EXHIBIT 10.35
                          INTEREST NOTE
                                
                 5% CONVERTIBLE PROMISSORY NOTE
                                
     THIS  NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
     ACT  OF  1933,  AS AMENDED (THE "ACT"),  OR  UNDER  THE
     SECURITIES LAWS OF ANY STATE ("BLUE SKY LAWS"), AND MAY
     NOT  BE  SOLD  OR  TRANSFERRED IN  THE  ABSENCE  OF  AN
     EFFECTIVE  REGISTRATION  STATEMENT  UNDER  THE  ACT  OR
     DELIVERY TO THE COMPANY OF EVIDENCE SATISFACTORY TO THE
     COMPANY   TO   THE   EFFECT  THAT  AN  EXEMPTION   FROM
     REGISTRATION THEREUNDER IS AVAILABLE.

Dated  March 6, 1996                                  $73,150.00

       FOR   VALUE  RECEIVED,  Electrosource,  Inc.,  a  Delaware
corporation (the "Company"), hereby promises to pay to the  order
Mitsui   Engineering  and  Shipbuilding  Co.,  Ltd.,  a  Japanese
corporation  ("Mitsui" or the "original holder"),  the  principal
sum  of  Seventy-three Thousand, One hundred  Fifty  Dollars  and
NO/100  (U.S. $73,150) together with interest thereon  calculated
from  the date hereof, in accordance with the provisions of  this
Note.

      This Note is the 5% Convertible Promissory Note (the "March
1996 Note") issued for payment of interest due pursuant to the 5%
Convertible Promissory Note (the "Original Note") issued pursuant
to  a  Note Purchase Agreement dated as of October 26, 1994,  and
for  payment  of interest under an additional Note dated  October
26,  1995  (the  "October  1995 Note" of  $190,000)  between  the
Company   and   the   original  holder  hereof   (the   "Purchase
Agreement").  The Purchase Agreement contains terms governing the
rights  and  obligations of the holder  of  this  Note,  and  all
provisions of the Purchase Agreement are incorporated  herein  by
reference.  Unless otherwise indicated herein, capitalized  terms
used  in this Note and in the Original Note have the same meaning
as set forth in the Purchase Agreement.

Part 1.   Payment of Interest.

     1.A. Rate of Interest.  Interest shall accrue at the rate of
five  percent  (5%) per annum on the unpaid principal  amount  of
this  Note outstanding from time to time.  Interest shall be paid
in  additional Notes having terms identical to the Original  Note
except  in  respect of principal amount, dated as of the  Payment
Date  (as  defined below) with respect to which such interest  is
payable  and  having a principal amount equal to  the  amount  of
interest accrued and unpaid as of that Payment Date.

      1.B.  Payment  Dates.   On April  26,  1996,  and  on  each
subsequent October 26 and April 26 (each of which dates shall  be
a  "Payment Date"), all unpaid interest that has accrued  on  the
unpaid principal amount of this Note on and prior to such Payment
Date  or  on any over due interest on this Note shall become  due
and payable.

      1.C.  Payment  upon  Maturity or Prepayment.   All  accrued
interest that has not theretofore been paid shall be paid in full
in  cash  on  the  date  on  which the  entire  principal  amount
outstanding  under this Note is paid, whether  upon  maturity  as
provided  in  paragraph  2.A or upon prepayment  as  provided  in
paragraphs 2.B or 2.C.  In the event that any portion  less  than
the  entire outstanding principal amount of this Note is  prepaid
pursuant  to  paragraph 2.B, the accrued interest  applicable  to
such  portion prepaid shall be paid as of the effective  date  of
such partial prepayment.

     1.D. Saving Clause.  All agreements and transactions between
the Company and the holder of this Note, whether now existing  or
hereafter  arising,  whether contained herein  or  in  any  other
instrument,  and  whether written or oral, are  hereby  expressly
limited so that in no contingency or event whatsoever, whether by
reason of acceleration of the maturity hereof, prepayment, demand
for  prepayment  or otherwise, shall the amount  contracted  for,
charged  or received by the holder of this Note from the  Company
for   the   use,  forbearance  or  detention  of  the   principal
indebtedness or interest hereof, which remains unpaid  from  time
to  time,  exceed the maximum amount permissible under applicable
law, it particularly being the intention of the parties hereto to
conform  strictly to the applicable law of usury.   Any  interest
payable hereunder or under any other instrument relating  to  the
indebtedness  evidenced hereby that is in  excess  of  the  legal
maximum,  shall,  in  the  event  of  acceleration  of  maturity,
prepayment, demand for prepayment or otherwise, be automatically,
as  of  the  date  of  such acceleration, prepayment,  demand  or
otherwise,  applied to a reduction of the principal  indebtedness
hereof  and not to the payment of interest, or if such  excessive
interest  exceeds  the  unpaid balance of  such  principal,  such
excess  shall  be  refunded to the Company.  To  the  extent  not
prohibited  by  law, determination of the legal maximum  rate  of
interest  shall  at  all times be made by amortizing,  prorating,
allocating and spreading in equal parts during the periods of the
full  stated term of the indebtedness, all interest at  any  time
contracted   for,  charged  or  received  from  the  Company   in
connection  with  the indebtedness, so that the  actual  rate  of
interest  on  account of such indebtedness is uniform  throughout
the term hereof.

Part 2.   Payment of Principal

      2.A.  Payment  upon Maturity.  The entire unpaid  principal
amount hereof shall be due and payable on October 26, 2004.

     2.B. Prepayment.

      (i)  The Company may prepay all or any part of this Note at
any  time  on  or after the date hereof (the "Prepayment  Date");
provided  that, the aggregate market price of the shares  of  the
Company's  Common  Stock,  par value  $0.10  per  share  ("Common
Stock")  into  which  this  Note is then  convertible  equals  or
exceeds  for the thirty (30) trading days preceding the  date  of
notice  of  prepayment one hundred twenty percent (120%)  of  the
principal amount of this Note.  The Company shall give  not  less
than  thirty (30) days prior written notice intention  to  prepay
this   Note.   Notwithstanding the provisions of part  8  hereof,
this  Note  may  not be converted into Common  Stock  during  the
period  of  ten (10) days prior to the date it is to be  prepaid.
The market price of the Common Stock for purposes of this section
2.B  shall  be  the average of the closing market price  of  such
Common Stock as reported on NASDAQ.

     (ii) Notwithstanding the provisions of part 8 hereof, in the
event  that  pursuant to part 5.D(ii) of the  Purchase  Agreement
Mitsui  gives notice of an intention to tender this Note  or  any
other  Notes  in  payment of license fees at a  price  determined
pursuant  to  part 5.D(iii)(B) of the Purchase  Agreement  or  to
tender shares of Common Stock issued upon conversion of Notes  in
payment  of  license fees (in each case, other than license  fees
payable  pursuant to paragraph 2.1(b) or (c) of the  Distribution
Agreement  dated July 7, 1994, between the Company  and  Mitsui),
Mitsui  shall not have the right to convert this Note into shares
of  Common Stock during the period beginning on the date  of  the
notice  of  such  tender  and  extending  for  sixty  (60)   days
immediately following the date of such tender.  The Company  may,
during such period, prepay all or any portion of the Notes (other
than  that  portion of the Notes tendered in payment  of  license
fees  pursuant to the notice of tender giving rise to such right)
at a price equal to the aggregate principal amount of Notes to be
prepaid, plus accrued and unpaid interest thereon; provided that,
the aggregate market price of the shares of the Common Stock into
which  the Notes are then convertible equals or exceeds  for  the
thirty  (30)  trading  days  preceding  the  date  of  notice  of
prepayment  one  hundred twenty percent (120%) of  the  principal
amount of such Notes.

      (iii)      This  Note may be prepaid at the option  of  the
Company only in accordance with the terms of this section 2.B.

Part 3.   Registration of Transfer.

      The  Company shall keep at its principal office a  register
for  the registration of Notes, which shall contain the name  and
address  of  the  registered holder (herein referred  to  as  the
holder)  of the Note and the principal and interest of the  Note.
No  transfer  of the Note or any right to receive payments  under
the  Note  shall  be  permitted unless made  upon  the  Company's
register.  Upon the surrender of any Note or Notes at such place,
the  Company  shall, at the request of the holder of  such  Note,
execute  and  deliver (at the Company's expense) a  new  Note  or
Notes  in  exchange therefore representing in the  aggregate  the
principal amount represented by the surrendered Note.  Each  such
new  Note  shall  be registered in such name and shall  represent
such  principal amount of Note as is requested by the  holder  of
the surrendered Note and shall be substantially identical in form
to  the  surrendered Note, and interest shall accrue on such  new
Note  from the date to which interest has been fully paid on such
Note  represented by the surrendered Note; provided that, if  any
Note is to be registered in the name of a person or persons other
than  the holder of the Note, there has been compliance with  all
laws  applicable  to such change of registered holder,  including
but not limited to federal and state securities laws.

Part 4.   Replacement.

      Upon  receipt  of evidence reasonably satisfactory  to  the
Company  of  the  ownership and the loss, theft,  destruction  or
mutilation  of any Note, and in the case of any such loss,  theft
or destruction, upon receipt of indemnity reasonably satisfactory
to  the  Company,  or,  in the case of any such  mutilation  upon
surrender  of  such  Note, the Company  shall  (at  its  expense)
execute and deliver in lieu of such Note, a new Note of like kind
representing  the  principal amount of Note represented  by  such
lost.  stolen, destroyed or mutilated Note and dated the date  of
such  lost,  stolen,  destroyed or mutilated Note,  and  interest
shall  accrue on the Note represented by such new Note  from  the
date  to which interest has been fully paid on such lost, stolen,
destroyed or mutilated Note.

Part 5.   Cancellation.

     After all principal and accrued interest at any time owed on
this  Note  has been paid in full, this Note shall be surrendered
to the Company for cancellation and shall not be reissued.

Part 6.   Waiver of Notice, etc.

      The  Company  hereby  waives presentment,  demand,  notice,
protest  and all other demands and notice in connection with  the
delivery,  acceptance, performance and enforcement of this  Note,
and assents to extension of the time of payment or forbearance or
other indulgence without notice.

Part 7.   Events of Default.

      7.A.  Events  of  Default.  Each  of  the  following  shall
constitute an Event of Default:

      (i)   the Company fails to pay when due the full amount  of
any principal or interest on this Note whether at maturity or  by
acceleration or otherwise; or

      (ii)  the  Company 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 bankrupt or insolvent;  or  the
Company  petitions or applies to any tribunal for the appointment
of  a  trustee, receiver or liquidator of the Company or  of  any
substantial  part of the assets of the Company, or commences  any
proceeding  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
and  either  (X)  the  Company takes any  action  indicating  its
approval thereof, consent thereto, or acquiescence therein or (Y)
such  petition, application or proceeding is not dismissed within
ninety (90) days.

      7.B. Remedies.  Upon the occurrence and continuance of  any
Event  or  Events  of default, the holders of a majority  of  the
combined  aggregate principal amount outstanding under this  Note
and any Notes issued in payment of accrued interest on Notes may,
by  written notice to the Company, declare all or any part of the
unpaid  principal  amount of the Notes  then  outstanding  to  be
forthwith  due  and payable, and thereupon such unpaid  principal
amount  or part thereof, together with interest accrued  thereon,
shall   become   so   due   and  payable  without   presentation,
presentment, protest, notice of intent to accelerate,  notice  of
acceleration,  or further demand or notice of any  kind,  all  of
which are hereby expressly waived, and such holder or holders may
proceed to enforce payment of such amount or part thereof in such
manner as it or they may elect.  The Company hereby waives to the
extent  not prohibited by applicable law which cannot  itself  be
waived (i) all presentments, demands for performance, notices  of
nonperformance  (except to the extent required by the  provisions
hereof), (ii) any requirement of diligence or promptness  on  the
part  of  any  holder of Notes in the enforcement of  its  rights
under  the provisions of this Note, and (iii) any and all notices
of  every kind and description which may be required to be  given
by any statute or rule of law.

Part 8.   Conversion.

     8.A. Conversion Procedure.

      (i)  The holder of this Note may convert all or any portion
of  the  outstanding principal amount hereof  (plus  accrued  but
unpaid interest on such principal amount or portion thereof) held
by  such  holder into a number of shares of the Company's  Common
Stock  computed  by dividing the principal amount  of  this  Note
(plus accrued but unpaid interest thereon) to be converted by the
"Conversion Price" (as defined below) then in effect.

     (ii) Each conversion will be deemed to have been effected as
of  the  close  of business on the date on which  the  instrument
representing  this  Note has been surrendered  at  the  principal
office of the Company.  At such time as such conversion has  been
effected,  the rights of the holder of this Note as  such  holder
will  cease and the person or persons in whose name or names  any
certificate or certificates for shares of Common Stock are to  be
issued  upon  such conversion will be deemed to have  become  the
holder  or  holders  of  record of the  shares  of  Common  Stock
represented thereby.

      (iii)      As soon as possible after a conversion has  been
effected (but in any event within three business days in the case
of  subparagraph  (a)  below), the Company will  deliver  to  the
converting holder:

          (a)     a certificate representing the number of shares
       of  Common Stock issuable by reason of such conversion  in
       such  name or names and such denomination or denominations
       as  the converting holder has specified (provided that, in
       the  event  that  the  name specified  by  the  converting
       holder  is  other than that of the converting holder,  the
       Company  has  received  evidence satisfactory  to  Company
       counsel  that  the  transfer  of  Common  Stock  from  the
       converting   holder  to  the  person  specified   may   be
       accomplished without violation of applicable law);

          (b)     a  replacement Note having terms  identical  to
       those  of this Note other than the principal amount, which
       shall be equal to portion of the principal amount of  this
       Note not converted; and

          (c)     the  amount  payable  under  subparagraph  (vi)
       below  with  respect to fractional shares of Common  Stock
       otherwise issuable upon such conversion.

     (iv) The issuance of certificates for shares of Common Stock
upon  conversion of this Note will be made without charge to  the
holder  of  such Note for any issuance tax in respect thereof  or
other  cost  incurred  by  the Company in  connection  with  such
conversion  and the related issuance of shares of  Common  Stock.
Upon  conversion  of this Note, the Company will  take  all  such
actions as are necessary in order to insure that the Common Stock
issuable with respect to such conversion will be validly  issued,
fully paid and nonassessable.

      (v)   The  Company  will not close its  books  against  the
transfer of this Note or of Common Stock issued or issuable  upon
conversion of this Note in any manner which interferes  with  the
timely conversion of this Note.

      (vi)  If any fractional interest in a share of Common Stock
would,  except for the provisions of this subparagraph  (vi),  be
deliverable  upon any conversion of this Note,  the  Company,  in
lieu  of  delivering the fractional share therefore, may  at  its
option  pay a cash adjustment for such fractional share equal  to
such fraction times the fair market value per share of the Common
Stock  at  the  close of business on the date of  conversion,  as
determined  in  good  faith  by the board  of  directors  of  the
Company.

      (vii)     In the event that pursuant to part 5.D(ii) of the
Purchase Agreement Mitsui gives notice of an intention to  tender
this  Note  or any other Notes in payment of license  fees  at  a
price  determined pursuant to part 5.D(iii)(B)  of  the  Purchase
Agreement  or  to  tender  shares of  Common  Stock  issued  upon
conversion  of  Notes in payment of license fees (in  each  case,
other  than license fees payable pursuant to paragraph 2.1(b)  or
(c) of the Distribution Agreement dated July 7, 1994, between the
Company  and  Mitsui),  the Company may,  by  notice  to  Mitsui,
require  that  Mitsui surrender for conversion into Common  Stock
all  then  outstanding  Notes other  than  those  Notes  actually
tendered  in  payment of license fees pursuant to the  notice  of
tender giving rise to such right on the part of the Company.  Any
such  conversion shall be effective as of the date of the  notice
given by Mitsui of its intention to tender.

      (viii)    The provisions of this part 8 shall be subject to
the limitations imposed by section 2.B hereof.

     8.B. Conversion Price.  The initial Conversion Price will be
U.S.$3.80.  In order to prevent dilution of the conversion rights
granted  under this part 8, the Conversion Price will be  subject
to adjustment from time to time pursuant to this part 8; provided
that the Conversion Price will in no event be less than $.0001.

      8.C.  Subdivision or Combination of Common Stock..  If  the
Company  at  any  time  subdivides (by  any  stock  split,  stock
dividend,  recapitalization or otherwise) its outstanding  shares
of  Common  Stock into a greater number of shares, the Conversion
Price  in  effect immediately prior to such subdivision  will  be
proportionately reduced, and if the Company at any time  combines
(by  reverse stock split or otherwise) its outstanding shares  of
Common  Stock  into  a smaller number of shares,  the  Conversion
Price  in  effect immediately prior to such combination  will  be
proportionately increased.

     8.D. Reorganization, Reclassification, Consolidation, Merger
or  Sale.   Any  reorganization, reclassification, consolidation,
merger  or  sale  of all or substantially all  of  the  Company's
assets  to  another Person which is effected in such a  way  that
holders  of Common Stock are entitled to receive (either directly
or  upon  subsequent liquidation), stock, securities  or  amounts
with  respect to or in exchange for Common Stock is  referred  to
herein as an "Organic Change."  Prior to the consummation of  any
Organic Change, the Company will make appropriate provisions  (in
form  and substance satisfactory to the holders of a majority  of
the  outstanding  principal amount of Notes then outstanding)  to
insure that each of the holders of Notes will thereafter (for  so
long  as  such  holders have the right to convert  the  Notes  as
provided in this part 8) have the right to receive, in lieu of or
in addition to the shares of Common Stock immediately theretofore
issuable upon the conversion of such holder's Notes, such  shares
of stock, securities or assets as such holder would have received
in  connection  with  such  Organic Change  if  such  holder  had
converted his Notes immediately prior to such Organic Change.  In
any  such case, the Company will make appropriate provisions  (in
form  and substance satisfactory to the holders of a majority  of
the  outstanding  principal amount of Notes then outstanding)  to
insure that the provisions of this part 8 will thereafter (for so
long  as  such  holders have the right to convert  the  Notes  as
provided in this part 8) be applicable to the Notes.

      8.E.  Certain  Events.  If any event  occurs  of  the  type
contemplated  by the provisions of this part 8 but not  expressly
provided  for  by  such provisions, then the Company's  Board  of
Directors  will make an appropriate adjustment in the  Conversion
Price  so  as to protect the rights of the holder of  this  Note;
provided  that  no such adjustment will increase  the  Conversion
Price as otherwise determined pursuant to this part 8 or decrease
the number of shares of Common Stock issuable upon conversion  of
this Note.

     8.F. Notices.  Until the maturity of this Note:

      (i)   Immediately  upon any adjustment  of  the  Conversion
Price, the Company will give written notice thereof to the holder
of this Note.

      (ii) The Company will give written notice to the holder  of
this  Note at least twenty (20) days prior to the date  on  which
the  Company closes its books or takes a record (a) with  respect
to  any  dividend  or distribution upon Common  Stock,  (b)  with
respect  to any pro rata subscription offer to Holders of  Common
Stock  or (c) for determining rights to vote with respect to  any
Organic Change, dissolution or liquidation.

      (iii)     The Company will also give written notice to  the
holder  of this Note at least thirty (30) days prior to the  date
on which any Organic Change will take place.

Part 9.   Amendment and Waiver.

      No  amendment, modification or waiver shall be  binding  or
effective with respect to any provision of this Note without  the
prior  written  consent of the holders of  at  least  sixty-seven
percent (67%) of the combined aggregate principal amount of  this
Note  and  any  additional Notes issued  in  payment  of  accrued
interest then outstanding.

Part 10.  Notices.

     Except as otherwise expressly provided, all notices referred
to  herein will be in writing and will be delivered by registered
or  certified mail, return receipt requested, postage prepaid and
will  be  deemed  to have been given when so mailed  (i)  to  the
Company,  at  its  principal executive offices and  (ii)  to  any
holder  of  this Note, at such holder's address as it appears  in
the  Note  register maintained pursuant to part 3 hereof  (unless
otherwise indicated by any such holder).

      IN  WITNESS WHEREOF, the Company has executed and delivered
this Note as of March 6, 1996.

ELECTROSOURCE, INC.

By:      /s/
  James M. Rosel
  Vice President
  General Counsel