<PAGE>

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


    THIS FIFTH AMENDMENT AND MODIFICATION TO LOAN AND SECURITY AGREEMENT (the
"AMENDMENT") is made effective as of the _____ day of March, 1997, by and among
NOBEL EDUCATION DYNAMICS, INC. ("NOBEL"), BLUEGRASS REAL ESTATE COMPANY, INC.
("BLUEGRASS"), 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 and Bank dated August 30,
1995 (as amended by those certain amendments dated September 1, 1995, April 4,
1996, July 23, 1996 and November 1, 1996, 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 Ten Million Dollars ($10,000,000.00) (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").  Subsequent to the execution of the Loan Agreement, Children's Park,
Incorporated and Rocking Horse Management Corporation merged into Nobel with
Nobel being the surviving entity.

    B.    Obligors' obligations to repay the sums advanced under the (i) Line is
evidenced by that certain Line Note from Obligors to Bank dated November 1, 1996
in the face amount of Ten Million Dollars ($10,000,000.00) (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").

    C.    Obligors and Bank desire to further amend the Loan Agreement in
accordance with the terms and conditions hereof.

    D.    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:

    1.    PERMITTED INDEBTEDNESS.  SECTION 6.2 of the Loan Agreement is amended
          ----------------------   -----------
by adding the following subsection (d):
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<PAGE>

          "(d)  Indebtedness to AEI Fund Management, Inc. ("AEI") in an amount
          not to exceed Seven Million Five Hundred Thousand Dollars
          ($7,500,000.00) in the aggregate to be used to finance the
          construction of new educational facilities of Obligors, provided that
          no Event of Default or event which with the giving of notice or the
          passage of time or both would become an Event of Default shall have
          occurred and the incurrence of such obligations will not cause an
          Event of Default.  All obligations of Obligors to AEI shall be secured
          only by mortgage liens and UCC-1 fixture filings against the property
          and improvements in respect of which AEI is providing construction
          financing.  Prior to each financing with AEI, Obligors shall provide
          to Bank a description of the properties being financed by AEI, the
          terms of such financing and copies of all documents in connection
          therewith."

    2.    INVESTMENT ACCOUNT.  Notwithstanding anything to the contrary
          ------------------
contained in the Loan Agreement, Bank consents to the transfer by Nobel of an
amount not to exceed Nine Million Five Hundred Thousand Dollars ($9,500,000.00)
to an account maintained by NEDI with Smith Barney, account number 532-14483-17-
187.  NEDI acknowledges and agrees that such account, together with all
securities and other assets therein, all substitutions and replacements therefor
and all proceeds thereof are part of the Collateral and are subject to the
Securities Pledge Agreement from NEDI to Bank and the agreement among Bank,
Smith Barney and NEDI regarding such account.

    3.    FINANCIAL COVENANTS.  SECTION 7 of the Loan Agreement shall be amended
          -------------------   ---------
as follows:

          (a) SECTIONS 7.1, 7.2 AND 7.3 are hereby deleted in their entirety.
              -------------------------

          (b) The following financial covenants are hereby added to SECTION 7:
                                                                    ---------

            (i) TOTAL FUNDED INDEBTEDNESS TO EBITDA.  Obligors shall maintain a
                -----------------------------------
                ratio of Total Funded Indebtedness to EBITDA of not greater than
                4.0 to 1.0. as of the end of each fiscal quarter of Obligors,
                calculated on a rolling four (4) quarter basis.

            (ii) TOTAL FUNDED SENIOR INDEBTEDNESS TO EBITDA.  Obligors shall
                 ------------------------------------------
                 maintain a ratio of Total Funded Senior Indebtedness to EBITDA
                 of not greater than 3.0 to 1.0. as of the end of each fiscal
                 quarter of Obligors, calculated on a rolling four (4) quarter
                 basis.

            As used  herein, the following terms shall have the following
            meanings:

            "TOTAL FUNDED SENIOR INDEBTEDNESS" shall mean the Total Funded
            Indebtedness of Obligors minus the Subordinated Indebtedness of
            Obligors then outstanding.

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<PAGE>

            "EBITDA" shall mean the earnings of Obligors for any given period,
            plus the aggregate amounts deducted in determining such earnings in
            respect of (i) Interest Expense, (ii) income taxes, (iii)
            depreciation and (iv) amortization, all as determined in accordance
            with GAAP.

            "TOTAL FUNDED INDEBTEDNESS" shall mean the sum of all Bank
            Indebtedness, Indebtedness owed to AEI, Subordinated Indebtedness
            and Capitalized Lease Obligations outstanding at any given time.

    4.    ADDITIONAL OBLIGORS.  From and after the date hereof, Montessori and
          -------------------
Another Generation shall each be an "OBLIGOR" under the Loan Agreement and shall
be bound by all of the terms and conditions thereof.  Unless otherwise
specifically restated for Montessori and Another Generation hereunder, all
representations, warranties and covenants under the Loan Agreement shall be
deemed to be the representations, warranties and covenants of Montessori and
Another Generation as if Montessori and Another Generation were originally named
as an "OBLIGOR" under the Loan Agreement.  All references to Obligors in the
Loan Agreement and the other Loan Documents shall hereafter also be deemed a
reference to Montessori and Another Generation.

    5.    SECURITY.  As security for the full and timely payment and performance
          --------
of all Bank Indebtedness, Montessori and Another Generation hereby grant to Bank
a security interest in all of the following:

          (a) All of such parties' present and future accounts, contract rights,
chattel paper, instruments and documents and all other rights to the payment of
money whether or not yet earned, for services rendered or goods sold, consigned,
leased or furnished by such parties or otherwise, together with (i) all goods
(including any returned, rejected, repossessed or consigned goods), the sale,
consignment, lease or other furnishings of which shall be given or may give rise
to any of the foregoing, (ii) all of such parties' rights as a consignor,
consignee, unpaid vendor or other lienor in connection therewith, including
stoppage in transit, set-off, detinue, replevin and reclamation, (iii) all
general intangibles related thereto, (iv) all guaranties, mortgages, security
interests, assignments, and other encumbrances on real or personal property,
leases and other agreements or property securing or relating to any accounts,
(v) choses-in-action, claims and judgments, (vi) any return or unearned
premiums, which may be due upon cancellation of any insurance policies, and
(vii) all products and proceeds of any of the foregoing.

          (b) All of such parties' present and future inventory (including but
not limited to goods held for sale or lease or furnished or to be furnished
under contracts for service, raw materials, work-in-process, finished goods and
goods used or consumed in such parties' business) whether owned, consigned or
held on consignment, together with all merchandise, component materials,
supplies, packing, packaging and shipping materials, and all returned, rejected
or repossessed goods sold, consigned, leased or otherwise furnished by such
parties and all products and proceeds of any of the foregoing.

          (c) All of such parties' present and future general intangibles
(including but not limited to tax refunds and rebates, manufacturing and
processing rights, designs, patent rights and applications therefor, trademarks
and registration or applications therefor, tradenames, brand names, logos,
inventions, copyrights and all applications and registrations therefor),
licenses, permits,

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approvals, software and computer programs, license rights, royalties, trade
secrets, methods, processes, know-how, formulas, drawings, specifications,
descriptions, label designs, plans, blueprints, patterns and all memoranda,
notes and records with respect to any research and development, and all product
and proceeds of any of the foregoing.

          (d) All of such parties' present and future machinery, equipment,
furniture, fixtures, motor vehicles, tools, dies, jigs, molds and other articles
of tangible personal property of every type together with all parts,
substitutions, accretions, accessions, attachments, accessories, additions,
components and replacements thereof, and all manuals of operation, maintenance
or repair, and all products and proceeds of any of the foregoing.

          (e) All of such parties' present and future general ledger sheets,
files, records, customer lists, books of account, invoices, bills, certificates
or documents of ownership, bills of sale, business papers, correspondence,
credit files, tapes, cards, computer runs and all other data and data storage
systems, whether in the possession of such parties or any service bureau.

          (f) All letters of credit now existing or hereafter issued naming such
parties as beneficiaries or assigned to such parties, including the right to
receive payment thereunder, and all documents and records associated therewith.

          (g) All deposits, funds, instruments, documents, policies and evidence
and certificates of insurance, securities, chattel paper and other assets of
such parties or in which such parties have an interest and all proceeds thereof,
now or at any time hereafter on deposit with or in the possession or control of
Bank or owing by Bank to such parties or in transit by mail or carrier to Bank
or in the possession of any other Person acting on Bank's behalf, without regard
to whether Bank received the same in pledge, for safekeeping, as agent for
collection or otherwise, or whether Bank has conditionally released the same,
and in all assets of such parties in which Bank now has or may at any time
hereafter obtain a lien, mortgage or security interest for any reason.

          (h) All stocks, bonds, treasury securities, commercial paper, mutual
funds and other investments or securities of any nature now or hereafter
acquired by such parties, and all interest, dividends and other proceeds
thereof.

    6.    REPRESENTATIONS, WARRANTIES AND COVENANTS.  Montessori and Another
          -----------------------------------------
Generation hereby join in and ratify and confirm all of the representations and
warranties in the Loan Agreement and agree to be bound by and to comply with all
of the covenants set forth herein.

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

          "6.27  NEW FACILITIES.  During any fiscal year, Obligors shall not
                 --------------
          establish more than ten (10) newly constructed educational facilities
          which they, or any of them, will own or which will otherwise appear as
          an asset on any Obligor's balance sheet ("OWNED FACILITIES").  In
          addition to the foregoing, Obligors may acquire and hold from time to
          time up to seven (7) parcels of vacant land (the "VACANT LAND"),
          provided, however, the aggregate purchase price of the Vacant Land

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<PAGE>

          at any time held by Obligors shall not exceed Three Million Five
          Hundred Thousand Dollars ($3,500,000.00)."

    8.    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, including, without limitation, Allonges to each of the promissory
notes in connection with the Loan Agreement adding Montessori and Another
Generation as Obligors thereunder.   All such documents, agreements, statements,
etc., shall be in form and content acceptable to Bank in its sole discretion.

    9.    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;

          (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;

          (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.

    10.   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

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<PAGE>

negotiation of this Amendment and all documents in connection therewith,
including, without limitation, all of Bank's attorneys' fees and costs.

    11.   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.

    12.   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.

    13.   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.

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

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

    16.   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.

    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:_____________________________

                                    Attest:_________________________________
                                    Name/Title:_____________________________


                                    BLUEGRASS REAL ESTATE
                                    COMPANY, INC.

                                    By:_____________________________________
                                    Name/Title:_____________________________

                                    Attest:_________________________________
                                    Name/Title:_____________________________

                        [SIGNATURES CONTINUED NEXT PAGE]

                                       6
<PAGE>

                   [SIGNATURES CONTINUED FROM PREVIOUS PAGE]

                                    IMAGINE EDUCATIONAL PRODUCTS,
INC.

                                    By:_____________________________________
                                    Name/Title:_____________________________

                                    Attest:_________________________________
                                    Name/Title:_____________________________


                                    MERRYHILL SCHOOLS, INC.

                                    By:_____________________________________
                                    Name/Title:_____________________________

                                    Attest:_________________________________
                                    Name/Title:_____________________________


                                    EDUCO, INC.

                                    By:_____________________________________
                                    Name/Title:_____________________________

                                    Attest:_________________________________
                                    Name/Title:_____________________________


                                    NEDI, INC.

                                    By:_____________________________________
                                    Name/Title:_____________________________

                                    Attest:_________________________________
                                    Name/Title:_____________________________


                                    MONTESSORI HOUSE, INC.

                                    By:_____________________________________
                                    Name/Title:_____________________________

                                    Attest:_________________________________
                                    Name/Title:_____________________________

                        [SIGNATURES CONTINUED NEXT PAGE]

                                       7
<PAGE>

                   [SIGNATURES CONTINUED FROM PREVIOUS PAGE]

                                    ANOTHER GENERATION ENTERPRISES,
                                    INC.

                                    By:_____________________________________
                                    Name/Title:_____________________________

                                    Attest:_________________________________
                                    Name/Title:_____________________________


                                         SUMMIT BANK, formerly known as
                                    First Valley Bank

                                    By:_____________________________________
                                         Donald H. McCarty
                                         Regional Vice President

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