<PAGE>

                       SEVENTH AMENDMENT AND MODIFICATION
                         TO LOAN AND SECURITY AGREEMENT
                         ------------------------------

     THIS SEVENTH AMENDMENT AND MODIFICATION TO LOAN AND SECURITY AGREEMENT (the
"AMENDMENT") is made effective as of the 22nd day of December, 1997, by and
among NOBEL EDUCATION DYNAMICS, INC. ("NOBEL"), IMAGINE EDUCATIONAL PRODUCTS,
INC. ("IMAGINE"), MERRYHILL SCHOOLS, INC. ("MERRYHILL"), EDUCO, INC. ("EDUCO"),
NEDI, INC. ("NEDI"), MONTESSORI HOUSE, INC. ("MONTESSORI"), ANOTHER GENERATION
ENTERPRISES, INC. ("ANOTHER GENERATION") (collectively, the "OBLIGORS") and
SUMMIT BANK, formerly known as First Valley Bank ("BANK").

                                   BACKGROUND
                                   ----------

     A.   By a Loan and Security Agreement among Obligors, Children's Park,
Incorporated, Rocking Horse Management Corporation, Bluegrass Real Estate
Company, Inc. and Bank dated August 30, 1995 (as amended by those certain
amendments dated September 1, 1995, April 4, 1996, July 23, 1996, November 1,
1996, March 20, 1997 and May 5, 1997, the "LOAN AGREEMENT"), Bank agreed, inter
alia, to extend to Obligors a (i) revolving line of credit in the original
principal amount of up to Thirteen Million Eight Hundred Thousand Dollars
($13,800,000.00) (the "LINE"), (ii) term loan in the original principal amount
of Seven Million Five Hundred Thousand Dollars ($7,500,000.00) (the "TERM
LOAN"), and (iii) term loan in the original principal amount of Six Million
Dollars ($6,000,000.00) (the "NEW TERM LOAN") (hereafter, the Term Loan and the
New Term Loan may be referred to collectively as the "TERM LOANS").  Subsequent
to the execution of the Loan Agreement, Children's Park, Incorporated, Rocking
Horse Management Corporation and Bluegrass Real Estate Company, Inc. merged into
Nobel with Nobel being the surviving entity.

     B.   Obligors' obligation to repay the sums advanced under the (i) Line is
evidenced by that certain Line Note from Obligors to Bank dated May 5, 1997 in
the face amount of Thirteen Million Eight Hundred Thousand Dollars
($13,800,000.00) (the "LINE NOTE"), (ii) Term Loan is evidenced by that certain
Term Note from Obligors to Bank dated August 30, 1995 in the original principal
amount of Seven Million Five Hundred Thousand Dollars ( $7,500,000.00) (as
amended, the "TERM NOTE"), and (iii) New Term Loan is evidenced by that certain
New Term Note from Obligors to Bank dated April 4, 1996 in the original
principal amount of Six Million Dollars ($6,000,000.00) (as amended, the "NEW
TERM NOTE") (hereafter, the Term Note and the New Term Note may be referred to
collectively as the "TERM NOTES").

     C.   Nobel is further indebted to Bank (the "NOBEL LOAN") as evidenced by a
certain promissory note dated January 31, 1994 in the original principal amount
of Four Hundred Ninety-One Thousand Three Hundred Thirteen and 69/100 Dollars
($491,313.69) from Nobel to Mount Holly State Bank (the "NOBEL NOTE").  Through
a series of transactions, Bank is the successor by merger to Mount Holly State
Bank and Bank is the holder of the Nobel Note.

     D.   Obligors and Bank desire to further amend the Loan Agreement to
restructure the Line, the Term Loans and the Nobel Loan in accordance with the
terms and conditions hereof.

     E.   Capitalized terms not otherwise defined herein will have the meanings
set forth therefor in the Loan Agreement.

     NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
<PAGE>

     1.   RESTRUCTURE OF THE LINE, THE TERM LOANS AND THE NOBEL LOAN.
          ----------------------------------------------------------

          a.  The current outstanding balances under the Line (including,
     without limitation, the face amount of all issued and outstanding letters
     of credit thereunder), the Term Loans and the Nobel Loan are as follows:

        i.     Line -              $7,820,000 (incl. $300,000 letters of credit)
        ii.    Term Loan -         $ 5,450,000
        iii    New Term Loan -     $ 4,200,000
        iv.    Nobel Loan -        $406,450.67

          b.  Effective as of the date hereof, the Line, the Term Loans and the
     Nobel Loan shall be restructured as Revolving and Term Facility A and
     Revolving and Term Facility B, as more fully described in SECTION 2 below.
                                                               ---------

          c.  The initial principal balances outstanding under Revolving and
     Term Facility A and Revolving and Term Facility B shall be as follows:

        i.  Revolving and Term Facility A - $0
        ii. Revolving and Term Facility B - $17,876,450.67
                                              (incl. $300,000 letters of credit)

          Effective as of the date hereof, such sums shall accrue interest and
     be repaid in accordance with the terms and conditions set forth in this
     Amendment.

          d.  The Line, the Term Loan, the New Term Loan and the Nobel Loan are
     being replaced with Revolving and Term Facility A and Revolving and Term
     Facility B and to the extent the context so requires, all references in the
     Loan Agreement, each of the other Loan Documents, the Nobel Note and any
     documents in connection therewith to the Line, the Term Loan, the New Term
     Loan, the Nobel Loan, the Line Note, the Term Note, the New Term Note and
     the Nobel Note shall be deemed references to Revolving and Term Facility A,
     Revolving and Term Facility B, Revolving and Term Facility Note A and
     Revolving and Term Facility Note B, mutatis mutandis. The term "BANK
     INDEBTEDNESS" under the Loan Agreement and any other term under any Loan
     Document or any documents in connection with the Nobel Loan which describes
     the indebtedness or other obligations of Obligors to Bank shall be deemed
     to include, without limitation, all obligations of Obligors to Bank under
     Revolving and Term Facility A and Revolving and Term Facility B.  The term
     "COLLATERAL" under the Loan Agreement shall be deemed to include, without
     limitation, all security for the Nobel Loan.  All obligations of Obligors
     to Bank under the Revolving and Term Credit Facilities shall be secured by
     all of the Collateral.

     2.   CREDIT FACILITIES.  SECTION 1.1 of the Loan Agreement is amended to
          -----------------   -----------
read, in its entirety, as follows:

          "1.1  CREDIT FACILITIES.  Bank will establish for Obligors for and
                -----------------
     during the period from the date hereof and until December 1, 2005 (the
     "CONTRACT PERIOD"), subject to the terms and conditions hereof:

               (a) A revolving and term facility pursuant to which Bank will
          from time to time during the period from December 22, 1997 through and
          including December

                                       2
<PAGE>

          22, 2000 (the "REVOLVING PERIOD"), make loans to Obligors in an
          aggregate amount not exceeding at any time Three Million Dollars
          ($3,000,000.00) ("REVOLVING AND TERM FACILITY A"); and

               (b) A revolving and term facility pursuant to which Bank will
          from time to time during the Revolving Period, make loans or other
          extensions of credit to Obligors in an aggregate amount not exceeding
          at any time Twenty-Two Million Dollars ($22,000,000.00) ("REVOLVING
          AND TERM FACILITY B").  Hereafter, Revolving and Term Facility A and
          Revolving and Term Facility B may be referred to collectively as the
          "REVOLVING AND TERM FACILITIES. "

          During the Revolving Period, Obligors may borrow, repay and reborrow
     under the Revolving and Term Facilities; provided, however, with respect to
                                              --------  -------
     Revolving and Term Facility B, such borrowings and repayments during the
     Revolving Period shall be in minimum amounts of Two Hundred Thousand
     Dollars ($200,000.00) each.  After the Revolving Period, no further
     advances will be made under the Revolving and Term Facilities and all sums
     outstanding thereunder shall be repaid as provided for in this Agreement.

          The Revolving and Term Facilities shall be subject to all terms and
     conditions set forth in all of the Loan Documents (as hereafter defined),
     which terms and conditions are incorporated herein.  Obligors' obligations
     to repay the loans and other extensions of credit under the Revolving and
     Term Facilities shall be evidenced by Obligors' amended and restated
     promissory notes (collectively, the "NOTES") in the face amounts of Three
     Million Dollars ($3,000,000.00) ("REVOLVING AND TERM FACILITY NOTE A") and
     Twenty-Two Million Dollars ($22,000,000.00) ("REVOLVING AND TERM FACILITY
     NOTE B"), respectively, both of which shall be in the forms attached hereto
     as EXHIBIT "A".  The Revolving and Term Facilities shall be subject to
        -----------
     review and renewal after expiration of the Contract Period, at the sole
     direction of Bank."

     3.   USE OF PROCEEDS.  SECTION 1.3(a) of the Loan Agreement is amended to
          ---------------   --------------
read, in its entirety, as follows:

          "(a)  USE OF PROCEEDS UNDER THE REVOLVING AND TERM FACILITIES.  The
                -------------------------------------------------------
     proceeds advanced under the Revolving and Term Facilities shall be used for
     proper working capital purposes, to fund future acquisitions of educational
     facilities or companies and construction of educational facilities by
     Obligors and for the issuance of standby letters of credit under Revolving
     and Term Facility B only; provided, however, the face amount under
                               -----------------
     outstanding letters of credit issued under Revolving and Term Facility B
     shall not at any time exceed Two Million Dollars ($2,000,000.00) in the
     aggregate."

     4.   INTEREST RATES.  SECTION 2 of the Loan Agreement is amended to read,
          --------------   ---------
in its entirety, as follows:

          "2.  INTEREST RATES.
               --------------

               2.1  INTEREST RATES ON REVOLVING AND TERM FACILITY A.  Interest
                    -----------------------------------------------
          on the unpaid principal balance of Revolving and Term Facility A will
          accrue at a definite and certain but variable per annum rate equal to
          the Floating Rate.

                                       3
<PAGE>

               2.2  INTEREST RATES ON REVOLVING AND TERM FACILITY B.  Interest
                    -----------------------------------------------
          on the unpaid principal balance of Revolving and Term Facility B will
          accrue at one of the two (2) interest rate options set forth below,
          subject to the restrictions and in accordance with the procedures set
          forth in this Agreement:

                    (i)  Line LIBOR Rate; or
                    (ii)  Floating Rate.

               2.3  TERM-OUT PORTION.  Interest on the unpaid principal balance
                    ----------------
          of any Term-Out Portion will accrue from the Effective Date until
          final payment thereof at the Term-Out Rate.

               2.4  REQUEST FOR FLOATING RATE ON THE REVOLVING AND TERM FACILITY
                    ------------------------------------------------------------
          B. All advances under Revolving and Term Facility B shall accrue
          -
          interest at the Floating Rate, unless Obligors have requested the Line
          LIBOR Rate.  The Obligors shall be deemed to have requested the
          Floating Rate unless the Line LIBOR Rate has been requested in
          accordance with the terms of this Agreement.

               If the Obligors desire to convert the interest rate applicable to
          all or any part of the principal balance of Revolving and Term
          Facility B from the Line LIBOR Rate to the Floating Rate, upon
          delivery by Obligors to Bank of a Floating Rate Notification, that
          portion of the principal balance outstanding under Revolving and Term
          Facility B identified in such Floating Rate Notification shall accrue
          interest at the Floating Rate from the expiration of the then current
          Rate Period related to such principal amount until the effective date
          of another interest rate option chosen for such amount in accordance
          with the terms of this Agreement.

               2.5  REQUEST FOR LINE LIBOR RATE.  If the Obligors desire that
                    ---------------------------
          all or part of the outstanding principal balance under Revolving and
          Term Facility B accrue interest at the Line LIBOR Rate, Obligors shall
          give Bank a LIBOR Rate Notification.  Upon delivery by Obligors to
          Bank of a LIBOR Rate Notification, that portion of the principal
          balance outstanding under Revolving and Term Facility B identified in
          such LIBOR Rate Notification shall accrue interest at the LIBOR Rate
          as follows:  (a) with respect to the principal amount of any new
          advance under Revolving and Term Facility B, from the date of such
          advance until the end of the Rate Period specified in such LIBOR Rate
          Notification; and/or (b) with respect to all or any portion of the
          principal amount of Revolving and Term Facility B outstanding and
          accruing interest at another Line LIBOR Rate at the time of the LIBOR
          Rate Notification related to such principal amount, from the
          expiration of the then current Rate Period related to such principal
          amount until the end of the Rate Period specified in such LIBOR Rate
          Notification; and/or (c) with respect to all or any portion of the
          principal amount of Revolving and Term Facility B outstanding and
          accruing interest at the Floating Rate at the time of the LIBOR Rate
          Notification related to such principal amount, from the date set forth
          in such LIBOR Rate Notification until the end of the Rate Period
          specified in such LIBOR Rate Notification.

                                       4
<PAGE>

               2.6  CERTAIN PROVISIONS REGARDING REVOLVING AND TERM FACILITY B
                    ----------------------------------------------------------
          INTEREST RATES.  Obligors understand and agree that:  (a) subject to
          --------------
          the provisions of this Agreement, the interest rates set forth in

          SECTION 2.2 above may apply simultaneously to different portions of
          -----------
          the outstanding principal of Revolving and Term Facility B, (b) the
          Line LIBOR Rate may apply simultaneously to various portions of the
          outstanding principal of Revolving and Term Facility B for various
          Rate Periods, (c) the Rate Periods for the Line LIBOR Rate shall be
          either one (1), two (2) or three (3) months, (d) the Line LIBOR Rate
          applicable to any portion of the outstanding principal of Revolving
          and Term Facility B may be different from the Line LIBOR Rate
          applicable to any other portion of the outstanding principal of
          Revolving and Term Facility B, (e) individual portions of Revolving
          and Term Facility B accruing interest at a Line LIBOR Rate must be in
          amounts of at least Two Hundred Fifty Thousand Dollars ($250,000.00)
          each, and (f) Bank shall have the right to terminate any Rate Period
          and the interest applicable thereto, prior to the maturity of such
          Rate Period, if Bank determines in good faith (which determination
          shall be conclusive) that continuance of such interest rate has been
          made unlawful by any law, statute, rule or regulation to which Bank
          may be subject, in which event the principal amount to which such
          terminated Rate Period relates shall thereafter earn interest at the
          Floating Rate.

               2.7  FLOATING RATE FALL BACK FOR REVOLVING AND TERM FACILITY B.
                    ---------------------------------------------------------
          After expiration of any Rate Period, any principal portion of
          Revolving and Term Facility B corresponding to such Rate Period which
          has not been converted or renewed in accordance with the terms of this
          Agreement shall accrue interest automatically at the Floating Rate
          from the date of expiration of such Rate Period until paid in full,
          unless and until Obligors request another interest rate in accordance
          with the terms of this Agreement.

               2.8  LIBOR RATE BORROWINGS.  No more than three (3) separate
                    ---------------------
          borrowings in the aggregate accruing interest at the Line LIBOR Rate
          may be outstanding at any one time.

               2.9  DEFAULT RATE.  Upon the occurrence and during the
                    ------------
          continuance of an Event of Default, at the option of Bank after ten
          (10) days notice to Obligors, interest will accrue on the outstanding
          principal balance of the Revolving and Term Facilities at a per annum
          rate which is three percent (3%) in excess of the highest rate in
          effect for Revolving and Term Facility A and Revolving and Term
          Facility B, respectively,  at the time the Event of Default occurs.
          During the continuance of any Event of Default, Obligors shall no
          longer have the ability to elect interest rate options.

               2.10  POST JUDGMENT INTEREST.  Any judgment obtained for sums due
                     ----------------------
          hereunder or under the Loan Documents will accrue interest at the
          applicable default rate set forth above until paid.

               2.11  CALCULATION.  Interest will be computed on the basis of a
                     -----------
          year of 360 days and paid for the actual number of days elapsed.

                                       5
<PAGE>

               2.12  LIMITATION OF INTEREST TO MAXIMUM LAWFUL RATE.  In no event
                     ---------------------------------------------
          will the rate of interest payable hereunder exceed the maximum rate of
          interest permitted to be charged by applicable law (including the
          choice of law rules) and any interest paid in excess of the permitted
          rate will be refunded to Obligors.  Such refund will be made by
          application of the excessive amount of interest paid against any sums
          outstanding hereunder and will be applied in such order as Bank may
          determine.  If the excessive amount of interest paid exceeds the sums
          outstanding, the portion exceeding the sums outstanding will be
          refunded in cash by Bank.  Any such crediting or refunding will not
          cure or waive any default by Obligors.  Obligors agree, however, that
          in determining whether or not any interest payable hereunder exceeds
          the highest rate permitted by law, any non-principal payment,
          including without limitation prepayment fees and late charges, will be
          deemed to the extent permitted by law to be an expense, fee, premium
          or penalty rather than interest.

               2.13  REQUEST BY ONE OBLIGOR.  Any requests to be made by
                     ----------------------
          Obligors under this SECTION 2 and any documents to be executed in
                              ---------
          connection therewith may be made or executed by any Obligor
          individually and any such request and documents delivered by any such
          Obligor shall be binding upon all Obligors."

     5.   PAYMENTS AND FEES.  SECTION 3 of the Loan Agreement is amended to
          -----------------   ---------
read, in its entirety, as follows:

          "3.  PAYMENTS AND FEES.
               -----------------

               3.1  PRINCIPAL AND INTEREST.  Principal and interest on the
                    ----------------------
          Revolving and Term Facilities shall be paid as follows:

                    (a) Obligors will pay interest monthly at the applicable
               rate set forth in SECTIONS 2.1 AND 2.2 above on the first day of
                                 --------------------
               each calendar month commencing on January 1, 1998.

                    (b) Obligors shall repay the outstanding principal balance
               of the Revolving and Term Facilities in (i) fifty-nine (59) equal
               and consecutive monthly installments on the first day of each
               month commencing on January 1, 2001, each in an amount equal to
               the quotient obtained by dividing the aggregate outstanding
               principal balance of the Revolving and Term Facilities as of the
               last day of the Revolving Period by sixty (60), and (ii) one
               final payment of the remaining principal balance thereof, all
               accrued and unpaid interest thereon and all other sums due in
               connection therewith on December 1, 2005.

               3.2  TERM-OUT PORTION.  Obligors may, at their option during the
                    ----------------
          Revolving Period, by delivering to Bank a Term-Out Notice, elect to
          term out a portion or portions of the outstanding principal balance
          under the Revolving and Term Facility B in minimum increments of at
          least Two Million Five Hundred Thousand Dollars ($2,500,000.00) each
          (each, a "TERM-OUT PORTION" and collectively, the "TERM-OUT
          PORTIONS").  Each Term-Out Portion shall be repaid in (a) fifty-nine
          (59) equal and consecutive monthly payments of principal each in an
          amount equal to the quotient obtained by dividing the original
          principal amount of

                                       6
<PAGE>

          such Term-Out Portion by sixty (60), together with interest thereon at
          the Term-Out Rate, commencing on the first (1st) day of the first
          (1st) month after the Effective Date, and (b) one (1) final payment of
          the remaining balance thereof and all accrued and unpaid interest
          thereon, on the first day of the sixtieth (60th) month after the
          Effective Date.

               Obligors shall deliver to Bank not less than fifteen (15) days
          prior written notice of Obligors' desire to elect a Term-Out Portion
          (each, a "TERM-OUT NOTICE"), which Term-Out Notice shall indicate the
          amount of such Term-Out Portion and the date on which Obligors desire
          such Term-Out Portion to become effective (the "EFFECTIVE DATE").
          Once a Term-Out Notice is delivered by Obligors, such Term-Out Notice
          shall be irrevocable and, on the Effective Date, the maximum amount
          available under Revolving and Term Facility B shall be permanently
          reduced by the full amount of the Term-Out Portion identified in such
          Term-Out Notice.

               3.3  PREPAYMENT OR TERMINATION OF THE REVOLVING AND TERM
                    ---------------------------------------------------
          FACILITIES.
          ----------

                    (a) Obligors may prepay all or any portion of the Revolving
               and Term Facilities or terminate the Revolving and Term
               Facilities (such termination or prepayment being referred to
               herein as a "PREPAYMENT EVENT") upon thirty (30) days prior
               written notice to Bank (a "PREPAYMENT EVENT NOTICE") specifying
               the amount of the Revolving and Term Facilities Obligors desire
               to prepay or that Obligors desire to terminate the Revolving and
               Term Facilities.  Once delivered, the Prepayment Event Notice
               shall be irrevocable.

                    (b) In the event that (i) a Prepayment Event occurs, or (ii)
               an Event of Default occurs as a result of Obligors' failure to
               pay any sums when due under this Agreement (whether upon
               maturity, acceleration or otherwise) and the Revolving and Term
               Facilities are terminated, Obligors shall pay to Bank, in
               addition to all other sums due hereunder, a fee (the "PREPAYMENT
               FEE") with respect to each Term-Out Portion in an amount equal to
               the product obtained by multiplying the applicable percentage set
               forth below times the outstanding principal amount of each Term-
               Out Portion prepaid or terminated:

               DATE OF PREPAYMENT EVENT            PERCENTAGE
               ------------------------            ----------

               Prior to the first anniversary of the date of the
               Term-Out Notice delivered in respect of such
               Term-Out Portion                    5%

               On or after the first anniversary of the date of the
               Term-Out Notice delivered in respect of such
               Term-Out Portion but prior to the second
               anniversary of such date                 4%

                                       7
<PAGE>

               On or after the second anniversary of the date of the
               Term-Out Notice delivered in respect of such
               Term-Out Portion but prior to the third
               anniversary of such date                 3%

               On or after the third anniversary of the date of the
               Term-Out Notice delivered in respect of such
               Term-Out Portion but prior to the fourth
               anniversary of such date                 2%

               On or after the fourth anniversary of the date of the
               Term-Out Notice delivered in respect of such
               Term-Out Portion                    1%

               Notwithstanding anything in this SECTION 3.3 to the contrary,
                                                -----------
          provided that no Event of Default shall have occurred and be
          continuing, Obligors may, without paying the Prepayment Fee, prepay
          during any fiscal year of Obligors, from internally generated funds
          only, an amount not to exceed twenty percent (20%) of the balance of
          each Term-Out Portion outstanding at the beginning of such fiscal
          year.

               In addition to the foregoing fees, if any portion of Revolving
          and Term Facility B is accruing interest at the Line LIBOR Rate at the
          time of a Prepayment Event, or if for any other reason Obligors pay
          all or any portion of such principal balance prior to the end of the
          applicable Rate Period, Obligors shall pay to Bank an additional fee
          on such portion equal to the economic loss, if any, suffered by Bank
          as determined by Bank in accordance with its customary practices,
          which determination shall be conclusive.

               3.4  TERM-OUT PORTION FEE.  Obligors shall pay to Bank a fee in
                    --------------------
          connection with each Term-Out Portion in an amount equal to one-
          quarter of one percent (1/4%) of each such Term-Out Portion (the
          "TERM-OUT PORTION FEE"). Each Term-Out Portion Fee shall be payable
          upon delivery of the respective Term-Out Notice.

               3.5  LETTER OF CREDIT FEES.    For each issuance or renewal of a
                    ---------------------
          standby letter of credit hereunder, Obligors will pay to Bank an
          issuance or renewal fee in an amount equal to one percent (1%) per
          annum of the face amount of such standby letter of credit, payable
          coincident with and as a condition of the issuance or renewal of such
          standby letter of credit.  In addition, Obligors shall pay such other
          fees and charges in connection with the negotiation or cancellation of
          each standby letter of credit as may be customarily charged by Bank.
          Such fees shall be computed on the basis of a year of 360 days.

               3.6  USAGE FEE.  During the Revolving Period, Obligors shall
                    ---------
          unconditionally pay to Bank a fee equal to one fifth of one percent
          (1/5%) per annum of the average daily unused portion of the Revolving
          and Term Facilities (which shall be Twenty-Five Million Dollars
          ($25,000,000.00) (or such greater amount if the maximum committed
          amount for the Revolving and Term Facilities is ever increased),

                                       8
<PAGE>

          minus the average daily outstanding principal balance of cash advances
          under the Revolving and Term Facilities for such period, minus the
          average outstanding undrawn face amount of all standby letters of
          credit issued and outstanding under the Line during such period),
          which fee shall be computed on a quarterly basis in arrears and shall
          be due and payable on the first day of each calendar quarter
          commencing on January 1, 1998.

               3.7  LATE CHARGE.  In the event that Obligors fail to pay any
                    -----------
          principal, interest or other fees or expenses payable hereunder for a
          period of at least fifteen (15) days past the applicable due date, in
          addition to paying such sums, Obligors shall pay a late charge equal
          to the lesser of:  (a) five percent (5%) of such past due payment, or
          (b) Two Thousand Five Hundred Dollars ($2,500.00), as compensation for
          the expenses incident to such past due payment.

               3.8  PAYMENT METHOD.  Obligors irrevocably authorize Bank to
                    --------------
          debit all payments required to be made by Obligors hereunder, under
          the Revolving and Term Facilities, on the date due, from any deposit
          account maintained by Obligors or any of them, with Bank; provided,
                                                                    --------
          however, prior to the occurrence of an Event of Default, Obligors may
          -------
          designate which accounts maintained with Bank shall be so debited.
          Otherwise, Obligors will be obligated to make such payments directly
          to Bank.  All payments are to be made in immediately available funds.
          If Bank accepts payment in any other form, such payment shall not be
          deemed to have been made until the funds comprising such payment have
          actually been received by or made available to Bank.

               3.9  APPLICATION OF PAYMENTS.  Any and all payments on account of
                    -----------------------
          the Bank Indebtedness will be applied to accrued and unpaid interest,
          outstanding principal and other sums due hereunder or under the Loan
          Documents, in such order as Bank, in its discretion, elects.  If
          Obligors make a payment or payments and such payment or payments, or
          any part thereof, are subsequently invalidated, declared to be
          fraudulent or preferential, set aside or are required to be repaid to
          a trustee, receiver, or any other person under any bankruptcy act,
          state or federal law, common law or equitable cause, then to the
          extent of such payment or payments, the obligations or part thereof
          hereunder intended to be satisfied shall be revived and continued in
          full force and effect as if said payment or payments had not been
          made.

               3.10  LOAN ACCOUNT.  Bank will open and maintain on its books a
                     ------------
          loan account (the "LOAN ACCOUNT") with respect to advances made,
          repayments, prepayments, the computation and payment of interest and
          fees and the computation and final payment of all other amounts due
          and sums paid to Bank under this Agreement.  Except in the case of
          manifest error in computation, the Loan Account will be conclusive and
          binding on the Obligors as to the amount at any time due to Bank from
          Obligors under this Agreement or the Notes.

               3.11  INDEMNITY; LOSS OF MARGIN.  Obligors will indemnify Bank
                     -------------------------
          against any direct loss or expense which Bank sustains or incurs as a
          consequence of an Event of Default, including, without limitation, any
          failure of Obligors to pay when due (at maturity, by acceleration or
          otherwise) any principal, interest, fee or any other

                                       9
<PAGE>

          amount due under this Agreement or the other Loan Documents. If Bank
          sustains or incurs any such loss or expense it will from time to time
          notify Obligors in writing of the amount determined in good faith by
          the Bank to be necessary to indemnify Bank for the loss or expense.
          Such amount will be due and payable by Obligors to Bank within ten
          (10) days after presentation by Bank of a statement setting forth a
          brief explanation of and Bank's calculation of such amount, which
          statement shall be conclusively deemed correct absent manifest error.
          Any amount payable to the Bank under this Section will bear interest
          at the highest default rate payable under the Revolving and Term
          Credit Facilities from the due date until paid, both before and after
          judgment.

               In the event that any present or future law, rule, regulation,
          treaty or official directive or the interpretation or application
          thereof by any central bank, monetary authority or governmental
          authority, or the compliance with any guideline or request of any
          central bank, monetary authority or governmental authority (whether or
          not having the force of law):

                    (a) subjects Bank to any tax with respect to any amounts
               payable under this Agreement or the other Loan Documents by
               Obligors or otherwise with respect to the transactions
               contemplated under this Agreement or the other Loan Documents
               (except for taxes on the overall net income of Bank imposed by
               the United States of America or any political subdivision
               thereof); or

                    (b) imposes, modifies or deems applicable any deposit
               insurance, reserve, special deposit, capital maintenance, capital
               adequacy, or similar requirement against assets held by, or
               deposits in or for the account of, or loans or advances or
               commitment to make loans or advances by, or letters of credit
               issued or commitment to issue letters of credit by, the Bank; or

                    (c) imposes upon Bank any other condition with respect to
               advances or extensions of credit or the commitment to make
               advances or extensions of credit under this Agreement,

               and the result of any of the foregoing is to increase the costs
          of Bank, reduce the income receivable by or return on equity of Bank
          or impose any expense upon Bank with respect to any advances or
          extensions of credit or commitments to make advances or extensions of
          credit under this Agreement, Bank shall so notify Obligors in writing.
          Obligors agree to pay Bank the amount of such increase in cost,
          reduction in income, reduced return on equity or capital, or
          additional expense (such amount being the "REIMBURSEMENT AMOUNT")
          suffered or incurred by Bank within thirty (30) days after
          presentation by Bank of a statement concerning such increase in cost,
          reduction in income, reduced return on equity or capital, or
          additional expense.  Such statement shall set forth a brief
          explanation of the Reimbursement Amount and Bank's calculation of the
          Reimbursement Amount (in determining such Reimbursement Amount the
          Bank may use any reasonable averaging and attribution methods), which
          statement shall be conclusively deemed correct absent manifest error.
          Notwithstanding the foregoing, if an event of the nature described in

                                       10
<PAGE>

          SECTION 3.11(a), (b) OR (c) above occurs, Obligors shall have the
          ---------------------------
          right to repay in full all Bank Indebtedness without any prepayment
          premium (other than the Prepayment Fee and an amount equal to the
          economic loss suffered by Bank with respect to that portion of the
          Bank Indebtedness accruing interest at the Line LIBOR Rate at the time
          of such prepayment), provided that, (i) within thirty (30) days of the
          presentation of such statement to Obligors, Obligors pay to Bank the
          Reimbursement Amount then due Bank through such date, (ii) such
          repayment to Bank is made on or before the one hundred twentieth
          (120th) day following the presentation of such statement to Obligors,
          and (iii) at the time of such repayment, Obligors shall also pay to
          Bank the Reimbursement Amount then due Bank through the date of such
          repayment.

               If the amount set forth in such statement is not paid in full as
          set forth above within thirty (30) days after such presentation of
          such statement, or the amount due in connection with a repayment of
          the Bank Indebtedness as described above is not paid in full within
          one hundred twenty (120) days after such presentation of such
          statement, interest will be payable on the unpaid amount at the
          highest default rate payable hereunder until paid, both before and
          after judgment."

     6.   NEW FACILITIES.  SECTION 6.27 of the Loan Agreement is amended to
          --------------   ------------
read, in its entirety, as follows:

          "6.27  NEW FACILITIES.  During any fiscal year, Obligors shall not
                 --------------
     establish more than five (5) newly constructed educational facilities that
     Obligors will own or which otherwise appear as an asset on any Obligor's
     balance sheet.  During any fiscal year, Obligors will not acquire more than
     five (5) parcels of land for the construction of facilities nor expend in
     excess of Two Million Five Hundred Thousand Dollars ($2,500,000.00) in the
     aggregate for such land acquisition."

     7.   FINANCIAL REPORTING.  SECTION 8 of the Loan Agreement is amended as
          -------------------   ---------
follows:

          a.  By amending SECTION 8.2 to read, in its entirety, as follows:
                          -----------

               "8.2  PROJECTIONS AND CASH FLOW.  As soon as available and in any
                     -------------------------
          event prior to (a) December 31 of each fiscal year of Obligors,
          projections and cash flows on a month-by-month basis for the next
          succeeding twelve (12) months, and (b) August 15 of each fiscal year
          of Obligors, a restatement of the most recently delivered projections
          showing Obligors' actual operating results through the first two (2)
          quarters of such year and, to the extent necessary, revised
          projections for the last two (2) quarters of such year, prepared by
          the controller or chief financial officer of Obligors in form and
          content satisfactory to Bank and in such detail so that, among other
          things, core, new and acquired school performance are distinguished
          from one another.  Obligors have furnished to Bank initial projections
          dated as of the date hereof and attached hereto as SCHEDULE 8.2
                                                             ------------
          containing the information required by this SECTION 8.2.  Obligors
                                                      -----------
          represent and covenant that (a) the initial projections attached
          hereto have been and all projections required by this SECTION 8.2
                                                                -----------
          shall be prepared by the controller or chief financial officer of
          Obligors and represent, and in the future shall represent, the best
          available good faith estimate of Obligors regarding the course of
          Obligors' business for the periods covered thereby; (b) the
          assumptions set forth in the initial projections are and the
          assumptions set forth in the future

                                       11
<PAGE>

          projections delivered hereafter shall be reasonable and realistic
          based on then current economic conditions; (c) Obligors know of no
          reason why Obligors should not be able to achieve the performance
          levels set forth in the initial projections and Obligors shall have no
          knowledge at the time of delivery of future projections of any reason
          why Obligors shall not be able to meet the performance levels set
          forth in said projections; and (d) Obligors have sufficient capital as
          may be required for their ongoing businesses and to pay their existing
          and anticipated debts as they mature."

          b.  By amending SECTION 8.11 to read, in its entirety, as follows:
                          ------------

               "8.11  PROFIT AND LOSS PER FACILITY.  As soon as available and in
                      ----------------------------
          any event within (a) forty-five (45) days after the end of each of the
          first three (3) fiscal quarters of Obligors during each year and (b)
          ninety (90) days after the end of the fourth fiscal quarter of
          Obligors during each year, quarterly profit and loss statements for
          each district (or region, if there is no district) operated by
          Obligors, in form and content satisfactory to Bank."

     8.   DEFINITIONS.  SECTION 14 of the Loan Agreement is amended as follows:
          -----------   ----------

          a.  By amending SECTION 14.23 to read, in its entirety, as follows:
                          -------------

               "14.23  FLOATING RATE MARGIN shall mean (a) during the period
                       --------------------
          from December 22, 1997 through and including March 31, 1998 (the
          "INITIAL PERIOD"), twenty-five (25) basis points, and (b) during the
          period commencing April 1, 1998 and thereafter (the "SUBSEQUENT
          PERIOD"), one of the following margins determined based on the ratio
          of Obligors' Total Funded Indebtedness to EBITDA from time to time:

          RATIO OF TOTAL FUNDED INDEBTEDNESS       FLOATING RATE
                      TO EBITDA                        MARGIN
          ----------------------------------       -------------

          3.5 to 1.0, but 4.0 to 1.0               25 basis points

          2.5 to 1.0, but less than 3.5 to 1.0     0 basis points

          1.5 to 1.0, but less than 2.5 to 1.0     -25 basis points

          less than 1.5 to 1.0                     -50 basis points

               The Floating Rate Margin during the Subsequent Period shall be
          determined on a quarterly basis effective upon the receipt, review and
          approval by Bank of Obligors' financial statements for such quarter,
          which financial statements shall include, inter alia, a calculation of
          Obligors' Total Funded Indebtedness to EBITDA as of the end of such
          quarter.  If Obligors fail to deliver to Bank the foregoing financial
          statements, the Floating Rate Margin shall be highest margin set forth
          above."

          b.  By amending SECTION 14.30 to read, in its entirety, as follows:
                          -------------

                                       12
<PAGE>

               "14.30  "LIBOR RATE MARGIN" shall mean (a) during the Initial
                       -------------------
          Period, two hundred twenty-five (225) basis points, and (b) during the
          Subsequent Period, one of the following margins determined based on
          the ratio of Obligors' Total Funded Indebtedness to EBITDA from time
          to time:

          RATIO OF TOTAL FUNDED INDEBTEDNESS       FLOATING RATE
                      TO EBITDA                        MARGIN
          ----------------------------------       -------------

          3.5 to 1.0, but 4.0 to 1.0               225 basis points

          2.5 to 1.0, but less than 3.5 to 1.0     175 basis points

          1.5 to 1.0, but less than 2.5 to 1.0     150 basis points

          less than 1.5 to 1.0                     125 basis points

               The LIBOR Rate Margin during the Subsequent Period shall be
          determined on a quarterly basis effective upon the receipt, review and
          approval by Bank of Obligors' financial statements for such quarter,
          which financial statements shall include, inter alia, a calculation of
          Obligors' Total Funded Indebtedness to EBITDA as of the end of such
          quarter.  If Obligors fail to deliver to Bank the foregoing financial
          statements, the LIBOR Rate Margin shall be highest margin set forth
          above."

          c.  By amending SECTION 14.36 to read, in its entirety, as follows:
                          -------------

               "14.36  "PERMITTED ACQUISITIONS" shall mean an acquisition by any
                       ------------------------
          Obligor in which the purchase price for the entity or assets being
          acquired is less than Two Million Five Hundred Thousand Dollars
          ($2,500,000.00)."

     9.   RESTRUCTURE CHARGE.  During Obligors' fiscal year ending December 31,
          ------------------
1997, a non-recurring restructure charge in a maximum amount of Three Million
Eight Hundred Ninety-Four Thousand Dollars ($3,894,000.00) (including gross
extraordinary expenses) will be expensed by Obligors.  For the purposes of
determining Obligors' compliance with the financial covenants in SECTION 7 of
                                                                 ---------
the Loan Agreement for the twelve (12) month period ending December 31, 1997
(and any portion thereof included in any rolling four (4) quarter calculations
for any subsequent periods) only, the foregoing restructure charge shall be
omitted. The components of the foregoing restructure charge are subject to the
approval of Bank.

     10.  ACQUISITIONS.
          ------------

          a.  Obligors shall not make any acquisitions of the ownership interest
     or assets of another Person (including, without limitation, any Permitted
     Acquisition) unless and until the properties owned by Nobel located in
     Sterling, Virginia and Sacramento, California have been sold and all
     proceeds of such sales, net only of sums approved by Bank, have been paid
     to Bank to reduce the Bank Indebtedness.  Obligors represent to Bank that
     the aggregate gross proceeds from the sales of such properties shall be
     approximately Six Million Dollars ($6,000,000.00), but in no event less
     than Five Million Five Hundred Thousand Dollars ($5,500,000.00).

                                       13
<PAGE>

          b.  Prior to making any Permitted Acquisition and in addition to all
     other requirements set forth in the Loan Agreement with respect thereto,
     Obligors shall deliver to Bank a certificate in form and content
     satisfactory to Bank stating that the acquisition is a Permitted
     Acquisition.

     11.  ASSET MANAGEMENT ACCOUNT.  Contemporaneously with the execution of
          ------------------------
this Amendment, Bank and Obligors will execute that certain Summit Asset
Management Account Supplemental Agreement for Line of Credit (the "SUPPLEMENTAL
AGREEMENT") in connection with Revolving and Term Facility A.  The terms and
conditions of the Supplemental Agreement are incorporated in the Loan Agreement
by this reference thereto and the term "LOAN DOCUMENTS" shall hereafter be
deemed to include, without limitation, the Supplemental Agreement   In the event
of any inconsistencies between the terms and conditions of the Loan Agreement
and the Supplemental Agreement, the terms and conditions of the Loan Agreement
shall control (except for any inconsistencies with respect to SECTION 2.3 of the
                                                              -----------
Supplemental Agreement, which shall be controlled by the Supplemental
Agreement).  All other terms and conditions of the Supplemental Agreement are in
full force and effect and are hereby ratified and confirmed by Bank and
Obligors.

     12.  FEE.  Contemporaneously with the execution of this Amendment, Obligors
          ---
shall pay to Bank a fee in an amount equal to Thirty Thousand Dollars
($30,000.00).  Bank is hereby authorized to deduct such fee from any deposit
account of any Obligor maintained with Bank; provided, however, to the extent of
availability therein, Bank shall deduct such fee first from Nobel's account with
Bank.

     13.  NEW NOTES.  Contemporaneously with the execution of this Amendment,
          ---------
Obligors shall execute and deliver to Bank Revolving and Term Facility Note A
and Revolving and Term Facility Note B, which notes shall  re-evidence the
existing indebtedness of Obligors to Bank as restructured under the Revolving
and Term Facilities.  Revolving and Term Facility Note A and Revolving and Term
Facility Note B merely re-evidence the indebtedness previously evidenced by the
Line Note, the Term Notes and the Nobel Note, and are given in substitution of,
and not as payment for or as a novation of the Line Note, the Term Notes or the
Nobel Notes.  Bank will stamp the Line Note, the Term Notes and the Nobel Note
to show that they have has been re-evidenced  and succeeded.

     14.  FURTHER ASSURANCES.  Obligors covenant and agree to execute and
          ------------------
deliver to Bank or to cause to be executed and delivered at the sole cost and
expense of Obligors, from time to time, any and all other documents, agreements,
statements, certificates and information as Bank shall reasonably request to
evidence or effect the terms hereof, the Loan Agreement, as amended, or any of
the other Loan Documents, or to enforce or to protect Bank's interest in the
Collateral. All such documents, agreements, statements, etc., shall be in form
and content acceptable to Bank in its sole discretion.

     15.  FURTHER AGREEMENTS AND REPRESENTATIONS.  Obligors do hereby:
          --------------------------------------

          a.  ratify, confirm and acknowledge that the Loan Agreement, as
     amended, and the other Loan Documents continue to be and are valid, binding
     and in full force and effect;

          b.  covenant and agree to perform all obligations of Obligors
     contained herein and under the Loan Agreement, as amended, and the other
     Loan Documents;

          c.  acknowledge and agree that Obligors have no defense, set-off,
     counterclaim or challenge against the payment of any sums owing under Loan
     Documents, the enforcement of any of the terms of the Loan Agreement, as
     amended, or the other Loan Documents;

                                       14
<PAGE>

          d.  acknowledge and agree that all representations and warranties of
     Obligors contained in the Loan Agreement and/or the other Loan Documents,
     as amended, are true, accurate and correct on and as of the date hereof as
     if made on and as of the date hereof, provided that the Schedules to
     Article 5 of the Loan Agreement shall be as attached hereto;

          e.  represent and warrant that no Event of Default (as defined in the
     Loan Agreement or any of the other Loan Documents) or event which with the
     giving of notice or passage of time or both would constitute such an Event
     of Default exists and all information described in the foregoing Background
     is true, accurate and complete;

          f.  acknowledge and agree that nothing contained herein and no actions
     taken pursuant to the terms hereof is intended to constitute a novation of
     the Loan Agreement or any of the other Loan Documents, and does not
     constitute a release, termination or waiver of any of the rights or
     remedies granted to the Bank therein, which rights and remedies are hereby
     ratified, confirmed, extended and continued as security for the obligations
     of Obligors to Bank under the Loan Agreement and the other Loan Documents,
     including, without limitation, this Amendment; and

          g.  acknowledge and agree that any Obligor's failure to comply with or
     perform any of its covenants, agreements or obligations contained in this
     Amendment shall constitute an Event of Default under the Loan Agreement and
     each of the Loan Documents.

     16.  COSTS AND EXPENSES.  Upon execution of this Amendment, Obligors shall
          ------------------
pay to Bank, all costs and expenses incurred by Bank in connection with the
review, preparation and negotiation of this Amendment and all documents in
connection therewith, including, without limitation, all of Bank's attorneys'
fees and out-of-pocket expenses.

     17.  INCONSISTENCIES.  To the extent of any inconsistency between the
          ---------------
terms, conditions and provisions of this Amendment and the terms, conditions and
provisions of the Loan Agreement or the other Loan Documents, the terms,
conditions and provisions of this Amendment shall prevail.  All terms,
conditions and provisions of the Loan Agreement and the other Loan Documents not
inconsistent herewith shall remain in full force and effect and are hereby
ratified and confirmed by Obligors.

     18.  CONSTRUCTION.     All references to the Loan Agreement therein or in
          ------------
any other Loan Documents shall be deemed to be a reference to the Loan Agreement
as amended hereby.

     19.  NO WAIVER.  Nothing contained herein and no actions taken pursuant to
          ---------
the terms hereof are intended to nor shall they constitute a waiver by the Bank
of any rights or remedies available to Bank at law or in equity or as provided
in the Loan Agreement or the other Loan Documents.

     20.  BINDING EFFECT.  This Amendment shall be binding upon and inure to the
          --------------
benefit of the parties hereto and their respective successors and assigns.

     21.  GOVERNING LAW.  This Amendment shall be governed by and construed in
          -------------
accordance with the laws of the Commonwealth of Pennsylvania.

     22.  HEADINGS.  The headings of the sections of this Amendment are inserted
          --------
for convenience only and shall not be deemed to constitute a part of this
Amendment.

                                       15
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first above written.

                              NOBEL EDUCATION DYNAMICS, INC.

                              By:   ___________________________________
                              Name/Title:  ____________________________
[CORPORATE SEAL]
                              Attest:    ______________________________
                              Name/Title:  ____________________________

                              IMAGINE EDUCATIONAL PRODUCTS, INC.

                              By:   ___________________________________
                              Name/Title:  ____________________________
[CORPORATE SEAL]
                              Attest:    ______________________________
                              Name/Title:  ____________________________

                              MERRYHILL SCHOOLS, INC.

                              By:   ___________________________________
                              Name/Title:  ____________________________
[CORPORATE SEAL]
                              Attest:    ______________________________
                              Name/Title:  ____________________________

                      [SIGNATURES CONTINUED ON NEXT PAGE]

                                       16
<PAGE>

                              EDUCO, INC.

                              By:   ___________________________________
                              Name/Title:  ____________________________
[CORPORATE SEAL]
                              Attest:    ______________________________
                              Name/Title:  ____________________________


                              NEDI, INC.

                              By:   ___________________________________
                              Name/Title:  ____________________________
[CORPORATE SEAL]
                              Attest:    ______________________________
                              Name/Title:  ____________________________

                              MONTESSORI HOUSE, INC.

                              By:   ___________________________________
                              Name/Title:  ____________________________
[CORPORATE SEAL]
                              Attest:    ______________________________
                              Name/Title:  ____________________________

                              ANOTHER GENERATION ENTERPRISES, INC.

                              By:   ___________________________________
                              Name/Title:  ____________________________
[CORPORATE SEAL]
                              Attest:    ______________________________
                              Name/Title:  ____________________________


                              SUMMIT BANK

                              By:   ___________________________________
                                    Janet L. Helms, Vice-President

                                       17