EDISON SCHOOLS INC
PLEDGE AGREEMENT
<DOCUMENT>
<TYPE>EX-10.37
<SEQUENCE>7
<FILENAME>y64230exv10w37.txt
<DESCRIPTION>PLEDGE AGREEMENT
<TEXT>
<PAGE>
                                                                   Exhibit 10.37



                                PLEDGE AGREEMENT

         PLEDGE AGREEMENT dated as of July 31, 2002 (the "Agreement") by EDISON
SCHOOLS INC. ("Pledgor") in favor of EDISON RECEIVABLES COMPANY LLC ("Pledgee").


         WHEREAS, the parties hereto have entered into that certain Purchase
Agreement dated as of October 31, 2001 (the "Original Purchase Agreement");


         WHEREAS, pursuant to the Original Purchase Agreement, the Pledgor has
certain obligations to the Pledgee, including the obligation to sell, from time
to time, Receivables to the Pledgee;


         WHEREAS, Pledgor wishes to induce Pledgee to purchase additional
Receivables and to extend the existing commitment under the Original Purchase
Agreement;


         WHEREAS, the parties have agreed to enter into that certain Amended and
Restated Purchase and Contribution Agreement of even date herewith (the
"Purchase Agreement") conditioned upon the parties entering into this Agreement
simultaneously with the Purchase Agreement;


         WHEREAS, Pledgee has requested, and Pledgor has agreed to provide,
collateral security for the performance of Pledgor's obligations under the
Purchase Agreement; and

         WHEREAS, Pledgor and Pledgee desire to provide for the release or
subordination of the security interest granted hereby upon the occurrence of
certain conditions as set forth herein;


         NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:

         1. Defined Terms. Except where otherwise specifically provided, all
capitalized terms which are not defined herein but which are defined in the
Purchase Agreement are used herein as so defined.

         2. Grant of Security Interest. As collateral security for (a) the
prompt and complete payment and performance when due of Pledgor's obligations
under Section 2.05, Section 6.07 and Section 8.03 of the Purchase Agreement
(collectively, the "Secured Obligations") and (b) all costs and expenses
incurred by Pledgee in connection with the enforcement of Pledgee's rights
against the Pledgor under the Facility Documents, Pledgor hereby assigns,
transfers, pledges and grants to Pledgee a security interest in and to (all of
such property being hereinafter collectively referred to as the "Collateral"):
<PAGE>
                  (a) (i) all of Pledgor's membership interest in 110th and 5th
         Associates, LLC, a New York limited liability company ("110th and
         5th"), (ii) any and all additional interests and/or membership
         interests issued from time to time in respect thereof, (iii) all
         certificates, instruments, or other writings representing or evidencing
         any of the foregoing or any portion thereof, (iv) any other claims
         which the Pledgor now has or may acquire in its capacity as a member of
         110th and 5th and (v) any and all proceeds of the foregoing (the
         membership and all other interests above, the "Pledged LLC Interest");
         and

                  (b) (i) all of Pledgor's right, title and interest under, in
         and to all of the loans evidenced by promissory notes listed on
         Schedule I attached hereto, (ii) any and all additional interests
         and/or promissory notes issued from time to time in respect thereof,
         (iii) all notes, instruments, or other writings representing or
         evidencing the foregoing or any portion thereof, (iv) any other claims
         which the Pledgor now has or may acquire in its capacity as lender
         and/or holder with respect to such promissory notes, and (v) any and
         all proceeds of the foregoing (the promissory notes and all other
         interests above, the "Promissory Notes").

                  3. Release and Subordination of Security Interest.

                  (a) If (i) "Special Condition (a)" (as defined in the Real
         Estate Agreement) occurs, (ii) the conditions precedent to the $10
         million Term Loan (as defined in the Real Estate Agreement) and a $10
         million revolving loan as contemplated by Section 2 of the Real Estate
         Agreement (the "Revolving Loan") have been satisfied, and (iii) such
         $10 million Term Loan has been fully drawn in accordance with the terms
         thereof and $5 million of the Revolving Loan has been drawn in
         accordance with the terms thereof, then Pledgee shall release the
         security interest in the Collateral granted hereby.

                  (b) If (i) "Special Condition (b)" (as defined in the Real
         Estate Agreement) occurs, (ii) the conditions precedent to the loan by
         the lender under the Real Estate Agreement (the "Real Estate Lender")
         of all or any portion of the up to $10 million Term Loan have been
         satisfied, and (iii) $5 million of such Term Loan has been drawn in
         accordance with the terms thereof, then Pledgee shall permit Pledgor to
         cause 110th and 5th to grant a mortgage on the real estate assets of
         110th and 5th listed on Exhibit C (the "Harlem Property") in favor of
         the Real Estate Lender to secure such Term Loan. If the events under
         the foregoing clauses (i) and (ii) occur, simultaneously with the
         Pledgor's draw of $10 million of such Term Loan in accordance with the
         terms thereof, the Pledgee shall release the security interest in the
         Pledged LLC Interest.

                  (c) If (i) "Special Condition (b)" occurs, (ii) Pledgor has
         satisfied the conditions precedent for the Second Closing Date with
         respect to all or any portion of the Revolving Loan, (iii) Pledgor has
         drawn $10 million under the Term Loan, and (iv) $1 million of the
         Revolving Loan has been drawn in accordance with the terms thereof,
         then Pledgee shall permit Pledgor to grant a security interest in the
         Promissory Notes in favor of the Real Estate Lender and Pledgee shall
         subordinate its interest therein to the security interest of the Real
         Estate Lender therein (the "Real Estate Lender Lien"). If the events
         under the foregoing clauses (i), (ii) and (iii) occur and Pledgor has
         drawn $15 million in the
<PAGE>
         aggregate under the Term Loan and the Revolving Loan, then Pledgee
         shall release the security interest in the Promissory Notes.

                  (d) Pledgor may cause 110th and 5th to sell the Harlem
         Property to a purchaser or grant a mortgage thereon to a lender other
         than the Real Estate Lender as set forth herein. When no mortgage in
         favor of the Real Estate Lender exists on the Harlem Property, if the
         proceeds of any such sale or financing are not less than $7 million,
         then Pledgee shall, simultaneously with the delivery to Pledgee of 25%
         of the proceeds of such sale or financing as cash collateral, permit
         Pledgor to consent to such sale or mortgage. When a mortgage on the
         Harlem Property in favor of the Real Estate Lender exists, if an amount
         equal to the lesser of (1) 25% of the sale proceeds received by 110th
         and 5th and (2) the excess of (x) the sale proceeds received by 110th
         and 5th over (y) the amount of the mortgage in favor of the Real Estate
         Lender is delivered to Pledgee as cash collateral, then the Pledgee
         shall, simultaneously with the delivery to the Pledgee of such amount,
         permit Pledgor to cause 110th and 5th to sell the Harlem Property.

                  (e) If all or any portion of the principal amount of any one
         or more of the Promissory Notes is paid in connection with a
         refinancing of the debt evidenced thereby prior to the pledge thereof
         to the Real Estate Lender, then the Pledgor shall cause 25% of the
         proceeds of such principal payment to be delivered to Pledgee as cash
         collateral. If all or any portion of the principal amount of any one or
         more of the Promissory Notes is paid in connection with a refinancing
         of the debt evidenced thereby after the pledge thereof to the Real
         Estate Lender, then the Pledgor shall cause to be delivered to Pledgee
         as cash collateral an amount equal to the lesser of (1) 25% of the
         proceeds of such principal payment, and (2) the excess of (x) the
         proceeds received by Pledgor over (y) the amount paid to the Real
         Estate Lender.

                  (f) Amounts held by Pledgee pursuant to Section 3(d) and/or
         3(e) shall be invested in such investments as Pledgor and Pledgee shall
         agree, and any proceeds of such investments shall be held by Pledgee as
         additional collateral. Such amounts shall be retained by Pledgee as
         additional collateral notwithstanding any subsequent release by Pledgee
         of Collateral upon the occurrence of "Special Condition (a)" or any
         mortgage granted to the Real Estate Lender on the Harlem Property or
         granting of the Real Estate Lender Lien upon the occurrence of "Special
         Condition (b)"; provided, however, that if the Term Loan is fully drawn
         and Pledgor has satisfied the conditions precedent to draw an amount
         under the Revolving Loan such that the aggregate amount Pledgor has
         borrowed or is then permitted to borrow under the Real Estate Agreement
         is greater than or equal to $15 million and the aggregate amount
         Pledgor has drawn under the Real Estate Agreement is greater than or
         equal to $10 million then Pledgee shall release the security interest
         in the Collateral and all proceeds thereof.

                  4. Certain Understandings of the Parties.

                  (a) (i) The parties acknowledge and agree that the Pledged LLC
         Interest constitutes general intangibles (as defined in Section
         9-102(a)(42) of the UCC); and (ii) the Pledgor represents and warrants
         that (1) neither the Pledged LLC Interest nor any portion thereof is or
         will be traded in and/or dealt in on securities exchanges or securities
<PAGE>
         markets, (2) neither the Pledged LLC Interest nor the Articles of
         Organization of 110th and 5th will provide that the Pledged LLC
         Interest constitutes securities governed by the UCC, (3) the Pledged
         LLC Interest is not and will not be investment company securities
         within the meaning of Section 8-103 of the UCC and (4) the Pledged LLC
         Interest is not held in a securities account by the Pledgor.

                  (b) To better assure the perfection of the security interest
         of the Pledgee in the Pledged LLC Interest, concurrently with the
         execution and delivery of this Agreement, the Pledgor shall send
         written instructions in the form of Exhibit A hereto to 110th and 5th,
         and shall cause 110th and 5th to, and 110th and 5th shall, deliver to
         the Pledgor the Confirmation Statement and Instruction Agreement in the
         form of Exhibit B hereto pursuant to which 110th and 5th will confirm
         that it has registered the pledge effected by this Agreement on its
         books and agrees to comply with the instructions of Pledgee in respect
         of the Pledged LLC Interest without further consent of the Pledgor or
         any other Person. Notwithstanding the foregoing, but subject to Section
         8 hereof, Pledgor shall continue to act as manager of 110th and 5th.

                  5. Representations, Warranties and Covenants of Pledgor -
General. Pledgor hereby represents, warrants and covenants as follows:

                  (a) Pledgor (i) is a corporation duly incorporated, validly
         existing and in good standing under the laws of the State of Delaware
         and has all corporate powers and all material governmental licenses,
         authorizations, consents and approvals required to carry on its
         business as now conducted, and (ii) has filed or caused to be filed all
         federal and state tax returns which are required to be filed and has
         paid or caused to be paid all amounts of taxes required to be paid by
         it, except for such taxes (x) as are being contested in good faith by
         proper proceedings and (y) against which adequate reserves shall have
         been established in accordance with and to the extent required by GAAP.

                  (b) The execution, delivery and performance by the Pledgor of
         this Agreement will not contravene or constitute a default under any
         provision of applicable law or regulation or of the certificate of
         incorporation or by-laws of the Pledgor, the Amended and Restated
         Limited Liability Operating Agreement of 110th and 5th dated as of the
         date hereof, 2002 (the "LLC Agreement") or any material agreement to
         which the Pledgor or 110th and 5th is a party or by which any property
         of either of them is bound, and will not result in the creation or
         imposition of any Lien on any of the Collateral pursuant to any
         requirement of law or contractual obligation except for (i) the Liens
         created pursuant to this Agreement (including Liens contemplated by
         Section 3), and (ii) Liens (x) securing taxes, assessments,
         governmental charges or levies not yet delinquent or the payment of
         which is being contested in good faith by appropriate proceedings
         diligently conducted and with respect to which adequate reserves have
         been established in accordance with GAAP and which do not, singly or in
         the aggregate, adversely affect in any material respect the Collateral
         or the Pledgee's ownership interest therein, and (y) arising by
         operation of law securing any amount not yet delinquent or the payment
         of which is being contested in good faith by appropriate proceedings
         diligently conducted and with respect to which adequate reserves have
         been established in accordance with GAAP and which do not, singly or in
         the aggregate, adversely affect in any material respect the
<PAGE>
         Collateral or the Pledgee's ownership interest therein (the Liens
         described in the foregoing clauses (i) through (ii), collectively, the
         "Permitted Liens").

                  (c) Pledgor acknowledges that UCC financing statements have
         been or will be filed in connection with the perfection of the security
         interest granted hereby. Pledgor understands that Pledgee has relied on
         Pledgor's representations set forth in the Purchase Agreement and the
         Officer's Certificate delivered in connection therewith as to
         jurisdiction of organization, location of chief executive offices,
         name, and transactions involving merger in order to conduct appropriate
         UCC financing statement searches with respect to the Pledgor. Pledgor
         covenants and agrees that Pledgor will not change its name, identity or
         corporate structure at any time during the term of this Agreement in
         any way that would make any financing statement or continuation
         statement filed in connection with this Agreement seriously misleading
         within the meaning of Section 9-506, 9-507 or 9-508 of the UCC unless
         it shall have given the Pledgee at least 30 days' prior written notice
         thereof and causes such financing statements or continuation statement
         to be amended or a new financing statement to be filed. The Pledgor
         shall give the Pledgee 15 days' prior written notice of any relocation
         of its chief executive office or jurisdiction of incorporation.

                  (d) This Agreement is the valid and binding obligation of
         Pledgor, enforceable in accordance with its terms, except as
         enforcement may be limited by bankruptcy and other similar laws
         affecting creditors' rights generally.

                  (e) No consent or authorization of, filing with, or other act
         by any governmental authority and no consent of any other person or
         entity is required in connection with the execution, delivery,
         performance, validity or enforceability of this Agreement.

                  (f) No litigation, investigation or proceeding of or before
         any arbitrator or governmental authority is pending or, to the
         knowledge of the Pledgor, threatened by or against Pledgor or against
         any of its properties.

                  (g) Except as expressly provided for herein, Pledgor shall not
         sell, assign, transfer, pledge or otherwise dispose of any portion of
         the Collateral, or contract to do so without the written consent of the
         Pledgee.

                  (h) Pledgor will advise Pledgee promptly, in reasonable
         detail, of (i) any Lien on, or claim asserted against, any portion of
         the Collateral, other than Permitted Liens, and (ii) the occurrence of
         any other event which could reasonably be expected to have a material
         adverse effect on the value of the Collateral or on the Liens created
         hereunder.

                  (i) Pledgor will not take or omit to take any action, the
         taking or the omission of which would result in an alteration or
         impairment of the Collateral or the security of this Agreement.
<PAGE>
                  6. Representations, Warranties and Covenants of Pledgor -
Pledged LLC Interest. Pledgor hereby represents, warrants and covenants as
follows:

                  (a) 110th and 5th (i) is a limited liability company duly
         organized, validly existing and in good standing under the laws of the
         State of New York, and has all company powers and all material
         governmental licenses, authorizations, consents and approvals required
         to carry on its business as now conducted, and (ii) has filed or caused
         to be filed all federal and state tax returns which are required to be
         filed and has paid or caused to be paid all amounts of taxes required
         to be paid by it, except for such taxes (x) as are being contested in
         good faith by proper proceedings and (y) against which adequate
         reserves shall have been established in accordance with and to the
         extent required by GAAP.

                  (b) Pledgor is the sole member of 110th and 5th.

                  (c) Pledgor owns the Pledged LLC Interest free and clear of
         any Liens, other than Permitted Liens.

                  (d) Subject to Section 3 hereof, Pledgee has and shall have a
         valid, enforceable and perfected first priority Lien on the Pledged LLC
         Interest and the proceeds thereof. No security agreement, financing
         statement or other public notice with respect to all or any part of the
         Pledged LLC Interest is on file or of record in any public office,
         except as may be filed pursuant to the terms of this Agreement.

                  (e) Pledgor's membership interest in 110th and 5th has been
         duly authorized, validly issued and is fully paid and non-assessable.
         Pledgor has paid in full its capital contribution to 110th and 5th as
         recorded on the books and records of 110th and 5th, and Pledgor is not
         required to contribute any additional amounts to the capital of 110th
         and 5th.

                  (f) No litigation, investigation or proceeding of or before
         any arbitrator or governmental authority is pending or, to the
         knowledge of the Pledgor, threatened by or against 110th and 5th or
         against any of its properties.

                  (g) Pledgor will not create, incur or permit to exist, will
         defend the Pledged LLC Interest against, and will take such other
         action as is necessary to remove, any Lien or claim on or to the
         Pledged LLC Interest, other than the Lien created by this Agreement and
         any other Permitted Liens, and will defend the right, title and
         interest of the Pledgee in, to and under the Pledged LLC Interest
         against the claims and demands of all persons whomsoever.

                  (h) The assets of 110th and 5th are listed on Exhibit C
         hereto. Such assets are not and will not be subject to any Liens during
         the term of this Agreement, other than as contemplated by Section 3
         above and Permitted Liens.

                  (i) There is no claim or liability, or to the knowledge of the
         Pledgor, any pending or threatened litigation, investigation,
         proceeding or arbitration affecting 110th and 5th or its properties or
         assets.
<PAGE>
                  (j) The LLC Agreement does not and will not prohibit, restrict
         or otherwise interfere with Pledgee's rights under this Agreement,
         including, but not limited to Pledgee's right, in the event of a
         default by Pledgor, under Section 8 of this Agreement, to exercise any
         and all voting and other consensual rights pertaining to the Pledged
         LLC Interest and to receive and retain as additional collateral all
         distributions and interest in respect thereof.

                  (k) Pledgor will not cause or permit 110th and 5th to violate
         the terms of the LLC Agreement. Except as contemplated by Section 3
         above, Pledgor will not cause or permit 110th and 5th to (i) acquire
         any assets, (ii) transfer or dispose of all or any portion of any asset
         (including by license, lease, participation or encumbrance of any
         kind), (iii) incur any indebtedness, (iv) issue any guarantees, or (v)
         otherwise incur or contract to incur any obligation of any kind
         whatsoever.

                  7. Representations, Warranties and Covenants of Pledgor -
Promissory Notes. Pledgor hereby represents, warrants and covenants as follows:

                  (a) Pledgor owns the Promissory Notes free and clear of any
         Liens, other than Permitted Liens.

                  (b) Pledgee has, and, subject to Section 3 above, at all times
         during the term of this Agreement, shall have a valid, enforceable and,
         upon the filing of the necessary financing statements under the UCC as
         in effect in the jurisdiction whose law governs the perfection of
         Pledgee's security interests in the Promissory Notes and/or taking
         possession of such Promissory Notes, perfected Lien on the Promissory
         Notes and the proceeds thereof, and such Promissory Notes are and will
         be subject to no Liens other than Permitted Liens. No security
         agreement, financing statement or other public notice with respect to
         all or any part of the Promissory Notes is on file or of record in any
         public office, except as may be filed pursuant to the Real Estate
         Lender Lien or the terms of this Agreement.

                  (c) Pledgor shall do all things necessary to preserve the
         Promissory Notes so that they remain subject to the security interest
         granted hereunder, subject, however, to Section 3 hereof. Without
         limiting the foregoing, Pledgor will comply with all rules, regulations
         and other laws of any governmental authority and cause the Promissory
         Notes to comply with all applicable rules, regulations and other laws.
         Pledgor will not allow any default for which Pledgor is responsible to
         occur under any of the Promissory Notes and Pledgor shall fully perform
         or cause to be performed when due all of its obligations under the
         Promissory Notes.

                  (d) Simultaneously with the execution and delivery of this
         Agreement, Pledgor shall deliver to the Pledgee or a designated
         assignee of the Pledgee (i) the Promissory Notes, together with an
         effective endorsement in blank, (ii) full and complete copies of the
         mortgages together with the assignments thereof in recordable form, and
         (iii) full and complete copies of any other documents relating to
         collateral for the Promissory Notes, together with appropriate
         assignments thereof (collectively, the "Loan Documents"). Upon the
         occurrence of the events contemplated by Section 3(a) or 3(c) above,
         such Loan
<PAGE>
         Documents shall be delivered to the Pledgor or the Real Estate Lender,
         as applicable. Upon the occurrence of the events contemplated by
         Section 3(e) the Promissory Notes and the related Loan Documents shall
         be delivered to Pledgor simultaneously with the delivery by Pledgor of
         the cash collateral as contemplated by such Section 3(e).

                  (e) Each Promissory Note is valid and enforceable against its
         respective obligor.

                  (f) No provision of any Promissory Note in any manner
         restricts the ability of the Pledgor or the Pledgee to assign,
         participate, grant security interests in, or otherwise transfer all or
         any portion of the Pledgor's or the Pledgee's interest in the
         Promissory Notes.

                  (g) No obligor is in default in any material respect under or
         with respect to any of its obligations under the Promissory Notes.

                  (h) Pledgor shall not amend, refinance, cancel or forgive any
         indebtedness evidenced by the Promissory Notes or release or impair any
         collateral related thereto, provided, however, that the Promissory
         Notes may be refinanced as contemplated in Section 3. Pledgor shall
         service the portfolio of Promissory Notes with the degree of care and
         skill that would be expected of a reasonably prudent person.

                  8. Default; Remedies.

                  (a) If Pledgor fails to perform any of the Secured Obligations
         in accordance with their terms, (i) the Pledgee may exercise, in
         addition to all other rights and remedies granted to it in the Purchase
         Agreement and this Agreement, all rights and remedies of a secured
         party under the applicable UCC, (ii) Pledgee shall be entitled to
         exercise any and all voting and other consensual rights pertaining to
         the Pledged LLC Interest and to receive and retain as additional
         collateral all distributions and interest in respect thereof, (iii)
         Pledgee shall be entitled to receive and collect payments of principal
         and interest in respect of the Promissory Notes and to exercise
         remedies for nonpayment provided therein and in any documents providing
         collateral security for the payment of the Promissory Notes, and (iv)
         Pledgor shall pay Pledgee's costs of collection, including the
         reasonable fees and expenses of counsel, and the obligation to pay such
         costs shall constitute an additional obligation secured by the
         Collateral.

                  (b) If any notice of a proposed sale or other disposition of
         the Pledged LLC Interest and/or the Promissory Notes shall be required
         by Law, such notice shall be deemed reasonable and proper if given as
         provided herein at least 10 Business Days before such sale or other
         disposition.

                  9. Miscellaneous.

                  (a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
         ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. The parties hereto
         hereby submit to the nonexclusive jurisdiction of the courts of the
         State of New York and the courts of the United States located in the
         State of New York for the purpose of adjudicating any claim or
         controversy arising under this Agreement, and for such

<PAGE>
         purpose, to the extent they may lawfully do so, waive any objection
         which they may now or hereafter have to such jurisdiction or to venue
         therein and any claim of inconvenient forum with respect thereto.
         Nothing in this Section 9(a) shall affect the right of Pledgee (or its
         assignee) to bring any action or proceeding against the Pledgor in the
         courts of other jurisdictions. EACH PARTY HERETO HEREBY KNOWINGLY,
         VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES, TO THE FULLEST
         EXTENT PERMITTED BY LAW, ANY RIGHT TO HAVE A JURY PARTICIPATE IN
         RESOLVING ANY DISPUTE ARISING OUT OF, IN CONNECTION WITH, RELATED TO,
         OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM ESTABLISHED BY THIS
         AGREEMENT OR ANY OTHER CONTRACT, INSTRUMENT, DOCUMENT OR AGREEMENT
         ENTERED IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
         CONTEMPLATED HEREBY OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
         STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF ANY OTHER PERSON.

                  (b) All notices, requests, consents and demands hereunder
         shall be in writing and shall together with any payments be personally
         delivered or sent postage prepaid to the intended party at the address
         set forth below or such other address as a party may specify by written
         notice to the other party:

                  If to Pledgor:

                           Edison Schools Inc.
                           521 Fifth Avenue, 11th Floor
                           New York, New York 10175
                           Attention: Adam T. Feild
                           Telephone:  (212) 419-1600
                           Telecopy:   (212) 419-1705
                           E-mail: afeild@edisonschools.com


                  If to Pledgee:

                           Edison Receivables Company LLC
                           529 Fifth Avenue, 11th Floor
                           New York, New York 10017
                           Attention: Christopher J. Scarlata
                           Telephone:  (212) 599-2655
                           Telecopy:   (212) 599-2652


                  with a copy to the Lender, at the following address:
<PAGE>
                           Merrill Lynch Mortgage Capital Inc.
                           4 World Financial Center
                           22nd Floor
                           New York, New York 10080
                           Attention:  Drew Nugent
                           Telephone:  (212) 449-8246
                           Telecopy:   (212) 449-6673
                           E-mail:  drewnugent@exchange.ml.com

         The date or mailing of a notice or other statement shall be deemed the
date the notice is given or statement rendered.

         (c) The terms of this Agreement may be waived, altered or amended only
in writing signed by the parties hereto.

         (d) This Agreement shall be binding on the parties hereto and their
respective successors and assigns; provided, however, that the Pledgor may not
assign any of its rights or delegate any of its duties hereunder without the
prior written consent of the Pledgee and the Lender. No provision of this
Agreement shall in any manner restrict the ability of the Pledgee to assign,
participate, grant security interests in, or otherwise transfer all or any
portion of the Pledgee's interest in the Agreement and the Collateral to the
Lender. The Pledgor hereby agrees and consents to the assignment as security by
the Pledgee of all of its rights under, interest in and title to this Agreement
to the Lender.

         (e) This Agreement may be executed in counterparts, which together
shall constitute one and the same instrument.

         (f) No delay or failure by the Pledgee in the exercise of any right or
remedies shall constitute a waiver thereof, and no single or partial exercise by
the Pledgee of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy.

         (g) The invalidity or unenforceability of any provision(s) of this
Agreement shall not affect any other provision hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provision were
omitted.

         (h) All representations and warranties of Pledgor contained in this
Agreement shall be true and correct at the time of execution of this Agreement
and until this Agreement terminates.

         (i) This Agreement contains the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
arrangements or understandings, oral or written, with respect to the subject
matter hereof, including the Receivables Financing Commitment Letter, dated June
4, 2002 from the Lender to the Pledgor and the Pledgee.

         (j) When the obligations secured hereby are paid in full or released in
writing by the Pledgee (or its assignees), this Agreement shall terminate.
<PAGE>
         (k) The parties hereto agree that the Lender shall be the third-party
beneficiary of this Agreement and shall have full right, power and authority to
enforce the Pledgee's rights and the Pledgor's obligations under this Agreement.

         (l) The Pledgor shall, upon the request of the Pledgee, from time to
time, execute, acknowledge and deliver, or cause to be executed, acknowledged
and delivered, within a reasonable period following such request, further
information, instruments or documentation and take such further action as may
reasonably be requested by Pledgee to effectuate the intention, performance and
provisions of this Agreement.
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.




                                        EDISON SCHOOLS INC.

                                        By: /s/ David Graff
                                           -------------------------------------
                                        Name:  David Graff
                                        Title: Senior Vice President and General
                                               Counsel


                                        EDISON RECEIVABLES COMPANY LLC


                                        By: /s/ Jay A. Rosenberg
                                           -------------------------------------
                                        Name:  Jay A. Rosenberg
                                        Title: Treasurer

</TEXT>
</DOCUMENT>
