<PAGE>   1
                                                                    Exhibit 10.1

                                                       Dated as of June 12, 1998

                                   MASTER NOTE
                  (CORPORATION, PARTNERSHIP, OR JOINT VENTURE)

THIS NOTE has been executed by          The Arnold Palmer Golf Company         ,
                               ------------------------------------------------
a corporation formed under the laws of the State of Tennessee  ("Borrower"); if
                                                    --------- 
more than one entity executes this Note, the term "Borrower" refers to each of 
them individually and some or all of them collectively, and their obligations 
hereunder shall be joint and several.* If a land trustee executes this Note, 
"Borrower" as used in sections 6 and 7 below also includes any beneficiary(ies)
of the land trust.**

     FOR VALUE RECEIVED, on or before           September 30, 1998             ,
                                       ----------------------------------------
the scheduled maturity date hereof, Borrower promises to pay to the order of THE
NORTHERN TRUST COMPANY, an Illinois banking corporation (hereafter, together
with any subsequent holder hereof, called "Lender"), at its main banking office
at 50 South LaSalle Street, Chicago, Illinois 60675, or at such other place as
Lender may direct, the aggregate unpaid principal balance of each advance (a
"Loan" and collectively the "Loans") made by Lender to Borrower hereunder. The
total principal amount of Loans outstanding at any one time hereunder shall not 
exceed
       -------------------------------------------------------------------------
      Two Million               UNITED STATES DOLLARS ($2,000,000).
------------------------------                         ---------- 

     Lender is hereby authorized by Borrower at any time and from time to time
at Lender's sole option to attach a schedule (grid) to this Note and to endorse
thereon notations with respect to each Loan specifying the date and principal
amount thereof, the Interim Maturity Date (as defined below) (if applicable),
the applicable interest rate and rate option, and the date and amount of each
payment of principal and interest made by Borrower with respect to each such
Loan. Lender's endorsements as well as its records relating to Loans shall be
rebuttably presumptive evidence of the outstanding principal and interest on the
Loans, and, in the event of inconsistency, shall prevail over any records of
Borrower and any written confirmations of Loans given by Borrower.

     If Borrower wishes to obtain a Loan under this Note, Borrower shall notify
Lender orally or in writing on a banking day. Any such notice shall be 
irrevocable; if the notice is received after 10:00 AM Chicago time the Loan may 
not be available until the next banking day. Additional procedures for "Bank 
Offered Rate" Loans, if available, are set forth below.

     Each request for a Loan shall be deemed to be a representation and warranty
by Borrower to Lender that: (i) no Event of Default or Unmatured Event of
Default (in each case as defined below) has occurred and is continuing as of the
date of such request or would result from the making of the Loan; and (ii)
Borrower's representations and warranties herein are true and correct as of such
date as though made on such date. Upon receipt of each Loan request Lender in
its sole discretion shall have the right to request that Borrower provide to
Lender, prior to Lender's funding of the Loan, a certificate executed by
Borrower's President, Treasurer, or Chief Financial Officer (if Borrower is a
corporation), or a general partner or joint venturer of Borrower (if Borrower is
a partnership or joint venture) to such effect.


1. INTEREST. See rider attached hereto and incorporated herein by reference.



* Insert "N/A" in any blank in this Note which is not applicable. ** Land 
trustee may not sign upon direction of individual beneficiary(ies) unless
Loans are for business purposes. ***Do not use if collateral includes real 
estate.



                                     Page 1
<PAGE>   2
2. PREPAYMENTS.



3. REFERENCES TO PREVIOUSLY NOTES, FACILITY TYPE, COLLATERAL, GUARANTIES, LOAN &
OTHER AGREEMENTS. (CHECK AS APPLICABLE)

LINE OF CREDIT:  This Note has been executed pursuant to a line of credit. At
the present time Lender intends to make available to Borrower credit as outlined
herein or in any related letter until the maturity day indicated above unless in
Lender's sole judgment there has occurred an adverse change in the assets,
condition or prospects of Borrower or any guarantor. THE LINE OF CREDIT MAY BE
CANCELLED OR REDUCED BY LENDER AT LENDER'S SOLE OPTION WITHOUT PRIOR NOTICE TO
BORROWER OR ANY OTHER PERSON OR ENTITY. THE LINE OF CREDIT IS REVOCABLE
NOTWITHSTANDING PAYMENT OF ANY FEES OR MAINTENANCE OF ANY ACCOUNT BALANCES, AS
AND IF PROVIDED IN ANY ACCOMPANYING LETTER OR OTHER DOCUMENT PERTAINING TO SUCH
FEES AND/OR BALANCES. Any such fees and/or balances shall be deemed compensation
to Lender for being prepared to respond to Borrower's requests for credit under
this Note.

[ ] This Note amends, restates, renews and replaces in its entirety the note
dated _______________ in the amount of $__________, and any previously renewed
note(s). Borrower hereby expressly confirms that all collateral and guaranties
given for such prior note(s) shall secure or guarantee this Note. All amounts
outstanding under such previous note(s) shall be deemed automatically
outstanding hereunder.

[X] This Note is secured without limitation as provided in the following and all
related documents, in each case as amended, modified, renewed, restated or
replaced from time to time.

     [X] Security Agreement dated as of May 15, 1997.

     [ ] Mortgage dated as of _______________________ on property all or part of
         which is commonly known as ___________________________________________
         ______________________________________________________________________.

     [X] Pledge Agreement dated as of December 29, 1997.

     [ ] Other (describe) _____________________________________________________.

[X] Payment of this Note has been unconditionally guaranteed by John T. Lupton
(each individually and all collectively referred to as "guarantor") as provided
in separately executed guaranties.

[X] This Note has been executed pursuant to a Note Purchase Agreement, dated as
of the date hereof, as amended, modified, restated, renewed, or replaced from
time to time, containing covenants and other terms, to which reference is hereby
made.

4. USE OF PROCEEDS. CHECK ONE:

[X] Borrower represents and warrants that the proceeds of this Note will be used
solely for business purposes, and not for personal, family or household use,
within the meaning of Federal Truth-in-Lending and similar state laws and
regulations.


[ ] **** Borrower represents that the proceeds of this Note will be used for
personal, family or household use. IF THIS OPTION IS CHECKED, THE FIRST LOAN
MUST BE IN THE AMOUNT OF $25,001 OR MORE

If Loan proceeds will be used to purchase or refinance the purchase of any
property describe:

_______________________________________________________________________________

Notwithstanding any other provision hereof, if this Note is covered by
Regulation Z of the Federal Reserve Board (Truth in Lending) or any like
disclosure requirement, this Note shall be secured by collateral referenced
herein or in any other document only if disclosed in a related disclosure
statement.

5. REPRESENTATIONS.

Borrower hereby represents and warrants to Lender that:

     (a) Borrower and any "Subsidiary" (as defined below) are existing and in
     good standing under the laws of their state of formation, are duly
     qualified, in good standing and authorized to do business in each
     jurisdiction where failure to do so might have a material adverse impact on
     the consolidated assets, condition or prospects of Borrower; the execution,
     delivery and performance of this Note and all related documents and
     instruments are within Borrower's powers and have been authorized by all
     necessary corporate action;

     (b) the execution, delivery and performance of this Note and all related
     documents and instruments have received any and all necessary governmental
     approval, and do not and will not contravene or conflict with any provision
     of law or of the charter or by-laws of Borrower or any agreement affecting
     Borrower or its property; and

     (c) there has been no material adverse change in the business, condition,
     properties, assets, operations or prospects of Borrower or any guarantor
     since the date of the latest financial statements provided on behalf of
     Borrower or any guarantor to Lender prior to the execution of this Note.

"Subsidiary" means any corporation, partnership, joint venture, trust, or other
legal entity of which Borrower owns directly or indirectly fifty percent (50%)
or more of the outstanding voting stock or interest, or of which Borrower has
effective control, by contract or otherwise.

6. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an
"Event of Default":

     (a) failure to pay, when and as due, any principal, interest or other
amounts payable hereunder; failure to comply with or perform any agreement or
covenant of Borrower contained herein; or failure to furnish (or caused to be
furnished to) Lender when and as requested by Lender (but not more often than
once every twelve months) fully completed financial statement(s) of any
guarantor on Lender's then-standard form together with such supporting
information as Lender may reasonably request; or

     (b) any default, event of default, or similar event shall occur or continue
under any other instrument, document, note, agreement, or guaranty delivered to
Lender in connection with this Note, or any such instrument, document, note,
agreement, or guaranty shall not be, or shall cease to be, enforceable in
accordance with its terms; or

     (c) there shall occur any default or event of default, or any event or
condition that might become such with notice or the passage of time or both, or
any similar event, or any event that requires the prepayment of borrowed money
or the acceleration of the maturity thereof, under the terms of any evidence of
indebtedness or other agreement issued or assumed or entered into by Borrower,
any Subsidiary, or any guarantor, or under the terms of any indenture,
agreement, or instrument under which any such evidence of indebtedness or other
agreement is issued, assumed, secured, or guaranteed, and such event shall
continue beyond any applicable period of grace; or

     (d) any representation, warranty, schedule, certificate, financial
statement, report, notice, or other writing furnished by or on behalf of
Borrower, any Subsidiary, or any guarantor to Lender is false or misleading in
any material respect on the date as of which the facts therein set forth are
stated or certified; or

     (e) any guaranty of or pledge of collateral security for this Note shall be
repudiated or become unenforceable or incapable of performance; or

     (f) Borrower or any Subsidiary shall fail to maintain their existence in
good standing in their state of formation or shall fail to be duly qualified, in
good standing and authorized to do business in each jurisdiction where failure
to do so might have a material adverse impact on the consolidated assets,
condition or prospects of Borrower; or

     (g) Borrower, any Subsidiary, or any guarantor shall die, become
incompetent, dissolve, liquidate, merge, consolidate, or cease to be in
existence for any reason; or

     (h) any person or entity presently not in control of Borrower, or any
guarantor, shall obtain control directly or indirectly of Borrower, or any
guarantor, whether by purchase or gift of stock or assets, by contract, or
otherwise; or

     (i) any proceeding (judicial or administrative) shall be commenced against
Borrower, any Subsidiary, or any guarantor, or with respect to any assets of
Borrower, any Subsidiary, or any guarantor which shall threaten to have a
material and adverse effect on the assets, condition or prospects of Borrower,
any Subsidiary, or any guarantor; or final judgment(s) and/or settlement(s) in
an aggregate amount in excess of one hundred thousand UNITED STATES DOLLARS
($100,000) in excess of insurance for which the insurer has confirmed coverage
in writing, a copy of which writing has been furnished to Lender, shall be
entered or agreed to in any suit or action commenced against Borrower, any
Subsidiary, of Borrower, or any guarantor; or

     (j) Borrower shall grant or any person (other than Lender) shall obtain a
security interest in any collateral for this Note; Borrower or any other person
shall perfect (or attempt to perfect) such a security interest; a court shall
determine that Lender does not have a first-priority security interest in any of
the collateral for this Note enforceable in accordance with the terms of the
related documents; or any notice of a federal tax lien against Borrower shall be
filed with any public recorder; or 


**** If this box is checked and a land trustee is signing the Note, do not take
     real estate as collateral.
<PAGE>   3
     (k) There shall be any material loss or depreciation in the value of any
collateral for this Note for any reason, or Lender shall otherwise reasonably
deem itself insecure; or, unless expressly permitted by the related documents,
all or any part of any collateral for this Note or any direct, indirect, legal,
equitable or beneficial interest therein is assigned, transferred or sold
without Lender's prior written consent; or

     (l) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
liquidation, dissolution, or similar proceeding, domestic or foreign, is
instituted by or against Borrower, or any guarantor; or Borrower, any
Subsidiary, or any guarantor shall take any steps toward, or to authorize, such
a proceeding; or

     (m) Borrower, any Subsidiary, or any guarantor shall become insolvent,
generally shall fail or be unable to pay its debts as they mature, shall admit
in writing its inability to pay its debts as they mature, shall make a general
assignment for the benefit of its creditors, shall enter into any composition
or similar agreement, or shall suspend the transaction of all or a substantial
portion of its usual business.

7. DEFAULT REMEDIES.
     (a) Upon the occurrence and during the continuance of any Event of Default
specified in Section 6(a)-(k), Lender at its option may declare this Note
(principal, interest and other amounts) immediately due and payable without
notice or demand of any kind. Upon the occurrence of any Event of Default
specified in Section 6(l)-(m), this Note (principal, interest and other
amounts) shall be immediately and automatically due and payable without action
of any kind on the part of Lender. Upon the occurrence and during the
continuance of any Event of Default, Lender may exercise any rights and
remedies under this Note, any related document or instrument (including without
limitation any pertaining to collateral), and at law or in equity.

     (b) Lender may, by written notice to Borrower, at any time and from time
to time, waive any Event of Default or "Unmatured Event of Default" (as defined
below), which shall be for such period and subject to such conditions as shall
be specified in any such notice. In the case of any such waiver, Lender and
Borrower shall be restored to their former position and rights hereunder, and
any Event of Default or Unmatured Event of Default so waived shall be deemed to
be cured and not continuing; but no such waiver shall extend to or impair any
subsequent or other Event of Default or Unmatured Event of Default. No failure
to exercise, and no delay in exercising, on the part of Lender of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies of Lender herein provided are cumulative and not exclusive of any
rights or remedies provided by law. "Unmatured Event of Default" means any
event or condition which would become an Event of Default with notice or the
passage of time or both.

8. NO INTEREST OVER LEGAL RATE.
     Borrower does not intend or expect to pay, nor does Lender intend or
expect to charge, accept or collect any interest which, when added to any fee
or other charge upon the principal which may legally be treated as interest,
shall be in excess of the highest lawful rate. If acceleration, prepayment or
any other charges upon the principal or any portion thereof, or any other
circumstance, result in the computation or earning of interest in excess of the
highest lawful rate, then any and all such excess is hereby waived and shall be
applied against the remaining principal balance. Without limiting the generality
of the foregoing, and notwithstanding anything to the contrary contained herein
or otherwise, no deposit of funds shall be required in connection herewith
which will, when deducted from the principal amount outstanding hereunder,
cause the rate of interest hereunder to exceed the highest lawful rate.

9. PAYMENTS, ETC.
     All payments hereunder shall be made in immediately available funds, and
shall be applied first to accrued interest and then to principal; however, if
an Event of Default occurs, Lender may, in its sole discretion, and in such
order as it may choose, apply any payment to interest, principal and/or lawful
charges and expenses then accrued. Borrower shall receive immediate credit on
payments received during Lender's normal banking hours if made in cash,
immediately available funds, or by debit to available balances in an account at
Lender; otherwise payments shall be credited after clearance through normal
banking channels. Borrower authorizes Lender to charge any account of Borrower
maintained with Lender for any amounts of principal, interest, taxes, duties,
or other charges or amounts due or payable hereunder, with the amount of such
payment subject to availability of collected balances in Lender's discretion;
unless Borrower instructs otherwise, all Loans shall be credited to an
account(s) of Borrower with Lender. LENDER AT ITS OPTION MAY MAKE LOANS
HEREUNDER UPON TELEPHONIC INSTRUCTIONS AND IN SO DOING SHALL BE FULLY ENTITLED
TO RELY SOLELY UPON INSTRUCTIONS, INCLUDING WITHOUT LIMITATION INSTRUCTIONS TO
MAKE TRANSFERS TO THIRD PARTIES. REASONABLY BELIEVED BY LENDER TO HAVE BEEN
GIVEN BY AN AUTHORIZED PERSON, WITHOUT INDEPENDENT INQUIRY OF ANY TYPE. All
payments shall be made without deduction for or on account of any present or
future taxes, duties or other charges levied or imposed on this Note or the
proceeds. Lender or Borrower by any government or political subdivision
thereof. Borrower shall upon request of Lender pay all such taxes, duties or
other charges in addition to principal and interest, including without
limitation all documentary stamp and intangible taxes, but excluding income
taxes based solely on Lender's income.

10. SETOFF.
     At any time and without notice of any kind, any account, deposit or other
indebtedness owing by Lender to Borrower, and any securities or other property
of Borrower delivered to or left in the possession of Lender or its nominee or
bailee, may be set off against and applied in payment of any obligation
hereunder, whether due or not.

11. NOTICES.
     All notices, requests and demands to or upon the respective parties hereto
shall be deemed to have been given or made when deposited in the mail, postage
prepaid, addressed if to Lender to its main banking office indicated above
(Attention: Division Head, Wealth Management Division), and if to Borrower to
its address set forth below, or to such other address as may be hereafter
designated in writing by the respective parties hereto or, as to Borrower, may
appear in Lender's records.

12. MISCELLANEOUS.
     This Note and any document or instrument executed in connection herewith
shall be governed by and construed in accordance with the internal law of the
State of Illinois, and shall be deemed to have been executed in the State of
Illinois. Unless the context requires otherwise, wherever used herein the
singular shall include the plural and vice versa, and the use of one gender
shall also denote the other. Captions herein are for convenience of reference
only and shall not define or limit any of the terms or provisions hereof;
references herein to Sections or provisions without reference to the document
in which they are contained are references to this Note. This Note shall bind
Borrower, its heirs, trustees (including without limitation successor and
replacement trustees), executors, personal representatives, successors and
assigns, and shall inure to the benefit of Lender, its successors and assigns,
except that Borrower may not transfer or assign any of its rights or interest
hereunder without the prior written consent of Lender. Borrower agrees to pay
upon demand all expenses (including without limitation attorneys' fees, legal
costs and expenses, and time charges of attorneys who may be employees of
Lender, in each case whether in or out of court, in original or appellate
proceedings or in bankruptcy) incurred or paid by Lender or any holder hereof
in connection with the enforcement or preservation of its rights hereunder or
under any document or instrument executed in connection herewith. Borrower
expressly and irrevocably waives notice of dishonor or default as well as
presentment, protest, demand and notice of any kind in connection herewith. If
there shall be more than one person or entity constituting Borrower, each of
them shall be primarily, jointly and severally liable for all obligations
hereunder.

13. WAIVER OF JURY TRIAL, ETC.
     BORROWER HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S SOLE AND
ABSOLUTE ELECTION, ALL SUITS, ACTIONS OR OTHER PROCEEDINGS WITH RESPECT TO,
ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY DOCUMENT OR INSTRUMENT
EXECUTED IN CONNECTION HEREWITH SHALL BE SUBJECT TO LITIGATION IN COURTS HAVING
SITUS WITHIN OR JURISDICTION OVER COOK COUNTY, ILLINOIS. BORROWER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT
LOCATED IN OR HAVING JURISDICTION OVER SUCH COUNTY, AND HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO REQUEST OR DEMAND TRIAL BY JURY, TO TRANSFER OR
CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT BY LENDER IN
ACCORDANCE WITH THIS PARAGRAPH, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.

[X] See Rider attached hereto and incorporated herein by reference.

     Lender is hereby authorized by Borrower without notice to Borrower to fill
in any blank spaces and dates and strike inapplicable terms herein or in any
related document to conform to the terms upon which the Loan(s) evidenced
hereby are or may be made, for which purpose Lender shall be deemed to have
been granted an irrevocable power of attorney coupled with an interest.


The Arnold Palmer Golf Company

/s/ John T. Lupton
   ------------------------------

By:
   ------------------------------

Title:
      ---------------------------


Address for Notices:

  6201 Mountain View Road
---------------------------------  
  Ooltewah, TN 37363
---------------------------------

---------------------------------

Attention: David Kirby
           ----------------------




                                     Page 3
<PAGE>   4
                        RIDER TO $2,000,000 MASTER NOTE
        (At Lender Option LIBOR Periods May Extend Beyond Note Maturity)

DATED AS OF JUNE 12, 1998, EXECUTED BY THE ARNOLD PALMER GOLF COMPANY (the
"Borrower") IN FAVOR OF THE NORTHERN TRUST COMPANY (the "Lender")

     1.  This Rider is attached to and forms an integral part of the
         above-referenced Master Note (as amended, the "Note"). Capitalized
         terms defined in the remainder of the Note and not otherwise defined in
         this Rider shall have the same meaning in this Rider as in the
         remainder of the Note. Wherever possible this Rider and the remainder
         of the Note shall be construed so as to be consistent with each other;
         however, if and to the extent that the terms of this Rider conflict or
         are inconsistent with the remainder of the Note, the terms of this
         Rider shall prevail. Except as modified by this Rider, the terms of the
         remainder of the Note shall apply.

     2.  Sections 1 ("INTEREST") and 2 ("PREPAYMENTS") of the Note are deleted 
         and the following is substituted in lieu thereof:

"SECTION 1. INTEREST.

  1.1 INTEREST RATES. The unpaid principal amount from time to time outstanding 
      hereunder shall bear interest at the following rates per year:

     (a)  before maturity, whether by acceleration or otherwise, at the option
          of Borrower subject to the terms hereof, at a rate equal to:

          (i)  the "Prime-Based Rate," which shall mean the "Prime Rate" (as
               defined below), minus one-half percent (-1/2%). Changes in the
               rate of interest resulting from a change in the Prime Rate shall
               take effect on the date set forth in each announcement for a
               change in the Prime Rate. "Prime Rate" means the rate announced
               from time to time by the Lender called its prime rate, which may
               not at any time be the lowest rate charged by the Lender; or

          (ii) "LIBOR," which shall mean that fixed rate of interest for
               deposits with maturity periods of up to and including twelve
               months (which periods Borrower shall select subject to the terms
               stated herein) in United States dollars offered to Lender in or
               through the London or another offshore interbank market, as
               determined by the Lender in its sole discretion for or as of the
               borrowing date requested by the Borrower, divided by one minus
               any applicable reserve requirement (expressed as a decimal) on
               Eurodollar


                                     1 of 5


<PAGE>   5




               deposits of the same amount and maturity as determined by Lender
               in its sole discretion, plus two percent (2%).

               For purposes hereof, the periods referred to in the definition of
               LIBOR are referred to as "Interest Period(s)", and the last day
               of any Interest Period is referred to as an "Interim Maturity
               Date." "Banking Day" means a day on which the Lender is open for
               banking business in Chicago, Illinois, and "LIBOR Banking Day"
               means a Banking Day on which Lender is open for business in
               London, England and United States dollar deposits are generally
               traded by dealers in such deposits. If an Interest Period would
               otherwise end on a day which is not a LIBOR Banking Day, it shall
               automatically be extended to and shall end on the next LIBOR
               Banking Day; however, if application of the foregoing part of
               this sentence would cause an Interest Period to end in the
               following month, such Interest Period shall end on the next
               preceding LIBOR Banking Day.

          (b)  after maturity, until paid, at a rate equal to 2% in addition to
               the Prime Rate (but not less than the Prime Rate in effect at
               maturity).

1.2  RATE SELECTION. Borrower shall select and change its selection of the
     interest rate as between the Prime-Based Rate and LIBOR to apply to at
     least $100,000 and in integral multiples of $100,000 thereafter (or any
     remaining amount available hereunder) of any Loan, subject to the
     requirements herein stated:

     (a)  At the time any Loan is made;

     (b)  At the expiration of the particular Interest Period Selected for the
          outstanding principal balance of any Loan currently bearing interest
          at LIBOR; and

     (c)  At any time for the outstanding principal balance of any Loan
          currently bearing interest at the Prime-Based Rate.

1.3 RATE CHANGES AND NOTIFICATIONS.

     (a)  Prime-Based Rate. If Borrower wishes to borrow funds at the
          Prime-Based Rate or if Borrower wishes to change the rate of interest
          on any Loan, within the limits described above, from LIBOR to the
          Prime-Based Rate, it shall, at or before 10:00 AM Chicago time on '
          the Banking Day such borrowing or change is to take effect, give
          Lender written or telephonic notice thereof, which shall be
          irrevocable. Borrowings requested after such time may not be available
          until the next Banking Day.

     (b)  LIBOR. If Borrower wishes to borrow funds at LIBOR or if Borrower
          wishes to change the rate of interest on any Loan, within the limits
          described above, from the Prime-Based Rate to LIBOR, it shall, not
          less than three LIBOR



                                     2 of 5


<PAGE>   6




          Banking Days prior to the LIBOR Banking Day on which such rate is to
          take effect, give Lender written or telephonic notice thereof, which
          shall be irrevocable. Such notice shall specify the Loan to which
          LIBOR is to apply and, in addition, the desired Interest Period (but
          not to exceed the maturity date of this Note unless the Lender
          consents otherwise).

     (c)  Failure to Notify. If Borrower does not notify Lender at the
          expiration of a selected Interest Period with respect to any principal
          outstanding at LIBOR, then in the absence of such notice Borrower
          shall be deemed to have elected to have such principal accrue interest
          after the Interest Period at the Prime-Based Rate. If Borrower does
          not notify Lender as to its selection of the interest rate option with
          respect to any new Loan, then in the absence of such notice Borrower
          shall be deemed to have elected to have such Loan accrue interest at
          the Prime-Based Rate.

 1.4 INTEREST PAYMENT DATES. Accrued interest shall be paid in respect of each 
     portion of principal to which:

     (a)  the Prime-Based Rate applies, monthly on the 30th day of each month
          (last day in February) of each year, beginning with the first of such
          dates to occur after the date of the first Loan, at maturity of this
          Note, and upon payment in full, whichever is earlier or more frequent;
          and

     (b)  LIBOR applies, monthly on the 30th day of each month (last day in
          February) of each year, beginning with the first of such dates to
          occur after the date of the first Loan, at maturity of this Note, and
          upon payment in full, whichever is earlier or more frequent.

After maturity, interest shall be payable upon demand.

 1.5 ADDITIONAL PROVISIONS WITH RESPECT TO LIBOR LOANS.

The selection by Borrower of LIBOR and the maintenance of Loans at such rate
shall be subject to the following additional terms and conditions:

     (a)  Availability of Deposits. If, after Borrower has elected to borrow or
          maintain any Loan at LIBOR, Lender notifies Borrower that:

          (i)  United States dollar deposits in the amount and for the maturity
               requested are not available to Lender in the London interbank
               market; or

          (ii) Reasonable means do not exist for Lender to determine LIBOR for
               the amount and maturity requested,



                                     3 of 5


<PAGE>   7




               all as determined by the Lender in its sole discretion, then the
               principal subject or to be subject to LIBOR shall accrue or shall
               continue to accrue interest at the Prime-Based Rate.

     (b)  Prohibition of Making, Maintaining, or Repayment of Principal. If any
          treaty, statute, regulation, interpretation thereof, or any directive,
          guideline, or otherwise by a central bank or fiscal authority (whether
          or not having the force of law) shall either prohibit or extend the
          time at which any principal subject to LIBOR, or corresponding
          deposits, may be purchased, maintained, or repaid, then on and as of
          the date the prohibition becomes effective, the principal subject to
          that prohibition shall continue at the Prime-Based Rate.

     (c)  Payments of Principal and Interest to be Net of Any Taxes or Costs.
          All payments of principal and interest shall be made net of any taxes
          and costs incurred by Lender resulting from having principal
          outstanding hereunder at LIBOR. Without limiting the generality of the
          preceding obligation, illustrations of such taxes and costs are:

          (i)  Taxes (or the withholding of amounts for taxes) of any nature
               whatsoever including income, excise, and interest equalization
               taxes (other than income taxes imposed by the United States or
               any state thereof on the income of Lender), as well as all
               levies, imposts, duties, or fees whether now in existence or
               resulting from a change in, or promulgation of, any treaty,
               statute, regulation, interpretation thereof, or any directive,
               guideline, or otherwise, by a central bank or fiscal authority
               (whether or not having the force of law) or a change in the basis
               of, or time of payment of, such taxes and other amounts resulting
               therefrom;

          (ii) Any reserve or special deposit requirements against assets or
               liabilities of, or deposits with or for the account of, Lender
               with respect to principal outstanding at LIBOR (including those
               imposed under Regulation D of the Federal Reserve Board) or
               resulting from a change in, or the promulgation of, such
               requirements by treaty, statute, regulation, interpretation
               thereof, or any directive, guideline, or otherwise by a central
               bank or fiscal authority (whether or not having the force of
               law);

         (iii) Any other costs resulting from compliance with treaties,
               statutes, regulations, interpretations, or any directives or
               guidelines, or otherwise by a central bank or fiscal authority
               (whether or not having the force of law);

          (iv) Any loss (including loss of anticipated profits) or expense
               incurred by reason cf the liquidation or re-employment of
               deposits acquired by Lender to make Loans or maintain principal
               outstanding at LIBOR:



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          (A)  As the result of a voluntary prepayment at a date other than the
               applicable Interim Maturity Date; or

          (B)  As the result of a mandatory repayment at a date other than the
               applicable Interim Maturity Date as a result of (i) Borrower
               exceeding any applicable borrowing base, (ii) the occurrence of
               an Event of Default and the acceleration of any portion of the
               indebtedness hereunder, or (iii) the scheduled maturity date of
               this Note occurring prior to the Interim Maturity Date due to
               Borrower's selection of an Interest Period which extends beyond
               the scheduled maturity date of this Note; or

          (C)  As the result of a prohibition on making, maintaining, or
               repaying principal outstanding at LIBOR.

If Lender incurs any such taxes or costs, Borrower, upon demand in writing
specifying such taxes and costs, shall promptly pay them; save for manifest
error Lender's specification shall be presumptively deemed correct. All Loans
bearing interest at LIBOR shall be conclusively deemed to have been funded by or
on behalf of Lender in the London interbank market by the purchase of deposits
corresponding in amount and maturity to the amount and Interest Periods selected
(or deemed to have been selected) by Borrower under this Note.

SECTION 2. PAYMENT.

     2.1  PAYMENT AND PREPAYMENT. Borrower may from time to time prepay any
          principal bearing interest at the Prime-Based Rate in whole or in part
          at any time and may prepay any principal bearing interest at LIBOR on
          the applicable Interim Maturity Date, provided that any partial
          prepayment shall be in an aggregate principal amount of at least
          $10,000. Any prepayment of an amount bearing interest at LIBOR at a
          date other than the applicable Interim Maturity Date shall be subject
          to the provisions of Section 1.5.

     2.2  BASIS OF COMPUTATION. Interest shall be computed for the actual number
          of days elapsed on the basis of a year consisting of 360 days,
          including the date a Loan is made and excluding the date a Loan or any
          portion thereof is paid or prepaid."



THE ARNOLD PALMER GOLF COMPANY

By /s/ John T. Lupton 
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