corresponding to the Eurodollar Rate (Reserve Adjusted),
if such next succeeding Business Day falls in a new month, such
Tranche Period shall end on the immediately preceding Business
Day.  In the case of any Tranche Period which commences before
the Facility Termination Date and would otherwise end on a date
occurring after the Facility Termination Date, such Tranche
Period shall end on the Facility Termination Date.  The duration
of each Tranche Period which commences after the Facility
Termination Date shall be of such duration as selected by the
Administrative Agent.

"Transaction Documents" means, collectively, this Agreement, each
Purchase Notice, the Receivables Sale Agreement, each Blocked
Account Agreement, the Performance Undertaking, the Fee Letter,
each Subordinated Note (as defined in the Receivables Sale
Agreement) and all other instruments, documents and agreements
executed and delivered in connection herewith.

"UCC" means the Uniform Commercial Code as from time to time in
effect in the specified jurisdiction.

"Unmatured Amortization Event" means an event which, with the
passage of time or the giving of notice, or both, would
constitute an Amortization Event.

"Wachovia" means Wachovia Bank, N.A. in its individual capacity
and its successors.

"Wachovia Blocked Account" means, collectively, those depositary
account numbers 8735-028902 and 8736-000912 maintained in the
name of the Seller with Wachovia and in which any Collections are
collected or deposited.

"Yield" means for each Tranche Period relating to a Receivable
Interest funded through a Liquidity Funding, an amount equal to
the product of the applicable Yield Rate for such Receivable
Interest multiplied by the Invested Amount of such Receivable
Interest for each day elapsed during such Tranche Period,
annualized on a 360 day basis.

"Yield Rate" means, with respect to each Receivable Interest
funded through a Liquidity Funding, the Eurodollar Rate (Reserve
Adjusted), the Alternate Base Rate or the Default Rate, as
applicable.

"Yield Reserve" means, for any Calculation Period, the product
(expressed as a percentage) of (i) 1.5 times (ii) the Alternate
Base Rate as of the immediately preceding Cut-Off Date times
(iii) a fraction the numerator of which is the highest Days Sales
Outstanding for the most recent 12 Calculation Periods and the
denominator of which is 360.

All accounting terms not specifically defined herein shall be
construed in accordance with GAAP.  All terms used in Article 9
of the UCC in the State of New York, and not specifically defined
herein, are used herein as defined in such Article 9.

                           EXHIBIT II

                     FORM OF PURCHASE NOTICE


                      Airborne Credit, Inc.

                         PURCHASE NOTICE
                   dated ______________, 20__
             for Purchase on ________________, 20__


Wachovia Bank, N.A., as Administrative Agent
191 Peachtree Street, N.E., GA-423
Atlanta, Georgia 30303

Attention:  ____________, Fax No. (404) _______
With a copy to:  John Dillon, Fax No. (336) ______________

Ladies and Gentlemen:

     Reference is made to the Receivables Purchase Agreement
dated as of December 28, 2000 (as amended, supplemented or
otherwise modified from time to time, the "Receivables Purchase
Agreement") among Airborne Credit, Inc. (the "Seller"), Airborne
Express, Inc. (the "Servicer"), Blue Ridge Asset Funding
Corporation, and Wachovia Bank N.A., as Administrative Agent.
Capitalized terms defined in the Receivables Purchase Agreement
are used herein with the same meanings.

     1.   The [Servicer, on behalf of the] Seller hereby
certifies, represents and warrants to the Administrative Agent
and Blue Ridge that on and as of the Purchase Date (as
hereinafter defined):

     (a)  all applicable conditions precedent set forth in
Article VI of the Receivables Purchase Agreement have been
satisfied;

     (b)  each of its representations and warranties contained in
Section 5.1 of the Receivables Purchase Agreement will be true
and correct, in all material respects, as if made on and as of
the Purchase Date;

     (c)  no event will have occurred and is continuing, or would
result from the requested Purchase, that constitutes an
Amortization Event or Unmatured Amortization Event;

     (d)  the Facility Termination Date has not occurred; and

     (e)  after giving effect to the Purchase requested below,
the Aggregate Invested Amount will not exceed the Purchase Limit
and the aggregate Receivable Interests will not exceed 100%.

     2.   The [Servicer, on behalf of the] Seller hereby requests
that Blue Ridge make a Purchase on ___________, 20__ (the
"Purchase Date") as follows:

     (a)  Purchase Price:  $_____________

     (b)  If the Purchase is funded with a Liquidity Funding,
[Servicer on behalf of the] Seller requests that the Invested
Amount (which will initially accrue Yield at the Alternate Base
Rate) begin to accrued Yield at a Eurodollar Rate (Reserve
Adjusted) for a Tranche Period of _____ months on the third
Business Day after the Purchase Date).

     3.   Please disburse the proceeds of the Purchase as
follows:

[Apply $________ to payment of Aggregate Unpaids due on the
Purchase Date].
[Wire transfer $________ to account no. ________ at ___________
Bank, in [city, state], ABA No. __________, Reference:
________].

     IN WITNESS WHEREOF, the [Servicer, on behalf of the] Seller
has caused this Purchase Request to be executed and delivered as
of this ____ day of ___________, _____.

                         [_______________________, as Servicer,
                    on behalf of:]      ____________., as Seller


                         By:
                         Name:
                         Title:


                           EXHIBIT III



     PLACES OF BUSINESS OF THE SELLER; LOCATIONS OF RECORDS;

             FEDERAL EMPLOYER IDENTIFICATION NUMBER



Places of Business:

     Airborne Credit, Inc.
     21240 Ridgetop Circle
     Sterling, VA 20166

     Tel.:

Locations of Records:

     Airborne Credit, Inc.
     21240 Ridgetop Circle
     Sterling, VA 20166

     Tel.:

And:
     Airborne Credit, Inc.
     3101 Western Avenue
     Seattle, WA 98121-1043

     Mailing Address:
     P.O. Box 662
     Seattle, WA 98111-0662

     Tel.: (206) 830-4600


Federal Employer Identification Number:

     Airborne Credit, Inc.: EIN #

Legal, Trade and Assumed Names:

     Airborne Credit, Inc.


                           EXHIBIT IV

                  LOCK-BOXES & BLOCKED ACCOUNTS



      Lock-Box            Related Blocked Account
                       Name of Current Account
Airborne Credit, Inc.  Holder:
(Current Name:         Airborne Freight Corporation
Airborne Express)
P.O Box 91001          Bank of America, N.T.S.A.
Seattle, WA 98111      Account Number:  1233386558
                       ABA Number:  121000358
                       Contact Person:  Aaron Van
                       Antwerp
                       Contact's Tel:  (925)  675-
                       7052
                       Contact's Fax:  (877) 681-
                       1132
                       Name of Current Account
                       Holder:
                       Airborne Freight Corp.

                       Wachovia Bank, N.A.
                       Account Number:  8736-000912
                       ABA Number:  053100494
                       Contact Person:  Betty Howard
                       Contact's Tel:  (404) 332-
                       6458
                       Contact's Fax:  (404) 332-
                       5253
                       Name of Current Account
                       Holder:
                       Airborne Freight Corporation

                       Wachovia Bank, N.A.
                       Account Number:  8735-028902
                       ABA Number:  053100494
                       Contact Person:  Betty Howard
                       Contact's Tel:  (404) 332-
                       6458
                       Contact's Fax:  (404) 332-
                       5253
                       Name of Current Account
                       Holder:
                       Airborne Freight Corporation

                       Bank of Boston, a ________
                       banking association
                       Account Number:  580-35308
                       ABA Number:  011000390
                       Contact Person:
                       _________________
                       Contact's Tel:  (
                       )_______________
                       Contact's Fax:  (
                       )_______________

                            EXHIBIT V

                 FORM OF COMPLIANCE CERTIFICATE


To:  Wachovia Bank, N.A., as Administrative Agent

     This Compliance Certificate is furnished pursuant to that
certain Receivables Purchase Agreement dated as of December 28,
2000 among Airborne Credit, Inc. (the "Seller"), Airborne
Express, Inc. (the "Servicer"), Blue Ridge Asset Funding
Corporation and Wachovia Bank, N.A., as administrative Agent (the
"Agreement").

     THE UNDERSIGNED HEREBY CERTIFIES THAT:

     1.   I am the duly elected _________________ of Seller.

     2.   I have reviewed the terms of the Agreement and I have
made, or have caused to be made under my supervision, a detailed
review of the transactions and conditions of Seller and its
Subsidiaries during the accounting period covered by the attached
financial statements.

     3.   The examinations described in paragraph 2 did not
disclose, and I have no knowledge of, the existence of any
condition or event which constitutes an Amortization Event or
Unmatured Amortization Event, as each such term is defined under
the Agreement, during or at the end of the accounting period
covered by the attached financial statements or as of the date of
this Certificate[, except as set forth in paragraph 5 below].

     4.   Schedule I attached hereto sets forth financial data
and computations evidencing the compliance with certain covenants
of the Agreement, all of which data and computations are true,
complete and correct.

     [5.  Described below are the exceptions, if any, to
paragraph 3 by listing, in detail, the nature of the condition or
event, the period during which it has existed and the action
which Seller has taken, is taking, or proposes to take with
respect to each such condition or event:  ____________________]
     The foregoing certifications, together with the computations
set forth in Schedule I hereto and the financial statements
delivered with this Certificate in support hereof, are made and
delivered as of ______________, 20__.


                              By:
                              Name:
                              Title:
              SCHEDULE I TO COMPLIANCE CERTIFICATE


     A.   Schedule of Compliance as of __________, ____ with
Section ___ of the Agreement.  Unless otherwise defined herein,
the terms used in this Compliance Certificate have the meanings
ascribed thereto in the Agreement.

     This schedule relates to the month ended: _______________
                           EXHIBIT VI

                FORM OF BLOCKED ACCOUNT AGREEMENT



                    BLOCKED ACCOUNT AGREEMENT


                       _____________, 2000

[Blocked Account Bank Name]
[Blocked Account Bank Address]

Attn:  ____________________
Fax No. (___) ______________

     Re:  [Name of current Blocked Account owner]/Airborne
Credit, Inc.

Ladies and Gentlemen:

     Reference is hereby made to the bank account[s] number[ed]
___________ (each, a "Blocked Account") of which [Blocked Account
Bank Name], a _________ banking association (hereinafter "you"),
has exclusive control for the purpose of processing deposits
therefrom pursuant to the [Account Agreement] originally by and
between Airborne Express, Inc. (the "Company") and you (the
"Account Agreement").

     1.   The Company hereby informs you that it has transferred
to its affiliate, Airborne Credit, Inc., an Ohio corporation (the
"Seller") all of the Company's right, title and interest in and
to the items from time to time deposited in the Blocked Account,
but that the Company has agreed to continue to service the
receivables giving rise to such items.  Accordingly, the Company
and Seller hereby request that the name of the Blocked Account be
changed to "Airborne Credit, Inc."  Seller hereby further advises
you that it has pledged the receivables giving rise to such items
to Wachovia Bank, N.A., as administrative agent for various
parties (in such capacity, the "Administrative Agent") and has
granted a security interest to the Administrative Agent on behalf
the Secured Parties in all of Seller's right, title and interest
in and to the Blocked Account and the funds therein.

     2.   Each of the Company and Seller hereby irrevocably
instructs you, and you hereby agree, that upon receiving notice
from the Administrative Agent in the form attached hereto as
Annex A:

          (i)  the name of the Blocked Account will be changed to
     "Wachovia Bank, N.A., as Administrative Agent" (or any
     designee of the Administrative Agent), and the
     Administrative Agent will have exclusive ownership of and
     access to the Blocked Account and none of the Company,
     Seller, nor any of their respective affiliates will have any
     control of the Blocked Account or any access thereto, (ii)
     you will transfer monies on deposit in the Blocked Account
     to the following account:

     Bank Name:          Wachovia Bank, N.A.
     Location:      Winston-Salem, SC
     ABA Routing No.:    ABA # 053100494
     Credit Account No.: For credit to Blue Ridge Asset Funding
Account #8735-098787.
                    Reference:  Blue Ridge/Airborne Credit, Inc.
                    Attention:  John Dillon, tel. (336) 732-2690

or to such other account as the Administrative Agent may specify,
(iii) all services to be performed by you under the Account
Agreement will be performed on behalf of the Administrative
Agent, and (iv) all correspondence or other mail which you have
agreed to send to the Company or Seller will be sent to the
Administrative Agent at the following address:

          Wachovia Bank, N.A., as Administrative Agent
          191 Peachtree Street
          Mail Stop GA-423
          Atlanta, GA  30303
          Attn:  Elizabeth K. Wagner,
          Asset-Backed Finance
          FAX:  (404) 332- 5152

     Moreover, upon such notice, the Administrative Agent will
have all rights and remedies given to the Company (and Seller, as
the Company's assignee) under the Account Agreement.  The Company
agrees, however, to continue to pay all fees and other
assessments due thereunder at any time.

     3.   You hereby acknowledge that monies deposited in the
Blocked Account or any other account established with you by the
Administrative Agent for the purpose of receiving funds from the
Blocked Account are subject to the liens of the Administrative
Agent, and will not be subject to deduction, set-off, banker's
lien or any other right you or any other party may have against
the Company or Seller except that you may debit the Blocked
Account for any items deposited therein that are returned or
otherwise not collected and for all charges, fees, commissions
and expenses incurred by you in providing services hereunder, all
in accordance with your customary practices for the charge back
of returned items and expenses.

     4.   You will be liable only for direct damages in the event
you fail to exercise ordinary care.  You shall be deemed to have
exercised ordinary care if your action or failure to act is in
conformity with general banking usages or is otherwise a
commercially reasonable practice of the banking industry.  You
shall not be liable for any special, indirect or consequential
damages, even if you have been advised of the possibility of
these damages.

     5.   The parties acknowledge that you may assign or transfer
your rights and obligations hereunder solely to a wholly-owned
subsidiary of [insert name of Blocked Account Bank's holding
company].

     6.   Seller agrees to indemnify you for, and hold you
harmless from, all claims, damages, losses, liabilities and
expenses, including legal fees and expenses, resulting from or
with respect to this letter agreement and the administration and
maintenance of the Blocked Account and the services provided
hereunder, including, without limitation:  (a) any action taken,
or not taken, by you in regard thereto in accordance with the
terms of this letter agreement, (b) the breach of any
representation or warranty made by Seller pursuant to this letter
agreement, (c) any item, including, without limitation, any
automated clearinghouse transaction, which is returned for any
reason, and (d) any failure of Seller to pay any invoice or
charge to you for services in respect to this letter agreement
and the Blocked Account or any amount owing to you from Seller
with respect thereto or to the service provided hereunder.

     7.   THIS LETTER AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER WILL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
_________, WHICH STATE SHALL BE YOUR "LOCATION" FOR PURPOSES OF
THE UNIFORM COMMERCIAL CODE FROM AND AFTER JULY 1, 2001.  This
letter agreement may be executed in any number of counterparts
and all of such counterparts taken together will be deemed to
constitute one and the same instrument.

     8.   This letter agreement contains the entire agreement
between the parties, and may not be altered, modified, terminated
or amended in any respect, nor may any right, power or privilege
of any party hereunder be waived or released or discharged,
except upon execution by all parties hereto of a written
instrument so providing.  In the event that any provision in this
letter agreement is in conflict with, or is inconsistent with,
any provision of the Account Agreement, this letter agreement
will exclusively govern and control.  Each party agrees to take
all actions reasonably requested by any other party to carry out
the purposes of this letter agreement or to preserve and protect
the rights of each party hereunder.
     Please indicate your agreement to the terms of this letter
agreement by signing in the space provided below.  This letter
agreement will become effective immediately upon execution of a
counterpart of this letter agreement by all parties hereto.

                              Very truly yours,

                              AIRBORNE EXPRESS, INC.

                              By:
                              Name:
                              Title:

Acknowledged and agreed to as of the
date first above written:

[BLOCKED ACCOUNT BANK]


By:
Name:
Title:


WACHOVIA BANK, N.A., AS ADMINISTRATIVE AGENT

By:
Name:
Title:

AIRBORNE CREDIT, INC.

By:
Name:
Title:



                             ANNEX A
                         FORM OF NOTICE

           [On letterhead of the Administrative Agent]


                             [Date]



[Blocked Account Bank Name]
[Blocked Account Bank Address]

Attn:  ____________________
Fax No. (___) ______________

     Re:  [Name of current Blocked Account owner]/Airborne
Express, Inc.

Ladies and Gentlemen:

     We hereby notify you that we are exercising our rights
pursuant to that certain letter agreement dated December 28, 2000
(the "Letter Agreement") among [Name of current Blocked Account
Owner], Airborne Credit, Inc., you and us, to have the name of,
and to have exclusive ownership and control of, account no.
__________ identified in the Letter Agreement (the "Blocked
Account") maintained with you, transferred to us.  The Blocked
Account will henceforth be a zero-balance account, and funds
deposited in the Blocked Account should be sent at the end of
each day to the account specified in Section 2 of the Letter
Agreement, or as otherwise directed by the undersigned.  You have
further agreed to perform all other services you are performing
under the "Account Agreement" (as defined in the Letter
Agreement) on our behalf.

     We appreciate your cooperation in this matter.

                              Very truly yours,

                              WACHOVIA BANK, N.A.,
                              AS ADMINISTRATIVE AGENT

                              By:
                              Name:
                              Title:

                 FORM OF PERFORMANCE UNDERTAKING

          THIS PERFORMANCE UNDERTAKING (this "Undertaking"),
dated as of December 28, 2000, is executed by Airborne, Inc., a
Delaware corporation (the "Performance Guarantor") in favor of
Airborne Credit, Inc., a Virginia corporation (together with its
successors and assigns, "Recipient").

                            RECITALS

1.   Airborne Express, Inc. ("Airborne Express" or the
  "Originator"), and Recipient have entered into a Receivables Sale
  Agreement, dated as of December 28, 2000 (as amended, restated or
  otherwise modified from time to time, the "Sale Agreement"),
  pursuant to which Originator, subject to the terms and conditions
  contained therein, is selling and/or contributing its right,
  title and interest in its accounts receivable to Recipient.

2.   Performance Guarantor owns one hundred percent (100%) of the
  capital stock of the Originator and Recipient and accordingly,
  Performance Guarantor, is expected to receive substantial direct
  and indirect benefits from its sale or contribution of
  receivables to Recipient pursuant to the Sale Agreement (which
  benefits are hereby acknowledged).

3.   As an inducement for Recipient to acquire Originator's
  accounts receivable pursuant to the Sale Agreement, Performance
  Guarantor has agreed to guaranty the due and punctual performance
  by Originator of its obligations under the Sale Agreement, as
  well as Airborne Express's Servicing Related Obligations (as
  hereinafter defined).

4.   Performance Guarantor wishes to guaranty the due and
  punctual performance by Originator of its obligations to
  Recipient under or in respect of the Sale Agreement and Airborne
  Express' Servicing Related Obligations (as hereinafter defined),
  as provided herein.

                            AGREEMENT

          NOW, THEREFORE, Performance Guarantor hereby agrees as
follows:

          Section 1.  Definitions.  Capitalized terms used herein
and not defined herein shall the respective meanings assigned
thereto in the Sale Agreement or the Receivables Purchase
Agreement (as hereinafter defined).  In addition:

          "Guaranteed Obligations" means, collectively:  (a) all
covenants, agreements, terms, conditions and indemnities to be
performed and observed by the Originator under and pursuant to
the Receivables Sale Agreement and each other document executed
and delivered by the Originator pursuant to the Sale Agreement,
including, without limitation, the due and punctual payment of
all sums which are or may become due and owing by the Originator
under the Sale Agreement, whether for fees, expenses (including
counsel fees), indemnified amounts or otherwise, whether upon any
termination or for any other reason and (b) all obligations of
Airborne Express (i) as Servicer under the Receivables Purchase
Agreement, dated as of December 28, 2000 by and among Recipient,
as Seller, Airborne Express, Inc., as Servicer, Blue Ridge Asset
Funding Corporation, as Purchaser and Wachovia Bank, N.A., as
Administrative Agent (the "Administrative Agent") (as amended,
restated or otherwise modified, the "Receivables Purchase
Agreement" and, together with the Sale Agreement, the
"Agreements") or (ii) which arise pursuant to Sections 8.2, 8.3
or 14.3(a) of the Receivables Purchase Agreement as a result of
its termination as Servicer (all such obligations under this
clause (b), collectively, the "Servicing Related Obligations").

          Section 2.  Guaranty of Performance of Guaranteed
Obligations.  Performance Guarantor hereby guarantees to
Recipient, the full and punctual payment and performance by the
Originator of its Guaranteed Obligations.  This Undertaking is an
absolute, unconditional and continuing guaranty of the full and
punctual performance of all Guaranteed Obligations of the
Originator under the Agreements and each other document executed
and delivered by the Originator pursuant to the Agreements and is
in no way conditioned upon any requirement that Recipient first
attempt to collect any amounts owing by the Originator to
Recipient, the Administrative Agent or the Purchaser from any
other Person or resort to any collateral security, any balance of
any deposit account or credit on the books of Recipient, the
Administrative Agent or the Purchaser  in favor of the Originator
or any other Person or other means of obtaining payment.  Should
the Originator default in the payment or performance of any of
its Guaranteed Obligations, Recipient (or its assigns) may cause
the immediate performance by Performance Guarantor of the
Guaranteed Obligations and cause any payment of Guaranteed
Obligations to become forthwith due and payable to Recipient (or
its assigns), without demand or notice of any nature (other than
as expressly provided herein), all of which are hereby expressly
waived by Performance Guarantor.  Notwithstanding the foregoing,
this Undertaking is not a guarantee of the collection of any of
the Receivables and Performance Guarantor shall not be
responsible for any Guaranteed Obligations to the extent the
failure to perform such Guaranteed Obligations by the Originator
results from Receivables being uncollectible on account of the
insolvency, bankruptcy or lack of creditworthiness of the related
Obligor; provided that nothing herein shall relieve the
Originator from performing in full its Guaranteed Obligations
under the Agreements or Performance Guarantor of its undertaking
hereunder with respect to the full performance of such duties.

          Section 3.  Performance Guarantor's Further Agreements
to Pay.  Performance Guarantor further agrees, as the principal
obligor and not as a guarantor only, to pay to Recipient (and its
assigns), forthwith upon demand in funds immediately available to
Recipient, all reasonable costs and expenses (including court
costs and reasonable legal expenses) incurred or expended by
Recipient in connection with the Guaranteed Obligations, this
Undertaking and the enforcement thereof, together with interest
on amounts recoverable under this Undertaking from the time when
such amounts become due until payment, at a rate of interest
(computed for the actual number of days elapsed based on a 360
day year) equal to the Prime Rate plus 2% per annum, such rate of
interest changing when and as the Prime Rate changes.

          Section 4.  Waivers by Performance Guarantor.
Performance Guarantor waives notice of acceptance of this
Undertaking, notice of any action taken or omitted by Recipient
(or its assigns) in reliance on this Undertaking, and any
requirement that Recipient (or its assigns) be diligent or prompt
in making demands under this Undertaking, giving notice of any
Termination Event, Amortization Event, other default or omission
by the Originator or asserting any other rights of Recipient
under this Undertaking.  Performance Guarantor warrants that it
has adequate means to obtain from the Originator, on a continuing
basis, information concerning the financial condition of such
Originator, and that it is not relying on Recipient to provide
such information, now or in the future.  Performance Guarantor
also irrevocably waives all defenses (i) that at any time may be
available in respect of the Obligations by virtue of any statute
of limitations, valuation, stay, moratorium law or other similar
law now or hereafter in effect or (ii) that arise under the law
of suretyship, including impairment of collateral.  Recipient
(and its assigns) shall be at liberty, without giving notice to
or obtaining the assent of Performance Guarantor and without
relieving Performance Guarantor of any liability under this
Undertaking, to deal with the Originator and with each other
party who now is or after the date hereof becomes liable in any
manner for any of the Guaranteed Obligations, in such manner as
Recipient in its sole discretion deems fit, and to this end
Performance Guarantor agrees that the validity and enforceability
of this Undertaking, including without limitation, the provisions
of Section 7 hereof, shall not be impaired or affected by any of
the following:  (a) any extension, modification or renewal of, or
indulgence with respect to, or substitutions for, the Guaranteed
Obligations or any part thereof or any agreement relating thereto
at any time; (b) any failure or omission to enforce any right,
power or remedy with respect to the Guaranteed Obligations or any
part thereof or any agreement relating thereto, or any collateral
securing the Guaranteed Obligations or any part thereof; (c) any
waiver of any right, power or remedy or of any Termination Event,
Amortization Event, or default with respect to the Guaranteed
Obligations or any part thereof or any agreement relating
thereto; (d) any release, surrender, compromise, settlement,
waiver, subordination or modification, with or without
consideration, of any other obligation of any person or entity
with respect to the Guaranteed Obligations or any part thereof;
(e) the enforceability or validity of the Guaranteed Obligations
or any part thereof or the genuineness, enforceability or
validity of any agreement relating thereto or with respect to the
Guaranteed Obligations or any part thereof; (f) the application
of payments received from any source to the payment of any
payment Obligations of the Originator or any part thereof or
amounts which are not covered by this Undertaking even though
Recipient (or its assigns) might lawfully have elected to apply
such payments to any part or all of the payment Obligations of
such Originator or to amounts which are not covered by this
Undertaking; (g) the existence of any claim, setoff or other
rights which Performance Guarantor may have at any time against
the Originator in connection herewith or any unrelated
transaction; (h) any assignment or transfer of the Guaranteed
Obligations or any part thereof; or (i) any failure on the part
of the Originator to perform or comply with any term of the
Agreements or any other document executed in connection therewith
or delivered thereunder, all whether or not Performance Guarantor
shall have had notice or knowledge of any act or omission
referred to in the foregoing clauses (a) through (i) of this
Section 4.

          Section 5.  Unenforceability of Guaranteed Obligations
Against Originators.  Notwithstanding (a) any change of ownership
of the Originator or the insolvency, bankruptcy or any other
change in the legal status of the Originator; (b) the change in
or the imposition of any law, decree, regulation or other
governmental act which does or might impair, delay or in any way
affect the validity, enforceability or the payment when due of
the Guaranteed Obligations; (c) the failure of the Originator or
Performance Guarantor to maintain in full force, validity or
effect or to obtain or renew when required all governmental and
other approvals, licenses or consents required in connection with
the Guaranteed Obligations or this Undertaking, or to take any
other action required in connection with the performance of all
obligations pursuant to the Guaranteed Obligations or this
Undertaking; or (d) if any of the moneys included in the
Guaranteed Obligations have become irrecoverable from the
Originator for any other reason other than final payment in full
of the payment Obligations in accordance with their terms, this
Undertaking shall nevertheless be binding on Performance
Guarantor.  This Undertaking shall be in addition to any other
guaranty or other security for the Guaranteed Obligations, and it
shall not be rendered unenforceable by the invalidity of any such
other guaranty or security.  In the event that acceleration of
the time for payment of any of the Guaranteed Obligations is
stayed upon the insolvency, bankruptcy or reorganization of the
Originator or for any other reason with respect to the
Originator, all such amounts then due and owing with respect to
the Guaranteed Obligations under the terms of the Agreements, or
any other agreement evidencing, securing or otherwise executed in
connection with the Guaranteed Obligations, shall be immediately
due and payable by Performance Guarantor.

          Section 6.  Representations and Warranties.
Performance Guarantor hereby represents and warrants to Recipient
that:

          (a)  Existence and Standing.  Performance Guarantor is
a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation.
Performance Guarantor is duly qualified to do business and is in
good standing as a foreign corporation, and has and holds all
corporate power and all governmental licenses, authorizations,
consents and approvals required to carry on its business in each
jurisdiction in which its business is conducted except where the
failure to so qualify or so hold could not reasonably be expected
to have a Material Adverse Effect.

          (b)  Authorization, Execution and Delivery; Binding
Effect.  The execution and delivery by Performance Guarantor of
this Undertaking, and the performance of its obligations
hereunder, are within its corporate powers and authority and have
been duly authorized by all necessary corporate action on its
part.  This Undertaking has been duly executed and delivered by
Performance Guarantor.  This Undertaking constitutes the legal,
valid and binding obligation of Performance Guarantor enforceable
against Performance Guarantor in accordance with its terms,
except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws
relating to or limiting creditors' rights generally and by
general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law).

          (c)  No Conflict; Government Consent.  The execution
and delivery by Performance Guarantor of this Undertaking, and
the performance of its obligations hereunder do not contravene or
violate (i) its certificate or articles of incorporation or by-
laws, (ii) any law, rule or regulation applicable to it, (iii)
any restrictions under any agreement, contract or instrument to
which it is a party or by which it or any of its property is
bound, or (iv) any order, writ, judgment, award, injunction or
decree binding on or affecting it or its property, and do not
result in the creation or imposition of any Adverse Claim on
assets of Performance Guarantor or its Subsidiaries (except as
created hereunder) except, in any case, where such contravention
or violation could not reasonably be expected to have a Material
Adverse Effect.

          (d)  Financial Statements.  The consolidated financial
statements of Performance Guarantor and its consolidated
Subsidiaries dated as of December 31, 1999 and September 30, 2000
heretofore delivered to Recipient have been prepared in
accordance with generally accepted accounting principles
consistently applied and fairly present in all material respects
the consolidated financial condition and results of operations of
Performance Guarantor and its consolidated Subsidiaries as of
such dates and for the periods ended on such dates.  Since the
later of (i) September 30, 2000 and (ii) the last time this
representation was made or deemed made, no event has occurred
which would or could reasonably be expected to have a Material
Adverse Effect.

          (e)  Taxes.  Performance Guarantor has filed all United
States federal tax returns and all other tax returns which are
required to be filed and have paid all taxes due pursuant to said
returns or pursuant to any assessment received by Performance
Guarantor or any of its Subsidiaries, except such taxes, if any,
as are being contested in good faith and as to which adequate
reserves have been provided.  The United States income tax
returns of Performance Guarantor have been audited by the
Internal Revenue Service through the fiscal year ended December
31, 1999.  No federal or state tax liens have been filed and no
claims are being asserted with respect to any such taxes.  The
charges, accruals and reserves on the books of Performance
Guarantor in respect of any taxes or other governmental charges
are adequate.

          (f)  Litigation and Contingent Obligations.  Except as
disclosed in the filings made by Performance Guarantor with the
Securities and Exchange Commission, there are no actions, suits
or proceedings pending or, to the best of Performance Guarantor's
knowledge threatened against or affecting Performance Guarantor
or any of its properties, in or before any court, arbitrator or
other body, that could reasonably be expected to have a Material
Adverse Effect on (i) the business, properties, condition
(financial or otherwise) or results of operations of
Performance Guarantor and its Subsidiaries taken as a whole, (ii)
the ability of Performance Guarantor to perform its obligations
under this Undertaking, or (iii) the validity or enforceability
of any of this Undertaking or the rights or remedies of Recipient
hereunder.  Performance Guarantor does not have any material
Contingent Obligations not provided for or disclosed in the
financial statements referred to in Section 6(d).

          Section 7.  Subrogation; Subordination.
Notwithstanding anything to the contrary contained herein, until
the Guaranteed Obligations are paid in full Performance
Guarantor:  (a) will not enforce or otherwise exercise any right
of subrogation to any of the rights of Recipient, the
Administrative Agent or any Lender against the Originator, (b)
hereby waives all rights of subrogation (whether contractual,
under Section 509 of the United States Bankruptcy Code, at law or
in equity or otherwise) to the claims of Recipient, the
Administrative Agent and the Purchaser against the Originator and
all contractual, statutory or legal or equitable rights of
contribution, reimbursement, indemnification and similar rights
and "claims" (as that term is defined in the United States
Bankruptcy Code) which Performance Guarantor might now have or
hereafter acquire against the Originator that arise from the
existence or performance of Performance Guarantor's obligations
hereunder, (c) will not claim any setoff, recoupment or
counterclaim against the Originator in respect of any liability
of Performance Guarantor to such Originator and (d) waives any
benefit of and any right to participate in any collateral
security which may be held by Beneficiaries, the Administrative
Agent or the Purchaser.  The payment of any amounts due with
respect to any indebtedness of the Originator now or hereafter
owed to Performance Guarantor is hereby subordinated to the prior
payment in full of all of the Guaranteed Obligations.
Performance Guarantor agrees that, after the occurrence of any
default in the payment or performance of any of the Guaranteed
Obligations, Performance Guarantor will not demand, sue for or
otherwise attempt to collect any such indebtedness of the
Originator to Performance Guarantor until all of the Guaranteed
Obligations shall have been paid and performed in full.  If,
notwithstanding the foregoing sentence, Performance Guarantor
shall collect, enforce or receive any amounts in respect of such
indebtedness while any Obligations are still unperformed or
outstanding, such amounts shall be collected, enforced and
received by Performance Guarantor as trustee for Recipient (and
its assigns) and be paid over to Recipient (or its assigns) on
account of the Guaranteed Obligations without affecting in any
manner the liability of Performance Guarantor under the other
provisions of this Undertaking.  The provisions of this Section 7
shall be supplemental to and not in derogation of any rights and
remedies of Recipient under any separate subordination agreement
which Recipient may at any time and from time to time enter into
with Performance Guarantor.

          Section 8.  Termination of Performance Undertaking.
Performance Guarantor's obligations hereunder shall continue in
full force and effect until all Obligations are finally paid and
satisfied in full and the Credit and Security Agreement is
terminated, provided that this Undertaking shall continue to be
effective or shall be reinstated, as the case may be, if at any
time payment or other satisfaction of any of the Guaranteed
Obligations is rescinded or must otherwise be restored or
returned upon the bankruptcy, insolvency, or reorganization of
the Originator or otherwise, as though such payment had not been
made or other satisfaction occurred, whether or not Recipient (or
its assigns) is in possession of this Undertaking.  No
invalidity, irregularity or unenforceability by reason of the
federal bankruptcy code or any insolvency or other similar law,
or any law or order of any government or agency thereof
purporting to reduce, amend or otherwise affect the Guaranteed
Obligations shall impair, affect, be a defense to or claim
against the obligations of Performance Guarantor under this
Undertaking.

          Section 9.  Effect of Bankruptcy.  This Performance
Undertaking shall survive the insolvency of the Originator and
the commencement of any case or proceeding by or against the
Originator under the federal bankruptcy code or other federal,
state or other applicable bankruptcy, insolvency or
reorganization statutes.  No automatic stay under the federal
bankruptcy code with respect to the Originator or other federal,
state or other applicable bankruptcy, insolvency or
reorganization statutes to which the Originator is subject shall
postpone the obligations of Performance Guarantor under this
Undertaking.

          Section 10.  Setoff.  Regardless of the other means of
obtaining payment of any of the Guaranteed Obligations, Recipient
(and its assigns) is hereby authorized at any time and from time
to time, without notice to Performance Guarantor (any such notice
being expressly waived by Performance Guarantor) and to the
fullest extent permitted by law, to set off and apply any
deposits and other sums against the obligations of Performance
Guarantor under this Undertaking, whether or not Recipient (or
any such assign) shall have made any demand under this
Undertaking and although such Obligations may be contingent or
unmatured.

          Section 11.  Taxes.  All payments to be made by
Performance Guarantor hereunder shall be made free and clear of
any deduction or withholding.  If Performance Guarantor is
required by law to make any deduction or withholding on account
of tax or otherwise from any such payment, the sum due from it in
respect of such payment shall be increased to the extent
necessary to ensure that, after the making of such deduction or
withholding, Recipient receive a net sum equal to the sum which
they would have received had no deduction or withholding been
made.

          Section 12.  Further Assurances.  Performance Guarantor
agrees that it will from time to time, at the request of
Recipient (or its assigns), provide information relating to the
business and affairs of Performance Guarantor as Recipient may
reasonably request.  Performance Guarantor also agrees to do all
such things and execute all such documents as Recipient (or its
assigns) may reasonably consider necessary or desirable to give
full effect to this Undertaking and to perfect and preserve the
rights and powers of Recipient hereunder.

          Section 13.  Successors and Assigns.  This Performance
Undertaking shall be binding upon Performance Guarantor, its
successors and permitted assigns, and shall inure to the benefit
of and be enforceable by Recipient and its successors and
assigns.    Performance Guarantor may not assign or transfer any
of its obligations hereunder without the prior written consent of
each of Recipient and the Administrative Agent. Without limiting
the generality of the foregoing sentence, Recipient may assign or
otherwise transfer the Agreements, any other documents executed
in connection therewith or delivered thereunder or any other
agreement or note held by them evidencing, securing or otherwise
executed in connection with the Guaranteed Obligations, or sell
participations in any interest therein, to any other entity or
other person, and such other entity or other person shall
thereupon become vested, to the extent set forth in the agreement
evidencing such assignment, transfer or participation, with all
the rights in respect thereof granted to the Beneficiaries
herein.

          Section 14.  Amendments and Waivers.  No amendment or
waiver of any provision of this Undertaking nor consent to any
departure by Performance Guarantor therefrom shall be effective
unless the same shall be in writing and signed by Recipient, the
Administrative Agent and Performance Guarantor.  No failure on
the part of Recipient to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right hereunder preclude
any other or further exercise thereof or the exercise of any
other right.

          Section 15.  Notices.  All notices and other
communications provided for hereunder shall be made in writing
and shall be addressed as follows:  if to Performance Guarantor,
at the address set forth beneath its signature hereto, and if to
Recipient, at the addresses set forth beneath its signature
hereto, or at such other addresses as each of Performance
Guarantor or any Recipient may designate in writing to the other.
Each such notice or other communication shall be effective (1) if
given by telecopy, upon the receipt thereof, (2) if given by
mail, three (3) Business Days after the time such communication
is deposited in the mail with first class postage prepaid or (3)
if given by any other means, when received at the address
specified in this Section 15.

          Section 16.  GOVERNING LAW.  THIS UNDERTAKING SHALL BE
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK (AND NOT THE LAW OF CONFLICTS OTHER THAN SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW).

          Section 17.  CONSENT TO JURISDICTION.  EACH OF
PERFORMANCE GUARANTOR AND RECIPIENT HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
UNDERTAKING, THE AGREEMENTS OR ANY OTHER DOCUMENT EXECUTED IN
CONNECTION THEREWITH OR DELIVERED THEREUNDER AND EACH OF THE
PERFORMANCE GUARANTOR AND RECIPIENT HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE
HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM.

          Section 18.  Bankruptcy Petition.  Performance
Guarantor hereby covenants and agrees that, prior to the date
that is one year and one day after the payment in full of all
outstanding senior Indebtedness of Recipient, it will not
institute against, or join any other Person in instituting
against, Recipient any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United
States.

          Section 19.  Miscellaneous.  This Undertaking
constitutes the entire agreement of Performance Guarantor with
respect to the matters set forth herein. The rights and remedies
herein provided are cumulative and not exclusive of any remedies
provided by law or any other agreement, and this Undertaking
shall be in addition to any other guaranty of or collateral
security for any of the Guaranteed Obligations.  The provisions
of this Undertaking are severable, and in any action or
proceeding involving any state corporate law, or any state or
federal bankruptcy, insolvency, reorganization or other law
affecting the rights of creditors generally, if the obligations
of Performance Guarantor hereunder would otherwise be held or
determined to be avoidable, invalid or unenforceable on account
of the amount of Performance Guarantor's liability under this
Undertaking, then, notwithstanding any other provision of this
Undertaking to the contrary, the amount of such liability shall,
without any further action by Performance Guarantor or Recipient,
be automatically limited and reduced to the highest amount that
is valid and enforceable as determined in such action or
proceeding.  Any provisions of this Undertaking which are
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.  Unless otherwise specified,
references herein to "Section" shall mean a reference to sections
of this Undertaking.

          IN WITNESS WHEREOF, Performance Guarantor has caused
this Undertaking to be executed and delivered as of the date
first above written.

                              AIRBORNE, INC.

                              By: ______________________________
                              Name: ____________________________
                              Title:
                              _____________________________

                              Address:
                              3101 Western Avenue
                              Seattle, WA 98121-1043
                              Telephone: (206) 281-1003
                              Fax: (206) 281-1444

                          EXHIBIT VIII

                     FORM OF MONTHLY REPORT

                           [EXHIBIT IX

                      FORM OF CONTRACT(S)]

                         [See Attached]

                            EXHIBIT X

                     FORM OF DELIVERY ORDER


          [On letterhead of the Airborne Credit, Inc.]


                             [Date]



United States Postal Service
[Address]

Attn:  ____________________
Fax No. (___) ______________

     Re:  Post Office Box Number [___________] (the "P.O. Box").

Ladies and Gentlemen:

     We hereby notify you that we have assigned all of our
rights, titles and interests, including, without limitation, all
of our rights to control the P.O. Box and/or remove any or all of
the items from the P.O. Box to Wachovia Bank, N.A and its
successors and designees.  From the date hereof, immediately upon
the receipt of any item in the P.O. Box, please forward all such
items to the following address:

          Wachovia Bank, N.A., as Administrative Agent
          191 Peachtree Street
          Mail Stop GA-423
          Atlanta, GA  30303
          Attn:  Elizabeth K. Wagner,
          Asset-Backed Finance
          FAX:  (404) 332- 5152

     We appreciate your cooperation in this matter.

                              Very truly yours,

                              AIRBORNE CREDIT, INC.

                              By:
                              Name:
                              Title:

                           SCHEDULE A


      DOCUMENTS TO BE DELIVERED TO THE ADMINISTRATIVE AGENT

               ON OR PRIOR TO THE INITIAL PURCHASE

     1.   Executed copies of the Receivables Purchase Agreement,
duly executed by the parties thereto.

     2.   Copy of the Resolutions of the Board of Directors of
each Seller Party certified by its Secretary authorizing such
Person's execution, delivery and performance of this Agreement
and the other documents to be delivered by it hereunder.

     3.   Articles or Certificate of Incorporation of each Seller
Party certified by the Secretary of State of its jurisdiction of
incorporation on or within thirty (30) days prior to the initial
Purchase.

     4.   Good Standing Certificate for each Seller Party issued
by the Secretaries of State of its state of incorporation and
each jurisdiction where it has material operations, each of which
is listed below:

     (a)  Seller:

     (b)  Servicer:

     5.   A certificate of the Secretary of each Seller Party
certifying (i) the names and signatures of the officers
authorized on its behalf to execute this Agreement and any other
documents to be delivered by it hereunder and (ii) a copy of such
Person's By-Laws.

     6.   Pre-filing state and federal tax lien, judgment lien
and UCC lien searches against each Seller Party from the
following jurisdictions:

     (a)  Seller:

     (b)  Servicer:

     7.   Time stamped receipt copies of proper financing
statements, duly filed under the UCC on or before the date of the
initial Purchase in all jurisdictions as may be necessary or, in
the opinion of the Administrative Agent, desirable, under the UCC
of all appropriate jurisdictions or any comparable law in order
to perfect the ownership interests contemplated by this
Agreement.

     8.   Time stamped receipt copies of proper UCC termination
statements, if any, necessary to release all security interests
and other rights of any Person in the Receivables, Contracts or
Related Security previously granted by Seller.

     9.   [Reserved].

     10.  A favorable opinion of legal counsel for the Seller
Parties  reasonably acceptable to the Administrative Agent which
addresses the following matters and such other matters as the
Administrative Agent may reasonably request:

     (a)  due authorization, execution, delivery, enforceability
and other corporate matters of the Seller Parties and the
Originator as to the Transaction Documents;

     (b)  The creation of a first priority perfected security
interest in favor of the Purchaser in (1) all of the Receivables
and Related Security (and including specifically any undivided
interest therein retained by the Seller hereunder), the
Receivables Sale Agreement and other Transaction Documents and
(2) all proceeds of any of the foregoing;

     (c)  The existence of a "true sale" of the Receivables from
the Originator to the Seller under the Receivables Sale
Agreement;

    (d)  The inapplicability of the doctrine of substantive
consolidation to the Seller and the Originator  in connection
with any bankruptcy proceeding involving any Seller Party; and

     (e)  Such other matters as such other matters as the
Administrative Agent, acting on behalf of the Purchaser, may
reasonably request.

    11.  A Compliance Certificate.

     12.  The Fee Letter.

     13.  A Monthly Report as at November 30, 2000.

     14.  Executed copies of (i) all consents from and
authorizations by any Persons and (ii) all waivers and amendments
to existing credit facilities, that are necessary in connection
with this Agreement.

     15.  Executed copies of Delivery Orders for each Lock-Box.

     16.  If applicable, a direction letter executed by each of
the Seller Parties authorizing the Administrative Agent and Blue
Ridge, and directing warehousemen to allow the Administrative
Agent and Blue Ridge to inspect and make copies from such Seller
Party's books and records maintained at off-site data processing
or storage facilities.

     17.  The Liquidity Agreement, duly executed by each of the
parties thereto.

     18.  If applicable, for each Liquidity Bank that is not
incorporated under the laws of the United States of America, or a
state thereof, two duly completed copies of United States
Internal Revenue Service Form W-8BEN or W-8ECI, as applicable,
certifying in either case that such Liquidity Bank is entitled to
receive payments under the Agreement without deduction or
withholding of any United States federal income taxes.

EX-10

EXHIBIT 10(t)

                   RECEIVABLES SALE AGREEMENT


                  DATED AS OF DECEMBER 28, 2000


                              among


                     AIRBORNE EXPRESS, INC.,
                         as Originator,


                               and



                     AIRBORNE CREDIT, INC.,
                            as Buyer







                   RECEIVABLES SALE AGREEMENT


     THIS RECEIVABLES SALE AGREEMENT, dated as of December 28,
2000, is by and among AIRBORNE EXPRESS, INC., a Delaware
corporation ("Originator") and AIRBORNE CREDIT, INC., a Virginia
corporation ("Buyer").  Unless defined elsewhere herein,
capitalized terms used in this Agreement shall have the meanings
assigned to such terms in Exhibit I hereto (or, if not defined in
Exhibit I hereto, the meaning assigned to such term in Exhibit I
to the Receivables Purchase Agreement).

                     PRELIMINARY STATEMENTS

     The Originator now owns, and from time to time hereafter
will own, Receivables.  The Originator wishes to sell and assign
to Buyer, and Buyer wishes to purchase from Originator, all of
Originator's right, title and interest in and to its Receivables,
together with the Related Security and Collections with respect
thereto.

     The Originator and Buyer intend the transactions
contemplated hereby to be true sales to Buyer by Originator of
the Receivables originated by it, providing Buyer with the full
benefits of ownership of such Receivables, and neither the
Originator nor Buyer intends these transactions to be, or for any
purpose to be characterized as, loans from Buyer to Originator.

     Following the purchase of Receivables from Originator, Buyer
will sell undivided interests therein and in the associated
Related Security and Collections pursuant to that certain
Receivables Purchase Agreement dated as of December 28, 2000 (as
the same may from time to time hereafter be amended,
supplemented, restated or otherwise modified, the "Purchase
Agreement") among Buyer, Originator, as initial Servicer, Blue
Ridge Asset Funding Corporation ("Blue Ridge"), and Wachovia
Bank, N.A. or any successor agent appointed pursuant to the terms
of the Purchase Agreement, as administrative agent (in such
capacity, the "Administrative Agent").

     NOW, THEREFORE, in consideration of the foregoing premises
and the mutual agreements herein contained and other good and
valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:

                            ARTICLE I

                AMOUNTS AND TERMS OF THE PURCHASE

     Section 1.1    Purchase of Receivables.

     (a)  Effective on the date hereof, in consideration for the
Purchase Price paid to Originator and upon the terms and subject
to the conditions set forth herein, Originator does hereby sell,
assign, transfer, set-over and otherwise convey to Buyer, without
recourse (except to the extent expressly provided herein), and
Buyer does hereby purchase from Originator, all of Originator's
right, title and interest in and to all Receivables of Originator
existing as of the close of business on the Initial Cutoff Date
and all Receivables of Originator arising thereafter through and
including the Termination Date, together, in each case, with all
Related Security relating thereto and all Collections thereof.
In accordance with the preceding sentence, on the date hereof
Buyer shall acquire all of Originator's right, title and interest
in and to all Receivables existing as of the Initial Cutoff Date
and thereafter arising through and including the Termination
Date, together with all Related Security relating thereto and all
Collections thereof.  Buyer shall be obligated to pay the
Purchase Price for the Receivables purchased hereunder from
Originator in accordance with Section 1.2.

     (b)  On the first Friday following the third Monday of each
calendar month hereafter (or if any such day is not a Business
Day, on the next succeeding Business Day thereafter, Originator
shall (or shall provide such information to the Servicer to
permit the Servicer to) deliver to Buyer a report in
substantially the form of Exhibit VI hereto (each such report
being herein called a "Purchase Report") with respect to the
Receivables sold by Originator to Buyer during the Settlement
Period then most recently ended.  In addition to, and not in
limitation of, the foregoing, in connection with the payment of
the Purchase Price for any Receivables purchased hereunder, Buyer
may request that the Originator deliver, and Originator shall
deliver, such approvals, opinions, information or documents as
Buyer may reasonably request.

     (c)  It is the intention of the parties hereto that each
Purchase of Receivables from the Originator made hereunder shall
constitute a sale, which sale is absolute and irrevocable and
provides Buyer with the full benefits of ownership of the
Receivables originated by Originator.  Except for the Purchase
Price Credits owed to Originator pursuant to Section 1.3, the
sale of Receivables hereunder by Originator is made without
recourse to Originator; provided, however, that (i) Originator
shall be liable to Buyer for all representations, warranties,
covenants and indemnities made by Originator pursuant to the
terms of the Transaction Documents to which Originator is a
party, and (ii) such sale does not constitute and is not intended
to result in an assumption by Buyer or any assignee thereof of
any obligation of Originator or any other Person arising in
connection with the Receivables, the related Contracts and/or
other Related Security or any other obligations of Originator.
In view of the intention of the parties hereto that each Purchase
of Receivables made hereunder shall constitute a sale of such
Receivables rather than loans secured thereby, Originator agrees
that it will, on or prior to the date hereof and in accordance
with Section 4.1(e)(ii), mark its master data processing records
relating to the Receivables originated by it with a legend
acceptable to Buyer and to the Administrative Agent (as Buyer's
assignee), evidencing that Buyer has purchased such Receivables
as provided in this Agreement and to note in its financial
statements that its Receivables have been sold to Buyer.  Upon
the request of Buyer or the Administrative Agent (as Buyer's
assignee), Originator will execute and file such financing or
continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be
necessary or appropriate to perfect and maintain the perfection
of Buyer's ownership interest in the Receivables originated by
Originator and the Related Security and Collections with respect
thereto, or as Buyer or the Administrative Agent (as Buyer's
assignee) may reasonably request.

     Section 1.2    Payment for the Purchases.

     (a)  The Purchase Price for the Purchase from Originator of
its Receivables in existence as of the close of business on the
Initial Cutoff Date shall be payable in full by Buyer to
Originator on the date hereof, and shall be paid to Originator in
the following manner:

          (i)  by delivery of immediately available funds, to the
     extent of funds made available to Buyer in connection with
     its subsequent request for an Advance from the Purchasers
     under the Purchase Agreement; provided that a portion of
     such funds shall be offset by amounts owed by Originator to
     Buyer on account of the issuance of equity having a total
     value of not less than the Required Capital Amount, and

          (ii) the balance, by delivery of the proceeds of a
     subordinated revolving loan from Originator to Buyer (a
     "Subordinated Loan") in an amount not to exceed the least of
     (A) the remaining unpaid portion of such Purchase Price, (B)
     the maximum Subordinated Loan that could be borrowed without
     rendering Buyer's Net Worth less than the Required Capital
     Amount, and (C) fifteen percent (15%) of such Purchase
     Price.  Originator is hereby authorized by Buyer to endorse
     on the schedule attached to the Subordinated Note an
     appropriate notation evidencing the date and amount of each
     advance thereunder, as well as the date of each payment with
     respect thereto, provided that the failure to make such
     notation shall not affect any obligation of Buyer
     thereunder.

The Purchase Price for each Receivable coming into existence
after the Initial Cutoff Date shall be due and owing in full by
Buyer to Originator or its designee on the date each such
Receivable came into existence (except that Buyer may, with
respect to any such Purchase Price, offset against such Purchase
Price any amounts owed by Originator to Buyer hereunder and which
have become due but remain unpaid) and shall be paid to
Originator in the manner provided in the following paragraphs
(b), (c) and (d).

     (b)  With respect to any Receivables coming into existence
after the Initial Cutoff Date, on each Settlement Date, Buyer
shall pay Originator the Purchase Price therefor in accordance
with Section 1.2(d) and in the following manner:

          first, by delivery to Originator or its designee of
     immediately available funds, to the extent of funds
     available to Buyer from its subsequent pledge of an interest
     in all of the Receivables to the Administrative Agent for
     the benefit of the Secured Parties under the Purchase
     Agreement or other cash on hand; and

          second, by delivery to Originator or its designee of
     the proceeds of a Subordinated Loan, provided that the
     making of any such Subordinated Loan shall be subject to the
     provisions set forth in Section 1.2(a)(ii).

     Subject to the limitations set forth in Section 1.2(a)(ii),
Originator irrevocably agrees to advance each Subordinated Loan
requested by Buyer on or prior to the Termination Date.  The
Subordinated Loans owing to Originator shall be evidenced by, and
shall be payable in accordance with the terms and provisions of
its Subordinated Note and shall be payable solely from funds
which Buyer is not required under the Purchase Agreement to set
aside for the benefit of, or otherwise pay over to, the
Purchasers.

     (c)  From and after the Termination Date, Originator shall
not be obligated to (but may, at its option) sell Receivables to
Buyer.

     (d)  Although the Purchase Price for each Receivable coming
into existence after the Initial Cutoff Date shall be due and
payable in full by Buyer to Originator on the date such
Receivable came into existence, settlement of the Purchase Price
between Buyer and Originator shall be effected on a monthly basis
on Settlement Dates with respect to all Receivables originated by
Originator during the same Calculation Period and based on the
information contained in the Purchase Report delivered by
Originator for the Calculation Period then most recently ended.
Although settlement shall be effected on Settlement Dates,
increases or decreases in the amount owing under the Subordinated
Note made pursuant to Section 1.2 shall be deemed to have
occurred and shall be effective as of the last Business Day of
the Calculation Period to which such settlement relates.

     Section 1.3    Purchase Price Credit Adjustments.

     If on any day:

     (a)  the Outstanding Balance of a Receivable purchased from
Originator is:

          (i)  reduced as a result of any defective or rejected
     or returned goods or services, any discount or any
     adjustment or otherwise by Originator (other than as a
     result of such Receivable becoming a Charged-Off Receivable
     or to reflect cash Collections on account of such
     Receivable),

          (ii) reduced or canceled as a result of a setoff in
     respect of any claim by any Person (whether such claim
     arises out of the same or a related transaction or an
     unrelated transaction), or

     (b)  any of the representations and warranties set forth in
Sections 2.1(h), (i), (j), (l), (r), (s), (t), (u), the second
sentence of Section 2.1(q) hereof and the last clause (relating
to bulk sales laws) of Section 2.1(c) are not true when made or
deemed made with respect to any Receivable,

then, in such event, Buyer shall be entitled to a credit (each, a
"Purchase Price Credit") against the Purchase Price otherwise
payable to Originator hereunder equal to the Outstanding Balance
of such Receivable (calculated before giving effect to reduction
or cancellation).  If such Purchase Price Credit exceeds the
Original Balance of the Receivables originated by Originator on
any day, Originator shall pay the remaining amount of such
Purchase Price Credit in cash immediately, provided that if the
Termination Date has not occurred, Originator shall be allowed to
deduct the remaining amount of such Purchase Price Credit from
any indebtedness owed to it under its Subordinated Note.

     Section 1.4    Payments and Computations, Etc.

     All amounts to be paid or deposited by Buyer hereunder shall
be paid or deposited in accordance with the terms hereof on the
day when due in immediately available funds to the account of
Originator designated from time to time by Originator or as
otherwise directed by Originator.  In the event that any payment
owed by any Person hereunder becomes due on a day that is not a
Business Day, then such payment shall be made on the next
succeeding Business Day.  If any Person fails to pay any amount
hereunder when due, such Person agrees to pay, on demand, the
Default Fee in respect thereof until paid in full; provided,
however, that such Default Fee shall not at any time exceed the
maximum rate permitted by applicable law.  All computations of
interest payable hereunder shall be made on the basis of a year
of 360 days for the actual number of days (including the first
but excluding the last day) elapsed.

     Section 1.5    Transfer of Records.

     (a)  In connection with the Purchase from Originator of
Receivables originated by it, Originator hereby sells, transfers,
assigns and otherwise conveys to Buyer all of Originator's right
and title to and interest in the Records relating to all
Receivables sold by it hereunder, without the need for any
further documentation in connection with such Purchase.  In
connection with such transfer, Originator hereby grants to each
of Buyer, the Administrative Agent and the Servicer an
irrevocable, non-exclusive license to use, without royalty or
payment of any kind, all software used by Originator to account
for such Receivables, to the extent necessary to administer such
Receivables, whether such software is owned by Originator or is
owned by others and used by Originator under license agreements
with respect thereto, provided that should the consent of any
licensor of such software be required for the grant of the
license described herein, to be effective, Originator hereby
agrees that upon the request of Buyer (or Buyer's assignee),
Originator will use its reasonable efforts to obtain the consent
of such third-party licensor.  If any software used by Originator
to account for the Receivables originated by it prohibits
Originator from granting the license to use described herein, or
if, after reasonable efforts, consent of any licensor of such
software for the grant of the license described herein is not
obtained, there shall be no transfer of such software hereunder
or any grant by Originator of the license to use described
herein.  The license granted hereby shall be irrevocable until
the indefeasible payment in full of the aggregate Outstanding
Balance, and shall terminate on the date this Agreement
terminates in accordance with its terms.

     (b)  Originator (i) shall take such action requested by
Buyer and/or the Administrative Agent (as Buyer's assignee), from
time to time hereafter, that may be necessary or appropriate to
ensure that Buyer and its assigns under the Purchase Agreement
have an enforceable ownership interest in the Records relating to
the Receivables purchased from Originator hereunder, and (ii)
shall use its reasonable efforts to ensure that Buyer, the
Administrative Agent and the Servicer each has an enforceable
right (whether by license or sublicense or otherwise) to use all
of the computer software used to account for such Receivables
and/or to recreate such Records.

     Section 1.6    Characterization.

     If, notwithstanding the intention of the parties expressed
in Section 1.1(c), any sale by Originator to Buyer of Receivables
hereunder shall be characterized as a secured loan and not a sale
or such sale shall for any reason be ineffective or
unenforceable, then this Agreement shall be deemed to constitute
a security agreement under the UCC and other applicable law.  For
this purpose and without being in derogation of the parties'
intention that the sale of Receivables by Originator hereunder
shall constitute a true sale thereof, Originator hereby grants to
Buyer a duly perfected security interest in all of Originator's
right, title and interest in, to and under all Receivables of
such Originator which are now existing or hereafter arising, all
Collections and Related Security with respect thereto, each Lock-
Box and Blocked Account, all other rights and payments relating
to such Receivables and all proceeds of the foregoing to secure
the prompt and complete payment of a loan deemed to have been
made in an amount equal to the Purchase Price of the Receivables
purchased from Originator together with all other obligations of
Originator hereunder, which security interest shall be prior to
all other Adverse Claims thereto.  Buyer and its assigns shall
have, in addition to the rights and remedies which they may have
under this Agreement, all other rights and remedies provided to a
secured creditor under the UCC and other applicable law, which
rights and remedies shall be cumulative.

                           ARTICLE II

                 REPRESENTATIONS AND WARRANTIES

     Section 2.1    Representations and Warranties of Originator.

     Originator hereby represents and warrants to Buyer on the
date hereof, on the date of the Purchase from Originator
hereunder and on each date that any Receivable is originated by
Originator on or after the date of such Purchase, that:

     (a)  Existence and Power.  Originator is a corporation duly
organized under the laws of the state set forth after its name in
the preamble to this Agreement (the "Applicable State"), and no
other state or jurisdiction, and as to which such Applicable
State must maintain a public record showing such entity to have
been organized.  Originator is validly existing and in good
standing under the laws of its Applicable State and is duly
qualified to do business and is in good standing as a foreign
entity, and has and holds all power and all governmental
licenses, authorizations, consents and approvals required to
carry on its business in each jurisdiction in which its business
is conducted except where the failure to so qualify or so hold
could not reasonably be expected to have a Material Adverse
Effect.

     (b)  Power and Authority; Due Authorization, Execution and
Delivery.  The execution and delivery by Originator of this
Agreement and each other Transaction Document to which it is a
party, and the performance of its obligations hereunder and
thereunder, and Originator's use of the proceeds of the Purchase
made from it hereunder, are within its organizational powers and
authority and have been duly authorized by all necessary
organizational action on its part.  This Agreement and each other
Transaction Document to which Originator is a party has been duly
executed and delivered by Originator.

     (c)  No Conflict.  The execution and delivery by Originator
of this Agreement and each other Transaction Document to which it
is a party, and the performance of its obligations hereunder and
thereunder do not contravene or violate (i) its Organizational
Documents, (ii) any law, rule or regulation applicable to it,
(iii) any restrictions under any agreement, contract or
instrument to which it is a party or by which it or any of its
property is bound, or (iv) any order, writ, judgment, award,
injunction or decree binding on or affecting it or its property,
and do not result in the creation or imposition of any Adverse
Claim on assets of Originator or its Subsidiaries (except as
created hereunder) except, in any case, where such contravention
or violation could not reasonably be expected to have a Material
Adverse Effect; and no transaction contemplated hereby requires
compliance with any bulk sales act or similar law.

     (d)  Governmental Authorization.  Other than the filing of
the financing statements required hereunder, no authorization or
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for the due
execution and delivery by Originator of this Agreement and each
other Transaction Document to which it is a party and the
performance of its obligations hereunder and thereunder.

     (e)  Actions, Suits.  There are no actions, suits or
proceedings pending, or to the best of Originator's knowledge,
threatened, against or affecting Originator, or any of its
properties, in or before any court, arbitrator or other body,
that could reasonably be expected to have a Material Adverse
Effect.  Originator is not in default with respect to any order
of any court, arbitrator or governmental body.

     (f)  Binding Effect.  This Agreement and each other
Transaction Document to which Originator is a party constitute
the legal, valid and binding obligations of Originator
enforceable against Originator in accordance with their
respective terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or other
similar laws relating to or limiting creditors' rights generally
and by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).

     (g)  Accuracy of Information.  All information heretofore
furnished by Originator or any of its Affiliates to Buyer (or its
assigns) for purposes of or in connection with this Agreement,
any of the other Transaction Documents or any transaction
contemplated hereby or thereby is, and all such information
hereafter furnished by Originator or any of its Affiliates to
Buyer (or its assigns) will be, true and accurate in every
material respect on the date such information is stated or
certified and does not and will not contain any material
misstatement of fact or omit to state a material fact or any fact
necessary to make the statements contained therein, taken as a
whole, not misleading.

     (h)  Use of Proceeds.  No portion of any Purchase Price
payment hereunder will be used (i) for a purpose that violates,
or would be inconsistent with, any law, rule or regulation
applicable to Originator or (ii) to acquire any security in any
transaction which is subject to Section 12, 13 or 14 of the
Securities Exchange Act of 1934, as amended.

     (i)  Good Title.  Immediately prior to the Purchase from
Originator hereunder and upon the creation of each Receivable
originated by Originator after the Initial Cut-Off Date,
Originator (i) is the legal and beneficial owner of such
Receivables and (ii) is the legal and beneficial owner of the
Related Security with respect thereto or possesses a valid and
perfected security interest therein, in each case, free and clear
of any Adverse Claim, except as created by the Transaction
Documents.  There have been duly filed all financing statements
or other similar instruments or documents necessary under the UCC
(or any comparable law) of all appropriate jurisdictions to
perfect Originator's ownership interest in each such Receivable,
its Collections and the Related Security.

     (j)  Perfection.  This Agreement, together with the filing
of the financing statements contemplated hereby, is effective to
transfer to Buyer (and Buyer shall acquire from Originator) (i)
legal and equitable title to, with the right to sell and encumber
each Receivable originated by Originator, whether now existing or
hereafter arising, together with the Collections with respect
thereto, and (ii) all of Originator's right, title and interest
in the Related Security associated with each such Receivable, in
each case, free and clear of any Adverse Claim, except as created
by the Transaction Documents.  There have been duly filed all
financing statements or other similar instruments or documents
necessary under the UCC (or any comparable law) of all
appropriate jurisdictions to perfect Buyer's ownership interest
in such Receivables, the Related Security and the Collections.
Originator's jurisdiction of organization is a jurisdiction whose
law generally requires information concerning the existence of a
nonpossessory security interest to be made generally available in
a filing, record or registration system as a condition or result
of such a security interest's obtaining priority over the rights
of a lien creditor which respect to collateral.

     (k)  Places of Business and Locations of Records.  The
principal places of business and chief executive office of
Originator and the offices where it keeps all of its Records are
located at the address(es) listed on Exhibit II or such other
locations of which Buyer has been notified in accordance with
Section 4.2(a) in jurisdictions where all action required by
Section 4.2(a) has been taken and completed.  Originator's
Federal Employer Identification Number is correctly set forth on
Exhibit II.

     (l)  Collections.  The conditions and requirements set forth
in Section 4.1(i) have at all times been satisfied and duly
performed.  The names and addresses of all Collection Banks,
together with the account numbers of the Blocked Accounts of
Originator at each Collection Bank and the post office box number
of each Lock-Box, are listed on Exhibit III.  Originator has not
granted any Person, other than Buyer (and its assigns) dominion
and control of any Lock-Box or Blocked Accounts, or the right to
take dominion and control of any such Lock-Box or Blocked
Accounts at a future time or upon the occurrence of a future
event.

     (m)  Material Adverse Effect.  Since September 30, 2000, no
event has occurred that would have a Material Adverse Effect.

     (n)  Names.  The name in which Originator has executed this
Agreement is identical to the name of Originator as indicated on
the public record of its state of organization which shows
Originator to have been organized.  In the past five (5) years,
Originator has not used any corporate names, trade names or
assumed names other than the name in which it has executed this
Agreement and as listed on Exhibit II.

     (o)  Ownership of Buyer.  Parent  owns, directly or
indirectly, 100% of the issued and outstanding equity interests
of Buyer.  Such equity interests are validly issued, fully paid
and nonassessable, and there are no options, warrants or other
rights to acquire securities of Buyer.

     (p)  Not a Holding Company or an Investment Company.
Originator is not a "holding company" or a "subsidiary holding
company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or any successor
statute.  Originator is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or any
successor statute.

     (q)  Compliance with Law.  Originator has complied in all
respects with all applicable laws, rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which it may
be subject, except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect.  Each
Receivable, together with the Contract related thereto, does not
contravene any laws, rules or regulations applicable thereto
(including, without limitation, laws, rules and regulations
relating to truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection
practices and privacy), and no part of such Contract is in
violation of any such law, rule or regulation, except where such
contravention or violation could not reasonably be expected to
have a Material Adverse Effect.

     (r)  Compliance with Credit and Collection Policy.
Originator has complied in all material respects with the Credit
and Collection Policy with regard to each Receivable originated
by it and the related Contract, and has not made any change to
such Credit and Collection Policy, except such material change as
to which Buyer (or its assigns) has been notified in accordance
with Section 4.1(a)(vii).

     (s)  Payments to Originator.  With respect to each
Receivable originated by Originator and sold to Buyer hereunder,
the Purchase Price received by Originator constitutes reasonably
equivalent value in consideration therefor.  No transfer
hereunder by Originator of any Receivable originated by
Originator is or may be voidable under any section of the
Bankruptcy Reform Act of 1978 (11 U.S.C.  101 et seq.), as
amended.

     (t)  Enforceability of Contracts.  Each Contract with
respect to each Receivable is effective to create, and has
created, a legal, valid and binding obligation of the related
Obligor to pay the Outstanding Balance of the Receivable created
thereunder and any accrued interest thereon, enforceable against
the Obligor in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to or limiting
creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in
equity or at law).

     (u)  Eligible Receivables.  Each Receivable reflected in any
Purchase Report as an Eligible Receivable was an Eligible
Receivable on the date of its acquisition by Buyer hereunder.

     (v)  Accounting.  The manner in which Originator accounts
for the transactions contemplated by this Agreement does not
jeopardize the characterization of the transactions contemplated
herein as being true sales.

                           ARTICLE III

                     CONDITIONS OF PURCHASE

     Section 3.1    Conditions Precedent to Purchase.

     The Purchase under this Agreement is subject to the
conditions precedent that (a) Buyer shall have been capitalized
with not less than $10,000 in cash, (b) Buyer shall have received
on or before the date of such purchase those documents listed on
Schedule A and (c) all of the conditions to the initial purchase
under the Purchase Agreement shall have been satisfied or waived
in accordance with the terms thereof.

     Section 3.2    Conditions Precedent to Subsequent Payments.

     Buyer's obligation to pay for Receivables coming into
existence after the Initial Cutoff Date shall be subject to the
further conditions precedent that:  (a) the Facility Termination
Date shall not have occurred under the Purchase Agreement; (b)
Buyer (or its assigns) shall have received such other approvals,
opinions or documents as it may reasonably request and (c) on the
date such Receivable came into existence, the following
statements shall be true (and acceptance of the proceeds of any
payment for such Receivable shall be deemed a representation and
warranty by Originator that such statements are then true):

          (i)  the representations and warranties set forth in
     Article II are true and correct on and as of the date such
     Receivable came into existence as though made on and as of
     such date; and

          (ii) no event has occurred and is continuing that will
     constitute a Termination Event or an Unmatured Termination
     Event.

Notwithstanding the foregoing conditions precedent, upon payment
of the Purchase Price for any Receivable (whether by payment of
cash, through an increase in the amounts outstanding under the
Subordinated Note, and/or by offset of amounts owed to Buyer),
title to such Receivable and the Related Security and Collections
with respect thereto shall vest in Buyer, whether or not the
conditions precedent to Buyer's obligation to pay for such
Receivable were in fact satisfied.  The failure of Originator to
satisfy any of the foregoing conditions precedent, however, shall
give rise to a right of Buyer to rescind the related purchase and
direct Originator to pay to Buyer an amount equal to the Purchase
Price payment that shall have been made with respect to any
Receivables related thereto.

                           ARTICLE IV

                            COVENANTS

     Section 4.1    Affirmative Covenants of Originator.

     Until the date on which this Agreement terminates in
accordance with its terms, Originator hereby covenants as set
forth below:

     (a)  Financial Reporting.  Parent will maintain, for itself
and each of its Subsidiaries, a system of accounting established
and administered in accordance with GAAP, and furnish to Buyer
(or its assigns):

          (i)  Annual Reporting.  Within 90 days after the close
     of its fiscal year, audited financial statements (which
     shall include balance sheets, statements of income and
     retained earnings and statements of cash flows) for Parent
     and its Subsidiaries for such fiscal year certified by
     Deloitte & Touche LLP or by any other nationally recognized
     independent public accountants, which certification shall be
     free of exceptions and qualifications not acceptable to the
     Administrative Agent.

          (ii) Quarterly Reporting.  Within 45 days after the
     close of the first three (3) quarterly periods of its
     respective fiscal year, balance sheets of Parent and its
     Subsidiaries as at the close of each such period and
     statements of income and retained earnings and a statement
     of cash flows for Parent and its Subsidiaries for the period
     from the beginning of such fiscal year to the end of such
     quarter, all certified by its chief financial officer.

          (iii)     Compliance Certificate.  Together with the
     financial statements required hereunder, a compliance
     certificate in substantially the form of Exhibit IV signed
     by Parent's Authorized Officer and dated the date of such
     annual financial statement or such quarterly financial
     statement, as the case may be.

          (iv) Shareholders Statements and Reports.  Promptly
     upon the furnishing thereof to the shareholders of Parent or
     its Subsidiaries, copies of all financial statements,
     reports and proxy statements so furnished.

          (v)  S.E.C. Filings.  Promptly upon the filing thereof,
     copies of all registration statements and annual, quarterly,
     monthly or other regular reports which Parent or any of its
     Subsidiaries files with the Securities and Exchange
     Commission.

          (vi) Copies of Notices.  Promptly upon its receipt of
     any notice, request for consent, financial statements,
     certification, report or other communication under or in
     connection with any Transaction Document from any Person
     other than Buyer, the Administrative Agent or Blue Ridge,
     copies of the same.

          (vii)     Change in Credit and Collection Policy.  At
     least thirty (30) days prior to the effectiveness of any
     material change in or material amendment to the Credit and
     Collection Policy, a copy of the Credit and Collection
     Policy then in effect and a notice (A) indicating such
     proposed change or amendment, and (B) if such proposed
     change or amendment would be reasonably likely to adversely
     affect the collectibility of the Receivables or decrease the
     credit quality of any newly created Receivables, requesting
     Buyer's (and the Administrative Agent's, as Buyer's
     assignee) consent thereto.

          (viii)    Other Information.  Promptly, from time to
     time, such other information, documents, records or reports
     relating to the Receivables originated by Originator or the
     condition or operations, financial or otherwise, of Parent
     or Originator as Buyer (or its assigns) may from time to
     time reasonably request in order to protect the interests of
     Buyer (and its assigns) under or as contemplated by this
     Agreement.

     (b)  Notices.  Originator will notify Buyer (or its assigns)
in writing of any of the following promptly upon learning of the
occurrence thereof, describing the same and, if applicable, the
steps being taken with respect thereto:

          (i)  Termination Events or Unmatured Termination
     Events.  The occurrence of each Termination Event and each
     Unmatured Termination Event, by a statement of an Authorized
     Officer of Originator.

          (ii) Judgment and Proceedings.  (A) The entry of any
     judgment or decree against Parent or any of its Subsidiaries
     if the aggregate amount of all judgments and decrees then
     outstanding against the Parent and its Subsidiaries exceeds
     $10,000,000 after deducting (1) the amount with respect to
     which Parent or Subsidiary is insured and with respect to
     which the insurer has assumed responsibility in writing, and
     (2) the amount for which Parent or Subsidiary is otherwise
     indemnified if the terms of such indemnification are
     satisfactory to Buyer (or its assigns), and (B) the
     institution of any litigation, arbitration proceeding or
     governmental proceeding against Parent or any of its
     Subsidiaries which, individually or in the aggregate, could
     reasonably be expected to have a Material Adverse Effect.

          (iii)     Material Adverse Effect.  The occurrence of
     any event or condition that has had, or could reasonably be
     expected to have, a Material Adverse Effect.

          (iv) Defaults Under Other Agreements.  The occurrence
     of a default or an event of default under any other material
     financing arrangement pursuant to which Parent or any of its
     Subsidiaries is a debtor or an obligor.

          (v)  ERISA Events.  The occurrence of any ERISA Event.

          (vi) Downgrade of Originator or Parent.  Any downgrade
     in the rating of any Indebtedness of Originator or Parent by
     S&P or by Moody's, setting forth the Indebtedness affected
     and the nature of such change.

     (c)  Compliance with Laws and Preservation of Existence.
Originator will comply in all respects with all applicable laws,
rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it may be subject, except where the
failure to so comply could not reasonably be expected to have a
Material Adverse Effect.  Originator will preserve and maintain
its legal existence, rights, franchises and privileges in the
jurisdiction of its organization, and qualify and remain
qualified in good standing as a foreign entity in each
jurisdiction where its business is conducted, except where the
failure to so qualify or remain in good standing could not
reasonably be expected to have a Material Adverse Effect.

               (d)  Audits.  Originator will furnish to Buyer (or its
assigns) from time to time such information with respect to it
and the Receivables sold by it as Buyer (or its assigns) may
reasonably request.  Originator will, from time to time during
regular business hours as requested by Buyer (or its assigns),
upon reasonable notice and at the sole cost of Originator, permit
Buyer (or its assigns) or their respective agents or
representatives, (i) to examine and make copies of and abstracts
from all Records in the possession or under the control of
Originator relating to the Receivables and the Related Security,
including, without limitation, the related Contracts, and (ii) to
visit the offices and properties of Originator for the purpose of
examining such materials described in clause (i) above, and to
discuss matters relating to Originator's financial condition or
the Receivables and the Related Security or Originator's
performance under any of the Transaction Documents or
Originator's performance under the Contracts and, in each case,
with any of the officers or employees of such Originator having
knowledge of such matters; provided, however, that so long as no
Amortization Event has occurred and is continuing, (A) the
Originator shall be responsible for the costs and expenses of one
(1) Review in any one calendar year, and (B) the Buyer (or its
assigns) will not request more than two (2) Reviews in any one
calendar year.

     (e)  Keeping and Marking of Records and Books.

          (i)  Originator will maintain and implement
     administrative and operating procedures (including, without
     limitation, an ability to recreate records evidencing
     Receivables in the event of the destruction of the originals
     thereof), and keep and maintain all documents, books,
     records and other information reasonably necessary or
     advisable for the collection of all Receivables (including,
     without limitation, records adequate to permit the immediate
     identification of each new Receivable and all Collections of
     and adjustments to each existing Receivable).  Originator
     will give Buyer (or its assigns) notice of any material
     change in the administrative and operating procedures
     referred to in the previous sentence.

          (ii) Originator will (A) on or prior to the date
     hereof, mark its master data processing records and other
     books and records relating to the Receivables with a legend,
     acceptable to Buyer (or its assigns), describing Buyer's
     ownership interests in the Receivables and further
     describing the security interest of the Administrative Agent
     (on behalf of the Secured Parties) under the Purchase
     Agreement and (B) upon the request of Buyer (or its assigns)
     following the occurrence of an Amortization Event:  (x) mark
     each Contract with a legend describing Buyer's ownership
     interests in the Receivables originated by Originator and
     further describing the Receivable Interests of the
     Administrative Agent (on behalf of the Secured Parties) and
     (y) after the occurrence of any Termination Event, deliver
     to Buyer (or its assigns) all Contracts (including, without
     limitation, all multiple originals of any such Contract)
     relating to such Receivables.

     (f)  Compliance with Contracts and Credit and Collection
Policy.  Originator will timely and fully (i) perform and comply
with all provisions, covenants and other promises required to be
observed by it under the Contracts related to the Receivables
originated by it, and (ii) comply in all respects with the Credit
and Collection Policy in regard to each such Receivable and the
related Contract.

     (g)  Ownership.  Originator will take all necessary action
to establish and maintain, irrevocably in Buyer, (i) legal and
equitable title to the Receivables originated by such Originator
and the Collections and (ii) all of Originator's right, title and
interest in the Related Security associated with the Receivables
originated by Originator, in each case, free and clear of any
Adverse Claims other than Adverse Claims in favor of Buyer (and
its assigns) (including, without limitation, the filing of all
financing statements or other similar instruments or documents
necessary under the UCC (or any comparable law) of all
appropriate jurisdictions to perfect Buyer's interest in such
Receivables, Related Security and Collections and such other
action to perfect, protect or more fully evidence the interest of
Buyer as Buyer (or its assigns) may reasonably request).

     (h)  Purchaser's Reliance.  Originator acknowledges that the
Administrative Agent and the Purchaser are entering into the
transactions contemplated by the Purchase Agreement in reliance
upon Buyer's identity as a legal entity that is separate from
Originator and any Affiliates thereof.  Therefore, from and after
the date of execution and delivery of this Agreement, Originator
will take all reasonable steps including, without limitation, all
steps that Buyer or any assignee of Buyer may from time to time
reasonably request to maintain Buyer's identity as a separate
legal entity and to make it manifest to third parties that Buyer
is an entity with assets and liabilities distinct from those of
Originator and any Affiliates thereof and not just a division of
Originator or any such Affiliate.  Without limiting the
generality of the foregoing and in addition to the other
covenants set forth herein, Originator (i) will not hold itself
out to third parties as liable for the debts of Buyer nor purport
to own any of the Receivables and other assets acquired by Buyer,
(ii) will take all other actions necessary on its part to ensure
that Buyer is at all times in compliance with the "separateness
covenants" set forth in Section 7.1(i) of the Purchase Agreement
and (iii) will cause all tax liabilities arising in connection
with the transactions contemplated herein or otherwise to be
allocated between Originator and Buyer on an arm's-length basis
and in a manner consistent with the procedures set forth in U.S.
Treasury Regulations 1.1502-33(d) and 1.1552-1.

     (i)  Collections.  Originator will cause (i) all Collections
to be sent to a Blocked Account or a Lock-Box and cause all such
Collections to be deposited in one of the Blocked Accounts, (ii)
each Blocked Account shall be subject at all times to a Blocked
Account Agreement that is in full force and effect, and (iii) a
Delivery Order to be executed and delivered with respect to each
Lock-Box.  In the event any payments relating to Receivables are
remitted directly to Originator or any Affiliate of Originator,
such Originator will deposit (or will cause all such payments to
be deposited) directly to a Blocked Account within two (2)
Business Days following receipt thereof and, at all times prior
to such remittance, Originator will itself hold or, if
applicable, will cause such payments to be held in trust for the
exclusive benefit of Buyer and its assigns.  Originator will
transfer exclusive ownership, dominion and control of each Lock-
Box and Blocked Account to Buyer and, will not grant the right to
take dominion and control of any Lock-Box or Blocked Account at a
future time or upon the occurrence of a future event to any
Person, except to Buyer (or its assigns) as contemplated by this
Agreement and the Purchase Agreement.

     (j)  Taxes.  Originator will file all tax returns and
reports required by law to be filed by it and promptly pay all
taxes and governmental charges at any time owing, except any such
taxes which are not yet delinquent or are being diligently
contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set
aside on its books.  Originator will pay when due any taxes
payable in connection with the Receivables originated by it,
exclusive of taxes on or measured by income or gross receipts of
Buyer and its assigns.

     Section 4.2    Negative Covenants of Originators.

     Until the date on which this Agreement terminates in
accordance with its terms, Originator hereby covenants that:

     (a)  Name Change, Offices and Records.  Originator will not
change its (i) state of organization, (ii) name, (iii) identity
or structure (within the meaning of Article 9 of any applicable
enactment of the UCC) or relocate its chief executive office at
any time while the location of its chief executive office is
relevant to perfection of Buyer's interest in the Receivables or
the associated Related Security and Collections or any office
where Records are kept unless it shall have:  (A) given Buyer (or
its assigns) at least forty-five (45) days' prior written notice
thereof and (B) delivered to Buyer (or its assigns) all financing
statements, instruments and other documents requested by Buyer
(or its assigns) in connection with such change or relocation.

     (b)  Change in Payment Instructions to Obligors.  Originator
will not add or terminate any bank as a Blocked Account Bank, or
make any change in the instructions to Obligors regarding
payments to be made to any Lock-Box or Blocked Account, unless
Buyer (or its assigns) shall have received, at least ten (10)
days before the proposed effective date therefor, (i) written
notice of such addition, termination or change and (ii) with
respect to the addition of a Blocked Bank or a Blocked Account,
an executed Blocked Account Agreement with respect to the new
Blocked Account; provided, however, that such Originator may make
changes in instructions to Obligors regarding payments if such
new instructions require such Obligor to make payments to another
existing Blocked Account.

     (c)  Modifications to Contracts and Credit and Collection
Policy.  Originator will not make any change to the Credit and
Collection Policy that could adversely affect the collectibility
of the Receivables originated by it or decrease the credit
quality of any of its newly created Receivables.  Except as
otherwise permitted in its capacity as Servicer pursuant to the
Purchase Agreement, Originator will not extend, amend or
otherwise modify the terms of any Receivable or any Contract
related to any Receivable other than in accordance with the
Credit and Collection Policy.

     (d)  Sales, Liens.  Originator will not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or grant
any option with respect to, or create or suffer to exist any
Adverse Claim upon (including, without limitation, the filing of
any financing statement) or with respect to, any Receivable,
Related Security or Collections, or upon or with respect to any
Contract under which any Receivable arises, or any Lock-Box or
Blocked Account, or assign any right to receive income with
respect thereto (other than, in each case, the creation of the
interests therein in favor of Buyer provided for herein), and
Originator will defend the right, title and interest of Buyer in,
to and under any of the foregoing property, against all claims of
third parties claiming through or under Originator.  Originator
shall not create or suffer to exist any mortgage, pledge,
security interest, encumbrance, lien, charge or other similar
arrangement on any of its inventory.

     (e)  Accounting for Purchase.  Originator will not, and will
not permit any Affiliate to, account for or treat (whether in
financial statements or otherwise) the transactions contemplated
hereby in any manner other than the sale by Originator to Buyer
of the Receivables originated by Originator and the associated
Related Security or in any other respect account for or treat the
transactions contemplated hereby in any manner other than as a
sale of such Receivables and Related Security by Originator to
Buyer except to the extent that such transactions are not
recognized on account of consolidated financial reporting in
accordance with generally accepted accounting principles.

                            ARTICLE V

                       TERMINATION EVENTS

     Section 5.1    Termination Events.

     The occurrence of any one or more of the following events
shall constitute a Termination Event:

     (a)  Originator shall fail (i) to make any payment or
deposit required hereunder when due and such failure shall
continue for five (5) consecutive days, or (ii) to perform or
observe any term, covenant or agreement hereunder (other than as
referred to in clause (i) of this paragraph (a)) or any other
Transaction Document to which it is a party and such failure
shall continue for ten (10) consecutive days.

     (b)  Any representation, warranty, certification or
statement made by Originator in this Agreement, any other
Transaction Document or in any other document delivered pursuant
hereto or thereto shall prove to have been incorrect in any
material respect when made or deemed made; provided that the
materiality threshold in the preceding clause shall not be
applicable with respect to any representation or warranty which
itself contains a materiality threshold.

     (c)  Failure of Originator to pay any Indebtedness when due
in excess of $5,000,000; or the default by Originator in the
performance of any term, provision or condition contained in any
agreement under which any such Indebtedness was created or is
governed, the effect of which is to cause, or to permit the
holder or holders of such Indebtedness to cause, such
Indebtedness to become due prior to its stated maturity; or any
such Indebtedness of Originator shall be declared to be due and
payable or required to be prepaid (other than by a regularly
scheduled payment) prior to the date of maturity thereof.

     (d)  (i) An Event of Bankruptcy shall occur with respect to
Originator or any of its Subsidiaries.

     (e)  A Change of Control shall occur.

     (f)  One or more final judgments for the payment of money in
an amount in excess of $10,000,000, individually or in the
aggregate, shall be entered against Originator on claims not
covered by insurance or as to which the insurance carrier has
denied its responsibility, and such judgment shall continue
unsatisfied and in effect for fifteen (15) consecutive days
without a stay of execution.

     (g)  (i) An ERISA Event shall occur with respect to a
Pension Plan or Multiemployer Plan which his resulted or could
reasonably be expected to result in liability of Originator under
Title IV of ERISA to such Pension Plan, such Multiemployer Plan
or the PBGC in an aggregate amount in excess of $1,000,000; (ii)
the aggregate amount of Unfunded-Pension Liability among all
Pension Plans at any time exceeds $1,000,000; or (iii) Originator
or any ERISA Affiliate shall fail to pay when due, after the
expiration of any applicable grace period, any installment
payment with respect to its withdrawal liability under Section
4201 of ERISA under a Multiemployer Plan in an aggregate amount
in excess of $1,000,000.

     Section 5.2    Remedies.

     Upon the occurrence and during the continuation of a
Termination Event, Buyer may take any of the following actions:
(a) declare the Termination Date to have occurred, whereupon the
Termination Date shall forthwith occur, without demand, protest
or further notice of any kind, all of which are hereby expressly
waived by Originator; provided, however, that upon the occurrence
of a Termination Event described in Section 5.1(d), or of an
actual or deemed entry of an order for relief with respect to
Originator under the Federal Bankruptcy Code, the Termination
Date shall automatically occur, without demand, protest or any
notice of any kind, all of which are hereby expressly waived by
Originator and (b) to the fullest extent permitted by applicable
law, declare that the Default Fee shall accrue with respect to
any amounts then due and owing by Originator to Buyer.  The
aforementioned rights and remedies shall be without limitation
and shall be in addition to all other rights and remedies of
Buyer and its assigns otherwise available under any other
provision of this Agreement, by operation of law, at equity or
otherwise, all of which are hereby expressly preserved,
including, without limitation, all rights and remedies provided
under the UCC, all of which rights shall be cumulative.

                           ARTICLE VI

                         INDEMNIFICATION

     Section 6.1    Indemnities by Originator.

     Without limiting any other rights that Buyer may have
hereunder or under applicable law, Originator hereby agrees to
indemnify (and pay upon demand to) Buyer and its assigns,
officers, directors, agents and employees (each an "Indemnified
Party") from and against any and all damages, losses, claims,
taxes, liabilities, costs, expenses and for all other amounts
payable, including reasonable attorneys' fees (which attorneys
may be employees of Buyer or any such assign) and disbursements
(all of the foregoing being collectively referred to as
"Indemnified Amounts") awarded against or incurred by any of them
arising out of or as a result of this Agreement or the
acquisition, either directly or indirectly, by Buyer of an
interest in the Receivables originated by Originator, excluding,
however:

     (a)  Indemnified Amounts to the extent a final judgment of a
court of competent jurisdiction holds that such Indemnified
Amounts resulted from gross negligence or willful misconduct on
the part of the Indemnified Party seeking indemnification;

     (b)  Indemnified Amounts to the extent the same includes
losses in respect of Receivables originated by Originator that
are uncollectible on account of the insolvency, bankruptcy or
lack of creditworthiness of the related Obligor; or

     (c)  taxes imposed by the jurisdiction in which such
Indemnified Party's principal executive office is located, on or
measured by the overall net income of such Indemnified Party;

provided, however, that nothing contained in this sentence shall
limit the liability of Originator or limit the recourse of Buyer
to Originator for amounts otherwise specifically provided to be
paid by Originator under the terms of this Agreement.  Without
limiting the generality of the foregoing indemnification, but
subject in each case to clauses (a), (b) and (c) above,
Originator shall indemnify Buyer for Indemnified Amounts relating
to or resulting from:

          (i)  any representation or warranty made by Originator
     (or any officers of Originator) under or in connection with
     any Purchase Report, this Agreement, any other Transaction
     Document or any other information or report delivered by
     Originator pursuant hereto or thereto for which Buyer has
     not received a Purchase Price Credit that shall have been
     false or incorrect when made or deemed made;

          (ii) the failure by Originator, to comply with any
     applicable law, rule or regulation with respect to any
     Receivable or Contract related thereto, or the nonconformity
     of any Receivable or Contract included therein with any such
     applicable law, rule or regulation or any failure of
     Originator to keep or perform any of its obligations,
     express or implied, with respect to any Contract;

          (iii)     any failure of Originator to perform its
     duties, covenants or other obligations in accordance with
     the provisions of this Agreement or any other Transaction
     Document;

          (iv) any products liability, personal injury or damage,
     suit or other similar claim arising out of or in connection
     with merchandise, insurance or services that are the subject
     of any Contract or any Receivable;

          (v)  any dispute, claim, offset or defense (other than
     discharge in bankruptcy of the Obligor) of the Obligor to
     the payment of any Receivable (including, without
     limitation, a defense based on such Receivable or the
     related Contract not being a legal, valid and binding
     obligation of such Obligor enforceable against it in
     accordance with its terms), or any other claim resulting
     from the sale of the merchandise or service related to such
     Receivable or the furnishing or failure to furnish such
     merchandise or services;

          (vi) the commingling of Collections of Receivables at
     any time with other funds;

          (vii)     any investigation, litigation or proceeding
     related to or arising from this Agreement or any other
     Transaction Document, the transactions contemplated hereby,
     Originator's use of the proceeds of the Purchase from it
     hereunder, the ownership of the Receivables originated by
     Originator or any other investigation, litigation or
     proceeding relating to Originator in which any Indemnified
     Party becomes involved as a result of any of the
     transactions contemplated hereby;

          (viii)    any inability to litigate any claim against
     any Obligor in respect of any Receivable as a result of such
     Obligor being immune from civil and commercial law and suit
     on the grounds of sovereignty or otherwise from any legal
     action, suit or proceeding;

          (ix) any Termination Event described in Section 5.1(d);

          (x)  any failure to vest and maintain vested in Buyer,
     or to transfer to Buyer, legal and equitable title to, and
     ownership of, the Receivables originated by such Originator
     and the associated Collections, and all of Originator's
     right, title and interest in the Related Security associated
     with such Receivables, in each case, free and clear of any
     Adverse Claim;

          (xi) the failure to have filed, or any delay in filing,
     financing statements or other similar instruments or
     documents under the UCC of any applicable jurisdiction or
     other applicable laws with respect to any Receivable
     originated by Originator, the Related Security and
     Collections with respect thereto, and the proceeds of any
     thereof, whether at the time of the Purchase from Originator
     hereunder or at any subsequent time;

          (xii)     any action or omission by Originator which
     reduces or impairs the rights of Buyer with respect to any
     Receivable or the value of any such Receivable;

          (xiii)    any attempt by any Person to void the
     Purchase from Originator hereunder under statutory
     provisions or common law or equitable action; and

          (xiv)     the failure of any Receivable reflected as an
     Eligible Receivable on any Purchase Report prepared by such
     Originator to be an Eligible Receivable at the time acquired
     by Buyer.

     Section 6.2    Other Costs and Expenses.

     Originator shall pay to Buyer on demand all costs and out-of-
pocket expenses in connection with the preparation, execution,
delivery and administration of this Agreement, the transactions
contemplated hereby and the other documents to be delivered
hereunder.  Originator shall pay to Buyer on demand any and all
costs and expenses of Buyer, if any, including reasonable counsel
fees and expenses in connection with the enforcement of this
Agreement and the other documents delivered hereunder and in
connection with any restructuring or workout of this Agreement or
such documents, or the administration of this Agreement following
a Termination Event.

                           ARTICLE VII

                          MISCELLANEOUS

     Section 7.1    Waivers and Amendments.

     (a)  No failure or delay on the part of Buyer (or its
assigns) in exercising any power, right or remedy under this
Agreement shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or remedy preclude
any other further exercise thereof or the exercise of any other
power, right or remedy.  The rights and remedies herein provided
shall be cumulative and nonexclusive of any rights or remedies
provided by law.  Any waiver of this Agreement shall be effective
only in the specific instance and for the specific purpose for
which given.

     (b)  No provision of this Agreement may be amended,
supplemented, modified or waived except in writing signed by
Originator and Buyer and, to the extent required under the
Purchase Agreement, the Administrative Agent and the Liquidity
Banks or the Required Liquidity Banks.  Any material amendment,
supplement, modification of waiver will required satisfaction of
the Rating Agency Condition.

     Section 7.2    Notices.

     All communications and notices provided for hereunder shall
be in writing (including bank wire, telecopy or electronic
facsimile transmission or similar writing) and shall be given to
the other parties hereto at their respective addresses or
telecopy numbers set forth on the signature pages hereof or at
such other address or telecopy number as such Person may
hereafter specify for the purpose of notice to each of the other
parties hereto.  Each such notice or other communication shall be
effective (a) if given by telecopy, upon the receipt thereof, (b)
if given by mail, three (3) Business Days after the time such
communication is deposited in the mail with first class postage
prepaid or (c) if given by any other means, when received at the
address specified in this Section 7.2.

     Section 7.3    Protection of Ownership Interests of Buyer.

     (a)  Originator agrees that from time to time, at its
expense, it will promptly execute and deliver all instruments and
documents, and take all actions, that may be necessary or
desirable, or that Buyer (or its assigns) may request, to
perfect, protect or more fully evidence the interest of Buyer
hereunder, or to enable Buyer (or its assigns) to exercise and
enforce their rights and remedies hereunder.  At any time, Buyer
(or its assigns) may, at Originator's sole cost and expense,
direct Originator to notify the Obligors of Receivables of the
ownership interests of Buyer under this Agreement and may also
direct that payments of all amounts due or that become due under
any or all Receivables be made directly to Buyer or its designee.

     (b)  If Originator fails to perform any of its obligations
hereunder, Buyer (or its assigns) may (but shall not be required
to) perform, or cause performance of, such obligations, and
Buyer's (or such assigns') costs and expenses incurred in
connection therewith shall be payable by Originator as provided
in Section 6.2.  Originator irrevocably authorizes Buyer (and its
assigns) at any time and from time to time in the sole discretion
of Buyer (or its assigns), and appoints Buyer (and its assigns)
as its attorney(ies)-in-fact, to act on behalf of Originator (i)
to execute on behalf of Originator as debtor and to file
financing statements necessary or desirable in Buyer's (or its
assigns') sole discretion to perfect and to maintain the
perfection and priority of the interest of Buyer in the
Receivables originated by such Originator and the associated
Related Security and Collections and (ii) to file a carbon,
photographic or other reproduction of this Agreement or any
financing statement with respect to the Receivables as a
financing statement in such offices as Buyer (or its assigns) in
their sole discretion deem necessary or desirable to perfect and
to maintain the perfection and priority of Buyer's interests in
such Receivables.  This appointment is coupled with an interest
and is irrevocable.  From and after July 1, 2001:  (A) Originator
hereby authorizes Buyer (or its assigns) to file financing
statements and other filing or recording documents with respect
to the Receivables and Related Security (including any amendments
thereto, or continuation or termination statements thereof),
without the signature or other authorization of Originator, in
such form and in such offices as Buyer (or any of its assigns)
reasonably determines appropriate to perfect or maintain the
perfection of the ownership or security interests of Buyer (or
its assigns) hereunder, (B) Originator acknowledges and agrees
that it is not authorized to, and will not, file financing
statements or other filing or recording documents with respect to
the Receivables or Related Security (including any amendments
thereto, or continuation or termination statements thereof),
without the express prior written approval by the Administrative
Agent (as Buyer's assignee), consenting to the form and substance
of such filing or recording document, and (C) Originator
approves, authorizes and ratifies any filings or recordings made
by or on behalf of the Administrative Agent (as Buyer's assign)
in connection with the perfection of the ownership or security
interests in favor of Buyer or the Administrative Agent (as
Buyer's assign).

     Section 7.4    Confidentiality.

     (a)  Originator shall maintain and shall cause each of its
employees and officers to maintain the confidentiality of this
Agreement and the other confidential or proprietary information
with respect to the Administrative Agent and Blue Ridge and their
respective businesses obtained by it or them in connection with
the structuring, negotiating and execution of the transactions
contemplated herein, except that Originator and its officers and
employees may disclose such information to Originator's external
accountants and attorneys and as required by any applicable law
or order of any judicial or administrative proceeding.

     (b)  Anything herein to the contrary notwithstanding,
Originator hereby consents to the disclosure of any nonpublic
information with respect to it (i) to Buyer, the Administrative
Agent, the Liquidity Banks or Blue Ridge by each other, (ii) by
Buyer, the Administrative Agent or the Purchasers to any
prospective or actual assignee or participant of any of them and
(iii) by the Administrative Agent to any rating agency,
Commercial Paper dealer or provider of a surety, guaranty or
credit or liquidity enhancement to Blue Ridge or any entity
organized for the purpose of purchasing, or making loans secured
by, financial assets for which Wachovia acts as the
administrative agent and to any officers, directors, employees,
outside accountants and attorneys of any of the foregoing,
provided each such Person is informed of the confidential nature
of such information.  In addition, the Purchasers and the
Administrative Agent may disclose any such nonpublic information
pursuant to any law, rule, regulation, direction, request or
order of any judicial, administrative or regulatory authority or
proceedings (whether or not having the force or effect of law).

     (c)  Buyer shall maintain and shall cause each of its
employees and officers to maintain the confidentiality of this
Agreement and the other confidential or proprietary information
with respect to Originator, the Obligors and their respective
businesses obtained by it in connection with the due diligence
evaluations, structuring, negotiating and execution of the
Transaction Documents, and the consummation of the transactions
contemplated herein and any other activities of Buyer arising
from or related to the transactions contemplated herein provided,
however, that each of Buyer and its employees and officers shall
be permitted to disclose such confidential or proprietary
information: (i) to the Administrative Agent and the other
Purchasers, (ii) to any prospective or actual assignee or
participant of the Administrative Agent or the other Purchasers
who execute a confidentiality agreement for the benefit of such
Originator and Buyer on terms comparable to those required of
Buyer hereunder with respect to such disclosed information, (iii)
to any rating agency, provider of a surety, guaranty or credit or
liquidity enhancement to Blue Ridge, (iv) to any officers,
directors, employees, outside accountants and attorneys of any of
the foregoing, and (v) to the extent required pursuant to any
applicable law, rule, regulation, direction, request or order of
any judicial, administrative or regulatory authority or
proceedings with competent jurisdiction (whether or not having
the force or effect of law) so long as such required disclosure
is made under seal to the extent permitted by applicable law or
by rule of court or other applicable body.

     Section 7.5    Bankruptcy Petition.

     (a)  Originator and Buyer each hereby covenants and agrees
that, prior to the date that is one year and one day after the
payment in full of all outstanding senior indebtedness of Blue
Ridge, it will not institute against, or join any other Person in
instituting against, Blue Ridge any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any
state of the United States.

     (b)  Originator covenants and agrees that, prior to the date
that is one year and one day after the payment in full of all
outstanding obligations of Buyer under the Purchase Agreement, it
will not institute against, or join any other Person in
instituting against, Buyer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any
state of the United States.

     Section 7.6    Limitation of Liability.

     Except with respect to any claim arising out of the willful
misconduct or gross negligence of Blue Ridge, the Administrative
Agent or any Liquidity Bank, no claim may be made by Originator
or any other Person against Blue Ridge, the Administrative Agent
or any Liquidity Bank or their respective Affiliates, directors,
officers, employees, attorneys or agents for any special,
indirect, consequential or punitive damages in respect of any
claim for breach of contract or any other theory of liability
arising out of or related to the transactions contemplated by
this Agreement, or any act, omission or event occurring in
connection therewith; and Originator hereby waives, releases, and
agrees not to sue upon any claim for any such damages, whether or
not accrued and whether or not known or suspected to exist in its
favor.

     Section 7.7    CHOICE OF LAW.

     THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE
STATE OF NEW YORK.

     Section 7.8    CONSENT TO JURISDICTION.

     ORIGINATOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT
SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY
ORIGINATOR PURSUANT TO THIS AGREEMENT AND ORIGINATOR HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS
TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL LIMIT THE RIGHT OF BUYER (OR ITS ASSIGNS) TO
BRING PROCEEDINGS AGAINST ORIGINATOR IN THE COURTS OF ANY OTHER
JURISDICTION.  ANY JUDICIAL PROCEEDING BY ORIGINATOR AGAINST
BUYER (OR ITS ASSIGNS) OR ANY AFFILIATE THEREOF INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT
EXECUTED BY ORIGINATOR PURSUANT TO THIS AGREEMENT SHALL BE
BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.

     Section 7.9    WAIVER OF JURY TRIAL.

     EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY
DOCUMENT EXECUTED BY ORIGINATOR PURSUANT TO THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.

     Section 7.10   Integration; Binding Effect; Survival of
Terms.

     (a)  This Agreement and each other Transaction Document
contain the final and complete integration of all prior
expressions by the parties hereto with respect to the subject
matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof
superseding all prior oral or written understandings.

     (b)  This Agreement shall be binding upon and inure to the
benefit of the Originator, Buyer and their respective successors
and permitted assigns (including any trustee in bankruptcy).
Originator may not assign any of its rights and obligations
hereunder or any interest herein without the prior written
consent of Buyer.  Buyer may assign at any time its rights and
obligations hereunder and interests herein to any other Person
without the consent of Originator.  Without limiting the
foregoing, Originator acknowledges that Buyer, pursuant to the
Purchase Agreement, may assign to the Administrative Agent, for
the benefit of the Secured Parties, its rights, remedies, powers
and privileges hereunder and that the Administrative Agent may
further assign such rights, remedies, powers and privileges to
the extent permitted in the Purchase Agreement.  Originator
agrees that the Administrative Agent, as the assignee of Buyer,
shall, subject to the terms of the Purchase Agreement, have the
right to enforce this Agreement and to exercise directly all of
Buyer's rights and remedies under this Agreement (including,
without limitation, the right to give or withhold any consents or
approvals of Buyer to be given or withheld hereunder) and
Originator agrees to cooperate fully with the Administrative
Agent in the exercise of such rights and remedies.  This
Agreement shall create and constitute the continuing obligations
of the parties hereto in accordance with its terms and shall
remain in full force and effect until terminated in accordance
with its terms; provided, however, that the rights and remedies
with respect to (i) any breach of any representation and warranty
made by any Originator pursuant to Article II; (ii) the
indemnification and payment provisions of Article VI; and (iii)
Section 7.5 shall be continuing and shall survive any termination
of this Agreement.

     Section 7.11   Counterparts; Severability; Section
References.

     This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all
of which when taken together shall constitute one and the same
Agreement.  Delivery of an executed counterpart of a signature
page to this Agreement by facsimile shall be effective as
delivery of a manually executed counterpart to this Agreement.
Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.  Unless otherwise expressly
indicated, all references herein to "Article," "Section,"
"Schedule" or "Exhibit" shall mean articles and sections of, and
schedules and exhibits to, this Agreement.


                    [signature pages follow]

     IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their duly authorized
officers as of the date hereof.

                              AIRBORNE EXPRESS, INC.


                              By:  /s/Diane M. Hackler
                              Name:  Diane M. Hackler
                              Title:    Treasurer

                              Address:
                                   3101 Western Avenue
                                   P.O. Box 662
                                   Seattle, WA 98111-0662
                              Telephone: (206) 281-1003
                              Telecopy: (206) 281-1444

                              AIRBORNE CREDIT, INC.


                              By:  /s/Diane M. Hackler
                              Name:     Diane M. Hackler
                              Title:    Treasurer

                              Address:
                                   3101 Western Avenue
                                   P.O. Box 662
                                   Seattle, WA 98111-0662
                              Telephone: (206) 281-1003
                              Telecopy: (206) 281-1444


                            Exhibit I

                           Definitions


     This is Exhibit I to the Agreement (as hereinafter defined).
As used in the Agreement and the Exhibits and Schedules thereto,
capitalized terms have the meanings set forth in this Exhibit I
(such meanings to be equally applicable to the singular and
plural forms thereof).  If a capitalized term is used in the
Agreement, or any Exhibit or Schedule thereto, and is not
otherwise defined therein or in this Exhibit I, such term shall
have the meaning assigned thereto in Exhibit I to the Purchase
Agreement (hereinafter defined)
 .
     "Administrative Agent" has the meaning set forth in the
Preliminary Statements to the Agreement.

     "Agreement" means the Receivables Sale Agreement, dated as
of December 28, 2000, among Originator and Buyer, as the same may
be amended, restated or otherwise modified.

     "Applicable State" has the meaning set forth in Section 2.1
of the Agreement.

     "Blue Ridge" has the meaning set forth in the Preliminary
Statements to the Agreement.

     "Buyer" has the meaning set forth in the preamble to the
Agreement.

     "Calculation Period" means each calendar month or portion
thereof which elapses during the term of the Agreement.  The
first Calculation Period shall commence on the date of the
Purchases hereunder and the final Calculation Period shall
terminate on the Termination Date.

     "Change of Control" means (a) the acquisition by any Person,
or two or more Persons acting in concert, of beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 20% or
more of the outstanding voting Equity Interests of Parent, (b)
Parent ceases to own 100% of the outstanding voting Equity
Interests of Originator, or (c) Parent ceases to own 100% of the
outstanding voting Equity Interests of Buyer.

     "Contract" means, with respect to any Receivable, any and
all instruments, agreements, invoices or other writings pursuant
to which such Receivable arises or which evidences such
Receivable.

     "Credit and Collection Policy" means the Originators' credit
and collection policies and practices relating to Contracts and
Receivables existing on the date hereof and summarized in Exhibit
V, as modified from time to time in accordance with the
Agreement.

     "Default Fee" means a per annum rate of interest equal to
the sum of (i) the Prime Rate, plus (ii) 2% per annum.

     "Discount Factor" means a percentage calculated to provide
Buyer with a reasonable return on its investment in the
Receivables originated by Originator after taking account of (i)
the time value of money based upon the anticipated dates of
collection of such Receivables and the cost to Buyer of financing
its investment in such Receivables during such period and (ii)
the risk of nonpayment by the Obligors.  Originator and Buyer may
agree from time to time to change the Discount Factor based on
changes in one or more of the items affecting the calculation
thereof, provided that any change to the Discount Factor shall
take effect as of the commencement of a Calculation Period, shall
apply only prospectively and shall not affect the Purchase Price
payment made prior to the Calculation Period during which
Originator and Buyer agree to make such change.  As of the date
hereof, the Discount Factor in respect of all Receivables is
LIBOR plus 0.35%.

     "Equity Interests" means, with respect to any Person, any
and all shares, interests, participations or other equivalents,
including membership interests (however designated, whether
voting or non-voting), of capital of such Person, including, if
such Person is a partnership, partnership interests (whether
general or limited) and any other interest or participation that
confers on a Person the right to receive a share of the profits
and losses of, or distributions of assets of, such partnership,
whether outstanding on the date hereof or issued after the date
of this Agreement.

     "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any rule or regulation
issued thereunder.

     "ERISA Affiliate" means any trade or business (whether or
not incorporated) under common control with Originator within the
meaning of Section 414(b) or (c) of the Tax Code (and Sections
414(m) and (o) of the Tax Code for purposes of provisions
relating to Section 412 of the Tax Code).

     "ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by Originator or any ERISA
Affiliate from a Pension Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer (as
defined in Section 4001 (a) (2) of ERISA) or a cessation of
operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) a complete or partial withdrawal by
Originator or any ERISA Affiliate from a Multiemployer Plan or
notification that a Multiemployer Plan is in reorganization; (d)
the filing of a notice of intent to terminate, the treatment of a
Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; or (f) the imposition of any liability under
Tide IV of ERISA, other than PBGC premiums due but not delinquent
under Section 4007 of ERISA, upon Originator or any ERISA
Affiliate.

     "Finance Charges" means, with respect to a Contract, any
finance, interest, late payment charges or similar charges owing
by an Obligor pursuant to such Contract.

     "Indemnified Amounts" has the meaning set forth in Section
6.1 of the Agreement.

     "Indemnified Parties" has the meaning set forth in Section
6.1 of the Agreement.

     "Initial Cutoff Date" means the Business Day immediately
prior to the date of this Agreement.

     "LIBOR" for the date hereof or any Settlement Period, as the
case may be, means the offered rate per annum (rounded upwards,
if necessary, to the nearest 1/16th of one percent) appearing in
The Wall Street Journal for one month LIBOR loans on the date
hereof or the first Business Day of such Settlement Period, as
the case may be.

     "Material Adverse Effect" means a material adverse effect on
(i) the financial condition or operations of the Originator and
its Subsidiaries, considered as a whole, (ii) the ability of
Originator to perform its obligations under the Agreement or any
other Transaction Document, (iii) the legality, validity or
enforceability of the Agreement or any other Transaction
Document, (iv) any Originator's, Buyer's, the Administrative
Agent's or any Purchaser's interest in the Receivables generally
or in any significant portion of the Receivables, the Related
Security or Collections with respect thereto, or (v) the
collectibility of the Receivables generally or of any material
portion of the Receivables.

     "Moody's" means Moody's Investors Service, Inc.

     "Multiemployer Plan" means a "multiemployer plan", within
the meaning of Section 4001 (a) (3) of ERISA, to which Originator
or any ERISA Affiliate makes, is making, or is obligated to make
contributions or, during the preceding three calendar years, has
made, or been obligated to make, contributions.

     "Net Worth" means as of the last Business Day of each
Calculation Period preceding any date of determination, the
excess, if any, of (a) the aggregate Outstanding Balance of the
Receivables at such time, over (b) the sum of (i) the Aggregate
Principal outstanding at such time, plus (ii) the aggregate
outstanding principal balance of the Subordinated Loans
(including any Subordinated Loan proposed to be made on the date
of determination).

     "Obligor" means a Person obligated to make payments pursuant
to a Contract.

     "Organizational Documents" means, for any Person, the
documents for its formation and organization, which, for example,
(a) for a corporation are its corporate charter and bylaws,
(b) for a partnership are its certificate of partnership (if
applicable) and partnership agreement, (c) for a limited
liability company are its certificate of formation or
organization and its operating agreement, regulations or the like
and (d) for a trust is the trust agreement, declaration of trust,
indenture or bylaws under which it is created.

     "Original Balance" means, with respect to any Receivable
coming into existence after the Initial Cutoff Date, the
Outstanding Balance of such Receivable on the date it was
created.

     "Originator" has the meaning set forth in the preamble to
the Agreement.

     "Parent" means Airborne, Inc., a Delaware corporation.

     "PBGC" means the Pension Benefit Guaranty Corporation, or
any successor thereto.

     "Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which Originator
sponsors or maintains, or to which it makes, is making, or is
obligated to make contributions, or in the case of a multiple
employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five
plan years.

     "Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which Originator or any of its ERISA Affiliates
sponsors or maintains or to which any Originator or any of its
ERISA Affiliates makes, is making, or is obligated to make
contributions and includes any Pension Plan, other than a Plan
maintained outside the United States primarily for the benefit of
Persons who are not U.S. residents.

     "Purchase" means the purchase by Buyer from Originator
pursuant to Section 1.1(a) of the Agreement of the Receivables
originated by Originator and the Related Security and Collections
related thereto, together with all related rights in connection
therewith.

     "Purchase Agreement" has the meaning set forth in the
Preliminary Statements to the Agreement.

     "Purchase Price" means, with respect to the Purchase from
Originator, the aggregate price to be paid by Buyer to Originator
for such Purchase in accordance with Section 1.2 of the Agreement
for the Receivables originated by Originator and the associated
Collections and Related Security being sold to Buyer, which price
shall equal on any date (i) the product of (x) the Outstanding
Balance of such Receivables on such date, multiplied by (y) one
minus the Discount Factor in effect on such date, minus (ii) any
Purchase Price Credits to be credited against the Purchase Price
otherwise payable in accordance with Section 1.3 of the
Agreement.

     "Purchase Price Credit" has the meaning set forth in Section
1.3 of the Agreement.

     "Purchase Report" has the meaning set forth in Section
1.1(b) of the Agreement.

     "Related Security" means, with respect to any Receivable:

          (i)  all of the Originator's interest in the inventory
     and other goods (including returned or repossessed inventory
     or goods), if any, the sale, financing or lease of which by
     Originator gave rise to such Receivable, and all insurance
     contracts with respect thereto,

          (ii) all other security interests or liens and property
     subject thereto from time to time, if any, purporting to
     secure payment of such Receivable, whether pursuant to the
     Contract related to such Receivable or otherwise, together
     with all financing statements and security agreements
     describing any collateral securing such Receivable,

          (iii)     all guaranties, letters of credit, insurance
     and other agreements or arrangements of whatever character
     from time to time supporting or securing payment of such
     Receivable whether pursuant to the Contract related to such
     Receivable or otherwise,

          (iv) all service contracts and other contracts and
     agreements associated with such Receivable,

          (v)  all Records related to such Receivable,

          (vi) all of the Originator's right, title and interest
     in each Lock-Box and each Blocked Account, and

          (vii)     all proceeds of any of the foregoing.

     "Reportable Event" means any of the events set forth in
Section 4043(c) of ERISA or the regulations thereunder, other
than any such event for which the 30-day notice requirement under
ERISA has been waived in regulations issued by the PBGC.

     "Required Capital Amount" means, as of any date of
determination, an amount equal to the greater of (a) 3% of the
Purchase Limit under the Purchase Agreement, and (b) the product
of (i) 1.5 times the product of the Default Ratio times the Loss
Horizon Ratio, each as determined from the most recent Monthly
Report received from the Servicer under the Purchase Agreement,
and (ii) the Outstanding Balance of all Receivables as of such
date, as determined from the most recent Monthly Report received
from the Servicer under the Purchase Agreement.

     "S&P" means Standard and Poor's Ratings Services, a division
of The McGraw Hill Companies, Inc.

     "Settlement Date" means, the 2nd Business Day after each
Reporting Date.

     "Subordinated Loan" has the meaning set forth in Section
1.2(a) of the Agreement.

     "Subordinated Note" means a promissory note in substantially
the form of Exhibit V hereto as more fully described in Section
1.2 of the Agreement, as the same may be amended, restated,
supplemented or otherwise modified from time to time.

     "Tax Code" means the Internal Revenue Code of 1986, as the
same may be amended from time to time.

     "Termination Date" means the earliest to occur of (i) the
Facility Termination Date (as defined in the Purchase Agreement),
(ii) the Business Day immediately prior to the occurrence of a
Termination Event set forth in Section 5.1(d), (iii) the Business
Day specified in a written notice from Buyer to the Originator
following the occurrence of any other Termination Event, and (iv)
the date which is 10 Business Days after Buyer's receipt of
written notice from Originator that it wishes to terminate the
facility evidenced by this Agreement.

     "Termination Event" has the meaning set forth in Section 5.1
of the Agreement.

     "Unmatured Termination Event" means an event which, with the
passage of time or the giving of notice, or both, would
constitute a Termination Event.


          All accounting terms not specifically defined herein
shall be construed in accordance with GAAP.  All terms used in
Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such
Article 9.

                           Exhibit II


            Places of Business; Locations of Records;
     Federal Employer Identification Number(s); Other Names


Places of Business:

     Airborne Express, Inc.
     3101 Western Avenue
     Seattle, WA 98121-1043

     Mailing Address:
     P.O. Box 662
     Seattle, WA 98111-0662

     Tel.: (206) 830-4600

Locations of Records:

     Airborne Express, Inc.
     3101 Western Avenue
     Seattle, WA 98121-1043

     Mailing Address:
     P.O. Box 662
     Seattle, WA 98111-0662

     Tel.: (206) 830-4600

Federal Employer Identification Number:

     Airborne Express, Inc.: EIN #91-0837469

Legal, Trade and Assumed Names:

     Airborne Express, Inc.
     Airborne Express
     Airborne Freight Corporation

                           Exhibit III


       Lock-boxes; Blocked Accounts; Blocked Account Banks


   Originator         Lock-Box        Related Blocked Account
Airborne Express  Airborne Express   Bank of America
Inc.              P.O. Box 91001     San Francisco, CA
                  Seattle, WA 98111  ABA#: 121000358
                                     A/C#: 1233386558

Airborne Express                     Wachovia Bank
Inc.                                 Atlanta, GA
                                     ABA#: 053100494
                                     A/C#: 8736-000912

Airborne Express                     Wachovia Bank
Inc.                                 Atlanta, GA
                                     ABA#: 053100494
                                     A/C#: 8735-028902

Airborne Express                     Bank of Boston
Inc.                                 Boston, MA
                                     ABA#: 011000390
                                     A/C#: 580-35308



                           Exhibit IV

                 Form of Compliance Certificate


     This Compliance Certificate is furnished pursuant to that
certain Receivables Sale Agreement dated as of December 28, 2000
between Airborne Express, Inc. and Airborne Credit, Inc. (the
"Agreement").  Capitalized terms used and not otherwise defined
herein are used with the meanings attributed thereto in the
Agreement.

             THE UNDERSIGNED HEREBY CERTIFIES THAT:

     1.   I am the duly elected ______________ of  ___________
("Originator").

     2.   I have reviewed the terms of the Agreement and I have
made, or have caused to be made under my supervision, a detailed
review of the transactions and conditions of Originator and its
Subsidiaries during the accounting period covered by the attached
financial statements.

     3.   The examinations described in paragraph 2 did not
disclose, and I have no knowledge of, the existence of any
condition or event which constitutes a Termination Event or an
Unmatured Termination Event, as each such term is defined under
the Agreement, during or at the end of the accounting period
covered by the attached financial statements or as of the date of
this Certificate[, except as set forth below].

     [4.  Described below are the exceptions, if any, to
paragraph 3 by listing, in detail, the nature of the condition or
event, the period during which it has existed and the action
which Originator has taken, is taking, or proposes to take with
respect to each such condition or event:
_______________________________].

     The foregoing certifications, together with the computations
set forth in Schedule I hereto and the financial statements
delivered with this Certificate in support hereof, are made and
delivered this ____ day of ______________, 200_.

                              ______________________________
                              [Name]

                            Exhibit V

                    Form of Subordinated Note


                        SUBORDINATED NOTE
                                                December 28, 2000

     1.   Note.  FOR VALUE RECEIVED, the undersigned, Airborne
Credit, Inc., a Virginia corporation ("SPV"), hereby
unconditionally promises to pay to the order of Airborne Express,
Inc., a Delaware corporation ("Originator"), in lawful money of
the United States of America and in immediately available funds,
on or before the date following the Termination Date which is one
year and one day after the date on which (i) the Outstanding
Balance of all Receivables sold by Originator under the "Sale
Agreement" referred to below has been reduced to zero and (ii)
Originator has paid to Buyer all indemnities, adjustments and
other amounts which may be owed thereunder in connection with the
Purchase thereunder (the "Collection Date"), the aggregate unpaid
principal sum outstanding of all "Subordinated Loans" made from
time to time by Originator to SPV pursuant to and in accordance
with the terms of that certain Receivables Sale Agreement dated
as of December 28, 2000 among Originator, as seller, and SPV, as
buyer (as amended, restated, supplemented or otherwise modified
from time to time, the "Sale Agreement").  Reference to Section
1.2 of the Sale Agreement is hereby made for a statement of the
terms and conditions under which the loans evidenced hereby have
been and will be made.  All terms which are capitalized and used
herein and which are not otherwise specifically defined herein
shall have the meanings ascribed to such terms in the Sale
Agreement.

     2.   Interest.  SPV further promises to pay interest on the
outstanding unpaid principal amount hereof from the date hereof
until payment in full hereof at a rate equal to the 1-month LIBOR
rate published in The Wall Street Journal on the first Business
Day of each month (or portion thereof) during the term of this
Subordinated Note, computed for actual days elapsed on the basis
of a year consisting of 360 days and changing on the first
business day of each month hereafter ("LIBOR"); provided,
however, that if SPV shall default in the payment of any
principal hereof, SPV promises to pay, on demand, interest at the
rate equal to LIBOR plus 2.00% per annum on any such unpaid
amounts, from the date such payment is due to the date of actual
payment.  Interest shall be payable on the first Business Day of
each month in arrears; provided, however, that SPV may elect on
the date any interest payment is due hereunder to defer such
payment and upon such election the amount of interest due but
unpaid on such date shall constitute principal under this
Subordinated Note.  The outstanding principal of any loan made
under this Subordinated Note shall be due and payable on the
Collection Date and may be repaid or prepaid at any time without
premium or penalty.

     3.   Principal Payments.  Originator is authorized and
directed by SPV to enter on the grid attached hereto, or, at its
option, in its books and records, the date and amount of each
loan made by it which is evidenced by this Subordinated Note and
the amount of each payment of principal made by SPV, and absent
manifest error, such entries shall constitute prima facie
evidence of the accuracy of the information so entered; provided
that neither the failure of Originator to make any such entry or
any error therein shall expand, limit or affect the obligations
of SPV hereunder.

     4.   Subordination.  Originator shall have the right to
receive, and SPV shall make, any and all payments and prepayments
relating to the loans made under this Subordinated Note provided
that, after giving effect to any such payment or prepayment, the
aggregate Outstanding Balance of Receivables (as each such term
is defined in the Purchase Agreement hereinafter referred to)
owned by SPV at such time exceeds the sum of (a) the Aggregate
Principal (as defined in the Purchase Agreement) outstanding at
such time under the Purchase Agreement, plus (b) the aggregate
outstanding principal balance of all loans made under this
Subordinated Note.  Originator hereby agrees that at any time
during which the conditions set forth in the proviso of the
immediately preceding sentence shall not be satisfied, Originator
shall be subordinate in right of payment to the prior payment of
any indebtedness or obligation of SPV owing to the Administrative
Agent or any Purchaser under that certain Purchase Agreement
dated as of December 28, 2000 by and among SPV, Airborne Express,
Inc., as initial Servicer, various "Purchasers" from time to time
party thereto, and Wachovia Bank, N.A., as the "Administrative
Agent" (as amended, restated, supplemented or otherwise modified
from time to time, the "Purchase Agreement").  The subordination
provisions contained herein are for the direct benefit of, and
may be enforced by, the Administrative Agent and the Purchasers
and/or any of their respective assignees (collectively, the
"Senior Claimants") under the Purchase Agreement.  Until the date
on which the "Aggregate Principal" outstanding under the Purchase
Agreement has been repaid in full and all other obligations of
SPV and/or the Servicer thereunder and under the "Fee Letter"
referenced therein (all such obligations, collectively, the
"Senior Claim") have been indefeasibly paid and satisfied in
full,  Originator shall not institute against SPV any proceeding
of the type described in Section 5.1(d) of the Sale Agreement
unless and until the Collection Date has occurred.  Should any
payment, distribution or security or proceeds thereof be received
by Originator in violation of this Section 4, Originator agrees
that such payment shall be segregated, received and held in trust
for the benefit of, and deemed to be the property of, and shall
be immediately paid over and delivered to the Administrative
Agent for the benefit of the Senior Claimants.

     5.   Bankruptcy; Insolvency.  Upon the occurrence of any
proceeding of the type described in Section 5.1(d) of the Sale
Agreement involving SPV as debtor, then and in any such event the
Senior Claimants shall receive payment in full of all amounts due
or to become due on or in respect of the Aggregate Principal and
the Senior Claim (including "Interest" as defined and as accruing
under the Purchase Agreement after the commencement of any such
proceeding, whether or not any or all of such Interest is an
allowable claim in any such proceeding) before Originator is
entitled to receive payment on account of this Subordinated Note,
and to that end, any payment or distribution of assets of SPV of
any kind or character, whether in cash, securities or other
property, in any applicable insolvency proceeding, which would
otherwise be payable to or deliverable upon or with respect to
any or all indebtedness under this Subordinated Note, is hereby
assigned to and shall be paid or delivered by the Person making
such payment or delivery (whether a trustee in bankruptcy, a
receiver, custodian or liquidating trustee or otherwise) directly
to the Administrative Agent for application to, or as collateral
for the payment of, the Senior Claim until such Senior Claim
shall have been paid in full and satisfied.

     6.   Amendments.  This Subordinated Note shall not be
amended or modified except in accordance with Section 7.1 of the
Sale Agreement.  The terms of this Subordinated Note may not be
amended or otherwise modified without the prior written consent
of the Administrative Agent for the benefit of the Purchasers.

     7.   GOVERNING LAW.  THIS SUBORDINATED NOTE HAS BEEN MADE
AND DELIVERED AT NEW YORK, NEW YORK, AND SHALL BE INTERPRETED AND
THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN
ACCORDANCE WITH THE LAWS AND DECISIONS OF THE STATE OF NEW YORK.
WHEREVER POSSIBLE EACH PROVISION OF THIS SUBORDINATED NOTE SHALL
BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER
APPLICABLE LAW, BUT IF ANY PROVISION OF THIS SUBORDINATED NOTE
SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH
PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION
OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH
PROVISION OR THE REMAINING PROVISIONS OF THIS SUBORDINATED NOTE.

     8.   Waivers.  All parties hereto, whether as makers,
endorsers, or otherwise, severally waive presentment for payment,
demand, protest and notice of dishonor.  Originator additionally
expressly waives all notice of the acceptance by any Senior
Claimant of the subordination and other provisions of this
Subordinated Note and expressly waives reliance by any Senior
Claimant upon the subordination and other provisions herein
provided.

     9.   Assignment.  This Subordinated Note may not be
assigned, pledged or otherwise transferred to any party other
than Originator without the prior written consent of the
Administrative Agent, and any such attempted transfer shall be
void.

                              AIRBORNE CREDIT, INC.


                              By:_____________________________
                                 Title:

                            Schedule
                               to
                        SUBORDINATED NOTE
          SUBORDINATED LOANS AND PAYMENTS OF PRINCIPAL


          Amount of      Amount of     Unpaid
         Subordinated    Principal   Principal   Notation
 Date        Loan          Paid       Balance     made by
                                                (initials)































                           Exhibit VI

                    [Form of] Purchase Report

  For the Calculation Period beginning [date] and ending [date]
                             -------

TO:  BUYER AND THE ADMINISTRATIVE AGENT (AS BUYER'S ASSIGNEE)


Aggregate Outstanding Balance
of all Receivables sold        $_____________                 A
during the period:
Less:  Aggregate Outstanding
Balance of all Receivables
sold during such period which
were not Eligible Receivables  ($____________)               (B)
on the date when sold:
Equals:  Aggregate
Outstanding Balance of all
Eligible Receivables sold                      $___________  =C
during the period (A - B):
Less:  Purchase Price
discount during the Period:    ($____________)               (D)

Equals:  Gross Purchase Price
Payable during the period (A                   $___________  =E
- - D)
Less:  Total Purchase Price
Credits arising during the     ($____________)			 (F)
Period:
Equals:  Net Purchase Price
payable during the Period (E                   $___________  =G
- - F):

Cash Purchase Price Paid to
Originator during the Period:  $_____________			  H
Subordinated Loans made
during the Period:             $_____________			  I
Less:  Repayments of
Subordinated Loans received   ($_____________)			 (J)
during the Period:
Equals:  Purchase Price paid
in Cash or Subordinated Loans
during the period                              $___________  =K
(H + I - J):

                           Schedule A

               DOCUMENTS TO BE DELIVERED TO BUYER
                   ON OR PRIOR TO THE PURCHASE

1.   Executed copies of the Receivables Sale Agreement, duly
executed by the parties thereto.

2.   A certificate of Originator's Secretary certifying:

          (a)  A copy of the Resolutions of the Board of
     Directors of such Originator, authorizing Originator's
     execution, delivery and performance of the Receivables Sale
     Agreement and the other documents to be delivered by it
     thereunder;

          (b)  A copy of the Organizational Documents of such
     Originator (also certified, to the extent that such
     documents are filed with any governmental authority, by the
     Secretary of State of the jurisdiction of organization of
     such Originator on or within thirty (30) days prior to
     closing);

          (c)  Good Standing Certificates for such Originator
     issued by the Secretaries of State of its state of
     incorporation and each jurisdiction where it has material
     operations; and

          (d)  The names and signatures of the officers
     authorized on its behalf to execute the Receivables Sale
     Agreement and any other documents to be delivered by it
     thereunder.

3.   Pre-filing state and federal tax lien, judgment lien and UCC
     lien searches against each Originator from the following
     jurisdictions:

          (a)

          (b)

4.   Time stamped receipt copies of proper financing statements,
     duly filed under the UCC on or before the date of the
     initial Purchase (as defined in the Receivables Sale
     Agreement) in all jurisdictions as may be necessary or, in
     the opinion of Buyer (or its assigns), desirable, under the
     UCC of all appropriate jurisdictions or any comparable law
     in order to perfect the ownership interests contemplated by
     the Receivables Sale Agreement.

5.   Time stamped receipt copies of proper UCC termination
     statements, if any, necessary to release all security
     interests and other rights of any Person in the Receivables,
     Contracts or Related Security previously granted by each
     Originator.

6.   [Reserved].

7.   A favorable opinion of legal counsel for Originator
     reasonably acceptable to Buyer (and the Administrative
     Agent, as Buyer's assignee) as to the following:

          (a)  Originator is a corporation duly organized,
     validly existing, and in good standing under the laws of the
     state of Delaware.

          (b)  Originator has all requisite authority to conduct
     its business in each jurisdiction where failure to be so
     qualified would have a material adverse effect on such
     Originator's business.

          (c)  The execution and delivery by Originator of the
     Receivables Sale Agreement and each other Transaction
     Document to which it is a party and its performance of its
     obligations thereunder have been duly authorized by all
     necessary organizational action and proceedings on the part
     of Originator and will not:

               (i)  require any action by or in respect of, or
          filing with, any governmental body, agency or official
          (other than the filing of UCC financing statements);

               (ii) contravene, or constitute a default under,
          any provision of applicable law or regulation or of its
          articles or certificate of incorporation or bylaws or
          of any agreement, judgment, injunction, order, decree
          or other instrument binding upon Originator; or

               (iii)     result in the creation or imposition of
          any Adverse Claim on assets of Originator or any of its
          Subsidiaries (except as contemplated by the Receivables
          Sale Agreement).

          (d)  The Receivables Sale Agreement and each other
     Transaction Document to which it is a party has been duly
     executed and delivered by Originator and constitutes the
     legally valid, and binding obligation of Originator
     enforceable in accordance with its terms, except to the
     extent the enforcement thereof may be limited by bankruptcy,
     insolvency or similar laws affecting the enforcement of
     creditors' rights generally and subject also to the
     availability of equitable remedies if equitable remedies are
     sought.

          (e)  In the event that the Receivables Sale Agreement
     is held to create a transfer for security purposes rather
     than a true sale or other outright assignment, the
     provisions of the Receivables Sale Agreement are effective
     to create valid security interests in favor of Buyer in all
     of Originator's right, title and interest in and to the
     Receivables and Related Security described therein which
     constitute "accounts," "chattel paper" or "general
     intangibles" (each as defined in the UCC) (collectively, the
     "Opinion Collateral"), as security for the payment of a loan
     deemed to have been made by Buyer to such Originator in an
     amount equal to the Purchase Price (as defined therein) of
     the Receivables (as defined therein) acquired from
     Originator, together with all other obligations of Buyer
     thereunder.

          (f)  Each of the UCC-1 Financing Statements naming
     Originator as debtor, Buyer, as secured party, and
     Administrative Agent, as assignee of secured party to be
     filed in the Department of Licensing of the State of
     Washington, is in appropriate form for filing therein.  Upon
     filing of such UCC-1 Financing Statements in such filing
     offices and payment of the required filing fees, the
     security interest in favor of Buyer in the Opinion
     Collateral will be perfected and assigned of record to the
     Administrative Agent.

          (g)  Based solely on our review of the UCC Search
     Reports, and assuming (i) the filing of the Financing
     Statements and payment of the required filing fees in
     accordance with paragraph (f) and (ii) the absence of any
     intervening filings between the date and time of the Search
     Reports and the date and time of the filing of the Financing
     Statements, the security interest of Buyer in the Opinion
     Collateral is prior to any security interest granted in the
     Opinion Collateral by Originator, the priority of which is
     determined solely by the filing of a financing statement in
     the Department of Licensing of the State of Washington.

          (h)  To the best of the opinion giver's knowledge,
     there is no action, suit or other proceeding against
     Originator or any Affiliate of Originator, which would
     materially adversely affect the business or financial
     condition of Originator and its Affiliates taken as a whole
     or which would materially adversely affect the ability of
     Originator to perform its obligations under the Receivables
     Sale Agreement.

          (i)  Originator is not an "investment company" as such
     term is defined in the Investment Company Act of 1940, as
     amended.

8.   A "true sale" opinion and "substantive consolidation"
     opinion of counsel for Originator with respect to the
     transactions contemplated by the Receivables Sale Agreement.

9.   A Certificate of Originator's chief financial officer
     certifying that, as of the closing date, no Termination
     Event or Unmatured Termination Event exists and is
     continuing.

10.  Executed copies of (i) all consents from and authorizations
     by any Persons and (ii) all waivers and amendments to
     existing credit facilities, that are necessary in connection
     with the Receivables Sale Agreement.

11.  Executed Subordinated Note by Buyer in favor of Originator.

12.  If applicable, a direction letter executed by Originator
     authorizing Buyer (and the Administrative Agent, as its
     assignee) and directing warehousemen to allow Buyer (and the
     Administrative Agent, as its assignee) to inspect and make
     copies from Originator's books and records maintained at off-
     site data processing or storage facilities.

EX-12

EXHIBIT 12

                                EXHIBIT 12

                      AIRBORNE INC. AND SUBSIDIARIES
                    PERCENTAGE RATIO OF TOTAL LONG-TERM
                       DEBT TO TOTAL CAPITALIZATION


                                                     DECEMBER 31, 2000
                                                    ------------------
                                                  (Dollars in thousands)


LONG-TERM DEBT:
   Revolving Credit Agreement                               $   75,000
   Money Market Lines of Credit                                 28,000
   Senior Notes                                                200,000
   Refunding Revenue Bonds                                      13,200
   Other                                                         6,507
                                                            ----------
                                                               322,707
   Less Current Portion                                            477
                                                            ----------
     Total Long-term Debt                                   $  322,230
                                                            ==========
TOTAL CAPITALIZATION:
   Long-term Debt                                              322,230
   Deferred Income Taxes                                       125,444
   Shareholders Equity, Net                                    862,855
                                                            ----------
     Total Capitalization                                   $1,310,529
                                                            ==========
RATIO OF TOTAL LONG-TERM DEBT TO TOTAL CAPITALIZATION            24.6%
                                                            ==========

EX-13

EXHIBIT 13

COMMON STOCK AND DIVIDEND INFORMATION

The Company's common stock is traded on the New York Stock Exchange and the Pacific Stock Exchange under the symbol ABF. The following is a summary of the cash dividends paid and the quarterly trading price ranges of Airborne common stock on the New York Stock Exchange for 2000 and 1999:

Quarter                      High        Low       Dividend
- -------                      ----        ---       --------
2000:
Fourth                     $10.938     $ 8.438     $ .04
Third                       19.313      10.000       .04
Second                      22.938      18.375       .04
First                       25.375      17.250       .04

1999:
Fourth                     $25.375     $20.000     $ .04
Third                       28.875      21.063       .04
Second                      36.625      24.688       .04
First                       41.625      28.625       .04

 

AIRBORNE, INC. AND SUBSIDIARIES SELECTED CONSOLIDATED FINANCIAL DATA
		2000		1999		1998		1997		1996
	(In thousands except per share data)
OPERATING RESULTS:    Revenues
Domestic		$	2,895,818	$	2,772,782	$	2,712,344	$	2,514,737	$	2,108,670
International			380,132		366,342		361,440		397,672		375,636
Total			3,275,950		3,139,124		3,073,784		2,912,409		2,484,306
Operating Expenses			3,233,332		2,981,403		2,841,452		2,687,154		2,405,125
Earnings From Operations			42,618		157,721		232,332		225,255		79,181
Other, Net			19,392		10,333		10,747		27,790		33,236
Earnings Before Income Taxes			23,226		147,388		221,585		197,465		45,945
Income Taxes			8,940		56,187		84,300		77,393		18,500
Net Earnings Before Change in Accounting			14,286		91,201		137,285		120,072		27,445
Cumulative Effect of Change in Accounting			14,206		--		--		--		--
Net Earnings			28,492		91,201		137,285		120,072		27,445
Preferred Stock Dividends			--		--		--		--		271
Net Earnings Available to Common Shareholders		$	28,492	$	91,201	$	137,285	$	120,072	$	27,174
Earnings Per Common Share:       Basic (1)		$	.30	$	1.88	$	2.77	$	2.68	$	.64
Diluted (1)		$	.30	$	1.85	$	2.72	$	2.44	$	.64
Dividends Per Common Share		$	.16	$	.16	$	.16	$	.15	$	.15
Diluted Average Shares Outstanding			48,647		49,269		50,561		50,339		42,573
FINANCIAL STRUCTURE:
Property and Equipment			1,314,758		1,115,712		1,010,721		901,303		864,735
Total Assets			1,745,919		1,643,250		1,501,577		1,365,973		1,307,422
Long-term Debt			322,230		314,707		249,149		250,559		524,440
Shareholders' Equity			862,855		858,207		769,152		670,915		431,830
NUMBER OF SHIPMENTS:
Domestic			322,493		316,391		316,590		297,032		254,234
International			6,558		7,038		6,451		5,699		5,036
Total			329,051		323,429		323,041		302,731		259,270

(1)For 2000, net earnings per common share is shown exclusive of the cumulative effect of a change in accounting for major engine overhaul costs. Basic and diluted earnings per share inclusive of the change was $.59.

AIRBORNE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION

RESULTS OF OPERATIONS:
    The Company's operating performance for 2000 was substantially below the results reported for 1999. A decline in the Company's core domestic shipments was the primary factor for the deterioration in earnings. With the slow growth in total shipment volumes, productivity gains were difficult to achieve and not sufficient to offset increases in operating costs. High fuel costs and poor weather late in the year coupled with additional costs to service the Company's new airborne@home service also had a negative impact on earnings.
    Net earnings in 2000 were $28.5 million or $.59 per diluted share, which includes a credit due for a change in accounting for certain major engine overhaul costs. Net earnings before this change were $14.3 million, or $.30 per share compared to $91.2 million, or $1.85 per share in 1999. Net earnings were $137.3 million or $2.72 per share in 1998.
    Effective at the beginning of 2000, the Company changed from the accrual method of accounting for DC-9 major engine overhaul costs to the direct expense method where costs are expensed as incurred. The cumulative effect of this change in accounting resulted in a non-cash credit of $14.2 million, net of taxes, or $.29 per share.

The following table is an overview of the Company's shipments, revenue and weight trends for the last three years:

                                        2000         1999         1998
                                        ----         ----         ----
Number of Shipments (in thousands):
  Domestic
    Overnight                        185,419      186,346      186,321
    Next Afternoon Service            54,213       56,201       58,186
    Second Day Service                82,583       73,556       71,724
    100 lbs. and Over                    278          288          359
                                     -------      -------      -------
      Total Domestic                 322,493      316,391      316,590
                                     -------      -------      -------
  International
    Express                            6,157        6,639        6,017
    Freight                              401          399          434
                                     -------      -------      -------
      Total International              6,558        7,038        6,451
                                     -------      -------      -------

  Total Shipments                    329,051      323,429      323,041
                                     =======      =======      =======

Average Pounds Per Shipment:
  Domestic                               4.3          4.2          4.3
  International                         51.8         44.2         42.6

Average Revenue Per Pound:
  Domestic                           $  2.03       $ 2.03       $ 1.96
  International                      $  1.10       $ 1.17       $ 1.31

Average Revenue Per Shipment:
  Domestic                           $  8.92       $ 8.76       $ 8.56
  International                      $ 57.96       $52.05       $56.03

    Total revenues increased 4.4% to $3.28 billion in 2000, compared to revenue growth of 2.1% in 1999 and 5.5% in 1998. Shipment volume was 329.1 million shipments in 2000, increasing 1.7% compared to growth of .1% in 1999 and 6.7% in 1998.
    Domestic revenues increased 4.4% to $2.9 billion in 2000, compared to domestic revenue growth of 2.2% in 1999 and 7.9% in 1998. Domestic shipments increased 1.9% to 322.5 million compared to flat growth in 1999 and 6.6% in 1998. Domestic revenues were aided by the implementation of a 3% fuel surcharge in February 2000 with an additional 1% added in October 2000. Fuel surcharge revenues totaled $77.6 million in 2000 and accounted for 63% of the increase in domestic revenues. Also impacting domestic revenue growth was the expansion of the Company's charter services, which contributed $18.9 million in revenues in 2000 compared to $2.5 million in 1999 and $2.8 million in 1998. Average revenue per domestic shipment was $8.92 in 2000 compared to $8.76 for 1999 and $8.56 for 1998.
    Core product shipment volumes experienced a disappointing .9% decline in 2000. The Company's core products include its Overnight Service, Next Afternoon Service (NAS) and Second Day Service (SDS) excluding airborne@home shipments. Airborne@home shipments are classified with Second Day Service (SDS) volumes for statistical reporting purposes. Higher yielding Overnight shipments decreased .5% in 2000 compared to flat growth in 1999 and 7.8% growth in 1998. The NAS product decreased 3.5% and 3.4% in 2000 and 1999, respectively and grew 8.2% in 1998. Core SDS shipment volumes grew .5%, 2.1% and 2.3% in 2000, 1999 and 1998, respectively. Overnight shipments accounted for 57.5% of total domestic shipments in 2000 compared to 58.9% in 1999 and 1998. The deferred NAS and SDS products comprise the balance of the Company's domestic product mix.
    The Company's new airborne@home product, which was introduced in late 1999, provided virtually all of the Company's shipment growth in 2000 and totaled 9.0 million shipments in 2000 compared to .3 million shipments in 1999. This service is intended to capture primarily business-to-consumer shipments from e-commerce and catalog fulfillment providers. airborne@home utilizes an arrangement with the U.S. Postal Service to provide final delivery of the product.
    International revenues increased 3.8% in 2000 with shipments decreasing 6.8%. Higher yielding international freight shipments increased slightly over 2000 while lower yielding international express product volumes decreased 7.3% due to the loss in early 2000 of a major customer. International revenues increased 1.4% in 1999 on shipment growth of 9.1%. In 1998, revenues declined 9.1% on shipment growth of 13.2%. While growth in the international freight segment was encouraging in the second half of 2000, a shift in mix during the year towards lower margin import business coupled with overall cost increases from airlines resulted in a deterioration in margins and international segment profitability. Lower international express volumes also contributed to the decline in profitability. The international segment contribution to earnings from operations was a loss of $7.3 million in 2000, compared to earnings of $1.1 million in 1999 and $1.5 million in 1998.

    OPERATING EXPENSES are affected by shipment volume, productivity levels, costs incurred to increase capacity and expand service, fuel price volatility and discretionary items such as the level of sales and marketing expenditures. Operating expenses as a percentage of revenues increased to 98.7% of revenues in 2000 compared to 95.0% in 1999 and 92.4% in 1998. Measuring cost performance on a per shipment basis, total operating expenses per shipment increased 6.6% to $9.83, compared to $9.22 in 1999 and $8.80 in 1998. The significantly higher cost of jet fuel was a major factor impacting operating expenses in 2000. Excluding the cost of jet fuel, operating cost per shipment rose 4.5% to $9.26 compared to $8.86 in 1999 and $8.45 in 1998. Additionally, productivity, as measured by shipments handled per paid employee hour declined .9% in 2000, compared to a decline of 2.5% in 1999 and an improvement of 1.4% in 1998. The Company continued to manage productivity at levels sufficient to maintain a high level of overall service integrity with its customers. A comparison of operating expense components is discussed below.
    Transportation purchased increased as a percentage of revenues to 31.8% in 2000 as compared to 30.8% in 1999 and 30.7% in 1998. This increase was primarily due to higher costs in farmed out pickup and delivery, international airline and surface line haul as well as fuel surcharges on these services. An increase in airborne@home shipment volumes was also a significant contributor to the increase as this category includes the U.S. Postal Service delivery costs necessary to support the new product. Due to the higher than expected volumes of this product during certain periods of the holiday season, additional and often times more expensive line hauls were incurred to meet service requirements.
    Station and ground expense as a percentage of revenues was 32.2% in 2000 compared to 31.1% in 1999 and 29.8% in 1998. The increase in this category as a percentage of revenues in 2000 compared to 1999 was primarily a result of a decline in productivity, increases in wage related costs to maintain service, and poor weather in the latter part of 2000.
    Flight operations and maintenance expense as a percentage of revenues was 18.0% in 2000 compared to 16.4% in 1999 and 15.5% in 1998. This category of expense was impacted during 2000 by higher fuel costs. The average aviation fuel price, exclusive of fuel hedge settlements was $1.02 per gallon in 2000 compared to $.64 per gallon in 1999 and $.57 per gallon in 1998. Aviation fuel consumption increased 1.8% to 184.1 million gallons compared to a .9% decrease in consumption in 1999 over 1998. Consumption totals include fuel used to service the Company's expanded charter operations. Excluding charters, total fuel consumed in 2000 decreased .5%. The decrease was due to the placing of nine additional 767 aircraft in service thereby allowing less fuel-efficient DC-8 aircraft to be moved to shorter lane segments, backup status or charter operations, or removed from service. The high cost of fuel through 1999 and 2000 hampered the Company's efforts to enter into fuel hedging contracts at acceptable price levels. No fuel contract hedges were outstanding as of either the year ended December 31, 2000 or 1999. The Company incurred settlement expense equivalent to approximately $.01 per gallon in 1999 and $.04 in 1998 as a result of fuel hedging contracts.
    Effective January 1, 2000 the Company began to expense DC-9 major engine overhaul costs directly to maintenance expense as costs were incurred. Engine overhaul costs charged to expense as incurred in 2000 and included in flight operations and maintenance were previously accrued in advance of the next scheduled overhaul and charged to the depreciation and amortization category.
    General and administrative expense as a percentage of revenues increased to 7.9% in 2000 compared to 7.6% in 1999 and 8.0% in 1998. The increase in 2000 was primarily due to wage and compensation cost pressures.
    Sales and marketing costs were 2.5% of revenues in 2000 and 1999 and 2.3% in 1998. In an effort to improve shipment growth the Company plans on adding sales personnel in 2001 as well as expanding its marketing efforts.
    Depreciation and amortization expense constituted 6.3% of revenues in 2000 compared to 6.7% in 1999 and 6.0% in 1998. The decrease in expense is due primarily to the effect of the change in accounting for engine overhauls discussed above but is offset by an increase in depreciation associated with the additional 767 aircraft placed in service during 2000 and the later part of 1999. In 2000, this expense category also includes an impairment loss of $4.0 million on three DC-8 aircraft which were removed from service.

    INTEREST EXPENSE increased in 2000 compared to 1999, primarily as a result of the higher level of average outstanding borrowings. Interest capitalized in 2000 of $6.8 million was primarily related to the acquisition and modification of 767 aircraft and compares to capitalized interest of $4.0 million in 1999 and $5.9 million in 1998. The Company anticipates the level of capitalized interest in 2001 to be less than the amount recorded in 2000 due to fewer 767 aircraft being modified and placed in service.

    OTHER income includes gains on sale and realized income from securities held, foreign joint venture earnings and costs associated with accounts receivable securitization transactions. In 2000, a gain of $1.9 million was recorded on the sale of common stock received in connection with the demutualization of Metropolitan Life Insurance Company. The shares were received since the Company held certain employee benefit policies with Metropolitan. In 1999, a gain of $4.6 million was realized on the sale of 34% of the Company's investment in Equant N.V., an international data network services company. The Company acquired its interest in Equant through its membership in SITA, a cooperative of major airline companies, which primarily provides data communication services to the air transport industry.

    INCOME TAXES for 2000 resulted in an effective tax rate on earnings from continuing operations of 38.5% compared to 38.1% in 1999 and 38.0% in 1998. The higher tax rates in 2000 were primarily due to higher non- deductible expenses in relation to earnings and higher effective state tax rates.

    The Company is undertaking a number of initiatives targeted to improve revenue growth and profitability. In January 2001, the Company announced a new pricing structure for its domestic services that include a rate increase, a shift to zone-based pricing, and a non-scheduled pickup fee. Additionally, a new product, Ground Delivery Service (GDS) is scheduled to be introduced beginning April 2001. This product will leverage the Company's sort and line haul infrastructure and will provide the Company the ability to offer customers both air and ground services. Other initiatives targeted to improve growth include expanded logistics capabilities, e-commerce and marketing alliances, as well as an expansion of the Company's sales force.

    The strength of the U.S. and global economies will have an impact on the results of operations in 2001 and beyond. The consensus forecast of some experts indicates very slow U.S. economic growth in the first half of 2001, with growth improving somewhat in the second half of the year. Looking ahead, it is difficult at this point to project a trend for all of 2001 regarding volume growth, but the Company is anticipating modest shipment growth somewhat commensurate with these forecasts. The Company's focus will continue to be on managing yields and cost per shipment to improve margins, while maintaining the high level of customer service.

FINANCIAL CONDITION:
    CAPITAL EXPENDITURES and financing associated with those expenditures have been the primary factors affecting the financial condition of the Company over the last three years. A significant portion of these expenditures has been related to the acquisition and modification of aircraft and related flight equipment. Over the past two years the Company accelerated its program to acquire and deploy Boeing 767 aircraft - which provide a high level of operating efficiency compared to the DC-8 aircraft. The Company acquired nine 767 aircraft during 2000. Accordingly, total capital expenditures net of dispositions increased to $368 million in 2000 compared to $293 million in 1999 and $283 million in 1998. At the end of 2000, there were 120 aircraft in service, consisting of 17 767s, 30 DC-8s and 73 DC-9s. In addition, there were two 767 and one DC-9 aircraft in modification status. Other capital expenditures in 2000 included vehicles for expansion and replacement, facilities and package handling equipment, leasehold improvements for new or expanded facilities and computer equipment.
    The level of planned capital spending for 2001 has been significantly reduced compared to 2000, primarily as a result of fewer planned aircraft acquisitions. The Company anticipates 2001 capital expenditures of approximately $260 million. This includes aircraft related expenditures of approximately $111 million, including the acquisition of three additional 767 aircraft. Also included is an estimated $30 million for vehicles and facility expansion related to the Ground Delivery Service program being launched in the second quarter. Other expenditures are primarily related to facilities and package handling equipment, leasehold improvements for new or expanded facilities, information systems development and equipment, and replacement vehicles.
    As the Company places additional 767 aircraft into service over the next few years, it may continue to remove additional DC-8's from service. This will depend on factors such as overall capacity requirements and the availability of placing aircraft for charter operations. At December 31, 2000 there were five DC-8 aircraft removed from service.
    The Company has commitments to acquire a total of 30 767 aircraft including the 19 aircraft owned and the three aircraft which will be delivered in 2001. The remaining 767 aircraft are to be delivered in 2002 and 2003. Additional 767 commitments may be made depending on capacity requirements or for operating efficiency purposes.

LIQUIDITY AND CAPITAL RESOURCES:
    A majority of the liquidity for financing capital expenditures in the past three years came from internally generated cash provided by operations. Cash provided by operations net of changes in working capital was approximately $264 million in 2000 compared to $259 million in 1999 and $345 million in 1998. Additional liquidity of $150 million was provided in 2000 from advances under a receivable securitization facility implemented in December 2000. Also, the Company's unsecured revolving bank credit agreement has been used as a source of liquidity for periods between other financing transactions.
    The Company completed a share repurchase of 1 million shares of common stock in June 2000 for approximately $20.7 million, which were added to the Company's treasury stock. The shares were repurchased pursuant to a 4 million stock repurchase program authorized by the Board of Directors in 1998. The Company has no current plans to purchase additional shares under the remaining repurchase authority.
    In July 2000, the Company replaced its revolving bank credit facility with a new agreement expiring June 30, 2005. The revolving bank credit is for a total commitment of $275 million, subject to certain financial covenants. The Company was in compliance with covenants at December 31, 2000. One of these covenants requires a fixed charge coverage ratio of 2.75 or greater to be maintained on a prior four quarter reporting basis. The Company's ratio of fixed charge coverage was approximately 2.95 at December 31, 2000. The fixed charge coverage ratio may not be met for the March 31, 2001 reporting date as a result of the decreased level of operating earnings over recent quarters. The Company is pursuing strategies to ensure the borrowing commitment under the bank revolver facility is maintained. These strategies may include obtaining covenant waivers, renegotiating terms of the agreement, and reducing amounts outstanding under the agreement through other financing options available to the Company.
    The Company also has available $30 million under unsecured, uncommitted money market lines of credit with two banks, used in conjunction with the revolving credit agreement to facilitate settlement and accommodate short-term borrowing fluctuations.
    Reliance on the bank facilities increased during 1999 and 2000 as the result of the level of capital expenditures exceeding cash provided by operating activities. At December 31, 2000, a total of $103.0 million was owed under the revolving bank credit and money market agreements compared to $95.0 million outstanding at December 31, 1999.
    In December 2000, the Company completed an agreement for an accounts receivable securitization facility for $200 million with a term of up to three years. This facility is accounted for as a sale of assets. Therefore, the amount outstanding is not reflected as long-term debt on the balance sheet and is not included in the debt capitalization ratio referred to below. At December 31, 2000, the Company had $150 million of sales proceeds drawn and outstanding under the facility.
    The Company's percentage ratio of total long-term debt to total capitalization was 24.6% at December 31, 2000, compared to 24.7% at December 31, 1999. Anticipated cash flow from 2001 operations and liquidity available under the accounts receivable securitization facility should provide the majority of the liquidity for projected 2001 capital expenditures. Accordingly, the debt-to-capitalization percentage ratio is not expected to change significantly during 2001.
    In management's opinion, the available capacity under the accounts receivable securitization facility and bank credit agreements coupled with anticipated internally generated cash flow from operations should provide adequate flexibility for financing growth in 2001.

INFLATION:
    The rate of inflation has been relatively constant over the past several years, and so has the impact of inflation on the Company's results of operations and financial condition. The effects of inflation have been considered in management's discussion where considered pertinent.

NEW ACCOUNTING PRONOUNCEMENTS:
    In September 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 140, "Accounting for Transfers of Servicing of Financial Assets and Extinguishments of Liabilities", which revises standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but carries over most of the provisions of SFAS No. 125 without reconsideration. SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. SFAS No. 140 is not expected to have a material effect on the Company's financial position or results of operations.
    In 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued and requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS No. 133, as amended, will be implemented in 2001 and is no expected to have a material effect on the Company's financial position or results of operations.

FORWARD LOOKING STATEMENTS:
    Statements contained herein and in other parts of this annual report which are not historical facts are considered forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Such statements relating to future events involve risks and uncertainties which are inherently difficult to predict, including statements regarding future shipment growth and product acceptance, capacity requirements, capital expenditure levels and the adequacy of available financing capacity. Actual results, however, may vary because of competitor pricing initiatives, customer demand for time-definite and deferred services, the ability of management to successfully implement growth and profitability initiatives, economic and regulatory conditions, fuel price volatility and labor disputes.

AIRBORNE, INC. AND SUBSIDIARIES RESPONSIBILITY FOR FINANCIAL REPORTING

    The management of Airborne, Inc. has the responsibility for preparing the accompanying consolidated financial statements of the Company and for their integrity and objectivity. The consolidated financial statements have been prepared by the management of the Company in accordance with accounting principles generally accepted in the United States of America using management's best estimates and judgment where necessary. Financial information appearing throughout this annual report is consistent with that in the consolidated financial statements.
    To help fulfill its responsibility, management maintains a system of internal controls designed to provide reasonable assurance that assets are safeguarded against loss or unauthorized use and that transactions are executed in accordance with management's authorizations and are reflected accurately in the Company's records. The concept of reasonable assurance is based on the recognition that the cost of maintaining a system of internal accounting controls should not exceed benefits expected to be derived from the system. The Company believes that its long-standing emphasis on the highest standards of conduct and ethics set forth in comprehensive written policies serves to reinforce its system of internal controls.
    Deloitte & Touche LLP, independent auditors, audited the consolidated financial statements in accordance with auditing standards generally accepted in the United States of America to independently assess the fair presentation of the Company's financial position results of operations and cash flows.
    The Audit Committee of the Board of Directors, composed entirely of outside directors, oversees the fulfillment by management of its responsibilities over financial controls and the preparation of financial statements. The Audit Committee meets with the independent auditors during the year to review audit plans and audit results. This provides the auditors direct access to the Board of Directors.
    Management recognizes its responsibility to conduct the business of Airborne, Inc. in accordance with high ethical standards. This responsibility is reflected in key policy statements that, among other things, address potentially conflicting outside business interests of Company employees and specify proper conduct of business activities. Ongoing communications and review programs are designed to help ensure compliance with these policies.

/s/ Robert S. Cline                     /s/ Lanny H. Michael
Robert S. Cline                         Lanny H. Michael
Chairman of the Board and               Senior Vice President and
Chief Executive Officer                 Chief Financial Officer

INDEPENDENT AUDITORS' REPORT

Board of Directors
Airborne, Inc. and subsidiaries
Seattle, Washington

    We have audited the accompanying consolidated balance sheets of Airborne, Inc. and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of net earnings, cash flows and shareholders' equity for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
    We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
    In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America.
    As discussed in Note A to the financial statements, the Company changed its method of accounting for major engine overhaul costs on DC-9 aircraft effective January 1, 2000.

/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
February 9, 2001
Seattle, Washington

 

AIRBORNE INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF NET EARNINGS
Year Ended December 31	2000			1999			1998
	(In thousands except per share data)
REVENUES:
Domestic	$	2,895,818		$	2,772,782		$	2,712,344
International		380,132			366,342			361,440
		3,275,950			3,139,124			3,073,784
OPERATING EXPENSES:
Transportation purchased		1,042,541			965,722			944,357
Station and ground operations		1,055,142			975,669			914,919
Flight operations and maintenance		588,582			513,337			477,799
General and administrative		258,149			240,089			248,497
Sales and marketing		82,512			77,196			71,354
Depreciation and amortization		206,406			209,390			184,526
		3,233,332			2,981,403			2,841,452
EARNINGS FROM OPERATIONS		42,618			157,721			232,332
OTHER INCOME (EXPENSE):
Interest, net		(23,425	)		(17,262	)		(12,882	)
Other		4,033			6,929			2,135
EARNINGS BEFORE INCOME TAXES		23,226			147,388			221,585
INCOME TAXES		8,940			56,187			84,300
NET EARNINGS BEFORE CHANGE IN ACCOUNTING	$	14,286		$	91,201		$	137,285
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING		14,206			--			--
NET EARNINGS	$	28,492		$	91,201		$	137,285
EARNINGS PER SHARE:
BASIC-
Before change in accounting	$	.30		$	1.88		$	2.77
Cumulative effect of change in accounting		.29			--			--
Earnings per basic share	$	.59		$	1.88		$	2.77
DILUTED-
Before change in accounting	$	.30		$	1.85		$	2.72
Cumulative effect of change in accounting		.29			--			--
Earnings per diluted share	$	.59		$	1.85		$	2.72
DIVIDENDS PER SHARE	$	.16		$	.16		$	.16
See notes to consolidated financial statements.

 

AIRBORNE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
December 31		2000			1999
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash		$	40,390		$	28,678
Trade accounts receivable,        less allowance of $10,290,000 and $9,640,000			218,685			339,044
Spare parts and fuel inventory			43,231			44,263
Refundable income taxes			21,595			1,679
Deferred income tax assets			28,839			31,950
Prepaid expenses and other			20,809			24,456
TOTAL CURRENT ASSETS			373,549			470,070
PROPERTY AND EQUIPMENT, NET			1,314,758			1,115,712
EQUIPMENT DEPOSITS AND OTHER ASSETS			57,612			57,468
TOTAL ASSETS		$	1,745,919		$	1,643,250
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable		$	180,623		$	142,087
Salaries, wages and related taxes			71,179			65,276
Accrued expenses			83,518			78,755
Income taxes payable			--			3,282
Current portion of debt			477			442
TOTAL CURRENT LIABILITIES			335,797			289,842
LONG-TERM DEBT			322,230			314,707
DEFERRED INCOME TAX LIABILITIES			125,444			99,169
POSTRETIREMENT LIABILITIES			62,360			46,552
OTHER LIABILITIES			37,233			34,773
COMMITMENTS AND CONTINGENCIES (Note H)
SHAREHOLDERS' EQUITY:
Preferred Stock, without par value -        Authorized 5,200,000 shares, no shares issued
Common Stock, par value $1 per share -       Authorized 120,000,000 shares       Issued 51,279,651 and 51,176,018			51,280			51,176
Additional paid-in capital			303,885			298,742
Retained earnings			567,700			546,962
Accumulated other comprehensive income			(136	)		918
			922,729			897,798
Treasury stock, 3,244,526 and 2,491,078 shares, at cost			(59,874	)		(39,591	)
			862,855			858,207
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	1,745,919		$	1,643,250
See notes to consolidated financial statements.

 

AIRBORNE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31	2000			1999			1998
	(In thousands)
OPERATING ACTIVITIES:
Net Earnings	$	28,492		$	91,201		$	137,285
Adjustments to reconcile net earnings to       net cash provided by operating activities:
Cumulative effect of change in accounting		(14,206	)		--			--
Depreciation and amortization		206,406			188,955			168,029
Deferred income taxes		20,679			6,889			9,538
Postretirement obligations		15,808			15,197			13,846
Provision for aircraft engine overhauls		--			20,435			16,497
Other		5,833			529			(1,590	)
CASH PROVIDED BY OPERATIONS		263,012			323,206			343,605
Change in:
Proceeds from receivable securitization facility		150,000			--			--
Receivables		(29,641	)		(15,866	)		(629	)
Inventories and prepaid expenses		4,679			(3,296	)		(1,475	)
Refundable income taxes		(19,916	)		(1,679	)		--
Accounts payable		38,536			(10,913	)		9,034
Accrued expenses salaries and taxes payable		7,384			(32,534	)		(5,532	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		414,054			258,918			345,003
INVESTING ACTIVITIES:
Additions to property and equipment		(372,575	)		(294,319	)		(285,481	)
Dispositions of property and equipment		4,713			1,693			2,598
Proceeds from sale of securities		1,913			4,603			--
Expenditures for engine overhauls		--			(18,735	)		(22,846	)
Other		(16,794	)		(5,453	)		(4,584	)
NET CASH USED BY INVESTING ACTIVITIES		(382,743	)		(312,211	)		(310,313	)
FINANCING ACTIVITIES:
Proceeds (payments) on bank notes, net		8,000			66,000			(1,000	)
Repurchase of common stock		(20,662	)		--			(38,835	)
Principal payments on debt		(442	)		(410	)		(381	)
Proceeds from common stock issuance		1,259			5,480			6,509
Dividends paid		(7,754	)		(7,778	)		(7,829	)
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES		(19,599	)		63,292			(41,536	)
NET INCREASE (DECREASE) IN CASH		11,712			9,999			(6,846	)
CASH AT BEGINNING OF YEAR		28,678			18,679			25,525
CASH AT END OF YEAR	$	40,390		$	28,678		$	18,679
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year -
Interest, net of amount capitalized	$	24,066		$	17,429		$	13,227
Income taxes		10,604			53,628			68,301
Non-cash financing activities -
Contribution of treasury stock to profit sharing plans		4,367			--			341
See notes to consolidated financial statements.

AIRBORNE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
		Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Total
	(In Thousands)
BALANCE at JANUARY 1,1998		$	50,428	$	287,209	$	334,083		$	--		$	(805	)	$	670,915
Comprehensive income:
Net earnings							137,285									137,285
Other comprehensive income, net of tax-
Unrealized securities gains										947						947
Foreign currency translation adjustments										(181	)					(181	)
Total comprehensive income			--		--		137,285			766			--			138,051
Common stock dividends paid							(7,829	)								(7,829	)
Repurchase of common stock													(38,835	)		(38,835	)
Exercise of stock options			391		6,093								25			6,509
Contribution of treasury stock    to profit sharing plans					327								14			341
BALANCE at DECEMBER 31, 1998		$	50,819	$	293,629	$	463,539		$	766		$	(39,601	)	$	769,152
Comprehensive income:
Net earnings							91,201									91,201
Other comprehensive income, net of tax-
Unrealized securities gains										29						29
Foreign currency translation adjustments										123						123
Total comprehensive income			--		--		91,201			152			--			91,353
Common stock dividends paid							(7,778	)								(7,778	)
Exercise of stock options			357		5,113								10			5,480
BALANCE at DECEMBER 31, 1999		$	51,176	$	298,742	$	546,962		$	918		$	(39,591	)	$	858,207
Comprehensive income:
Net earnings							28,492									28,492
Other comprehensive income, net of tax-
Unrealized securities losses										(769	)					(769	)
Foreign currency translation adjustments										(285	)					(285	)
Total comprehensive income			--		--		28,492			(1,054	)		--			27,438
Common stock dividends paid							(7,754	)								(7,754	)
Repurchase of common stock													(20,662	)		(20,662	)
Exercise of stock options			104		1,155											1,259
Contribution of treasury stock    to profit sharing plans					3,988								379			4,367
BALANCE at DECEMBER 31, 2000		$	51,280	$	303,885	$	567,700		$	(136	)	$	(59,874	)	$	862,855
See notes to consolidated financial statements.

AIRBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Three Years Ended December 31, 2000

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REORGANIZATION
    Effective December 26, 2000, the Company reorganized its corporate structure through the creation of a new holding company, Airborne, Inc. (the Company). Pursuant to a reorganization agreement, Airborne Express, Inc., (formerly Airborne Freight Corporation), ABX Air, Inc., and Sky Courier, Inc. (formerly Airborne Forwarding Corporation) became wholly- owned subsidiaries of Airborne, Inc. Holders of outstanding Airborne Freight Corporation common shares, $1.00 par value, automatically became holders of Airborne, Inc. common shares at the same par value.

NATURE OF OPERATIONS
    The Company's revenues are primarily derived from domestic and international transportation of shipments. The Company provides door-to- door express delivery of small packages and documents throughout the United States and to most foreign countries. The Company also acts as an international and domestic freight forwarder for shipments of any size. Most domestic shipments are transported on the Company's own airline and a fleet of ground transportation vehicles through its Company-owned airport and central sorting facilities, or one of nine regional hubs. International shipments are transported utilizing a combination of the Company's domestic network, commercial airline lift capacity, and through a network of offshore Company offices and independent agents.
    As of December 31, 2000, the Company had approximately 10,600 employees (44% of total employees), including approximately 800 pilots, employed under collective bargaining agreements with various locals of the International Brotherhood of Teamsters and Warehousemen. The pilots are covered by an agreement that becomes amendable on July 31, 2001. Most labor agreements covering the Company's ground personnel expire in either 2003 or 2004. The Company has not experienced any significant disruptions from labor disputes in the past.

PRINCIPLES OF CONSOLIDATION
    The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions are eliminated in consolidation.

USE OF ESTIMATES
    The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements. Changes in these estimates and assumptions may have a material impact on the financial statements.

CASH
    The Company has a cash management system under which a cash overdraft exists for uncleared checks in the Company's primary disbursement accounts. The cash amount in the accompanying financial statements represents balances in other accounts prior to being transferred to the primary disbursement accounts. Uncleared checks of $51,738,000 and $43,246,000 are included in accounts payable at December 31, 2000 and 1999, respectively.

SPARE PARTS AND FUEL INVENTORY
    Spare parts are stated at average cost and fuel inventory is stated at cost on a first-in, first-out basis.

PROPERTY AND EQUIPMENT
    Property and equipment is stated at cost. The cost and accumulated depreciation of property and equipment disposed of are removed from the accounts with any related gain or loss reflected in earnings from operations.

For financial reporting purposes, depreciation of property and equipment is provided on a straight-line basis over the asset's useful life or lease term as follows:

Flight equipment                                    5 to 18 years
Buildings, runways, and leasehold improvements      5 to 40 years
Package handling and ground support equipment       3 to 10 years
Vehicles and other equipment                        3 to  8 years

    DC-8 and DC-9 aircraft generally carry residual values of 10% and 15% of asset cost, respectively. All other property and equipment have no assigned residual values.
    As of December 31, 2000, residual values on three DC-8 aircraft that were removed from service were adjusted to fair value in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". During 2000, an impairment loss of $3,956,000 was recorded and included in depreciation and amortization expense in the consolidated statements of net earnings. The fair values of the aircraft were adjusted to their estimated parts value. The fair value approximated net book value on two additional DC-8 aircraft which had been removed from service as of December 31, 2000.
    Major engine overhauls as well as ordinary engine maintenance and repairs for DC-8 and 767 aircraft are performed by third-party service providers under long-term contracts. Service costs under the contracts are based upon hourly rates for engine usage and are charged to expense in the period utilization occurs. Beginning in 2000, major engine overhauls for DC- 9 aircraft are expensed as incurred. As discussed in "Change in Accounting" below, prior to 2000 the Company provided accruals for costs in advance of the next scheduled overhaul. The provision for engine overhauls was included in depreciation and amortization expense in prior years.

CAPITALIZED INTEREST
    Interest incurred during the construction period of certain facilities and on aircraft purchase and modification costs is capitalized until the date the asset is placed in service as an additional cost of the asset. Capitalized interest was $6,770,000, $3,969,000 and $5,850,000 for 2000, 1999 and 1998, respectively.

INCOME TAXES
    The Company uses the asset and liability method of accounting for income taxes. Deferred income taxes are provided for temporary differences between the timing of reporting certain revenues and expenses for financial versus tax purposes. Deferred taxes are measured using provisions of currently enacted tax laws. Tax credits are accounted for as a reduction of income taxes in the year in which the credit originates.

FUEL CONTRACTS
    The Company has, in the past, utilized fuel contract hedges with financial institutions to limit its exposure to volatility in jet fuel prices. Under terms of the contracts, the Company either made or received payments if the market price of heating oil, as determined by an index of the monthly NYMEX Heating Oil futures contracts, was lower than or exceeded certain prices agreed to between the Company and the financial institutions. Settlements were made in cash and recorded in the period of settlement as either an increase or decrease to fuel expense.
    The Company had no fuel contract hedges outstanding at December 31, 2000. There were no settlement payments made on fuel contract hedges during 2000. Settlement payments of $1,886,000 and $7,915,000 were made during 1999 and 1998, respectively. The Company may enter into fuel contract hedges in future periods depending on pricing and market conditions.
    The Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". As amended by SFAS No. 137, this statement will be effective for fiscal year 2001. SFAS No. 138, an additional amendment, and SFAS No. 133 require an entity to recognize all derivatives as either assets or liabilities in the consolidated balance sheets and measure those instruments at fair value.
    Under the cash flow hedge provisions of SFAS Nos. 133 and 138, the Company will be required to record all outstanding fuel contracts at fair value, with corresponding changes in fair value recorded as a component of Other Comprehensive Income if the hedges are determined to be effective. Upon implementation in 2001, the Company does not anticipate the provisions of SFAS Nos. 133 and 138 will have a material effect on its financial condition or results of operations.

COMPREHENSIVE INCOME
    Comprehensive income includes net income and other comprehensive income which includes changes in equity arising during the period from holding investments in marketable securities and foreign joint ventures.

REVENUE RECOGNITION
    Domestic revenues and most domestic operating expenses are recognized when shipments are picked up from the customer. International revenues and direct air carrier expenses are recognized in the period when shipments are tendered to a carrier for transport to a foreign destination. Domestic and international delivery costs are recognized in the period incurred. The net revenue resulting from existing recognition policies does not materially differ from that which would be recognized on a delivery date basis.

CHANGE IN ACCOUNTING
    Effective January 1, 2000, the Company changed its method of accounting for major engine overhaul costs on DC-9 aircraft from the accrual method to the direct expense method where costs are expensed as incurred. Previously, these costs were accrued in advance of the next scheduled overhaul based upon engine usage and estimates of overhaul costs. The Company believes that this new method is preferable because it is more consistent with industry practice and appropriate given the relatively large size of its DC-9 fleet.
    The cumulative effect of this change in accounting resulted in a non- cash credit in 2000 of $14,206,000 net of taxes, or $.29 per diluted share. Excluding the cumulative effect, this change increased net earnings for 2000 by approximately $3,687,000, net of tax or $.08 per diluted share. If the accounting change had been retroactively applied, net earnings and earnings per diluted share would have been as follows (in thousands except per share data):

Year Ended December 31                                1999         1998
                                                      ----         ----
As reported:
     Net Earnings                                   $91,201     $ 137,285
     Earnings per diluted share                     $  1.85     $    2.72

Proforma:
     Net Earnings                                   $94,828     $ 135,819
     Earnings per diluted share                     $  1.92     $    2.69

RECLASSIFICATIONS
    Certain amounts for prior years have been reclassified in the consolidated financial statements to conform to the classification used in 2000.

NOTE B - FAIR VALUE INFORMATION
The carrying amounts and related fair values of the Company's financial instruments are as follows (in thousands):

December 31                             2000                  1999
- -----------                             ----                  ----
                                Carrying       Fair   Carrying       Fair
                                  Amount      Value     Amount      Value
                                  ------      -----     ------      -----
Marketable securities           $ 18,747   $ 18,747   $ 19,619   $ 19,619
Long-term debt                   322,707    306,078    315,149    314,804

    Marketable securities consist primarily of commingled investment funds that may be used for funding non-qualified pension plan obligations. These securities are considered available-for-sale securities for financial reporting purposes and are classified with equipment deposits and other assets on the consolidated balance sheets. Fair value for these investments is based on quoted market prices for the securities underlying the investment funds or the same securities. Unrealized losses on these securities, which are included in other comprehensive income, were $1,248,000 for 2000. Unrealized gains on these securities were $47,000 and $1,540,000 for 1999 and 1998, respectively. Realized gains recognized in 2000, 1999 and 1998 were $1,117,000, $1,268,000 and $1,531,000, respectively.
    Discussion regarding the fair value of the Company's long-term debt and fuel contracts is disclosed in the respective notes to the consolidated financial statements. Carrying amounts for cash, trade accounts receivable and current liabilities approximate fair value.

NOTE C - ACCOUNTS RECEIVABLE
Accounts receivable consist of the following (in thousands):

December 31                                            2000         1999
                                                       ----         ----
Retained interest in securitized accounts
receivable:
     Securitized trade accounts receivable          $340,838     $      -
Less: Proceeds from sale of undivided interest in
receivables                                         (150,000)           -
Less: Allowance for doubtful accounts                 (8,610)           -
                                                    --------     --------
     Retained interest in securitized accounts
receivable, net                                      182,228            -

Other accounts receivable:
     Other trade accounts receivable                  38,137      348,684
Less: Allowance for doubtful accounts                 (1,680)      (9,640)
                                                    --------     --------
Other trade accounts receivable, net                  36,457      339,044
                                                    --------     --------
Accounts receivable on consolidated balance sheets  $218,685     $339,044

    The Company entered into an agreement with a financial institution in December 2000 to finance the sale, on a continuous basis, of an undivided interest in all eligible U.S. trade accounts receivables through an accounts receivable securitization facility. This financing agreement is accounted for as a sale of assets under the provisions of SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
    To facilitate the sales, the Company formed Airborne Credit, Inc. ("ACI"), a wholly-owned, special purpose, bankruptcy remote subsidiary consolidated by the Company. The Company transfers substantially all of its U.S. trade account receivables to ACI, who's sole purpose, in turn, is to sell an undivided interest in the receivables to an unrelated third party and receive proceeds of up to $200,000,000. The facility has a committed term of three years, subject to annual renewal of a separate liquidity facility. The Company retains the servicing of the receivables transferred to ACI.
    To the extent that customers default on the receivables, losses will first reduce the Company's retained interest in the receivables prior to reducing the interests sold through the facility. Any increase in actual defaults above the recorded amount of allowance for doubtful accounts would decrease the value of the Company's retained interest.
    Upon the sale of the undivided interest in the receivables, the Company incurs a liability to fund the purchaser's costs of financing the proceeds. This liability is recorded at the time of sale and is estimated based on projected financing costs over the projected life of the receivable interests sold. Discounts associated with the sale of receivables, primarily related to recording the obligation to fund the purchaser's costs, were $96,000 for 2000 and are included in other expense in the consolidated statements of net earnings. The Company does not believe any difference between the projected and actual financing costs would have a material effect on the financial condition or results of operations.
    In September 2000, the Financial Accounting Standards Board issued SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities", which revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures but carries over most of the provisions of SFAS No. 125 without reconsideration. SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. SFAS No. 140 is not expected to have a material effect on the Company's financial position or its results of operations.

NOTE D - PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):

December 31                                           2000         1999
- -----------                                           ----         ----
Flight equipment                                   $1,871,137   $1,584,089
Land, buildings and leasehold improvements            269,723      246,004
Package handling and ground support equipment         200,796      175,081
Vehicles and other equipment                          278,585      268,161
                                                   ----------   ----------
                                                    2,620,241    2,273,335
Accumulated depreciation and amortization          (1,305,483)  (1,157,623)
                                                   ----------   ----------
                                                   $1,314,758   $1,115,712
                                                   ==========   ==========

NOTE E - ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):

December 31                                           2000         1999
- -----------                                           ----         ----
Insurance                                          $40,556      $28,377
Unearned revenues                                   17,176       15,781
Property and other taxes                             9,725        8,815
Other retirement plans                               7,000        3,584
Interest                                             2,738        2,762
Profit sharing retirement plan                         380       10,747
Aircraft lease payments                                  -        2,796
Other                                                5,943        5,893
                                                   -------      -------
                                                   $83,518      $78,755
                                                   =======      =======

NOTE F - INCOME TAXES
Deferred income tax assets and liabilities consist of the following (in thousands):

December 31                                           2000         1999
- -----------                                           ----         ----
Employee benefits                                  $ 13,715     $ 19,025
Insurance                                            12,733        9,466
Bad debts, sales reserves and other                   2,391        3,459
                                                   --------     --------
Current net deferred income tax assets               28,839       31,950
                                                   --------     --------
Depreciation                                        146,677      122,974
Employee benefits                                   (17,062)     (10,033)
Insurance                                           (12,874)     (11,788)
Capitalized systems development                       3,671            -
Aircraft engine overhaul accrual                          -       (6,163)
Other                                                 5,032        4,179
                                                   --------     --------
Noncurrent net deferred income tax liabilities      125,444       99,169
                                                   --------     --------
Net deferred income tax liabilities                $ 96,605     $ 67,219
                                                   ========     ========

Income taxes consist of the following (in thousands):

Year Ended December 31                    2000        1999         1998
- ----------------------                    ----        ----         ----
Current:
   Federal                              $(11,785)    $44,215      $66,372
   State                                    (210)      4,920        7,800
   Foreign                                   256         163          590
                                         -------     -------      -------
                                         (11,739)     49,298       74,762
Deferred:
   Depreciation                           23,702      13,845       11,425
   Aircraft engine overhaul accrual        6,163        (637)       2,180
   Capitalized systems development         3,671           -            -
   Alternative Minimum Tax credit           (639)          -       11,761
   Employee benefits                      (1,684)     (7,230)      (6,240)
   Insurance accruals                     (4,352)     (1,794)      (2,178)
   Cumulative effect of change in
    accounting principle                  (8,707)          -            -
   Union pension benefits                      -           -       (8,225)
   Other                                   2,525       2,705          815
                                         -------     -------      -------
                                          20,679       6,889        9,538
                                         -------     -------      -------
                                         $ 8,940     $56,187      $84,300
                                         =======     =======      =======

     The income tax rate on earnings from continuing operations differed
from the Federal statutory rate as follows:

Year Ended December 31                     2000        1999        1998
- ----------------------                     ----        ----        ----
Taxes computed at statutory rate of 35%    35.0%       35.0%       35.0%
State and foreign income taxes,
    net of Federal benefit                  3.0%        2.2%        2.3%
Tax effect of nondeductible expenses        6.7%        1.1%        0.7%
Tax credits                                (3.5%)         -           -
Other                                      (2.7%)      (0.2%)         -
                                         -------     -------     -------
                                           38.5%       38.1%       38.0%
                                         =======     =======     =======

NOTE G - LONG-TERM DEBT
Long-term debt consists of the following (in thousands):

December 31                                            2000         1999
- -----------                                            ----         ----
Revolving credit notes payable to banks, effective
rate of 7.42% as of December 31, 2000              $ 75,000     $ 95,000
Money market lines of credit                         28,000           --
Senior notes, 8.875%, due December, 2002            100,000      100,000
Senior notes, 7.35%, due September, 2005            100,000      100,000
Refunding revenue bonds, effective rate of 4.95% as
of December 31, 2000, due June 2011                  13,200       13,200
Other                                                 6,507        6,949
                                                   --------     --------
                                                    322,707      315,149
  Less current portion                                  477          442
                                                   --------     --------
                                                   $322,230     $314,707
                                                   ========     ========

    The Company has a revolving bank credit agreement providing for a total commitment of $275,000,000. The agreement expires June 30, 2005. Interest rates for borrowings outstanding are generally determined by maturities selected and prevailing market conditions. The Company was in compliance with covenants of the revolving credit agreement during 2000, 1999 and 1998, including net worth restrictions that limit the payment of dividends ($142,173,000 of retained earnings was not restricted at December 31, 2000). One of the covenants requires a fixed charge coverage ratio of 2.75 or greater to be maintained on a prior four quarter reporting basis. The Company's ratio of fixed charge coverage was approximately 2.95 at December 31, 2000. The fixed charge coverage ratio may not be met for the March 31, 2001 reporting date as a result of the decreased level of operating earnings over recent quarters. The Company is pursuing strategies to ensure the borrowing commitment under the bank revolver facility is maintained. These strategies may include obtaining covenant waivers, renegotiating terms of the agreement, and reducing amounts outstanding under the agreement through other financing options available to the Company.
    The Company has available $30,000,000 of financing under uncommitted money market lines of credit with several banks. These facilities bear interest at rates that vary with the banks' cost of funds and are typically less than the prevailing bank prime rate. The average interest rate on these borrowings was 7.05% for 2000. These credit lines are used in conjunction with the revolving credit agreement to facilitate settlement and accommodate short-term borrowing fluctuations.
    The Company classified the borrowings outstanding under the money market lines of credit as long-term as of December 31, 2000. The Company had the intent and ability at that date to refinance these borrowings under the revolving credit agreement.
    The Company's tax-exempt airport facilities refunding bonds carry no sinking fund requirements and bear interest at weekly adjustable rates. The average interest rate on these borrowings was 4.2% during 2000. Payment of principal and interest is secured by an irrevocable bank letter of credit that is collateralized by a mortgage on certain airport properties which had a net carrying value of $46,343,000 at December 31, 2000.
    The scheduled annual principal payments on long-term debt for the next five years are $477,000, $100,513,000, $553,000, $596,000 and $203,643,000 for 2001 through 2005, respectively.
    The fair value information shown in Note B reflects values for the Company's senior notes based on quoted market prices for the same issues. The carrying value of the Company's remaining long-term financial debt instruments approximates fair value primarily because of the repricing frequency of the instruments.

NOTE H - COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
    The Company is obligated under various long-term operating lease agreements for certain equipment and for a substantial portion of its facilities. These leases expire at various dates through 2016. Rental expense for 2000, 1999 and 1998 was $95,559,000, $98,416,000 and $104,816,000, respectively.

Rental commitments under long-term operating leases at December 31, 2000 total $415,936,000 and are payable as follows (in thousands):

                                                   Facilities    Equipment
                                                   ----------    ---------
2001                                                 $ 76,350       $3,167
2002                                                   73,395        2,932
2003                                                   61,176        1,785
2004                                                   51,304          613
2005                                                   38,139           31
2006 and beyond                                       107,044            -

COMMITMENTS
    The Company has entered into firm agreements to purchase 11 used Boeing 767s and related freighter conversion kits at various dates through 2003. At December 31, 2000, cash deposits of $2,743,000 had been made toward these purchases. Additional deposits and payments for all aircraft acquisitions will approximate $67,321,000, $85,243,000 and $75,400,000 for 2001 through 2003, respectively. There are currently no aircraft related commitments extending beyond 2003.

CONTINGENCIES
    In the normal course of business, the Company has various legal claims and other contingent matters outstanding. Management believes that any ultimate liability arising from these actions would not have a material adverse effect on the Company's financial condition or results of operations as of and for the year ended December 31, 2000.

NOTE I - PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
    The Company sponsors defined benefit and defined contribution pension plans and postretirement healthcare plans. These plans are generally provided to employees who are not covered by multi-employer plans to which the Company contributes under terms of various collective bargaining agreements.

Information regarding the Company's qualified defined benefit pension plans and postretirement healthcare plans is as follows (in thousands):

                                                                    Postretirement
                                             Pension Plans         Healthcare Plans
                                             -------------         ----------------
Year Ended December 31                      2000        1999        2000       1999
- ----------------------                      ----        ----        ----       ----
Reconciliation of benefit obligation:
   Obligation as of January 1            $ 111,902    $111,635   $  8,374   $ 9,234
   Service cost                             17,309      11,218        948       935
   Interest cost                            13,379       7,578        700       540
   Benefits paid                            (1,495)       (999)      (293)     (246)
   Actuarial gain (loss)                    26,755     (17,762)     1,286    (2,089)
   Plan transfers                                -         232          -         -
   Plan amendments                          52,755           -        110         -
                                         ---------    --------   --------   -------
   Obligation as of December 31          $ 220,605    $111,902   $ 11,125   $ 8,374
                                         =========    ========   ========   =======
Reconciliation of fair value of plan
assets:
   Plan assets as of January 1           $  94,511    $ 78,237   $      -   $     -
   Actual return on plan assets             (1,353)     13,309          -         -
   Employer contributions                   10,904       3,732        293       246
   Benefits paid                            (1,495)       (999)      (293)     (246)
   Plan transfers                                -         232          -         -
                                         ---------    --------   --------   -------
   Plan assets as of December 31         $ 102,567    $ 94,511   $      -   $     -
                                         =========    ========   ========   =======
Funded status:
   Funded status as of December 31       $(118,038)   $(17,391)  $(11,125)  $(8,374)
   Unrecognized prior service cost (income) 46,522      (1,625)      (438)     (668)
   Unrecognized net actuarial loss (gain)   28,691      (7,153)     1,279        28
   Unrecognized transition amount                -          30          -         -
                                         ---------     --------  --------   -------
   Accrued benefit liabilities           $ (42,825)   $(26,139)  $(10,284)  $(9,014)
                                         =========     ========  ========   =======

    Accrued expenses on the consolidated balance sheets include accrued qualified defined benefit pension plan liabilities of $7,000,000 and $3,584,000 as of December 31, 2000 and 1999, respectively. Long-term postretirement liabilities include postretirement healthcare and remaining qualified defined benefit pension plan liabilities of $46,109,000 and $31,569,000 as of December 31, 2000 and 1999, respectively, which do not require funding in the next year.

Net periodic benefit cost consists of the following components (in thousands):

                                                                          Postretirement
                                            Pension Plans                Healthcare Plans
                                            -------------                ----------------
Year Ended December 31               2000       1999       1998       2000      1999      1998
- ----------------------               ----       ----       ----       ----      ----      ----
Service cost                      $17,309    $11,218    $ 9,775    $   948   $   935   $   954
Interest cost                      13,379      7,578      6,403        700       540       529
Expected return on plan assets     (7,926)    (6,390)    (5,363)        --        --        --
Net amortization and deferral       4,828      1,115      1,584       (101)      (73)       29
                                  -------    -------    -------    -------   -------   -------
   Net periodic benefit cost      $27,590    $13,521    $12,399    $ 1,547   $ 1,402   $ 1,512
                                  =======    =======    =======    =======   =======   =======

Assumptions used in determining pension and postretirement healthcare obligations were as follows:

                                                                             Postretirement
                                                  Pension Plans             Healthcare Plans
                                                  -------------             ----------------
                                            2000      1999      1998     2000     1999     1998
                                            ----      ----      ----     ----     ----     ----
Discount rate                               7.25%     7.75%     6.75%    7.25%    7.75%   6.75%
Expected return on plan assets              8.00%     8.00%     8.00%      --       --       --
Rate of compensation increase (pilots)      6.50%     6.50%     6.50%      --       --       --
Rate of compensation increase (non-pilots)  5.00%     5.00%     5.00%      --       --       --

    Effective January 1, 2000, the Company amended its qualified retirement plans that cover substantially all employees not covered under collective bargaining agreements. Retirement income has historically been provided to employees through the coordination of benefits accumulated and funded through a defined benefit plan and a defined contribution profit sharing plan. Generally, benefit levels calculated under defined benefit plan formulas are offset by amounts contributed and earned in an employee's profit sharing account. The amendments adopted in 2000 provided for an increase in retirement income levels provided under the defined benefit plan through formula changes that increased the percentage applied to an employee's salary to determine the level of retirement benefit and removed provisions that limited the maximum years of allowable service credit. These changes are effective for past and future years of accumulated service with the Company. Additionally, the Company amended its defined contribution profit sharing plan to discontinue future contributions to employee's accounts. Previous contributions and earnings accumulated under the profit sharing plan prior to the amendments as well as future account earnings will continue to be coordinated with benefits accrued under the defined benefit plan.
    The effect of the amendments is to increase pension expense and projected benefit obligations provided under the defined benefit plans and discontinue contributions to the profit sharing plan, other than for the Company's pilots. The Company's funding policy provides for annual contributions to pension trusts at least equal to amounts required by ERISA.
    The Company's qualified defined benefit pension plans had aggregate accumulated benefit obligations of $106,863,000 compared to plan assets of $102,567,000. All qualified defined benefit plans had plan assets in excess of accumulated benefit obligations as of December 31, 1999.
    The Company also sponsors several non-qualified defined benefit pension plans. The accumulated benefit obligation of these plans was $18,379,000 and $13,811,000 as of December 31, 2000 and 1999, respectively. Postretirement liabilities include accruals relating to these plans of $16,039,000 and $14,611,000 as of December 31, 2000 and 1999, respectively. The Company has invested in certain commingled investment funds that may be used for funding non-qualified pension plan obligations.
    The assumed healthcare cost trend rate used in measuring postretirement healthcare benefit costs was 8.5% for 2000, decreasing each year to a 5.5% annual growth rate in 2003 and thereafter. A 1% increase or decrease in the assumed healthcare cost trend rate for each year would not have a material effect on the accumulated postretirement benefit obligation or cost as of or for the year ended December 31, 2000. Postretirement healthcare plan obligations have not been funded.
    The Company maintains defined contribution capital accumulation and profit sharing plans. Capital accumulation plans (401K) are funded by both voluntary employee salary deferrals of up to 16% of annual compensation and by employer matching contributions on employee salary deferrals of up to 6% of annual compensation. In connection with the amendments to the Company's qualified defined benefit retirement plans, except for the pilots, accruals for contributions to the profit sharing plans were discontinued beginning in 2000. Prior to 2000, a basic formula had been followed for contributions of 7% of earnings before taxes up to a specific profit level plus 14% of earnings in excess of that level. The profit sharing plans hold 1,166,725 shares of the Company's common stock at December 31, 2000, representing 2% of outstanding shares. Expense for these plans is as follows (in thousands):

Year Ended December 31               2000       1999       1998
- ----------------------               ----       ----       ----
Capital accumulation plans         $ 7,970    $ 8,009    $ 7,375
Profit sharing plans                   380     10,747     20,407
                                   -------    -------    -------
   Defined contribution plans      $ 8,350    $18,756    $27,782
                                   =======    =======    =======

    The Company contributes to multi-employer defined benefit pension plans and health and welfare plans for substantially all employees covered under collective bargaining agreements. Expense for these plans is as follows (in thousands):

Year Ended December 31                           2000       1999      1998
- ----------------------                           ----       ----      ----
Multi-employer defined benefit pension plans  $45,668    $41,062   $37,309
Multi-employer health and welfare plans        49,113     44,415    41,473
                                              -------    -------   -------
Multi-employer plans                          $94,781    $85,477   $78,782
                                              =======    =======   =======

NOTE J - STOCK OPTIONS
    The Company has three shareholder approved stock option plans. Two of these plans, approved by the shareholders in 1994 and 1998 (the "1994 Plan" and "1998 Plan"), reserve shares of the Company's common stock for issuance to officers and key employees. Options granted under the 1994 Plan vest over a three year period. Options granted under the 1998 Plan include options which vest over a four year period and performance options issued to the Company's executive officers which vest upon attainment of specified market price targets of the Company's common stock. A third plan, the 2000 Directors' Stock Option Plan, provides for annual grants to the Company's non-employee directors of 2,000 shares that vest fully on the date of grant. Options granted under these three plans are issued at the fair market value of the Company's stock on the date of grant. A total of 7,707,250 shares may be granted under these plans. There were 4,086,575 shares available for future grants as of December 31, 2000.

A summary of the Company's stock option activity and related information is as follows:

Year Ended December 31               2000         1999        1998
- ----------------------               ----         ----        ----
Outstanding at beginning of year 2,819,847   2,516,417   2,189,014
Granted                            746,200     738,410     766,280
Exercised                         (116,485)   (411,100)   (423,697)
Canceled                          (117,245)    (23,880)    (15,180)
                                 ---------   ---------   ---------
Outstanding at end of year       3,332,317   2,819,847   2,516,417
                                 =========   =========   =========
Exercisable at end of year       1,977,390   1,428,574   1,297,300
                                 =========   =========   =========

Weighted average option price information is as follows:

Year Ended December 31              2000        1999        1998
- ----------------------              ----        ----        ----
Outstanding at beginning of year  $25.35      $19.38      $12.22
Granted                            18.94       38.13       34.90
Exercised                          10.74       11.21       10.44
Canceled                           25.07       35.30       20.07
Outstanding at end of year         24.44       25.35       19.38
Exercisable at end of year         21.65       17.31       14.54

Information related to the number of options outstanding, weighted average price per share and remaining life of significant option groups outstanding at December 31, 2000 is as follows:

                       Outstanding                     Exercisable
              ----------------------------    ----------------------------
                                    Life                            Life
 Price Range   Number     Price   in Years     Number     Price   in Years
 -----------   ------     -----   --------     ------     -----   --------
$11.06-$11.56   345,572  $11.37     2.7         345,572  $11.37     2.7
$13.00-$18.94 1,573,967   16.40     6.8         941,917   14.70     5.3
$31.06-$38.13 1,412,778   36.58     7.5         689,901   36.28     7.4

    The Company has elected to follow APB Opinion No. 25 in accounting for its stock option plans. No compensation expense was recorded in 2000 or 1999. In 1998, compensation expense of $1,198,000 was recognized upon attainment of market price targets as specified under the grant provisions of the performance options. Had expense been measured under the fair value provisions of SFAS No. 123, the Company's net earnings and earnings per diluted share for 2000, 1999 and 1998 would have been reduced to the pro forma amounts as follows (in thousands except per share data):

Year Ended December 31                            2000      1999      1998
- ----------------------                            ----      ----      ----
Net Earnings:
     As reported                               $ 28,492  $ 91,201   $137,285
     Pro forma                                   23,124    85,510    134,230

Earnings Per Diluted Share:
     As reported                               $    .59  $   1.85   $   2.72
     Pro forma                                      .48      1.74       2.65

The weighted average fair value for options granted in 2000, 1999 and 1998 computed utilizing the Black-Scholes option-pricing model, was $10.61, $17.21 and $16.83 respectively. Significant assumptions used in the estimation of fair value and compensation expense are as follows:

Year Ended December 31                  2000         1999         1998
- ----------------------                  ----         ----         ----
Weighted expected life (years)           9.6          6.2          7.4
Weighted risk-free interest rate         6.6%         4.8%         5.5%
Weighted volatility                     41.0%        41.0%        38.8%
Dividend yield                           0.9%         0.4%         0.5%

NOTE K - EARNINGS PER SHARE
Net earnings from continuing operations and average shares used in basic and diluted earnings per share calculations were as follows (in thousands except per share data):

Year Ended December 31                   2000         1999         1998
- ----------------------                   ----         ----         ----
NET EARNINGS:
Net earnings from continuing
operations before cumulative effect
of change in accounting principle    $ 14,286     $ 91,201     $137,285
                                     ========     ========     ========
SHARES:
   Basic weighted average shares
   outstanding                         48,396       48,596       49,620
      Stock options                       251          673          941
                                     --------     --------     --------
   Diluted weighted average shares
   outstanding                         48,647       49,269       50,561
                                     ========     ========     ========
EARNINGS PER SHARE:
   Basic                             $    .30     $   1.88     $   2.77
   Diluted                                .30         1.85         2.72
                                     ========     ========     ========

    The above calculations of earnings per diluted share for 2000, 1999 and 1998 exclude 2,130,740, 1,361,000 and 528,000, respectively, of common shares issuable under stock option plans because the options' exercise price was greater than the average market price of the common shares.

NOTE L - SEGMENT INFORMATION
    The Company has organized its business into two reportable operating segments. The domestic segment derives its revenues from the door-to-door delivery of small packages and documents throughout the United States, Canada and Puerto Rico. Domestic operations are supported principally by Company operated aircraft and facilities. The international segment derives its revenues from express door-to-door delivery and a variety of freight services. International revenues are recognized on shipments where the origin and/or destination is outside of locations supported by the domestic segment. The Company uses a variable cost approach in delivering international services through use of existing commercial airline capacity in connection with its domestic network and independent express and freight agents in locations not currently served by Company-owned foreign operations.

The following is a summary of key segment information (in thousands):

                                     Domestic    International      Total
                                     --------    -------------      -----
2000
- ----
Revenues                           $2,895,818     $  380,132     $3,275,950
Depreciation and amortization         204,913          1,493        206,406
Segment earnings from operations       49,915         (7,297)        42,618
Segment assets                      1,661,075         84,844      1,745,919
Expenditures for property
   and equipment                      370,317          2,258        372,575

1999
- ----
Revenues                           $2,772,782     $  366,342     $3,139,124
Depreciation and amortization         207,902          1,488        209,390
Segment earnings from operations      156,637          1,084        157,721
Segment assets                      1,569,367         73,883      1,643,250
Expenditures for property
   and equipment                      292,130          2,189        294,319

1998
- ----
Revenues                           $2,712,344     $  361,440     $3,073,784
Depreciation and amortization         183,147          1,379        184,526
Segment earnings from operations      230,831          1,501        232,332
Segment assets                      1,428,956         72,621      1,501,577
Expenditures for property
   and equipment                      281,571          3,910        285,481

    International operations are supported in the United States by pickup and delivery, customer service and airline capabilities provided by the domestic segment. Management allocates these costs, generally on a per shipment basis, to the international segment.
    Management considers interest expense, other income and income taxes as corporate items and, accordingly, does not allocate these amounts to the operating segments. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.
    A substantial portion of international revenue is associated with shipments originating within the United States ($211,835,000 in 2000, $234,087,000 in 1999 and $256,259,000 in 1998). Long lived assets located within the United States and associated with the international segment were $6,382,000, $6,792,000 and $6,274,000 as of December 31, 2000, 1999 and 1998, respectively.

NOTE M - GAIN ON SALE OF SECURITIES
    In June 2000, a gain of $1,912,000 was recorded from the sale of common shares of Metropolitan Life Insurance Company ("Metropolitan"). As a policyholder for certain employee benefit programs, these shares were allocated to the Company and sold in connection with the demutualization of Metropolitan. The gain was recorded in other income on the consolidated statements of net earnings.
    The Company is a participating member of SITA, a cooperative of major airline companies, which primarily provides data communication services to the air transport industry. Through this membership the Company holds depository certificates in The SITA Foundation ("Foundation") whose principal asset is an equity interest in Equant, N.V. ("Equant"), an international data network services company whose stock is traded publicly on the New York Stock Exchange under the symbol ENT. In December 1999, the Foundation sold a portion of its interest in Equant through a public offering and distributed proceeds pro rata to the certificate holders that elected to participate in the offering. As part of this sale, the Company sold 34% of its interest in Equant and recognized a pre-tax gain of approximately $4,600,000 that was included in other income on the consolidated statements of net earnings.
    The Company has remaining restricted depository certificates in the Foundation that may, in the future, become convertible into 103,351 shares of Equant. As convertibility is contingent on future share offerings by the Foundation, no amount has been recorded on the consolidated balance sheets as of December 31, 2000 and 1999. The Company has no cost basis in the depository certificates, although the converted fair value of the remaining certificates was approximately $2,700,000 and $11,600,000 at December 31, 2000 and 1999, respectively.

NOTE N - OTHER COMPREHENSIVE INCOME
Other comprehensive income includes the following transactions and tax effects for the years ended December 31, 2000, 1999 and 1998, respectively (in thousands):

                                                     Income Tax
                                            Before    (Expense)    Net of
                                             Tax     or Benefit     Tax
                                            -------   --------     ------
2000
- ----
Unrealized securities losses arising
   during the period                       $  (132)    $    50    $   (82)
Less: Reclassification adjustment for
   gains realized in net income             (1,117)        430       (687)
                                           -------     -------    -------
Net unrealized securities losses            (1,249)        480       (769)
Foreign currency translation adjustments      (465)        180       (285)
                                           -------     -------    -------
Other comprehensive income                 $(1,714)    $   660    $(1,054)
                                           =======     =======    =======
1999
- ----
Unrealized securities gains arising
   during the period                       $ 1,315     $  (506)   $   809
Less: Reclassification adjustment for
   gains realized in net income             (1,268)        488       (780)
                                           -------     -------    -------
Net unrealized securities gains                 47         (18)        29
Foreign currency translation adjustments       200         (77)       123
                                           -------     -------    -------
Other comprehensive income                 $   247     $   (95)   $   152
                                           =======     =======    =======

1998
- ----
Unrealized securities gains arising
   during the period                       $ 3,071     $(1,182)   $ 1,889
Less: Reclassification adjustment for
   gains realized in net income             (1,531)        589       (942)
                                           -------     -------    -------
Net unrealized securities gains              1,540        (593)       947
Foreign currency translation adjustments      (295)        114       (181)
                                           -------     -------    -------
Other comprehensive income                 $ 1,245     $  (479)   $   766
                                           =======     =======    =======

NOTE O - QUARTERLY RESULTS (UNAUDITED)
The following is a summary of quarterly results of operations (in thousands except per share data):

                                   1st        2nd        3rd        4th
2000                             Quarter    Quarter    Quarter    Quarter
- ----                             --------   --------   --------   --------
Revenues                         $812,464   $811,027   $804,529   $847,930
Earnings (Loss) from operations    33,425     25,343     (3,026)   (13,124)
Earnings (Loss) before change in
accounting                         17,899     13,758     (5,509)   (11,862)
Cumulative Effect of Change in
Accounting                         14,206          -          -          -
Net Earnings (Loss)                32,105     13,758     (5,509)   (11,862)
Earnings (Loss) per Share
  Basic:
   Before Change in Accounting   $    .37   $    .28   $   (.11)   $  (.25)
   Cumulative Effect of Change in
Accounting                            .29          -          -          -
                                 --------   --------   --------   --------
   Earnings per Basic Share      $    .66   $    .28   $   (.11)  $   (.25)

  Diluted:
   Before Change in Accounting   $    .36   $    .28   $   (.11)  $   (.25)
   Cumulative Effect of Change in
Accounting                            .29          -          -          -
                                 --------   --------   --------   --------
   Earnings per Diluted Share    $    .65   $    .28   $   (.11)  $   (.25)

1999
- ----
Revenues                         $769,348   $779,000   $785,308   $805,468
Earnings from Operations           44,827     47,834     38,811     26,249
Net Earnings                       25,244     27,022     21,604     17,331
Earnings per Share:
  Basic                          $    .52   $    .56   $    .44   $    .36
  Diluted                        $    .51   $    .55   $    .44   $    .35

1998
- ----
Revenues                         $750,153   $763,981   $768,666   $790,984
Earnings from Operations           56,529     58,836     55,471     61,496
Net Earnings                       32,360     33,827     32,813     38,285
Earnings per Share:
  Basic                          $    .65   $    .67   $    .66   $    .79
  Diluted                        $    .63   $    .66   $    .65   $    .78

NOTE P - SUPPLEMENTAL GUARANTOR INFORMATION
    In connection with the issuance of $200,000,000 of Senior Notes (Notes) by Airborne Express, Inc. (AEI), certain subsidiaries (collectively, "Guarantors") of Airborne, Inc. (the "Company")have fully and unconditionally guaranteed, on a joint and several basis, the obligations to pay principal, premium, if any, and interest with respect to the Notes. The Guarantors are ABX Air Inc. (ABX) and Sky Courier, Inc. (SKY), which are wholly-owned subsidiaries of the Company, and Airborne FTZ Inc. (FTZ) and Wilmington Air Park Inc. (WAP), which are wholly-owned subsidiaries of ABX.
    ABX is a certificated air carrier that owns and operates the domestic express cargo services for which AEI is the sole customer. ABX also offers air charter services on a limited basis to third-party customers. FTZ owns certain aircraft parts inventories that it sells primarily to ABX but also has limited sales to third-party customers. FTZ is also the holder of a foreign trade zone certificate at Wilmington airport property. WAP is the owner of the Wilmington airport property, which includes the Company's main sort facility, aircraft maintenance facilities, runways and related airport facilities and airline administrative and training facilities. ABX is the only occupant and customer of WAP. SKY provides expedited courier services and regional logistics warehousing primarily to third-party customers.
    Revenues and net earnings recorded by ABX, FTZ, and WAP are controlled by the Company and are based on various discretionary factors. Investment balances and revenues between Guarantors have been eliminated for purposes of presenting financial information below. Intercompany advances and liabilities represent net amounts due between the various entities. The Company provides its subsidiaries with a majority of the cash necessary to fund operating and capital expenditure requirements.

The following are consolidating condensed balance sheets of the Company as of December 31, 2000 and 1999 and the related consolidating condensed statements of net earnings and cash flows for each of the three years ended December 31, 2000:

Balance Sheet Information:
                          Airborne   Airborne,                Non-
December 31, 2000      Express, Inc.   Inc.     Guarantors guarantors Elimination Consolidated
- -----------------         --------- ----------  ---------- ---------- ----------- ------------
                                                    (in thousands)
ASSETS
  Cash                    $  37,523  $        -  $       52   $  2,815   $       -   $   40,390
  Accounts receivable        20,248           -      16,164    182,273           -      218,685
  Spare parts and
   fuel inventory                 -           -      40,885      2,346           -       43,231
  Refundable income taxes    21,595           -           -          -           -       21,595
  Deferred income tax
   assets                    28,839           -           -          -           -       28,839
  Prepaid expenses and
   other                      5,408           -      14,948        453           -       20,809
                          ---------  ----------  ----------   --------   ---------   ----------
  Total current assets      113,613           -      72,049    187,887           -      373,549

Property and equipment,
 net                        115,309           -   1,195,122      4,327           -    1,314,758
Intercompany advances       408,403     364,303      (3,532)   (68,309)   (700,865)           -
Equipment deposits and
 other assets                38,418       5,988      13,207         10         (11)      57,612
                          ---------  ----------  ----------   --------   ---------   ----------
Total assets              $ 675,743  $  370,291  $1,276,846   $123,915   ($700,876)  $1,745,919
                          =========  ==========  ==========   ========   =========   ==========
LIABILITIES AND
 SHAREHOLDERS' EQUITY
  Accounts payable        $ 114,198  $        -  $   61,142   $  5,392    $   (109)  $  180,623
  Salaries, wages and
   related taxes             44,796           -      26,383          -           -       71,179
  Accrued expenses and
   income taxes payable      75,689           -       7,752         77           -       83,518
  Current portion of debt         -           -         477          -           -          477
                          ---------  ----------  ----------   --------   ---------   ----------
  Total current
   liabilities              234,683           -      95,754      5,469        (109)     335,797

Long-term debt              228,000      75,000      19,230          -           -      322,230
Intercompany liabilities          -           -     585,756          -    (585,756)           -
Deferred income tax
 liabilities                 13,112           -     112,124        208           -      125,444
Postretirement
 liabilities                 42,438           -      19,922          -           -       62,360
Other liabilities            37,233           -           -          -           -       37,233
Common stock                      -      51,280        (109)       120         (11)      51,280
Additional paid in
 capital                          -     303,885        (754)   115,754    (115,000)     303,885
Retained earnings           120,413           -     444,923      2,364           -      567,700
Accumulated other
 comprehensive income          (136)          -           -          -           -        (136)
Treasury stock                    -     (59,874)          -          -           -     (59,874)
                          ---------  ----------  ----------   --------   ---------   ----------
  Total shareholders'
   equity                   120,277     295,291     444,060    118,238    (115,011)     862,855
                          ---------  ----------  ----------   --------   ---------   ----------
Total liabilities and
 shareholders'equity      $ 675,743  $  370,291  $1,276,846   $123,915   ($700,876)  $1,745,919
                          =========  ==========  ==========   ========   =========   ==========
                                     Airborne                 Non-
December 31, 1999                 Express, Inc. Guarantors guarantors Elimination Consolidated
- -----------------                 ------------- ---------- ---------- -----------  -----------
                                                         (in thousands)
ASSETS
  Cash                               $   28,638 $       99  $     (59)  $       -   $   28,678
  Accounts receivable                   325,778     13,224         42           -      339,044
  Spare parts and fuel inventory              -     42,265      1,998           -       44,263
  Refundable income taxes                 1,679          -          -           -        1,679
  Deferred income tax assets             31,950          -          -           -       31,950
  Prepaid expenses and other              7,281     17,145         30           -       24,456
                                    ----------- ----------  ---------   ---------  -----------
  Total current assets                  395,326     72,733      2,011           -      470,070

Property and equipment, net             113,174  1,001,513      1,025           -    1,115,712
Intercompany advances                   484,583    (47,481)       302    (437,404)           -
Equipment deposits and other assets      43,395     19,562         10      (5,499)      57,468
                                     ---------- ----------  ---------   ---------   ----------
Total assets                         $1,036,478 $1,046,327  $   3,348   ($442,903)  $1,643,250
                                     ========== ==========  =========   =========   ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
  Accounts payable                   $   99,379 $   41,302  $   1,616   ($    210)  $  142,087
  Salaries, wages and related taxes      39,242     26,031          3           -       65,276
  Accrued expenses and income taxes
   payable                               70,970     11,067          -           -       82,037
  Current portion of debt                     -        442          -           -          442
                                     ---------- ----------  ---------   ---------   ----------
  Total current liabilities             209,591     78,842      1,619        (210)     289,842

Long-term debt                          295,000     19,707          -           -      314,707
Intercompany advances                         -    437,194          -    (437,194)           -
Deferred income tax liabilities          14,880     84,081        208           -       99,169
Postretirement liabilities               34,112     12,440          -           -       46,552
Other liabilities                        34,773          -          -           -       34,773
Common stock                             51,176        (10)       110        (100)      51,176
Additional paid in capital              298,741      4,647        753      (5,399)     298,742
Retained earnings                       136,878    409,426        658           -      546,962
Accumulated other comprehensive
 income                                     918          -          -           -          918
Treasury stock                          (39,591)         -          -           -      (39,591)
                                     ---------- ----------  ---------   ---------   ----------
  Total shareholders' equity            448,122    414,063      1,521      (5,499)     858,207
                                     ---------- ----------  ---------   ---------   ----------
Total liabilities and shareholders'
 equity                              $1,036,478 $1,046,327  $   3,348   ($442,903)  $1,643,250
                                     ========== ==========  =========   =========   ==========

Statement of Net Earnings Information:
                                    Airborne                  Non-
Year ended December 31, 2000      Express, Inc. Guarantors guarantors Elimination Consolidated
- ----------------------------      ------------- ---------- ---------- ----------- ------------
                                                         (in thousands)
Revenues                             $3,198,442 $1,187,164  $     246 ($1,109,902)  $3,275,950
Operating expenses:
  Transportation purchased            1,966,993    185,293          -  (1,109,745)   1,042,541
  Station and ground operations         906,583    148,559          -           -    1,055,142
  Flight operations and maintenance       1,025    590,455     (2,741)       (157)     588,582
  General and administrative            195,926     62,066        157           -      258,149
  Sales and marketing                    81,287      1,225          -           -       82,512
  Depreciation and amortization          52,638    153,485        283           -      206,406
                                     ---------- ----------  ---------  ----------   ----------
                                      3,204,452  1,141,083     (2,301) (1,109,902)   3,233,332
                                     ---------- ----------  ---------  ----------   ----------
  Earnings from operations               (6,010)    46,081      2,547           -       42,618
Other income (expense):
  Interest, net                         (10,876)   (12,549)         -           -      (23,425)
  Other                                   3,984          -         49           -        4,033
                                     ---------- ----------  ---------  ----------   ----------
  Earnings before income taxes          (12,902)    33,532      2,596           -       23,226
Income taxes                             (4,208)    12,238        910           -        8,940
                                     ---------- ----------  ---------  ----------   ----------
  Net earnings before change in
   accounting                            (8,694)    21,294      1,686           -       14,286
Cumulative effect of change in
 accounting                                   -     14,206          -           -       14,206
                                     ---------- ----------  ---------  ----------   ----------
  Net earnings                      ($    8,694)$   35,500  $   1,686  $        -   $   28,492
                                     ========== ==========  =========  ==========   ==========


                                    Airborne                  Non-
Year ended December 31, 1999      Express, Inc. Guarantors guarantors Elimination Consolidated
- ----------------------------      ------------- ---------- ---------- ----------- ------------
                                                         (in thousands)
Revenues                             $3,072,947 $1,171,003  $     163 ($1,104,989)  $3,139,124
Operating expenses:
  Transportation purchased            1,891,610    178,934          -  (1,104,822)     965,722
  Station and ground operations         836,758    138,911          -           -      975,669
  Flight operations and maintenance       3,102    513,213     (2,811)       (167)     513,337
  General and administrative            187,605     52,348        136           -      240,089
  Sales and marketing                    75,890      1,306          -           -       77,196
  Depreciation and amortization          52,950    156,284        156           -      209,390
                                     ---------- ----------  ---------  ----------   ----------
                                      3,047,915  1,040,996     (2,519) (1,104,989)   2,981,403
                                     ---------- ----------  ---------  ----------   ----------
  Earnings from operations               25,032    130,007      2,682           -      157,721
Other income (expense):
  Interest, net                          (8,323)    (8,939)         -           -      (17,262)
  Other                                   6,929          -          -           -        6,929
                                     ---------- ----------  ---------  ----------   ----------
  Earnings before income taxes           23,638    121,068      2,682           -      147,388
Income taxes                             12,077     43,170        940           -       56,187
                                     ---------- ----------  ---------  ----------   ----------
  Net earnings                       $   11,561 $   77,898  $   1,742  $        -   $   91,201
                                     ========== ==========  =========  ==========   ==========


                                    Airborne                   Non-
Year ended December 31, 1998      Express, Inc.  Guarantors guarantors Elimination Consolidated
- ----------------------------      -------------  ---------- ---------- ----------- ------------
                                                          (in thousands)
Revenues                             $3,002,876  $1,055,174 $     351  ($ 984,617)  $3,073,784
Operating expenses:
  Transportation purchased            1,785,015     143,844         -    (984,502)     944,357
  Station and ground operations         783,297     131,622         -           -      914,919
  Flight operations and maintenance       6,948     473,693    (2,727)       (115)     477,799
  General and administrative            205,540      42,802       155           -      248,497
  Sales and marketing                    69,941       1,413         -           -       71,354
  Depreciation and amortization          50,873     133,445       208           -      184,526
                                     ----------  ---------- ---------  ----------   ----------
                                      2,901,614     926,819    (2,364)   (984,617)   2,841,452
                                     ----------  ---------- ---------  ----------   ----------
  Earnings from operations              101,262     128,355     2,715           -      232,332
Other income (expense):
  Interest, net                          (3,846)     (9,036)        -           -      (12,882)
  Other                                   2,135           -         -           -        2,135
                                     ----------  ---------- ---------  ----------   ----------
  Earnings before income taxes           99,551     119,319     2,715           -      221,585
Income taxes                             40,707      42,641       952           -       84,300
                                     ----------  ---------- ---------  ----------   ----------
  Net earnings                       $   58,844  $   76,678 $   1,763  $        -   $  137,285
                                     ==========  ========== =========  ==========   ==========


Statement of Cash Flows Information:
                                               Airborne                    Non-
Year ended December 31, 2000                Express, Inc. Guarantors  guarantors  Consolidated
- ----------------------------                ------------- ----------  ----------  ------------
                                                              (in thousands)
OPERATING ACTIVITIES:
Net earnings                                   ($   8,694)$   35,500   $   1,686    $   28,492
Adjustments to reconcile net earnings to net
cash provided by operating activities:
 Cumulative effect of change in accounting              -    (14,206)          -       (14,206)
 Depreciation and amortization                     52,638    153,485         283       206,406
 Deferred income taxes                             11,444      9,235           -        20,679
 Postretirement obligations                         8,326      7,482           -        15,808
 Other                                              5,833          -           -         5,833
                                                --------- ----------   ---------    ----------
  Cash provided (used) by operations               69,547    191,496       1,969       263,012

Change in:
Proceeds from receivable securitization
 facility                                               -          -     150,000       150,000
Receivables                                       121,808     (2,940)   (148,509)      (29,641)
Inventories and prepaid expenses                    1,873      3,577        (771)        4,679
Refundable income taxes                           (19,916)         -           -       (19,916)
Accounts payable                                   14,710     19,948       3,878        38,536
Accrued expenses, salaries and taxes
 payable                                           10,273     (2,963)         74         7,384
Intercompany transactions                        (154,197)   154,379        (182)            -
                                                --------- ----------   ---------    ----------
     Net cash provided by operating activities     44,098    363,497       6,459       414,054

INVESTING ACTIVITIES:
 Additions to property and equipment              (31,786)  (337,204)     (3,585)     (372,575)
 Disposition of property and equipment             27,396    (22,683)          -         4,713
 Proceeds from sale of securities                   1,913          -           -         1,913
 Other                                            (13,579)    (3,215)          -       (16,794)
                                                --------- ----------   ---------    ----------
 Net cash used by investing activities            (16,056)  (363,102)     (3,585)     (382,743)

FINANCING ACTIVITIES:
 Proceeds on bank notes, net                        8,000          -           -         8,000
 Repurchase of common stock                       (20,662)         -           -       (20,662)
 Principal payments on debt                             -       (442)          -          (442)
 Proceeds from common stock issuance                1,259          -           -         1,259
 Dividends paid                                    (7,754)         -           -        (7,754)
                                                --------- ----------   ---------    ----------
 Net cash used by financing                       (19,157)      (442)          -       (19,599)
                                                --------- ----------   ---------    ----------
 Net increase (decrease) in cash                    8,885        (47)      2,874        11,712

 Cash at beginning of year                         28,638         99         (59)       28,678
                                                --------- ----------   ---------    ----------
 Cash at end of year                            $  37,523 $       52   $   2,815    $   40,390
                                                ========= ==========   =========    ==========


                                              Airborne                    Non-
Year ended December 31, 1999                Express, Inc. Guarantors  guarantors  Consolidated
- ----------------------------                ------------- ----------  ----------  ------------
                                                               (in thousands)
OPERATING ACTIVITIES:
Net earnings                                    $  11,561 $   77,898   $  1,742     $   91,201
Adjustments to reconcile net earnings to net
cash provided by operating activities:
 Depreciation and amortization                     52,950    135,849        156        188,955
 Deferred income taxes                             (3,240)    10,113         16          6,889
 Postretirement obligations                        14,509        688          -         15,197
 Provision for aircraft engine overhauls                -     20,435          -         20,435
 Other                                                529          -          -            529
                                                --------- ----------  ---------     ----------
  Cash provided by operations                      76,309    244,983      1,914        323,206

Change in:
Receivables                                       (13,490)    (2,386)        10        (15,866)
Inventories and prepaid expenses                    1,063     (3,773)      (586)        (3,296)
Refundable income taxes                            (1,679)         -          -         (1,679)
Accounts payable                                   (3,091)    (7,888)        66        (10,913)
Accrued expenses, salaries and taxes
 payable                                          (22,715)    (9,845)        26        (32,534)
Intercompany transactions                         (74,208)    75,647     (1,439)             -
                                                --------- ----------  ---------     ----------
     Net cash (used) provided by operating
      activities                                  (37,811)   296,738         (9)       258,918

INVESTING ACTIVITIES:
 Additions to property and equipment              (49,582)  (244,714)       (23)      (294,319)
 Disposition of property and equipment             33,218    (31,525)         -          1,693
 Gain on sale of securities                         4,603          -          -          4,603
 Expenditures for engine overhauls                      -    (18,735)         -        (18,735)
 Other                                             (4,072)    (1,381)         -         (5,453)
                                                --------- ----------  ---------     ----------
 Net cash used by investing activities            (15,833)  (296,355)       (23)      (312,211)

FINANCING ACTIVITIES:
 Proceeds on bank notes, net                       66,000          -          -         66,000
 Principal payments on debt                             -       (410)         -           (410)
 Proceeds from common stock issuance                5,480          -          -          5,480
 Dividends paid                                    (7,778)         -          -         (7,778)
                                                --------- ----------  ---------     ----------
 Net cash provided (used) by financing             63,702       (410)         -         63,292
                                                --------- ----------  ---------     ----------
 Net increase (decrease) in cash                   10,058        (27)       (32)         9,999

 Cash at beginning of year                         18,580        126        (27)        18,679
                                                --------- ----------  ---------     ----------
 Cash at end of year                            $  28,638 $       99  ($     59)    $   28,678
                                                ========= ==========  =========     ==========


                                              Airborne                  Non-
Year ended December 31, 1998                Express, Inc. Guarantors guarantors   Consolidated
- ----------------------------                ------------- ---------- ----------   ------------
                                                               (in thousands)
OPERATING ACTIVITIES:
Net earnings                                    $  58,844 $   76,678  $   1,763     $  137,285
Adjustments to reconcile net earnings to net
cash provided by operating activities:
 Depreciation and amortization                     50,872    116,949        208        168,029
 Deferred income taxes                              4,203      5,306         29          9,538
 Postretirement obligations                        12,352      1,494          -         13,846
 Provision for aircraft engine overhauls                -     16,497          -         16,497
 Other                                             (1,590)         -          -         (1,590)
                                                --------- ----------  ---------     ----------
  Cash provided by operations                     124,681    216,924      2,000        343,605

Change in:
Receivables                                           811     (1,421)       (19)          (629)
Inventories and prepaid expenses                   16,386    (19,996)     2,135         (1,475)
Accounts payable                                    4,136      1,925      2,973          9,034
Accrued expenses, salaries and taxes
 payable                                           (1,689)    (3,867)        24         (5,532)
Intercompany transactions                         (88,113)    94,445     (6,332)             -
                                                --------- ----------  ---------     ----------
     Net cash provided (used) by operating
      activities                                   56,212    288,010        781        345,003

INVESTING ACTIVITIES:
 Additions to property and equipment              (51,191)  (233,707)      (583)      (285,481)
 Disposition of property and equipment             31,852    (29,254)         -          2,598
 Expenditures for engine overhauls                      -    (22,846)         -        (22,846)
 Other                                             (2,618)    (1,966)         -         (4,584)
                                                --------- ----------  ---------     ----------
 Net cash used by investing activities            (21,957)  (287,773)      (583)      (310,313)

FINANCING ACTIVITIES:
 Proceeds on bank notes, net                       (1,000)         -          -         (1,000)
 Repurchase of common stock                       (38,835)         -          -        (38,835)
 Principal payments on debt                             -       (381)         -           (381)
 Proceeds from common stock issuance                6,509          -          -          6,509
 Dividends paid                                    (7,829)         -          -         (7,829)
                                                --------- ----------  ---------     ----------
 Net cash used by financing                       (41,155)      (381)         -        (41,536)
                                                --------- ----------  ---------     ----------
 Net (decrease) increase in cash                   (6,900)      (144)       198         (6,846)

 Cash at beginning of year                         25,480        270       (225)        25,525
                                                --------- ----------  ---------     ----------
 Cash at end of year                            $  18,580 $      126  ($     27)    $   18,679
                                                ========= ==========  =========     ==========

EX-23

EXHIBIT 23

                                                                 EXHIBIT 23

INDEPENDENT AUDITORS' CONSENT


We consent to the incorporation by reference in Registration Statement Nos.
33-3713, 33-39720, 33-51651, 33-58905, 333-55687 and 333-55282 of Airborne,
Inc. and subsidiaries on Form S-8 of our report dated February 9, 2001,
incorporated by reference in this Annual Report on Form 10-K of Airborne,
Inc. and subsidiaries for the year ended December 31, 2000.




/s/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP

Seattle, Washington
March 29, 2000

10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000

Commission File Number 1-6512

AIRBORNE, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation or organization) 91-2065027
(I.R.S. Employer
Identification No.)

3101 Western Avenue
P.O. Box 662
Seattle, Washington 98111-0662
(Address of principal executive offices)

Registrant's telephone number, including area code: (206) 285-4600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, Par value $1.00 per share	New York Stock Exchange Pacific Stock Exchange
Rights to Purchase Series A Participating Cumulative Preferred Stock	New York Stock Exchange Pacific Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

NONE

    Indicate by check mark whether the Registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes /x/  No / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.(X)

    As of February 20, 2001, 48,103,545 shares (net of 3,240,526 treasury shares) of the registrant's Common Stock were outstanding and the aggregate market value of the voting stock held by non-affiliates of the registrant (based on the closing price on that date on the New York Stock Exchange) was approximately $504,000,000.(1)

Documents Incorporated by Reference

    Portions of the 2000 Annual Report to Shareholders are incorporated by reference into Part I and Part II.

    Portions of the Proxy Statement for the 2001 Annual Meeting of Shareholders to be held April 24, 2001 are incorporated by reference into Part III.

(1) Excludes value of shares of Common Stock held of record by non- employee directors and executive officers at February 20, 2001. Includes shares held by certain depository organizations. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant, or that such person is controlled by or is under common control with the registrant.

                              AIRBORNE, INC.
                       2001 FORM 10-K ANNUAL REPORT

                             Table of Contents



                                                               Page

          Part I

Item 1.   Business                                              1
Item 2.   Properties                                            13
Item 3.   Legal Proceedings                                     13
Item 4.   Submission of Matters to a Vote of Security Holders   13
Item 4a.  Executive Officers of the Registrant                  14


          Part II

Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters                                   16
Item 6.   Selected Financial Data                               16
Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                   16
Item 7a.  Quantitative and Qualitative Disclosures about
          Market Risk                                           16
Item 8.   Financial Statements and Supplementary Data           17
Item 9.   Changes in and disagreements with Accountants on
          Accounting and Financial Disclosure                   18


          Part III

Item 10.  Directors and Executive Officers of the Registrant    18
Item 11.  Executive Compensation                                18
Item 12.  Security Ownership of Certain Beneficial Owners and   18
          Management
Item 13.  Certain Relationships and Related Transactions        18


          Part IV

Item 14.  Exhibits, Financial Statement Schedules, and          18
          Reports on Form 8-K


                                  PART I

ITEM 1.   BUSINESS
- ------------------
a)   General Development of Business
     -------------------------------
     Airborne, Inc. is a Delaware corporation formed in November 1999 to
serve as a holding company for the operations of Airborne Freight
Corporation.  On December 26, 2000, the holding company structure was
implemented, and Airborne Freight Corporation became a wholly-owned
subsidiary of Airborne, Inc. and was renamed Airborne Express, Inc.
Certain of its affiliated corporations also became wholly-owned
subsidiaries of Airborne, Inc. as part of this reorganization.

     Airborne, Inc. (herein referred to as the "Company," which reference
shall include its direct and indirect subsidiaries and their assets and
operations, unless the context clearly indicates otherwise) is a holding
company operating through its subsidiaries as an air express company and
air freight forwarder.  The Company expedites shipments of all sizes to
destinations throughout the United States and most foreign countries.

     The Company holds a certificate of registration issued by the United
States Patent and Trademark Office for the service mark AIRBORNE EXPRESS.
Most public presentations of the Company carry this name.  The purpose of
using this trade name is to more clearly communicate to the market place
the primary nature of the business of the Company.

     Wholly-owned operating subsidiaries of the Company include Airborne
Express, Inc. (herein referred to as "AEI"), ABX Air, Inc. ("ABX") and Sky
Courier, Inc. AEI provides domestic and international delivery services in
addition to customer service, sales and marketing activities.  ABX provides
domestic express cargo service and cargo service to Canada and Puerto Rico.
AEI is the sole customer of ABX for this service.  ABX also offers limited
charter services.

b)   Financial Information about Industry Segments
     ---------------------------------------------
     Response to this Item is contained in Note L of the Notes to
Consolidated Financial Statements (contained in the 2000 Annual Report to
Shareholders and incorporated by reference herein).

c)   Narrative Description of Business
     ---------------------------------
     The Company provides door-to-door express delivery of small packages
and documents throughout the United States and to and from most foreign
countries.  The Company also acts as an international and domestic freight
forwarder for shipments of any size.  The Company's strategy is to be the
low cost provider of express services for business customers.




                                  Page 1

Domestic Operations
- -------------------
     The Company's domestic operations, supported by approximately 295
facilities, primarily involve express door-to-door delivery of shipments
weighing less than 100 pounds.  Shipments consist primarily of business
documents and other printed matter, computer hardware and parts, software,
electronic and machine parts, health care items, films and videotapes, and
other items for which speed and reliability of delivery are important.

     The Company's primary service is its Overnight Express product.  This
product, which comprised approximately 57% of the Company's domestic
shipments during 2000, generally provides before noon delivery on the next
business day to most metropolitan cities in the United States.  The Company
also provides Saturday, Sunday and holiday pickup and delivery service for
most cities.

     The Company also offers two deferred service products, Next Afternoon
Service ("NAS") and Second Day Service ("SDS").  NAS is available for
shipments weighing five pounds or less and SDS is offered for shipments of
all weights.  Deferred service shipments, which comprised approximately 43%
of domestic shipments during 2000, are lower priced than the Overnight
Express product reflecting the less time sensitive nature of the shipments.
NAS rates are generally higher than SDS rates for comparably sized
shipments.

     In 2000, the Company introduced its airborne@home product, which
targets the residential delivery market.  This new product offers shippers
a competitive combination of delivery service and pricing, while providing
the Company an effective way to accomplish residential deliveries.  This
product captures business from primarily Internet retailers and catalog
fulfillment providers. The Company picks up, sorts and delivers
airborne@home shipments to any one of 21,000 U.S. Postal Service
Destination Delivery Units for expedited delivery to residences via USPS
Parcel Select Service. These shipments are sorted and routed similarly to
SDS shipments and are included in that category for shipment volume
reporting purposes.

     While the Company's domestic system is designed primarily to handle
small packages, any available capacity is also utilized to carry heavier
weight shipments which the Company would normally move on other carriers in
its role as an airfreight forwarder.

Communications System
- ---------------------
     FOCUS (Freight On-line Control and Update System) is a proprietary
communications system which provides real time information for purposes of
tracking and providing the status of customer shipments as well as
monitoring the performance of the Company's operational systems.  The
Company's facilities and international agents are linked to FOCUS and
provide information on the status and location of customer shipments 24


                                  Page 2
hours a day.  Some information is provided to FOCUS through the use of hand-
held scanners which read bar-codes on the shipping documents.  FOCUS allows
customers access to shipment information through either direct dial-in
capabilities or through the Company's website on the Internet.

     FOCUS provides the Company's personnel with important information for
use in coordinating its operational activities.  Information regarding
Company-operated aircraft arrivals and departures, weather, and
documentation requirements for shipments destined to foreign locations are
several examples of the information maintained and provided by FOCUS.

Pickup and Delivery
- -------------------
     The Company accomplishes its door-to-door pickup and delivery service
using approximately 15,400 radio-dispatched delivery vans and trucks.
Approximately 6,200 are operated by the Company with employee drivers.
Independent contractors under contract with the Company provide the balance
of the pickup and delivery services.

     Because convenience is an important factor in attracting business from
less frequent shippers, the Company has an ongoing program to place drop
boxes in convenient locations.  Drop boxes allow customers the flexibility
to tender shipments to the Company without scheduling a pickup.  The
Company has approximately 15,100 boxes in service.

Sort Facilities
- ---------------
     The Company's main sort center is located in Wilmington, Ohio.  The
sort center currently has the capacity to handle approximately 1.2 million
pieces during the primary 3-1/4 hour nightly sort operation.  On average,
approximately 1.0 million pieces were sorted each weekday night at the sort
center during the fourth quarter of 2000.

     In addition to the main sort facility at Wilmington, nine regional hub
facilities have been established primarily to sort shipments originating
and having a destination within approximately a 300 mile radius of a
regional hub.

     The Company also conducts a day sort operation at Wilmington which
services SDS and airborne@home shipments.  The day sort generally receives
these shipments through a combination of flights and trucks originating
from regional hubs, station facilities or customer sites.

     The operation of the Wilmington facility is critical to the Company's
business.  The inability to use the Wilmington airport, because of bad
weather or other factors, would have a serious adverse effect on the
Company's service.  The Company has invested in sophisticated instrument
landing and radar systems and other equipment which is intended to limit
the effect bad weather may have on the Wilmington airport.

     In the fourth quarter of 2000, the night sort and day sort operations
at Wilmington handled approximately 45% and 27% of total shipment weight,
respectively, with the regional hubs handling the remaining 28%.
                                  Page 3
Shipment Routing
- ----------------
     The logistics of moving a shipment from its origin to destination are
determined by several factors.  Shipments are routed differently depending
on shipment product type, weight, geographic distances between origin and
destination, and locations of Company stations relative to the locations of
sort facilities.  Shipments generally are moved between stations and sort
facilities on either Company aircraft or contracted trucks.  A limited
number of shipments are transported airport-to-airport on commercial air
carriers.

     Overnight Express shipments and NAS shipments are picked up by local
stations and generally consolidated with other stations' shipments at
Company airport facilities.  Shipments that are not serviced through
regional hubs are loaded on Company aircraft departing each weekday evening
from various points within the United States, Canada and Puerto Rico.
These aircraft may stop at other airports to permit additional locations
and feeder aircraft to consolidate their cargo onto the larger aircraft
before completing the flight to the Wilmington hub.  The aircraft are
scheduled to arrive at Wilmington between approximately 10:30 p.m. and 2:30
a.m. at which time the shipments are sorted and reloaded.  The aircraft are
scheduled to depart before 6:00 a.m. and return to their applicable
destinations in time to complete scheduled next business morning or
deferred service commitments.  The Wilmington hub also receives shipments
via truck from selected stations in the vicinity of the Wilmington hub for
integration with the nightly sort process.

     The day sort operation for SDS shipments is supported by 16 aircraft
that return to Wilmington from overnight service destinations on Tuesday
through Thursday.  These aircraft, and trucks from eight regional hubs,
arrive at Wilmington between 8:00 a.m. and 1:30 pm, at which time shipments
are sorted and reloaded on the aircraft or trucks by 3:30 p.m. for
departure and return to their respective destinations.

     The Company also performs weekend sort operations at Wilmington to
accommodate Saturday pickups and Monday deliveries of both Overnight
Express and deferred service shipments.  This sort is supported by 22
Company aircraft and by trucks.

Aircraft
- --------
     The Company currently utilizes pre-owned Boeing 767 aircraft and
McDonnell Douglas DC-8 and DC-9 aircraft.  After acquisition, the aircraft
are modified for use within the Company's cargo operation.  As of the end
of 2000, the Company's in-service fleet consisted of a total of 120
aircraft, including 17 Boeing 767-200s, 30 McDonnell Douglas DC-8s
(consisting of nine series 61, four series 62 and 17 series 63 aircraft)
and 73 DC-9s (consisting of two series 10, 43 series 30 and 28 series 40
aircraft).  The Company owns all the aircraft it operates, except for one
DC-9 aircraft.  In addition, approximately 70 smaller aircraft are
chartered nightly to connect small cities with Company aircraft that then
operate to and from Wilmington.

                                  Page 4
     In 1998, the Company introduced the Boeing 767-200 aircraft to its
operating fleet.  During 2000, nine additional 767s were placed into
service bringing the total 767 aircraft in service to 17.  The Company has
commitments to acquire a total of 30 767s (inclusive of 19 767s owned at
December 31, 2000) by the end of 2003.  This newer, more efficient
generation of aircraft has allowed the Company to remove from service less
economical DC-8 aircraft and provide additional lift capacity.  A total of
three additional 767 aircraft are anticipated to be placed into service in
2000 including two 767s which were undergoing modification at the end of
2000.  With these additions, the Company anticipates removing a total of
nine DC-8s from service by the end of 2001 inclusive of three DC-8s
anticipated to be removed during 2001.  Currently, 2 of the
removed DC-8 aircraft have been redeployed to the Company's dedicated
charter service operations.  Additional DC-8s may be dedicated to this
service depending on customer demand.  Future aircraft retirements will be
determined based upon shipment growth, capacity requirements, charter
service demand and the timing of placing 767s into service.

     During 2000, the nightly lift capacity of the system was increased by
approximately 96,000 pounds, reaching 4.2 million pounds at December 31,
2000.  During 2000, the Company's average utilization of available lift
capacity approximated 70%.

     In response to increased public awareness regarding the operation of
older aircraft, the Federal Aviation Administration ("FAA") periodically
mandates additional maintenance requirements for certain aircraft,
including the type operated by the Company.  In recent years, the Company
has completed, and continues to perform, a number of inspection and
maintenance programs pertaining to various Airworthiness Directives issued
by the FAA.  The FAA could, in the future, impose additional maintenance
requirements for aircraft and engines of the type operated by the Company
or interpret existing rules in a manner which could have a material effect
on the Company's operations and financial position.  See "Business -
Regulation".

Ground Service
- --------------
     The Company plans on expanding its service offerings by introducing a
new product, Ground Delivery Service ("GDS"), beginning in April 2001.
With GDS, the Company can offer customers both air and ground services and
effectively utilize a bundled marketing approach to attracting and
retaining customers.  GDS will be a door-to-door, one to six day ground
transit service which will leverage the Company's existing sort, line haul
and pickup and delivery infrastructure.  This new product will generally be
priced less then existing deferred services reflecting the less time
sensitive nature of ground shipments.

International Operations
- ------------------------
     The Company provides international express door-to-door delivery and a
variety of freight services.  These services are provided in most foreign
countries on an inbound and outbound basis through a network of Company

                                  Page 5
offices and independent agents.  Most international deliveries are
accomplished within 24 to 96 hours of pickup.

     The Company's domestic stations are staffed and equipped to handle
international shipments to or from almost anywhere in the world.  In
addition to its extensive domestic network, the Company operates its own
offices in Taipei, Hong Kong, Singapore, Australia, New Zealand,
Netherlands, Sweden and the United Kingdom.  The Company's freight and
express agents worldwide are connected to FOCUS, The Company's on-line
communication network, through which the Company can provide its customers
with immediate access to the status of shipments almost anywhere in the
world.

     The Company's international air express service is intended for the
movement of non dutiable and certain dutiable shipments weighing 70 pounds
or less.  The Company's international airfreight service handles heavier
weight shipments on either an airport-to-airport, door-to-airport or door-
to-door basis.  The Company also offers ocean service capabilities
for customers who want a lower cost shipping option.

     The Company's strategy is to use a variable-cost approach in
delivering and expanding international services to its customers.  This
strategy uses existing commercial airline lift capacity in connection with
the Company's domestic network to move shipments to and from overseas
destinations and origins.  Additionally, service arrangements with
independent freight and express agents have been entered into to
accommodate shipments in locations not currently served by Company-owned
operations.  The Company currently believes there are no significant
service advantages which would justify the operation of its own aircraft on
international routes, or making significant investment in additional
offshore facilities or ground operations.  In order to expand its business
at a reasonable cost, the Company has, from time to time, entered into
joint venture agreements which combine the Company's management expertise,
domestic express system and information systems with local business
knowledge and market reputation of suitable partners.  Joint venture
operations currently exist in Japan, Thailand, Malaysia, and South Africa.

Customers and Marketing
- -----------------------
     The Company's primary domestic strategy focuses on providing low cost
express services for business customers.  Most high volume customers have
entered into service agreements providing for specified rates or rate
schedules for express deliveries.  As of December 31, 2000, the Company
serviced approximately 526,000 active customer shipping locations.

     The Company determines prices for any particular domestic express
customer based on competitive factors, anticipated costs, shipment volume
and weight, and other considerations.  The Company believes that it
generally offers prices that are competitive with, or lower than, prices
quoted by its principal competitors for comparable services.



                                  Page 6
     Internationally, the Company's marketing strategy is to target the
outbound express and freight shipments of U.S. business customers, and to
sell the inbound service of the Company's distribution capabilities in the
United States.

     Both in the international and domestic markets, the Company believes
that its customers are most effectively reached by a direct sales force and
does not engage in extensive mass media advertising.  Domestic sales
representatives are responsible for selling both domestic and international
express shipments.  In addition, the International Division has its own
dedicated direct sales organization for selling international freight
service.

     The Company's sales force currently consists of approximately 385
domestic representatives and approximately 105 international specialists.
The Company plans on expanding the size of its domestic sales force in 2001
through the addition ratably during the year of approximately 100
representatives.  The Company's sales efforts are supported by the
Marketing and International Divisions, based at the Company headquarters.
Senior management is also active in marketing the Company's services to
major accounts.

     Customer technology and automation continue to be important factors in
attracting and retaining customers.  The Company continues to enhance
automation of the shipping process to make it easier for customers to use
the Company's services as well as provide them with valuable management
information.  The Company believes that it is generally competitive with
other express carriers in terms of, customer automation, reliability and
convenience.

     For many of its high volume customers, the Company offers a metering
device, called LIBRA (SM), which is installed at the customer's place of
business.  With minimum data entry, the metering device weighs the package,
calculates the shipping charges, generates the shipping labels, provides
custom shipping reports, and enables the customer to track the exact status
of shipments in the Company's FOCUS shipping and tracking system.  At year
end 2000, the system was in use at approximately 9,800 customer locations.
Use of LIBRA not only benefits the customer, but also lowers the Company's
operating costs, since LIBRA shipment data is transferred into the FOCUS
system automatically, thus avoiding duplicate data entry.

     "Customer Linkage", an electronic data interchange ("EDI") program
developed for the Company's highest volume shippers, allows customers, with
their computers, to create shipping documentation at the same time they are
entering orders for their goods.  At the end of each day, shipping
activities are transmitted electronically to the FOCUS system where
information is captured for shipment tracking and billing purposes.
Customer Linkage benefits the customer by eliminating repetitive data entry
and paperwork and also lowers the Company's operating costs by eliminating
manual data entry.  EDI also includes electronic invoicing and payment
remittance processing.  The Company also has available a software program
known as QUICKLINK, which significantly reduces programming time required
by customers to take advantage of linkage benefits.
                                  Page 7
     The Company offers customers PC-based software designed to improve
their productivity and provide convenient access to the Company's various
services.  LIGHTSHIPr Shipping Software for Windowsr allows customers,
working from their PCs, to obtain estimated shipping rates and delivery
times, prepare and print shipping labels, schedule pickups and track the
status of their shipments.

     The Company maintains an Internet website, www.airborne.com, which
provides customers a global connection to the Company's services.  The
website allows customers to track the status of their shipments, contact
customer service representatives, locate drop boxes, obtain information
regarding the Company's service offerings and documentation requirements,
transit times, in addition to providing other useful information about the
Company.  In 2000, the Company introduced eServices, a secure internet
based shipping system which allows for online shipment labeling, pickup
scheduling, tracking and billing.

     In 2001, the Company plans on introducing AirborneExchange, a suite of
interrelated customer technology programs designed to take advantage of
internet functionality.  These products will enhance and in some instances
replace existing customer technology solutions.

     The Company offers a number of special logistics programs to customers
through Airborne Logistics Services ("ALS"), a division of ABX.  ALS
operates the Company's Stock Exchange and Hub Warehousing and other
logistics programs.  These programs provide customers the ability to
maintain centralized inventories which can be managed either by Company or
customer personnel.  Items inventoried at Wilmington can be delivered
utilizing either the Company's airline system or, if required, commercial
airlines on a next-flight-out basis.  ALS' Central Print program allows
information to be sent electronically to customer computers located at
Wilmington where Company personnel monitor printed output and ship the
material according to customer instructions.

     In addition, the Company's Sky Courier subsidiary provides expedited
next-flight-out domestic and international services at premium prices.  Sky
Courier also offers limited local intercity courier services as well as a
Field Stock Exchange program where customer inventories are managed at over
60 locations around the United States and Canada.

Competition
- -----------
     The market for the Company's services has been and is expected to
remain highly competitive.  The principal competitive factors in both
domestic and international markets are price, the ability to provide
reliable pickup and delivery, and value-added services.

     Federal Express continues to be the dominant competitor in the
domestic air express business, followed by United Parcel Service.  The
Company ranks third in shipment volume behind these two companies in the
domestic air express business.  Other domestic air express competitors
include the U.S. Postal Service's Express and Priority Mail Services and

                                  Page 8
several other transportation companies offering next morning or next-plane-
out delivery service.  The Company also competes to some extent with
companies offering ground transportation services and with facsimile and
other forms of electronic transmission.

     The Company believes it is important to maintain an active capital
expansion program to improve and maintain service and increase productivity
Additionally, the Company made a strategic decision to accelerate the
acquisition and deployment of 767 aircraft in 1999 and 2000 in order to
replace less efficient DC-8 aircraft. However, the Company has
significantly less capital resources than its two primary competitors.

     In the international markets, in addition to Federal Express and
United Parcel Service, the Company competes with DHL, TNT, and airfreight
forwarders and carriers, and most commercial airlines.

Employees
- ---------
     As of December 31, 2000, the Company and its subsidiaries had
approximately 16,000 full-time employees and 8,100 part-time and casual
employees.  Approximately 7,300 full-time employees (including the
Company's 800 pilots) and 3,000 part-time and casual employees are employed
under union contracts, primarily with locals of the International
Brotherhood of Teamsters and Warehousemen.

Labor Agreements
- ----------------
     Labor agreements covering most of the Company's union ground personnel
were renegotiated in 1998 or 1999 and expire in either 2003 or 2004. The
Company's pilots are covered by a contract which becomes amendable on July
31, 2001.  Although the Company has not experienced any significant
disruption from labor disputes in the past, there can be no assurance that
disputes will not arise in the future which could disrupt service to
customers.

Subsidiaries
- ------------
The Company has the following wholly-owned subsidiaries:

1.   Airborne Express, Inc., a Delaware corporation, provides domestic and
international delivery services in addition to customer service, sales and
marketing activities.
2.   ABX Air, Inc., a Delaware corporation, owns and operates the Company's
certificated air carrier and related assets.  Its wholly-owned subsidiaries
with operating activities are as follows:
     a)   Wilmington Air Park, Inc., an Ohio corporation, is the owner of the
         Wilmington airport property (Airborne Air Park).
     b)   Airborne FTZ, Inc., an Ohio corporation, is the holder of a foreign
         trade zone certificate at the Wilmington airport property and owns and
         manages the Company's expendable aircraft parts inventory.

                                  Page 9
     c)   Aviation Fuel, Inc., an Ohio corporation, purchases and sells aviation
         and other fuels.
3.   Sky Courier, Inc., a Delaware corporation, provides expedited courier
service.
4.   Airborne Credit, Inc., a Virginia corporation, provides liquidity
through the purchase and sale of AEI's trade accounts receivable.
5.   Airborne Freight Limited, a New Zealand corporation, provides air
express and air freight services.

Regulation
- ----------
     The Company's operations are regulated by the United States Department
of Transportation ("DOT"), the FAA, and various other federal, state, local
and foreign authorities.

     The DOT, under federal transportation statutes, grants air carriers
the right to engage in domestic and international air transportation.  The
DOT issues certificates to engage in air transportation and has the
authority to modify, suspend or revoke such certificates for cause,
including failure to comply with federal law or the DOT regulations.  The
Company believes it possesses all necessary DOT-issued certificates to
conduct its operations.

     The FAA regulates aircraft safety and flight operations generally,
including equipment, ground facilities, maintenance, flight dispatch,
security procedures, training, communications, the carriage of hazardous
materials and other matters affecting air safety.  The FAA issues operating
certificates and operations specifications to carriers which possess the
technical competence to conduct air carrier operations.  In addition, the
FAA issues certificates of airworthiness to each aircraft which meets the
requirements for aircraft design and maintenance.  The Company believes it
holds all airworthiness and other FAA certificates required for the conduct
of its business and operation of its aircraft, although the FAA has the
power to suspend or revoke such certificates for cause, including failure
to comply with federal law and FAA regulations.

     The FAA has authority to issue maintenance directives and other
mandatory orders relating to, among other things, inspection of aircraft
and replacement of aircraft structures, components and parts, based on the
age of the aircraft and other factors.  For example, the FAA has commenced
an inspection of DC-8 aircraft of the type operated by the Company to
determine if certain of the aircraft structures and components meet all
aircraft certification requirements. The DC-9 may in the future also be
subject to a similar FAA inspection.  If the FAA were to determine that the
aircraft structures or components are not adequate, it could order
operators to either reduce cargo loads, strengthen any structure or
component shown to be inadequate, or make other modifications to the
aircraft. New mandatory directives could also be issued requiring the
Company to inspect and replace aircraft components based on their age or
condition.


                                  Page 10
     In addition to the issuance of mandatory directives, the FAA from time
to time may amend its regulations thereby increasing regulatory burdens on
air carriers.  For example, the FAA can order the installation or
enhancement of safety related aircraft equipment.  Recent legislation
requires the FAA to mandate the installation of collision avoidance systems
in all cargo aircraft by the end of 2002.  The Company estimates the cost
to comply with this legislation to be approximately $9 million.  Depending
on the scope of the FAA's orders or amended regulations, these requirements
may cause the Company to incur substantial expenses.

     The federal government generally regulates aircraft engine noise at
its source.  However, local airport operators may, under certain
circumstances, regulate airport operations based on aircraft noise
considerations.  The Airport Noise and Capacity Act of 1990 provides that
in the case of Stage 3 aircraft (all of the Company's operating aircraft
satisfy Stage 3 noise compliance requirements), an airport operator must
obtain the carriers' or the government's approval of the rule prior to its
adoption.  The Company believes the operation of its aircraft either
complies with or is exempt from compliance with currently applicable local
airport rules.  However, some airport authorities are considering adopting
local noise regulations and to the extent more stringent aircraft operating
regulations are adopted on a widespread basis, the Company might be
required to expend substantial sums, make schedule changes or take other
actions to comply with such local rules.  In addition, the United States,
working through the International Civil Aviation Organization, is
considering the adoption of more stringent aircraft noise regulation which,
if adopted, could impose additional requirements on the Company to mitigate
aircraft noise including the possible retirement of certain of its aircraft
before the end of their useful economic lives.

     The Company's aircraft currently meet all known requirements for
emission levels.  However, under the Clean Air Act, individual states or
the Federal Environmental Protection Agency (the "EPA") may adopt
regulations requiring reduction in emissions for one or more localities
based on the measured air quality at such localities.  Such regulations may
seek to limit or restrict emissions through restricting the use of emission
producing ground service equipment or aircraft auxiliary power units.
There can be no assurance that if such regulations are adopted in the
future or changes in existing laws or regulations are promulgated, such
laws or rules would not have a material adverse effect on the Company.

     Under currently applicable federal aviation law, ABX could cease to be
eligible to operate as an all-cargo carrier if more than 25% of the voting
stock of the Company were owned or controlled by non-U.S. citizens or the
airline were not effectively controlled by U.S. citizens.  Moreover, in
order to hold an all-cargo air carrier certificate, the president and at
least two-thirds of the directors and officers of an air carrier must be
U.S. citizens.  To the best of the Company's knowledge, foreign
stockholders do not control more than 25% of the outstanding voting stock.
Two of the Company's 42 officers are not U.S. citizens.



                                  Page 11
     The Company believes that its current operations are substantially in
compliance with the numerous regulations to which its business is subject;
however, various regulatory authorities have jurisdiction over significant
aspects of the Company's business, and it is possible that new laws or
regulations or changes in existing laws or regulations or the
interpretations thereof could have a material adverse effect on the
Company's operations.

Financial Information Regarding International and Domestic Operations
- ---------------------------------------------------------------------
     Financial information relating to foreign and domestic operations for
each of the three years in the period ended December 31, 2000 is presented
in Note L (Segment Information) of the Notes to Consolidated Financial
Statements appearing in the 2000 Annual Report to Shareholders and is
incorporated herein by reference.

Forward-looking statements
- --------------------------

     Certain statements contained in this report or in documents
incorporated by reference are considered "forward-looking statements" as
the term is defined in the Private Securities Litigation Reform Act of
1995.  Such statements relate to views of future events and operating
performance based upon information currently available to management.
Forward-looking statements that are not historical facts are generally
identified by the use of terminology which includes "believes", "expects",
"anticipates", "intends", "plans" or other words with similar intent.
Forward-looking statements involve risks, which are inherently difficult to
predict.  Actual results could materially differ from those expressed in
the forward-looking statements.

     Many factors could cause actual results to differ materially from the
views expressed by the forward-looking statements.  Those factors include,
but are not limited to the following:

     -   Economic conditions in the U.S. and international markets
         in which the Company operates.

     -   Competition from other providers of transportation and
         related services.

     -   The ability to adapt to changing customer demand patterns,
          including the effect on demand from technology developments.

     -    The ability of management to successfully implement sales
          growth initiatives and other business strategies in a cost-
          effective manner.

     -    Customer acceptance of new business initiatives and pricing
          programs.

     -    Retention and maintenance of key customer relationships.

                                  Page 12

     -    Disruption of service due to labor disputes.

     -    Changes in government regulation, including federal and local
          regulation governing the operation of the Company's aircraft.

     -    Increase in fuel prices.

     -    The ability to obtain financing on reasonable terms.

     -    Weather related disruptions of service, and customer demand
          related impacts.

The Company does not intend to publicly revise or update any of its forward-
looking statements.

ITEM 2.   PROPERTIES
- --------------------
     The Company leases general and administrative office facilities
located in Seattle, Washington.

     At year end the Company maintained approximately 295 domestic and 45
foreign stations, most of which are leased.  The majority of the facilities
are located at or near airports.

     The Company owns the airport at the Airborne Air Park, in Wilmington,
Ohio.  The airport currently consists of two runways, taxi-ways, aprons,
buildings serving as aircraft and equipment maintenance facilities, sort
facilities, storage facilities, a training center and both operations and
administrative offices.

     The Company believes its existing facilities are adequate to meet
current needs.

     Information regarding collateralization of certain property and lease
commitments of the Company is set forth in Notes G and H of the Notes to
Consolidated Financial Statements appearing in the 2000 Annual Report to
Shareholders and is incorporated herein by reference.


ITEM 3.   LEGAL PROCEEDINGS
- ---------------------------
     None


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
     None



                                  Page 13



ITEM 4a.  EXECUTIVE OFFICERS OF THE REGISTRANT
- ----------------------------------------------

                              Positions and Offices Presently
Name                     Age  Held and Business Experience
- ----                     ---  ----------------------------

Robert S. Cline          63   Chairman and Chief Executive Officer (1984
                              to date); Vice Chairman and Chief Financial
                              Officer (1978 to 1984); Executive Vice
                              President and Chief Financial Officer (1973
                              to 1978); Senior Vice President, Finance
                              (1970 to 1973); Vice President, Finance
                              (1968 to 1970); Vice President, Finance,
                              Pacific Air Freight, Inc. (1966 to 1968)

Robert G. Brazier        63   Vice Chairman (2000 to date); President and
                              Chief Operating Officer (1978 to 2000);
                              Executive Vice President and Chief
                              Operating Officer (1973 to 1978); Senior
                              Vice President, Operations (1970 to 1973);
                              Vice President, Operations (1968 to 1970);
                              Vice President, Sales and Operations,
                              Pacific Air Freight, Inc. (1964 to 1968)

Carl D. Donaway          49   President and Chief Operating Officer
                              (August 2000 to date); Senior Executive
                              Vice President (February 2000 to August
                              2000); Chief Executive Officer, ABX Air,
                              Inc. (1992 to date); offices held in the
                              Company:  Vice President, Business Analysis
                              (1992); Vice President, Customer Support
                              (1990 to 1992)

David A. Billings        55   Senior Vice President and Chief Information
                              Officer (August 2000 to date); Senior Vice
                              President, Information and Technology
                              Systems (1993 to 2000); Vice President,
                              Information and Technology Systems (1981 to
                              1988,1990 to 1993)

Kenneth J. McCumber      55   Senior Vice President, Sales (November 2000
                              to date); Senior Vice President and General
                              Manager,Logistics Services (1999 to 2000);
                              Vice President and General Manager,
                              Logistics Services (1993 to 1999); Vice
                              President, Corporate Marketing (1986 to
                              1993)


                                  Page 14

Lanny H. Michael         49   Senior Vice President and Chief Financial
                              Officer (August 2000 to date); Senior Vice
                              President, Treasurer (1993 to 2000); Vice
                              President, Treasurer and Controller (1988
                              to 1993); Vice President, Controller (1985
                              to 1988); Controller (1981 to 1985)

David C. Anderson        47   Vice President, General Counsel and
                              Corporate Secretary (February 2000 to
                              date); Corporate Secretary/Counsel (1993 to
                              2000)


                                  Page 15
                                  PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
- ---------------------------------------------------------------
STOCKHOLDER MATTERS
- --------------------
     The response to this Item is contained in the 2000 Annual Report to
Shareholders and the information contained therein is incorporated herein
by reference.

     On February 20, 2001 there were 1,212 shareholders of record of the
Common Stock of the Company based on information provided by the Company's
transfer agent.

ITEM 6.   SELECTED FINANCIAL DATA
- ---------------------------------
     The response to this Item is contained in the 2000 Annual Report to
Shareholders and the information contained therein is incorporated herein
by reference.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
     The response to this Item is contained in the 2000 Annual Report to
Shareholders and the information contained therein is incorporated herein
by reference.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -----------------------------------------------------------------
     The Company is exposed to market risks in the ordinary course of its
business. These risks include interest rate risk, fuel price risk and
foreign exchange risk. The following is a description of these risks and a
discussion of the Company's exposure to changes in market rates and prices
and related effects on fair values, earnings and cashflows.

Interest Rate Risk
- ------------------
     Indebtedness of the Company under its various borrowing arrangements
creates interest rate risk. The Company had outstanding long-term debt of
$322 million as of December 31, 2000. The Company has exposure to changes
in interest rates for the portion of its long-term debt ($115 million) that
carries variable interest rates which reprice frequently. However, the
majority of its long-term debt ($207 million) carries interest rates which
are fixed.  Management does not consider this repricing risk to be
significant. The Company does not currently use derivative financial
instruments to manage its interest rate risk.

     The Company's sensitivity to interest rate risk can be quantified by
estimating the decrease in fair value of its long-term debt through a
hypothetical 10% increase in interest rates. As of December 31, 2000, a 10%
increase in interest rates would have decreased fair value of the Company's
long-term debt by approximately $6 million. The underlying fair value

                                  Page 16
before performing the hypothetical calculation was estimated principally
from quoted market prices for the same securities.

Foreign Currency Risk
- ---------------------
     The Company's earnings are exposed to changes in the value of the U.S.
dollar relative to other foreign currencies since the Company's services
are provided in a number of foreign markets. Currency exposure may arise
through the collection of revenues and payment of expenses in these foreign
markets. The Company currently does not use derivative financial
instruments to manage foreign currency risks.

     Foreign currency rate sensitivity can be quantified by estimating the
change in earnings as a result of a hypothetical, uniform, 10%
Strengthening in the value of the U.S. dollar relative to the currencies in
which the revenues and expenses are denominated. This calculation, while
ignoring the potential effect on revenue and expense levels resulting from
a significant change in foreign currency exchange rates, would result in an
approximately $4 million dollar increase in pretax earnings from operations
for the year ended December 31, 2000.

Jet Fuel Price Risk
- -------------------
     The Company is inherently dependent on jet fuel to operate its fleet
of aircraft and accordingly earnings are impacted by changes in jet fuel
prices. For the year ended December 31, 2000 the Company consumed 184.1
million gallons of jet fuel at an average price of $1.02 per gallon.  Notes
A and B of the Notes to Consolidated Financial Statements (contained in the
2000 Annual Report to Shareholders and incorporated by reference herein)
describe the accounting policy, fair value and additional information
regarding the Company's use of financial instruments to manage jet fuel
price risk.

     Jet fuel price sensitivity can be quantified by estimating the
decrease in earnings as a result of a uniform increase in average jet fuel
prices applied against consumption. If jet fuel prices were to increase
10%, earnings for the year ended December 31, 2000 would have decreased
approximately $18.8 million.  While the Company does have a fuel hedging
program and has utilized fuel hedging contracts in previous periods, the
Company did not have contracts in place during 2000.  The Company may enter
into contracts in future periods depending on pricing and market
conditions.  During 2000, the Company implemented a temporary fuel
surcharge on revenue to mitigate the earnings effect of unusually high fuel
prices.

     The Company does not use derivative financial instruments for trading
purposes.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
     The response to this Item is contained in the 2000 Annual Report to
Shareholders and the information contained therein is incorporated herein
by reference.
                                  Page 17
ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
     None

                                 PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
     The response to this Item is contained in part in the Proxy Statement
for the 2001 Annual Meeting of Shareholders under the captions "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance"
and the information contained therein is incorporated herein by reference.

     The executive officers of the Company are elected annually at the
Board of Directors meeting held in conjunction with the annual meeting of
shareholders.  There are no family relationships between any directors or
executive officers of the Company.  Additional information regarding
executive officers is set forth in Part I, Item 4a.

ITEM 11.  EXECUTIVE COMPENSATION
- --------------------------------
     The response to this Item is contained in the Proxy Statement for the
2001 Annual Meeting of Shareholders under the caption "Executive
Compensation" and the information contained therein is incorporated herein
by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
     The response to this Item is contained in the Proxy Statement for the
2001 Annual Meeting of Shareholders under the captions "Voting at the
Meeting" and "Stock Ownership of Management" and the information contained
therein is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
     None

                                  PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
(a)1.     Financial Statements
          --------------------
     The following consolidated financial statements of Airborne, Inc. and
its subsidiaries as contained in its 2000 Annual Report to Shareholders are
incorporated by reference in Part II, Item 8:

               Consolidated Statements of Net Earnings

               Consolidated Balance Sheets

                                  Page 18
               Consolidated Statements of Cash Flows

               Consolidated Statements of Shareholders' Equity

               Notes to Consolidated Financial Statements

               Independent Auditors' Report

     All schedules are omitted because they are not applicable or are not
required, or because the required information is included in the
consolidated financial statements or notes thereto.

(a)3.     Exhibits
          --------
      The following exhibits are filed with this report:


EXHIBIT NO. 3  Articles of Incorporation and Bylaws
- ---------------------------------------------------
            3(a) The Restated Certificate of Incorporation of Airborne,
            Inc.

            3(b) The Bylaws of Airborne, Inc. (incorporated by reference
            from Exhibit 4.2 to the Company's Form 8-K filed with the
            Securities and Exchange Commission on December 26, 2000).


EXHIBIT NO. 4  Instruments Defining the Rights of Security Holders
- ------------------------------------------------------------------
Including Indentures
- --------------------
            4(a) Indenture dated as of December 3, 1992, between AEI and
            The Bank of New York, as trustee, relating to AEI's 8-7/8%
            Notes due 2002 (incorporated by reference from Exhibit 4(a) to
            Amendment No. 1 to the Company's Registration Statement on
            Form S-3, No. 33-54560 filed with the Securities and Exchange
            Commission on December 4, 1992).

            4(b) First Supplemental Indenture dated as of September 15,
            1995, between AEI and The Bank of New York, as trustee,
            relating to AEI's 7.35% Notes due 2005 (incorporated by
            reference from Exhibit 4(b) to Amendment No. 1 to the
            Company's
                 Registration Statement on Form S-3, No. 33-61329, filed
            with the Securities and Exchange Commission on September 5,
            1995).

            4(c) Second Supplemental Indenture dated as of February 12,
            1997 between AEI and The Bank of New York, as trustee,
            relating to AEI's 8-7/8% Notes due 2002 (incorporated by
            reference from Exhibit 4(e) to the Company's Form 10-K for the
            year ended December 31, 1996).

            4(d) Rights Agreement, dated as of February 14, 1997 between
            AEI and The Bank of New York, as Rights Agent (incorporated by
            reference from Exhibit 1 to the Company's Registration

                                  Page 19
                 Statement on Form 8-A, filed with the Securities and
            Exchange Commission on February 12, 1997).

            4(e) Assignment and Assumption Agreement dated December 21,
            2000 between Airborne, Inc. and AEI relating to the Rights
            Agreement(see 4(d) above, incorporated by reference from
            Exhibit 4.3 to the Company's Form 8-K filed with the
            Securities and Exchange Commission on December 26, 2000).

            4(f) Certificate of Adjustment relating to the Rights
            Agreement (see 4(d) above, incorporated by reference from
            Exhibit 4 to Amendment 1 to the Company's Registration
            Statement on Form 8-A, filed with the Securities and Exchange
            Commission on June 1, 1998).

            4(g) Certification of Adjustment relating to the Rights of
            Agreement (see 4(d) above, incorporated by reference from
            Exhibit 4.4 to the Company's Form 8-K filed with the
            Securities and Exchange Commission on December 26, 2000).

            4(h) Form of Right Certificate relating to the Rights
            Agreement (see 4(d) above, incorporated by reference from
            Exhibits 2 and 3 to the Company's Registration Statement on
            Form 8-A, filed with the Securities and Exchange Commission on
            February 12, 1997).


EXHIBIT NO. 10 Material Contracts
- ---------------------------------

Executive Compensation Plans and Agreements
- -------------------------------------------
            10(a)     1983 Airborne, Inc. Key Employee Stock Option and
            Stock Appreciation Rights Plan, as amended through February 2,
            1987 (incorporated by reference from Exhibit 10(c) to the
            Company's Form 10-K for the year ended December 31, 1986).

            10(b)     1989 Airborne, Inc. Key Employee Stock Option and
            Stock Appreciation Rights Plan (incorporated by reference from
            Exhibit 10(d) to the Company's Form 10-K for the year ended
            December 31, 1989).

            10(c)     1994 Airborne, Inc. Key Employee Stock Option and
            Stock Appreciation Rights Plan (incorporated by reference from
            the Addendum to the Company's Proxy Statement for the 1994
            Annual Meeting of Shareholders).

            10(d)     Airborne, Inc. 1998 Key Employee Stock Option Plan
            (incorporated by reference from the Addendum to the Company's
            Proxy Statement for the 1998 Annual Meeting of Shareholders).



                                  Page 20
            10(e)     Airborne, Inc. Directors Stock Option Plan
            (incorporated by reference from the Addendum to the Company's
            Proxy Statement for the 1991 Annual Meeting of Shareholders).

            10(f)     Airborne, Inc. 2000 Director Stock Option Plan
            (incorporated by reference from the addendum to the Company's
            Proxy Statement for the 2000 Annual Meeting of shareholders).

            10(g)     Airborne, Inc. Director Stock Bonus Plan dated April
            23, 1996 (incorporated by reference from Exhibit 10(a) to the
            Company's Form 10-Q for the quarter ended June 30, 1996).

            10(h)     First Amendment to Airborne, Inc. Director Stock
            Bonus Plan dated as of February 3, 1998 (incorporated by
            reference from Exhibit 10(g) to the Company's Form 10-K for
            the year ended December 31, 1998).

            10(i)     Second Amendment to Airborne, Inc. Director Stock
            Bonus Plan dated as of February 3, 1998 (incorporated by
            reference from Exhibit 10(h) to the Company's Form 10-K for
            the year ended December 31, 1998).

            10(j)     Airborne Express Executive Deferral Plan restated
            January 1, 2000(incorporated by reference from Exhibit 10(i)
            to the Company's Form 10-K for the year ended December 31,
            1999).

            10(k)     Airborne Express Supplemental Executive Retirement
            Plan restated January 1, 2000(incorporated by reference from
            Exhibit 10(j) to the Company's Form 10-K for the year ended
            December 31, 1999).

            10(l)     Airborne Express 2000-2004 Executive Incentive
            Compensation Plan (incorporated by reference from Exhibit
            10(b) to the Company's Form 10-Q for the quarter ended March
            31, 2000).

            10(m)     Airborne Express 2000-2004 Executive Group Incentive
            Compensation Plan (incorporated by reference from Exhibit
            10(a) to the Company's Form 10-Q for the quarter ended March
            31, 2000).

            10(n)     Employment Agreement dated December 15, 1983, as
            amended November 20, 1986, between AEI and Mr. Robert G.
            Brazier, then President and Chief Operating Officer
            (incorporated by reference from Exhibit 10(a) to the Company's
            Form 10-K for the year ended December 31, 1986).  A
            substantially identical agreement exist between the Company
            and four other executive officer.

            10(o)     Employment Agreement dated August 14, 2000 between
            AEI and Mr. Richard Corrado, Vice President, Marketing.  AEI
            has entered into substantially identical agreements with most
            of their officers.

                                  Page 21

Other Material Contracts
- ------------------------
            10(p)     $275,000,000 Credit Agreement dated as of July 27,
            2000 among AEI, as borrower, and Wachovia Bank of Georgia,
            N.A., as agent, and Wachovia Bank, N.A., as administrative
            agent, with U.S. Bank, as documentation agent, Bank of
            America, N.A., as syndication agent, and Wachovia Securities,
            Inc., as lead arranger (incorporated by reference from Exhibit
            10(a) to the Company's Form 10-Q for the year ended June 30,
            2000).

            10(q)     Joinder Agreement relating to the Credit Agreement
            between AEI, the original borrower, Wachovia Bank, N.A., as
            agent and Airborne, Inc., the new borrower (see 10(p) above).

            10(r)     Used Aircraft Sales Agreement entered into as of
            December 22, 1995 between ABX Air, Inc. and KC-One, Inc; KC-
            Two, Inc.; and KC-Three, Inc. (incorporated by reference from
            Exhibit 10(n) to the Company's Form 10-K for the year ended
            December 31, 1996).  Confidential treatment has been granted
            for confidential commercial and financial information,
            pursuant to Rule 24b-2 under the Securities Exchange Act of
            1934.

            10(s)     Receivables Purchase Agreement between Airborne
            Credit, Inc., as seller; AEI, as servicer; Blue Ridge Asset
            Funding
                 Corporation, as purchaser, and Wachovia Bank, N.A., as
            administrative agent.

            10(t)     Receivables Sale Agreement between AEI, as
            originator and Airborne Credit, Inc., as buyer.


EXHIBIT NO. 12 Statements Re Computation of Ratios
- -------------------------------------------------------------
            12   Statement re computation of percentage ratio of total
            long-term debt to total capitalization


EXHIBIT NO. 13 Annual Report to Security Holders
- ------------------------------------------------
            13   Portions of the 2000 Annual Report to Shareholders of
            Airborne, Inc.


EXHIBIT NO. 21 Subsidiaries of the Registrant
- ---------------------------------------------
            21   The subsidiaries of the Company are listed in Part I of
            this report on Form 10-K for the year ended December 31, 2000.


EXHIBIT NO. 23 Consents of Experts and Counsel
- ----------------------------------------------
      23    Independent Auditors' Consent
                                  Page 22
      All other exhibits are omitted because they are not applicable, or
      not required, or because the required information is included in the
      consolidated financial statements or notes thereto.

(b)   Reports on Form 8-K
      -------------------
      On December 26, 2000, the Company filed a Form 8-K to report the
      implementation of a new holding company structure.

                                SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                   AIRBORNE, INC.

                                   By /s/ Robert S. Cline
                                   ----------------------
                                      Robert S. Cline
                                      Chairman & Chief Executive
                                      Officer

                                   By /s/ Lanny H. Michael
                                   -----------------------
                                      Lanny H. Michael
                                      Chief Financial Officer

                                   By /s/ Robert T. Christensen
                                   ----------------------------
                                      Robert T. Christensen
                                      Chief Accounting Officer

Date:  _March 29, 2001__

     Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:

/s/ Robert G. Brazier                /s/ Richard M. Rosenberg
- -----------------------------        -----------------------------
Robert G. Brazier (Director)         Richard M. Rosenberg (Director)


/s/ Robert S. Cline                  /s/ Mary Agnes Wilderotter
- -----------------------------        -----------------------------
Robert S. Cline (Director)           Mary Agnes Wilderotter (Director)


/s/ Harold M. Messmer, Jr.           /s/ Carl D. Donaway
- -----------------------------        -----------------------------
Harold M. Messmer, Jr. (Director)    Carl D. Donaway (Director)

                                  Page 23
EXHIBIT INDEX

Exhibit
 Number                          Description
- -------                          ------------

EXHIBIT NO. 3   Articles of Incorporation and Bylaws
- ----------------------------------------------------

  3(a)    Restated Certificate of Incorporation of Airborne, Inc.



EXHIBIT NO. 10  Material Contracts
- ----------------------------------

 10(o)    Employment Agreement between AEI and Mr. Richard Corrado

 10(q)    Joinder Agreement

 10(s)    Receivables Purchase Agreement

 10(t)    Receivables Sale Agreement


EXHIBIT NO. 12  Statements Re Computation of Ratios
- --------------------------------------------------------------

   12     Statement re computation of percentage ratio of total
          long-term debt to total capitalization



EXHIBIT NO. 13  Annual Report to Security Holders
- -------------------------------------------------

   13     Portions of the 2000 Annual Report to Shareholders of
          Airborne, Inc.



EXHIBIT NO. 23  Consents of Experts and Counsel
- -----------------------------------------------

   23     Independent Auditors' Consent







                                  Page 24