Promissory Note - Alliance Edison LLC and KeyBank NA


                                PROMISSORY NOTE

$1,620,000.00                                                      Dayton, Ohio
                                                                   July 21, 2000
     
     FOR VALUE RECEIVED, ALLIANCE EDISON LLC, a Delaware limited liability
company ("Company"), promises to pay to the order of KEYBANK NATIONAL
ASSOCIATION, a national banking association ("Bank"), the principal sum of ONE 
MILLION SIX HUNDRED TWENTY THOUSAND and 00/100 DOLLARS ($1,620,000.00) or, if 
less, the amount of all loan advances ("Loan Advances") made by Bank to the 
Company pursuant to the terms and conditions contained in a Loan Agreement 
dated July 21, 2000 by and between the Company and Bank (the "Loan Agreement"), 
together with interest thereon at the interest rate or rates as established by 
Bank pursuant to Paragraph 1(a) and 1(b) of this Promissory Note ("Note"). 
This Note is the Note referred to in, is executed and delivered by the Company 
pursuant to, and is entitled to the benefits of and is subject to, the Loan 
Agreement. Except as otherwise defined in this Note, all defined terms in this 
Note shall have the same meanings as defined in the Loan Agreement.

     1. ACCRUAL OF INTEREST.

         (a)    Prime Rate. Interest shall accrue upon the unpaid balance of
                the Loan Advances at an interest rate per annum equal to three
                quarters of one percent (.75%) above Bank's Prime Rate (the
                "Interest Rate"). The term "Bank's Prime Rate" shall mean that
                interest rate established by Bank from time to time as Bank's
                Prime Rate, whether or not such rate is publicly announced. The
                Bank's Prime Rate may not be the lowest interest rate charged by
                Bank for its commercial loans or other extensions of credit. The
                Interest Rate shall change and become immediately effective
                without notice to the Company upon each change in Bank's Prime
                Rate.     

         (b)    After-Maturity Interest Rate. After maturity of this Note, 
                whether or not by acceleration, interest shall accrue upon the 
                unpaid balance of the Loan Advances at an interest rate per 
                annum equal to three and three quarters percent (3.75%) above 
                Bank's Prime Rate (the "After-Maturity Interest Rate"). The 
                After-Maturity Interest Rate shall change and become 
                immediately effective without notice to the Company upon each 
                change in Bank's Prime Rate.

         (c)    Calculation of Interest. Interest shall be calculated on the 
                basis of the actual number of days elapsed divided by a year 
                of three hundred and sixty (360) days.
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2.   PAYMENT OF ACCRUED INTEREST AND PRINCIPAL.
     
     (a)  Monthly Interest Payments. Beginning on August 15, 2000 and
          continuing on the fifteenth day of each month thereafter until and
          including July 15, 2002, the Company shall pay Bank a monthly interest
          payment in an amount equal to all interest which has accrued upon the
          unpaid balance of the Loan Advances. On or about the last day of each
          month during the term of this Note, Bank shall send the Company a
          statement of the estimated interest which shall be due and payable on
          the fifteenth day of the following month (the "monthly interest
          statement"). Each monthly interest statement shall be based upon the
          unpaid balance of the Loan Advances as of the statement date and
          Interest Rate in effect on the statement date. If the unpaid balance
          of the Loan Advances or Interest Rate changes between the statement
          date and payment date, Bank shall make an appropriate adjustment on
          the next monthly interest statement.

     (b)  Maturity Date. On July 15, 2002 (the "Maturity Date"), the
          Company shall pay Bank the entire unpaid balance of the Loan Advances
          and any accrued and unpaid interest.

3.   LATE PAYMENT CHARGE. If any principal or interest payment is not received
     by Bank within ten (10) days of its due date, the Company shall pay Bank,
     at Bank's option, (i) a late fee in the sum of $50.00, or five percent (5%)
     of the overdue payment, whichever is greater, and (ii) to the extent not
     prohibited by law, all costs and expenses, including reasonable attorney
     fees and court costs incurred by Bank in connection with the collection of
     any past due principal and/or interest payment upon this Note.

4.   PREPAYMENT PREMIUM. If the Company prepays, in whole or part, the unpaid
     balance of the Loan Advances, the Company shall not be required to pay Bank
     a prepayment premium.

5.   SECURITY. This Note is secured by the following:

     (a)  An Open-End Leasehold Mortgage, Assignment of Leases, Rents and
          Contract Rights and Security Agreement dated July 21, 2000 (the
          "Mortgage") in which the Company has mortgaged to Bank its leasehold
          estate in a parcel of real estate containing approximately 5.8494
          acres of land located at 1416 West Riverview Avenue, Dayton, Ohio
          45407 (the "Premises"), which the Company is leasing from the Dayton
          Metropolitan Housing Authority ("DMHA") pursuant to the terms and
          conditions contained in a Ground Lease Agreement dated November 23,
          1999 as amended by a First Amendment to Ground Lease dated as of July
          21, 2000 (collectively,

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    the "Ground Lease"), between DMHA, as Landlord, and Alliance Facilities
    Management, Inc., an Ohio non-profit corporation ("AFM"), as Tenant. The 
    Ground Lease has been assigned and transferred by AFM to the Company
    pursuant to the terms and conditions contained in an Assignment and
    Assumption of Ground Lease and Lessor Consent dated as of July 21, 2000
    (the "Ground Lease Assignment"), by and between AFM, as Assignor, the
    Company, as Assignee, and DMHA, as Lessor. The Premises have been subleased
    to Alliance Community Schools, Inc., and Ohio non-profit corporation 
    ("ACS"), pursuant to the terms and conditions contained in a Sublease
    Agreement dated March 10, 2000, by and between AFM, as Sublessor, and ACS,
    as Sublessee, as amended by an Amended and Restated Sublease Agreement dated
    as of July 21, 2000, between the Company, as Sublessor, and ACS, as
    Sublessee (collectively, the "Sublease"). The Sublease has been assigned and
    transferred by AFM to the Company pursuant to the terms and conditions
    contained in an Assignment and Assumption of Sublease and Sublessee Consent
    and Acknowledgment dated July 21, 2000 (the "Sublease Assignment"), by
    and between AFM, as Assignor, the Company, as Assignee, and ACS,
    as Sublessee.

(b) A Security Agreement dated July 21, 2000 (the "Security Agreement") in 
    which the Company has granted Bank a first lien security interest in (i) all
    accounts, accounts receivable, contract rights, chattel paper, instruments,
    general intangibles and all other obligations and receivables now owned or
    hereafter acquired by the Company ("Receivables"), (ii) all inventory,
    including, but not limited to, all goods, merchandise, raw materials, goods
    in process, finished goods and other tangible personal property now owned or
    hereafter acquired and held for sale or lease or to be furnished under
    contracts of service or to be used or consumed in the Company's business
    ("Inventory"), (iii) all machinery, equipment, furniture, fixtures and
    tangible personal property of every kind and description, now owned or
    hereafter acquired by the Company and wherever located ("Equipment"), (iv)
    all replacements of and additions to the Equipment (the "Replacements and
    Additions"), and (v) all proceeds of the Receivables, Inventory and
    Equipment, including, without limitation, all insurance proceeds (the
    "Proceeds").


(c) A Deposit Assignment dated July 21, 2000 (the "Deposit Assignment") in 
    which the Company has unconditionally assigned and transferred to Bank all
    of its right, title and interest in the Company's Cash Security (as this
    term is defined in the Loan Agreement and Deposit Assignment).


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(d)  A Security Agreement dated July 21, 2000 (the "Security Agreement") in
     which AFM has granted Bank a third lien security interest in (i) all
     accounts, accounts receivable, contract rights, chattel paper, instruments,
     general intangibles and all other obligations and receivables now owned or
     hereafter acquired by AFM ("Receivables"), (ii) all inventory, including,
     but not limited to, all goods, merchandise, raw materials, goods in
     process, finished goods and other tangible personal property now owned or
     hereafter acquired and held for sale or lease or to be furnished under
     contracts of service or to be used or consumed in AFM's business ("AFM
     Inventory"), (iii) all machinery, equipment, furniture, fixtures and
     tangible personal property of every kind and description, now owned or
     hereafter acquired by AFM and wherever located ("AFM Equipment"), (iv) all
     replacements of and additions to the AFM Equipment (the "AFM Replacements
     and Additions"), and (v) all proceeds of the AFM Receivables, AFM Inventory
     and AFM Equipment including, without limitation, all insurance proceeds
     (the "AFM Proceeds").

(e)  A Security Agreement dated July 21, 2000 (the "ACS Additional Security
     Agreement") in which ACS has granted Bank a third lien security interest in
     (i) all accounts, accounts receivable, contract rights, chattel paper,
     instruments, general intangibles and all other obligations and receivables
     now owned or hereafter acquired by ACS ("ACS Receivables"), (ii) all
     inventory, including, but not limited to, all goods, merchandise, raw
     materials, goods in process, finished goods and other tangible personal
     property now owned or hereafter acquired and held for sale or lease or to
     be furnished under contracts of service or to be used or consumed in ACS's
     business ("ACS Inventory"), (iii) all machinery, equipment, furniture,
     fixtures and tangible personal property of every kind and description, now
     owned or hereafter acquired by ACS and wherever located ("ACS Equipment"),
     (iv) all replacements of and additions to the ACS Equipment (the "ACS
     Replacements and Additions"), and (v) all proceeds of the ACS Receivables,
     ACS Inventory and ACS Equipment including, without limitation, all
     insurance proceeds (the "ACS Proceeds").

(f)  A Payment Guaranty dated as of July 21, 2000 (the "AFM Payment Guaranty")
     in which AFM has unconditionally guaranteed (i) to repay Bank all
     principal and interest payments which become due and payable to Bank upon
     this Note, and (ii) to pay Bank all amounts, obligations and liabilities
     which become due and payable to Bank upon the Loan Documents.

(g)  A Payment Guaranty dated as of July 21, 2000 (the "Edison Payment
     Guaranty") in which Edison Schools Inc., a Delaware corporation 
     ("Edison"), has unconditionally guaranteed pursuant to the terms thereof
     (i) to repay Bank all principal and interest payments which become due and
     payable to  

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          Bank upon this Note, and (ii) to pay Bank all amounts, obligations and
          liabilities which become due and payable to Bank upon the Loan
          Documents.

     (h)  A Payment Guaranty dated as of July 21, 2000 (the "ACS Payment
          Guaranty") in which ACS has unconditionally guaranteed (i) to repay
          Bank all principal and interest payments which become due and payable
          to Bank upon this Note, and (ii) to pay all amounts, obligations and
          liabilities which become due and payable to Bank upon the Loan
          Documents.

6.   EVENTS OF DEFAULT. Each of the following occurrences shall constitute an
     Event or Events of Default:

     (a)  The Company fails to pay Bank any principal or interest payment which
          becomes due and payable upon this Note;

     (b)  The Company (i) shall generally not pay, or shall be unable to pay, or
          shall admit in writing its inability to pay its debts as such debts
          become due; or (ii) shall make an assignment for the benefit of its
          creditors, or petition or apply to any tribunal for the appointment of
          a custodian, receiver, or trustee for it or for a substantial part of
          its assets; or (iii) shall commence any proceeding under any
          bankruptcy, reorganization, arrangement, readjustment of debt,
          dissolution or liquidation law or statute of any jurisdiction, whether
          now or hereafter in effect; or (iv) shall have had any bankruptcy
          proceeding commenced against it in which an order for relief is
          entered or an adjudication or appointment is made and which remains
          undismissed for a period of sixty (60) days or more;

     (c)  The Company shall breach, or any default shall occur in the
          performance of any of its covenants or agreements as contained in this
          Note, the Loan Agreement, Mortgage, Security Agreement, Deposit
          Assignment, Environmental Indemnity Agreement, Ground Lease or
          Sublease;

     (d)  The Company (i) fails to pay any indebtedness (other than as evidenced
          by this Note) owing by the Company when due, whether at maturity, by
          acceleration or otherwise, or (ii) fails to perform any term, covenant
          or agreement or instrument evidencing, securing or relating to such
          indebtedness when required to be performed, or is otherwise in default
          thereunder, if the effect of such failure is to accelerate, or to
          permit the holder(s) of such indebtedness or the trustee(s) under any
          such agreement or instrument to accelerate, the maturity of such
          indebtedness unless and to the extent only that the same shall be
          contested in good faith and by appropriate proceedings by the Company;

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(e)        Any representation or warranty previously or hereafter made by the
           Company to Bank in connection with the Loan Advances evidenced by
           this Note shall prove false or misleading in any material respect 
           when made;

(f)        AFM shall breach, or any default shall occur in the performance of 
           any of its covenants or agreements as contained in the AFM Security 
           Agreement or AFM Payment Guaranty;

(g)        Edison shall breach, or any default shall occur in the performance 
           of any of its covenants or agreements as contained in the Edison 
           Payment Guaranty;

(h)        ACS shall breach, or any default shall occur in the performance of 
           any of its covenants or agreements as contained in the ACS Security 
           Agreement or ACS Payment Guaranty;

(i)        AFM (i) fails to pay any indebtedness owing by AFM when due, whether 
           at maturity, by acceleration or otherwise, or (ii) fails to perform 
           any term, covenant or agreement or instrument evidencing, securing 
           or relating to such indebtedness when required to be performed, or 
           is otherwise in default thereunder, if the effect of such failure is 
           to accelerate, or to permit the holder(s) of such indebtedness or 
           the trustee(s) under any such agreement or instrument to accelerate, 
           the maturity of such indebtedness unless and to the extent only that 
           the same shall be contested in good faith and by appropriate 
           proceedings by AFM, and such failure by AFM in (i) or (ii) has a 
           material adverse effect on the ability of the Company to perform its 
           obligations under the Loan Documents;

(j)        AFM (i) shall generally not pay, or shall be unable to pay, or shall
           admit in writing its inability to pay its debts as such debts become
           due; or (ii) shall make an assignment for the benefit of its
           creditors, or petition or apply to any tribunal for the appointment
           of a custodian, receiver, or trustee for it or for a substantial part
           of its assets; or (iii) shall commence any proceeding under any
           bankruptcy, reorganization, arrangement, readjustment of debt,
           dissolution or liquidation law or statute of any jurisdiction,
           whether now or hereafter in effect; or (iv) shall have had any
           bankruptcy proceeding commenced against it in which an order for
           relief is entered or an adjudication or appointment is made and which
           remains undismissed for a period of sixty (60) days or more;

(k)        Edison (i) fails to pay any indebtedness owing by Edison when due, 
           whether at maturity, by acceleration or otherwise, or (ii) fails to 
           perform any term, covenant or agreement or instrument evidencing, 
           securing or relating to such indebtedness when required to be 
           performed, or is otherwise in default



                                      -6-
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          thereunder, if the effect of such failure is to accelerate, or to
          permit the holder(s) of such indebtedness or the trustee(s) under any
          such agreement or instrument to accelerate, the maturity of such
          indebtedness unless and to the extent only that the same shall be
          contested in good faith and by appropriate proceedings by Edison, and
          such failure by Edison in (i) or (ii) has a material adverse effect on
          the ability of the Company to perform its obligations under the Loan
          Documents;

(l)       Edison (i) shall generally not pay, or shall be unable to pay, or
          shall admit in writing its inability to pay its debts as such debts
          become due; or (ii) shall make an assignment for the benefit of its
          creditors, or petition or apply to any tribunal for the appointment of
          a custodian, receiver, or trustee for it or for a substantial part of
          its assets; or (iii) shall commence any proceeding under any
          bankruptcy, reorganization, arrangement, readjustment of debt,
          dissolution or liquidation law or statute of any jurisdiction, whether
          now or hereafter in effect; or (iv) shall have had any bankruptcy
          proceeding commenced against it in which an order for relief is
          entered or an adjudication or appointment is made and which remains
          undismissed for a period of sixty (60) days or more;

(m)       ACS (i) fails to pay any indebtedness owing by ACS when due, whether
          at maturity, by acceleration or otherwise, or (ii) fails to perform
          any term, covenant or agreement or instrument evidencing, securing or
          relating to such indebtedness when required to be performed, or is
          otherwise in default thereunder, if the effect of such failure is to
          accelerate, or to permit the holder(s) of such indebtedness or the
          trustee(s) under any such agreement or instrument to accelerate, the
          maturity of such indebtedness unless and to the extent only that the
          same shall be contested in good faith and by appropriate proceedings
          by ACS, and such failure by ACS in (i) or (ii) has a material adverse
          effect on the ability of the Company to perform its obligations under
          the Loan Documents; or

(n)       ACS (i) shall generally not pay, or shall be unable to pay, or shall
          admit in writing its inability to pay its debts as such debts become
          due; or (ii) shall make an assignment for the benefit of its
          creditors, or petition or apply to any tribunal for the appointment of
          a custodian, receiver, or trustee for it or for a substantial part of
          its assets; or (iii) shall commence any proceeding under any
          bankruptcy, reorganization, arrangement, readjustment of debt,
          dissolution or liquidation law or statute of any jurisdiction, whether
          now or hereafter in effect, or (iv) shall have had any bankruptcy
          proceeding commenced against it in which an order for relief is
          entered or an adjudication or appointment is made and which remains
          undismissed for a period of sixty (60) days or more.


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7.    REMEDIES UPON DEFAULT. After the occurrence of any Event or Events of
      Default as defined in Paragraph 6 of this Note, except for an Event or
      Events of Default as defined in Paragraph 6(b), 6(j), 6(l) or 6(n) of this
      Note, Bank shall make its best efforts to provide the Company with a
      written notice which shall specify the Event or Events of Default, the
      action necessary to cure the Event or Events of Default, and the time
      within which the Company may cure the Event or Events of Default, which
      cure period shall be not less than ten (10) days for a payment default,
      and not less than thirty (30) days for a non-payment default; provided,
      however, if the Company has commenced the necessary action to cure the
      default within the applicable cure period and the default can be cured
      within a reasonable period of time, the cure period shall be extended by
      Bank on the condition that the Company continues to take all necessary
      action to cure the default within the extended cure period. In the event
      the Company does not cure the Event or Events of Default or cause to be
      cured the Event or Events of Default within the applicable cure period or,
      if applicable, the extended cure period, Bank, without any further notice
      to the Company, may, at its option, declare the entire indebtedness
      evidenced by this Note to be due and payable in full and institute
      proceedings for collection.

8.    DEFINITION OF BANK. The term "Bank" as used in this Note shall mean 
      KeyBank National Association or any subsequent holder of this Note. All 
      sums which become due under the terms hereof shall be payable in lawful 
      money of the United States of America at Bank's office located at 34 
      North Main Street, Dayton, Ohio 45402, or at such other place as Bank may 
      designate in writing. All payments received by Bank upon this Note shall 
      be applied by Bank to the payment of accrued interest and late charges 
      due upon this Note and the repayment of the unpaid principal balance of 
      this Note in such order as Bank may determine in Bank's sole discretion.

9.    WAIVER OF PRESENTMENT, DEMAND AND NOTICE OF PROTEST. No delay or omission 
      by Bank in exercising any right shall operate as a waiver of such right 
      or any other right under this Note; a waiver on any one occasion shall 
      not be construed as a bar to or waiver of any right on any future 
      occasion. Except as otherwise provided in Paragraph 7 of this Note, the 
      Company hereby waives presentment, demand, notice, protest and all other 
      demands and notices in connection with the delivery, acceptance, 
      performance, default or enforcement of this Note and assents to any 
      extension or postponement of the time of payment or any other 
      indulgence, to any substitution, exchange or release of collateral and 
      to the addition or release of any other party primarily or secondarily 
      liable.

10.   COGNOVIT NOTE. The Company hereby authorizes any attorney at law, 
      including any attorney retained by Bank, to appear in any court of 
      record within the State of Ohio if this Note is not paid when due, 
      whether or not by acceleration, to waive issuance and service of 
      process, to confess judgment against the Company for the 


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amount of principal and interest then appearing due, together with costs of 
suit, and to release all errors and right to review. The Company hereby 
expressly (i) waives a conflict of interest in an attorney retained by Bank 
confessing judgment against the Company upon this Note, and (ii) consents to the
attorney retained by Bank in receiving a legal fee from Bank for legal services 
rendered for confessing judgment against the Company upon this Note. A copy of 
this Note, certified by Bank, may be filed in each such proceeding in place of 
filing the original as warrant of attorney.


WARNING - BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT 
TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU 
WITHOUT YOUR PRIOR KNOWLEDGE, AND THE POWERS OF A COURT CAN BE USED TO COLLECT 
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR, WHETHER 
FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE 
AGREEMENT, OR ANY OTHER CAUSE.


                              ALLIANCE EDISON LLC,
                              a Delaware limited liability company

                              By: ALLIANCE FACILITIES MANAGEMENT, INC.,
                                  an Ohio non-profit corporation
                                  Managing Member


                                  By /s/ Sam Warwar
                                     ------------------------------
                                     Sam Warwar
                                     Secretary



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