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                                                                    EXHIBIT 10.5

THIS NOTE WAS ISSUED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") AND UNDER THE SECURITIES
LAWS OF THE STATES OF WISCONSIN AND GEORGIA. THIS NOTE CANNOT BE RESOLD OR
OTHERWISE TRANSFERRED OR DISPOSED OF IN ANY MANNER UNLESS IT IS REGISTERED
PURSUANT TO THE 1933 ACT AND APPLICABLE STATE LAW OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS THEN AVAILABLE AND THE HOLDER HEREOF OBTAINS AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.

                           AER ENERGY RESOURCES, INC.

                            CONVERTIBLE SUBORDINATED
                                 PROMISSORY NOTE

April 27, 2001                                                         $250,000

         AER ENERGY RESOURCES, INC., a Georgia corporation (the "Company"),
hereby promises to pay to the order of RAYOVAC CORPORATION, a Wisconsin
corporation, or its assigns (the "Holder") the principal amount of $250,000 (the
"Note").

         This Note was issued pursuant to a License and Development Agreement,
dated as of April 6, 2001 (as amended and modified from time to time, the
"License Agreement"), between the Company and the Holder. Except as defined in
paragraph 6 hereof or unless otherwise indicated herein, capitalized terms used
in this Note have the same meanings set forth in the License Agreement.

         1. No Interest. No interest shall be payable on this Note.

         2. Payment of Principal on Note. The Company shall have no right to
prepay any of the outstanding principal amount of this Note. Principal shall be
repaid only in the case of an Event of Default. Absent an Event of Default, the
full principal amount of this Note shall be converted in accordance with Section
4 below.

         3. Events of Default.

                  (a) Definition. For purposes of this Note, an Event of Default
shall be deemed to have occurred if:

                           (i)      the Company fails to perform or observe any
material provision contained in this Note or in the License Agreement;


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                           (ii)     any representation, warranty or information
contained in the License Agreement or required to be furnished to Holder
pursuant to the License Agreement, or any writing furnished by the Company to
any Holder, is false or misleading in any material respect on the date made or
furnished;

                           (iii)    the Company or any Subsidiary makes an
assignment for the benefit of creditors or admits in writing its inability to
pay its debts generally as they become due; or an order, judgment or decree is
entered adjudicating the Company or any Subsidiary bankrupt or insolvent; or any
order for relief with respect to the Company or any Subsidiary is entered under
the Federal Bankruptcy Code; or the Company or any Subsidiary petitions or
applies to any tribunal for the appointment of a custodian, trustee, receiver or
liquidator of the Company or any Subsidiary, or of any substantial part of the
assets of the Company or any Subsidiary, or commences any proceeding (other than
a proceeding for the voluntary liquidation and dissolution of any Subsidiary)
relating to the Company or any Subsidiary under any bankruptcy reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Company or any Subsidiary and either (A)
the Company or any such Subsidiary by any act indicates its approval thereof,
consent thereto or acquiescence therein or (B) such petition, application or
proceeding is not dismissed within 60 days;

                           (iv)     a judgment in excess of $1,000,000 is
rendered against the Company or any Subsidiary and, within 60 days after entry
thereof, such judgment is not discharged in full or execution thereof stayed
pending appeal, or within 60 days after the expiration of any such stay, such
judgment is not discharged in full; or

                           (v)      the Company or any Subsidiary defaults in
the performance of any obligation if the effect of such default is to cause an
amount exceeding $1,000,000 to become due prior to its stated maturity or to
permit the holder or holders of such obligation to cause an amount exceeding
$1,000,000 to become due prior to its stated maturity.

         The foregoing shall constitute Events of Default whatever the reason or
cause for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.

                  (b) Consequences of Events of Default.

                           (i)      If an Event of Default of the type described
in subparagraph 3(a) above has occurred, without waiving any rights or remedies
of the Holder under paragraph 4 hereof or any other right Holder may have at law
or equity, Holder may declare all or any portion of the outstanding principal
amount of this Note (together with all other amounts due and payable with
respect thereto) to be immediately due and payable without any action on the
part of the Holder, and the Company shall immediately pay to the Holder all
amounts due and payable with respect to this Note.


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                           (ii)     Holder shall also have any other rights or
remedies which such Holder may have been afforded under any contract or
agreement (including this Note) at any time and any other rights which such
holder may have pursuant to applicable law. The exercise of any such right or
remedy (whether under this Note or otherwise) shall not limit or restrict the
ability of the Holder to exercise any other such rights or remedies (whether
under this Note or otherwise).

                           (iii)    The Company hereby waives diligence,
presentment, protest and demand and notice of protest and demand, dishonor and
nonpayment of this Note, and expressly agrees that this Note, or any payment
hereunder, may be extended from time to time and that the holder hereof may
accept security for this Note or release security for this Note, all without in
any way affecting the liability of the Company hereunder.

         4. Conversion Rights.

                  (a) Conditions. If the Conversion Date occurs at any time
prior to the payment of this Note in full, then the outstanding principal amount
of this Note (the "Conversion Amount") shall automatically convert into a number
of shares of the Conversion Stock determined by dividing the Conversion Amount
by the Conversion Price (rounding up any fractional share).

                  (b) Conversion Procedures.

                           (i)      A conversion of this Note pursuant to
subparagraph 4(a) above shall be deemed to have been effected as of the close of
business on the date on which this Note has been surrendered for conversion at
the principal office of the Company. At such time as such conversion has been
effected, the rights of the Holder, to the extent of the conversion, shall
cease, and the Person or Persons in whose name or names any certificate or
certificates for shares of the stock into which this Note was converted are to
be issued upon such conversion shall be deemed to have become the holder or
holders of record of the shares of such stock represented thereby.

                           (ii)     Within five business days after a conversion
has been effected, the Company shall deliver to the converting holder a
certificate or certificates representing the number of shares of the stock into
which this Note was converted (rounding up any fractional share) issuable by
reason of such conversion in such name or names and such denomination or
denominations as the converting holder has specified.

                           (iii)    The issuance of certificates for shares of
the stock into which this Note was converted upon conversion of this Note shall
be made without charge to the Holder hereof for any issuance tax in respect
thereof or other cost incurred by the Company in connection with such conversion
and the related issuance of such shares. Upon conversion of this Note, the
Company shall take all such actions as are necessary in order to insure that the
Conversion Stock issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable.


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                           (iv)     The Company shall not close its books
against the transfer of the Conversion Stock issued or issuable upon conversion
of this Note in any manner which interferes with the timely conversion of this
Note. The Company shall assist and cooperate with any holder of this Note
required to make any governmental filings or obtain any governmental approval
prior to or in connection with the conversion of this Note (including, without
limitation, making any filings required to be made by the Company).

                           (v)      The Company shall at all times reserve and
keep available out of its authorized but unissued shares of the Conversion
Stock, solely for the purpose of issuance upon the conversion of this Note, such
number of shares of Conversion Stock issuable upon the conversion of this
outstanding Note. All shares of stock which are so issuable shall, when issued,
be duly and validly issued, fully paid and nonassessable and free from all
taxes, liens, charges and pre-emptive rights. The Company shall take all such
actions as may be necessary to assure that all such shares of Conversion Stock
may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange, quotation
system or over-the-counter market upon which shares of such Conversion Stock may
be listed (except for official notice of issuance which shall be immediately
delivered by the Company upon each such issuance).

         5. Amendment and Waiver. Except as otherwise expressly provided herein,
the provisions of this Note may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Holder.

         6. Definitions. For purposes of this Note, the following capitalized
terms have the following meaning.

                  "Conversion Date" means the Phase III Notice Date (as defined
in the License Agreement).

                  "Conversion Price" means the AER Stock Price (as defined in
the License Agreement).

                  "Conversion Stock" means shares of the Company's common stock,
no par value.

                  "Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.

                  "Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time


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owned or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person or a combination thereof, or (ii) if a
limited liability company, partnership, association or other business entity, a
majority of the partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.

         7. Cancellation. After all principal owed on this Note has been paid in
full or satisfied by conversion into Conversion Stock, this Note shall be
surrendered to the Company for cancellation and shall not be reissued.

         8. Payments. All payments to be made to the Holder shall be made in the
lawful money of the United States of America in immediately available funds.

         9. Place of Payment. Payments of principal and certificates
representing shares of Conversion Stock shall be delivered to the following
address:

                           Rayovac Corporation
                           601 Rayovac Drive
                           Madison, Wisconsin 53711
                           Attn: Chief Financial Officer

or to such other address or to the attention of such other person as specified
by prior written notice to the Company.

         10. Business Days. If any payment is due, or any time period for giving
notice or taking action expires, on a day which is a Saturday, Sunday or legal
holiday in the State of New York, the payment shall be due and payable on, and
the time period shall automatically be extended to, the next business day
immediately following such Saturday, Sunday or legal holiday.


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         IN WITNESS WHEREOF, the Company has executed and delivered this Note on
April 27, 2001.

                                       AER ENERGY RESOURCES, INC.



                                       By       /s/    David W. Dorheim
                                         --------------------------------------
                                         David W. Dorheim
                                         President

Attest:



      /s/    J.T. Moore
-----------------------------
J.T. Moore, Secretary


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