EXHIBIT 10.1


August 21, 1998



Mr. James M. Rosel                              VIA HAND DELIVERY
1507 Falcon Ledge
Austin, Texas 78746

Dear Jim:

This  letter  confirms  our discussions and  the  agreement  made
between  you  and  Electrosource, Inc.  ("ELSI")  regarding  your
resignation  from  your employment with ELSI, ELSI's  payment  of
special separation compensation, and various related matters. The
terms  of ELSI's offer in this regard are stated below, and  your
acceptance of such terms will be shown by your signature  in  the
space  provided at the end of this letter.  On behalf of ELSI,  I
want  to express appreciation for your service and contributions,
and wish you success in your future endeavors.

1.    Resignation from Employment and from All Offices.  Based on
your  voluntary  resignation for the purpose of retirement,  your
employment with ELSI will terminate effective with the  close  of
business on Monday, August 31, 1998 (the "Separation Date").   By
your agreement and signature below, you also resign effective  as
of  the Separation Date from your offices of General Counsel  and
Vice  President, and all other offices, if any, held by you  with
ELSI and any of ELSI's subsidiary or affiliated companies.

2.    Salary  and  Benefits.  In accordance with ELSI's  existing
policies or at its discretion, you have received or will  receive
the  following payments and benefits pursuant to your  employment
with ELSI and your participation in its benefit plans:

     (a)   Payment  of  your regular base salary ($10,426.66  per
month), less all legal deductions, through the Separation Date;

     (b)   Payment of accrued and unused vacation leave benefits,
if any, as of the Separation Date;

     (c)   Health  and dental benefits through the  Electrosource
group insurance plan through the Separation Date, subject to your
COBRA continuation rights in accordance with applicable law;

     (d)   Continuation of your Group Term Life, Accidental Death
and  Dismemberment  and Short and Long Term Disability  insurance
coverage  through the Separation Date, with no conversion  option
available for any of this insurance;

     (e)   Participation  in  the Section 125  Plan  through  the
Separation  Date  and return of any unreimbursed election  monies
thereafter pursuant to Plan terms;

     (f)   Payment of vested benefits in the Electrosource 401  k
Plan in accordance with the terms of the Plan;

     (g)   On  your timely election, exercise of options  in  the
1996  Stock  Option Plan of Electrosource, Inc. (the  "Plan")  in
accordance with the terms of the Plan and Option Grants 00000578,
00000579,  00000580, 00000581, 00000582, 00000583,  00000685,  as
amended  or  replaced prior to the Separation Date, a summary  of
which  is  attached to this letter as Exhibit A and by  reference
made a part hereof; and

     (h)   On  your  timely  election,  exercise  of  contractual
warrants in accordance with the terms January 2, 1997, Securities
Subscription  Agreement/Executive Officers and Warrant  Agreement
and Stock Purchase Warrant dated January 23, 1997, as amended  or
replaced  prior to the Separate Date, attached to this letter  as
Exhibits B-1 and B-2 and by reference made a part hereof.

The amounts paid in accordance with subparagraphs (a) and (b)  of
this  paragraph are gross amounts, subject to lawful  deductions,
including any deductions you have previously authorized, and will
be paid to you, within six days after the Separation Date.

After  the  termination of your employment, you are  entitled  at
your  option to continue your group health insurance  and  dental
coverage at your own expense, in accordance with applicable  law.
Please complete a COBRA election form, which will be furnished to
you,   and   return  it  to  the  undersigned  at  your  earliest
convenience,  in accordance with the terms of the election  form,
if  you  elect  to  continue such insurance coverage.   Continued
coverage  for  yourself  and your family will  cost  $424.50  per
month.

ELSI  will  settle promptly all authorized reimbursable  business
expenses,  if  any,  when you have submitted appropriate  expense
reports   along  with  the  required  receipts  and   documenting
information.  Please submit any request for reimbursement as soon
as possible, but not later than September 30, 1998.

By  your signature on this letter, you represent and warrant that
on the advice of counsel you have no other claims or entitlements
to Company wages or benefits other than as set forth herein.

3.    Special  Separation  Compensation.   Contingent  upon  your
acceptance  of the terms of this Agreement, ELSI offers  you,  in
consideration  of  your undertakings set forth  in  Paragraphs  6
(General    Release),    7   (Confidentiality,    Nonprosecution,
Nondisparagement, and Cooperation), and 8 (Agreement Not to  Seek
Reemployment)  of  this Agreement, in addition  to  the  pay  and
benefits  you will receive pursuant to Paragraph 2, the following
Special Separation Compensation:

      (a)   Continuation  of your pay after the  Separation  Date
stated  in  this letter through the earlier of (i) your obtaining
full-time employment and receiving cash compensation at or  above
your  regular base salary rate, or (ii) October 31, 1998, at your
regular  base  salary rate.  Payment will be made  in  equal  bi-
weekly installments of $4,812.31 on ELSI's regular bi-weekly  pay
dates  commencing  on the Effective Date of  this  Agreement  (as
defined  in Paragraph 14).  The foregoing sums are gross amounts,
subject to lawful deductions.  It is expressly the mutual  intent
of you and ELSI that the foregoing amounts are tendered and shall
be  accepted and treated as wages in lieu of notice for  purposes
of  the  Texas  Unemployment Compensation Act,  with  the  result
according  to law that you should not be eligible for receipt  of
unemployment compensation benefits during the period of time over
which such continuing wages are paid.

     (b)   If  you  elect continuation of your group  health  and
dental insurance coverage under COBRA as referred to in Paragraph
2,  payment by ELSI, for a period not to exceed two months  after
the Separation Date stated in this letter, of such portion of the
health  and  dental  insurance premiums as is equivalent  to  the
amount  that would have been paid by ELSI on your behalf  if  you
had  continued employment with ELSI during such period.   Further
upon  your election of such COBRA continuation, by your signature
below  you authorize ELSI to withhold from the payments described
in  Paragraph 3(a) the portion of premium required to be paid  by
you,  on  the same cost allocation basis as if you had  continued
employment with ELSI during the period of ELSI's payments.

          By  executing this Agreement, you acknowledge and agree
that  neither  ELSI  nor any of the other  Released  Parties  (as
defined  in Paragraph 6 below) has any prior legal obligation  to
provide all or any portion of the Special Separation Compensation
to  you.  You also acknowledge and agree that your acceptance  of
the Special Separation Compensation and attendant obligations  as
described  in this Agreement is in consideration of the  promises
and undertakings of ELSI as set forth herein.

4.    Return of Property/Orderly Transaction.  You must return to
ELSI  by no later than the close of business on August 31,  1998,
or  as  soon thereafter as is possible with respect to any  items
not  then  immediately available, any and  all  items  of  ELSI's
property, including without limitation keys, computers, software,
calculators,  equipment,  credit cards,  technical  data,  forms,
files, manuals, correspondence, business records, personnel data,
lists  of  employees, salary and benefits information,  lists  of
suppliers   and   vendors,   contracts,   contract   information,
brochures,  catalogs,  training  materials,  computer  tapes  and
diskettes  or other portable media, computer-readable  files  and
data  stored  on  any hard drive or other installed  or  portable
device,  and  data  processing reports,  any  other  process-  or
technical-procedures-related information, and any and  all  other
ELSI  documents or property which you have had possession  of  or
control  over  during  the course of your employment  with  ELSI.
Consistent with your ethical obligations as an attorney,  and  as
the  Company's General Counsel, you will provide me on or  before
your  Separation  Date with a written summary of all  outstanding
Company  legal and financial matters of which you are aware,  the
current status, any applicable deadline dates, and if the  matter
is  being  handled  by outside counsel, the  name  and  telephone
number of the counsel.

5.    Use of Confidential Information.  Whether or not you accept
the terms of this Agreement, you are hereby notified that all  of
the documents and information to which you have had access during
your  employment,  including but not limited to  all  information
pertaining to any specific business transactions in which ELSI or
any  of  the  other Released Parties (as defined in  Paragraph  6
below)  were, are, or may be involved, all information concerning
salary  and benefits paid to current or former employees of  ELSI
or  any  of the other Released Parties, all personnel information
relating  in any way to current or former employees  of  ELSI  or
those  of  any  of  the other Released Parties,  all  information
pertaining  in  any way to technical processes and procedures  of
ELSI,  all legal, financial and budgetary information, all  other
information  specified in Paragraph 4 above, and in general,  the
business  and  operations of ELSI or any of  the  other  Released
Parties,  except such information as has been publicly  disclosed
by  ELSI  or  any  of the other Released Parties, are  considered
confidential and are not to be disseminated or disclosed  by  you
to  any  other  parties,  except as may be  required  by  law  or
judicial  process.   In the event it appears  that  you  will  be
compelled   by   law  or  judicial  process  to   disclose   such
confidential information, to avoid potential liability you should
notify ELSI's CEO in writing immediately upon your receipt  of  a
subpoena or other legal process.

6.   General Release.  In consideration of the Special Separation
Compensation described in Paragraph 3 above, you and your  family
members,   heirs,  successors,  and  assigns  (collectively   the
"Releasing   Parties")  hereby  release,  acquit,   and   forever
discharge  any  and all claims and demands of  whatever  kind  or
character, whether vicarious, derivative, or direct, that you  or
they,  individually,  collectively, or  otherwise,  may  have  or
assert against:  (i) ELSI; (ii) any affiliated entity of ELSI  or
its  shareholders; or (iii) any officer, member of ELSI's or  any
affiliate's  Board  of  Directors,  fiduciary,  agent,  employee,
representative, insurer, attorney, or any successors and  assigns
of the persons or entities just named (collectively the "Released
Parties").   This General Release includes but is not limited  to
any  claim  or  demand  based on any  federal,  state,  or  local
statutory or common law or constitutional provision that  applies
or   is  asserted  to  apply,  directly  or  indirectly,  to  the
formation,   continuation,  or  termination  of  your  employment
relationship  with  ELSI.   Thus, you  and  the  other  Releasing
Parties  agree not to make any claims or demands against ELSI  or
any of the other Released Parties such as for wrongful discharge;
any  form  of  unlawful  employment discrimination;  retaliation;
breach  of contract (express or implied); breach of any  duty  of
good  faith and fair dealing; violation of the public  policy  of
the  United  States,  the State of Texas,  or  any  other  state;
intentional  or  negligent  infliction  of  emotional   distress;
tortious   interference  with  contract;   promissory   estoppel;
detrimental reliance; defamation of character; duress;  negligent
misrepresentation;   intentional  misrepresentation   or   fraud;
invasion  of  privacy;  loss  of  consortium;  assault;  battery;
conspiracy;   bad   faith;  negligent   hiring,   retention,   or
supervision; any intentional or negligent act of personal injury;
any  alleged  act  of harassment or intimidation;  or  any  other
intentional  or negligent tort; or any alleged violation  of  the
Age  Discrimination in Employment Act of 1967, as amended;  Title
VII  of  the Civil Rights Act of 1964, as amended; the  Americans
with  Disabilities Act of 1990; the Family and Medical Leave  Act
of 1993; the Employee Retirement Income Security Act of 1974; the
Fair  Labor  Standards Act; the Fair Credit  Reporting  Act;  the
Texas  Commission on Human Rights Act; and the Texas Wage Payment
Statute.

The  effect  of your acceptance of this Agreement is to  release,
acquit,  and forever discharge any and all claims and demands  of
whatever kind or character that you or any of the other Releasing
Parties may now have or hereafter have or assert against ELSI  or
any  of  the  other  Released Parties for any liability,  whether
vicarious,  derivative,  or direct.  This  release  includes  any
claims  or demands for damages (actual or punitive), back  wages,
future  wages  or  front  pay,  commissions,  bonuses,  severance
benefits,  medical  expenses and the  costs  of  any  counseling,
reinstatement or priority placement, promotion, accrued  vacation
leave  benefits,  past  and future medical  or  other  employment
benefits  (except  as to which there is existing  contractual  or
vested entitlement as identified in Paragraph 2 herein) including
contributions to any employee benefit plans, retirement  benefits
(except as to which there is vested entitlement as identified  in
Paragraph  2 herein), relocation expenses, compensatory  damages,
injunctive  relief,  liquidated  damages,  penalties,   equitable
relief, attorney's fees, costs of court, disbursements, interest,
and  any  and  all other loss, expense, or detriment of  whatever
kind  or  character, resulting from, growing  out  of,  connected
with,  or  related in any way to the formation, continuation,  or
termination  of  your employment relationship  with  ELSI.   This
General  Release does not apply to any rights or claims that  may
arise after the date this Agreement is executed.

7.     Confidentiality,  Nonprosecution,  Nondisparagement,   and
Cooperation.

     (a)   The  terms  of  this Agreement  shall  be  and  remain
confidential,  and shall not be disclosed by you to  any  persons
other  than the Releasing Parties and your spouse, attorney,  and
accountant or tax return preparer if such persons have agreed  to
keep   such   information  confidential.    Notwithstanding   the
foregoing,  either party may make any disclosures concerning  the
terms of this Agreement that are required by law.

     (b)   Except as requested by ELSI or as compelled by law  or
judicial process, you will not assist, cooperate with, or  supply
information  of  any  kind  to  any individual  or  private-party
litigant  or  their  agents or attorneys (i) in  any  proceeding,
investigation,   or  inquiry  raising  issues   under   the   Age
Discrimination in Employment Act of 1967, Title VII of the  Civil
Rights Act of 1964, the Americans with Disabilities Act of  1990,
the Family and Medical Leave Act of 1993, the Employee Retirement
Income  Security Act of 1974, the Fair Labor Standards  Act,  the
Fair  Credit Reporting Act, the Texas Commission on Human  Rights
Act, the Texas Wage Payment Statute, or any other federal, state,
or   local   law   involving  the  formation,  continuation,   or
termination of your employment relationship, or the employment of
other  persons, by ELSI or any of the other Released Parties;  or
(ii)  in  any other litigation against ELSI or any of  the  other
Released Parties.

     (c)   Except as permitted by law, you will not initiate  any
investigation  or  inquiry,  or any other  action  of  any  kind,
including an administrative charge with any governmental  agency,
with  respect  to  ELSI's  facilities, employment  practices,  or
business  operations,  relating  to  the  termination   of   your
employment as provided for in this Agreement or otherwise.

     (d)   You  will not make to any other parties any statement,
oral or written, which directly or indirectly impugns the quality
or  integrity  of  ELSI's or any of the other  Released  Parties'
business  or  employment practices, or any other  disparaging  or
derogatory  remarks  about  ELSI or any  of  the  other  Released
Parties,  their  officers,  directors,  stockholders,  managerial
personnel, or other employees.  ELSI shall instruct its  officers
not to make any disparaging or derogatory remarks about you.

     (e)   It shall not be a breach of the obligations set  forth
in  this  Paragraph  for you, your spouse, or your  attorneys  to
state  to any person that any differences, if you believe any  to
exist,  between  you and ELSI have been settled or satisfactorily
resolved.

     (f)   You agree to cooperate fully and completely with  ELSI
or  any  of  the other Released Parties in any matter related  to
ELSI's business or activities, as follows: (i) to be available at
mutually   agreeable  times,  personally  or  by  telephone,   as
necessary,  at  such  reasonable times and  without  unreasonable
interference  with  your  employment or personal  activities,  to
provide such information as may be from time to time requested by
ELSI in its sole discretion in connection with various matters in
which  you  were involved during your employment with  ELSI;  and
(ii)  in all pending and future litigation involving ELSI or  any
of  the  other  Released Parties, which obligation includes  your
promptly  meeting  with counsel for ELSI or  the  other  Released
parties  at  reasonable times upon their request,  and  providing
testimony in court or upon deposition that is truthful, accurate,
and  complete,  according to information known to  you.   If  you
appear  as a witness in any pending or future litigation  at  the
request of ELSI or any of the other Released Parties, ELSI agrees
to    reimburse    you,   upon   submission   of   substantiating
documentation, for necessary and reasonable expenses incurred  by
you as a result of your testifying.

8.    Agreement  Not  to Seek Reemployment. You acknowledge  that
ELSI  and the other Released Parties have no obligation to employ
or  to  hire or rehire you, to consider you for hire, or to  deal
with  you  in  any  respect with regard to future  employment  or
potential  employment  at  any  location,  office,  or  place  of
business.   Therefore, and in order to prevent the occurrence  of
any future dispute regarding employment opportunities, you hereby
agree:   (i)  that  you  will not apply  for  or  otherwise  seek
employment  by ELSI or its affiliates at any time in the  future,
at any location, office, or place of business, and (ii) that your
forbearance  to seek future employment as just stated  is  purely
contractual  and  is  in no way involuntary,  discriminatory,  or
retaliatory.

9.   Nonadmission of Liability or Wrongdoing. This Agreement does
not  in  any  manner  constitute an  admission  of  liability  or
wrongdoing  on  the  part of ELSI or any of  the  other  Released
Parties,  but ELSI and the other Released Parties expressly  deny
any  such  liability  or wrongdoing; and, except  to  the  extent
necessary  to enforce this Agreement, neither this Agreement  nor
any  part of it may be construed, used, or admitted into evidence
in  any judicial, administrative, or arbitral proceedings  as  an
admission  of  any  kind  by ELSI or any of  the  other  Released
Parties.

10.   Authority to Execute.  You represent and warrant  that  you
have the authority to execute this Agreement on behalf of all the
Releasing Parties.  You further agree to indemnify fully and hold
harmless ELSI and any of the other Released Parties from any  and
all claims brought by the Releasing Parties or derivative of your
own  with  respect  to  the  subject matter  of  this  Agreement,
including the amount of any such claims ELSI or any of the  other
Released  Parties  are  compelled  to  pay,  and  the  costs  and
attorney's fees incurred in defending against all such claims.

11.   Governing Law and Interpretation.  This Agreement  and  the
rights  and  duties of the parties under it shall be governed  by
and  construed in accordance with the laws of the State of Texas.
If  any  provision of this Agreement is held to be unenforceable,
such  provision  shall  be  considered  separate,  distinct,  and
severable  from the other remaining provisions of this Agreement,
and shall not affect the validity or enforceability of such other
remaining  provisions; and in all other respects, this  Agreement
shall remain in full force and effect.  If any provision of  this
Agreement is held to be unenforceable as written but may be  made
to  be  enforceable  by limitation thereof, then  such  provision
shall   be  enforceable  to  the  maximum  extent  permitted   by
applicable  law.   The language of all parts  of  this  Agreement
shall in all cases be construed as a whole, according to its fair
meaning, and not strictly for or against any of the parties.

12.  Breach of Agreement.  Should you fail to comply with any  of
your  obligations  as  set forth in this Agreement,  you  further
acknowledge  and  agree that in addition to any  other  legal  or
equitable remedy available, ELSI will have no obligation  to  pay
you  the Special Separation Compensation described above, and you
may  be  required  to  repay the Special Separation  Compensation
provided  to you by this Agreement; but that all other provisions
of this Agreement shall remain in full force and effect.  You may
also  be  liable for ELSI's damages and its attorney's  fees  and
expenses  resulting  from your breach of any  provision  in  this
Agreement.

13.   Expiration of Offer.  ELSI's offer of the proposed  Special
Separation Compensation will expire at 12:01 a.m. on the  twenty-
second  day following the date of this letter, i.e. on  September
12,  1998.   You  may  accept  this  offer  at  any  time  before
expiration  by  signing this letter in the space provided  below,
and  returning  it  to the undersigned by personal  or  messenger
delivery,  or  overnight delivery service.  Whether  or  not  you
execute  this Agreement, you will receive the items set forth  in
Paragraph 2, and are required to follow the obligations set forth
in Paragraphs 4 and 5.

14.   Effective  Date.  This Agreement will become effective  and
enforceable  upon  the  expiration  of  seven  days  after   your
execution  of  it  ("Effective Date").  At any  time  before  the
Effective Date of this Agreement, you may revoke your acceptance.


15.   Consultation With an Attorney.  You have the right and  are
encouraged  to  consult with an attorney of your choosing  before
executing this Agreement.

16.  Voluntary Agreement.  You acknowledge that execution of this
Agreement is knowing and voluntary on your part, and you have had
a reasonable time to deliberate regarding its terms.

17.  Entire Agreement.  This Agreement, and its attached exhibits
A, B-1 and B-2, together with the plans referenced in paragraph 2
herein  contain  and  constitute  the  entire  understanding  and
agreement  between you and ELSI, and may be modified  only  by  a
written  contemporaneous agreement executed by both  you  and  an
authorized official of ELSI.

            ________________________________________

      If  you  are  in  agreement with the foregoing  provisions,
please  execute,  in front of a notary, both  originals  of  this
letter  in  the  space  provided below.  You  should  return  one
executed  original as provided above, and maintain the  other  in
your  files.   This  letter shall then  constitute  a  valid  and
binding  agreement by and between ELSI and you, effective  as  of
the expiration of seven days after the date of your execution.

Sincerely,

ELECTROSOURCE, INC.


By:  /s/ Michael G. Semmens
  Michael G. Semmens
  Chairman, President and CEO


ACCEPTED AND AGREED TO:



  /s/ James M. Rosel
James M. Rosel


Date Signed: August 31, 1998
[This  agreement  must be signed on or after  the  last  date  of
employment.]


State of Texas
County of Hays

      This  instrument was acknowledged before me on  8/31/98  by
James M. Rosel.


  /s/ Sherry D. Lindley                      (Seal)
Notary Public, in and for
The State of Texas

Commission Expires:  7/17/99


EXHIBIT A
to Severance Agreement
dated August 31, 1998

<TABLE>
<S>                                                       <C>                    <S> <C>
Personnel Option Status                      Electrosource, Inc.                 Page: 1                 
                                             ID: 74-2466304-9                    File: Optstmt
AS OF                                        2809 IH 35 South                    Date: 8/21/98
8/19/98                                      San Marcos, TX 78666                Time: 1:54:42 PM


James M. Rosel                        ID: 0157
1507 Falcon Ledge
Austin, TX 78746
</TABLE>
<TABLE>
<C>      <C>       <C>  <S>   <C>     <C>       <C>       <C>    <C>      <C>      <C>         <C>
 Number   Option   Plan Type  Granted Price    Exercised Vested Cancelled Unvested Outstanding Exercisable
           Date
00000578 10/30/96  1996 ISO   5,000   $36.2500  0         5,000  0        0        5,000       5,000
00000579 10/30/96  1996 ISO   5,000   $35.0000  0         5,000  0        0        5,000       5,000
00000580 10/30/96  1996 ISO     500   $33.7500  0           500  0        0          500         500
00000581 10/30/96  1996 ISO   1,667   $12.5000  0         1,667  0        0        1,667       1,667
00000582 10/30/96  1996 ISO   9,500   $11.6000  0         6,333  0        3,167    9,500       6,333
00000583 10/30/96  1996 ISO   8,500    $5.2800  0         8,500  0        0        8,500       8,500
00000685  6/25/97  1996 ISO  17,500    $6.9380  0         5,833  0        11,667  17,500       5,833
                             47,667             0        32,833  0        14,834  47,667      32,833
                                                                                                        
                                                                                                        
Information Currently on File                                                                           

Tax              Rate %       Broker           Registration        Alternate Address

Federal           28.00                                                                                 
Medicare           1.45                                                                                 
Social Security     6.2                                                                                 
</TABLE>



EXHIBIT B-1
to Severance Agreement
dated August 31, 1998


                SECURITIES SUBSCRIPTION AGREEMENT
                       EXECUTIVE OFFICERS
                                
                                
THE  OFFERING OF SECURITIES OF ELECTROSOURCE, INC. HEREUNDER  HAS
NOT  BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE  "SECURITIES  ACT"), IN RELIANCE UPON  THE  AVAILABILITY  OF
EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 4(2) OF SAID  ACT
AND REGULATION D OF THE GENERAL RULES AND REGULATIONS PROMULGATED
THEREUNDER.  THERE ARE SUBSTANTIAL RESTRICTIONS UPON TRANSFER  OF
THE  SECURITIES.   ACCORDINGLY, THE  SECURITIES  ARE  NOT  FREELY
TRANSFERABLE AND MAY HAVE TO BE HELD UNTIL TRANSFER MAY  BE  MADE
PURSUANT  TO  A  REGISTERED  TRANSACTION  OR  AN  EXEMPTION  FROM
REGISTRATION.


      THIS  SECURITIES SUBSCRIPTION AGREEMENT dated as of January
2,  1997  (the  "Agreement"),  is  executed  by  the  undersigned
"Purchaser"  in connection with the private placement  of  common
stock   and   warrants  of  Electrosource,  Inc.,  a  corporation
organized   under  the  laws  of  Delaware,  with  its  principal
executive offices located at 2809 IH 35 South, San Marcos,  Texas
78666 (hereinafter referred to as "Company").

1.   Agreement to Subscribe; Purchase Price.

     (a)   Subscription.       The undersigned  Purchaser  hereby
     subscribes  for and agrees to purchase 3,810 shares  of  the
     Company's Common Stock ("Shares") for $6.5625 per  share  or
     $25,003.13 in total ("Purchase Price").

     (b)   Warrants.   For  purchase of  the  Common  Stock,  the
     Purchaser  shall  also  receive  warrants  ("Warrants")  for
     purchase  of  25,003  shares  (a  warrant  for  every  $1.00
     invested) of common stock at the exercise price of $7.56 per
     share.   The warrants shall have a two (2) year  term.   The
     form of the warrant is attached hereto as Exhibit "A."

     (c)    Payment.   The  Purchase  Price  shall  be  paid   by
     delivering  immediately available funds  by  check  or  wire
     transfer  as directed by Company for delivery of the  Shares
     and Warrants versus payment.

     (d)   Closing.  The closing of the transactions contemplated
     by this Agreement shall occur on or before January 17, 1997,
     or  such earlier or later date as is mutually agreed  to  by
     Purchaser and Company.

2.   Company Representations.

     (a)   Corporate Power.  The Company has all requisite  legal
     and  corporate power to execute and deliver this  Agreement,
     and  all  requisite and legal corporate power  to  sell  and
     issue  the Shares and Warrants and to carry out and  perform
     its obligations under the terms of this Agreement.

     (b)  Authorization.  All corporate action on the part of The
     Company necessary for the authorization, execution, delivery
     and  performance of this Agreement, the authorization, sale,
     issuance  and  delivery of the Shares and Warrants  and  the
     performance of the company's obligations hereunder has  been
     taken  or  will be taken prior to closing.  This  Agreement,
     when executed and delivered, shall constitute the valid  and
     binding obligation of the Company, enforceable in accordance
     with  its  terms,  subject to laws  of  general  application
     relating  to  bankruptcy,  insolvency  and  the  relief   of
     debtors,   rules  of  law  governing  specific  performance,
     injunctive   relief   or  other  equitable   remedies,   and
     limitations  of  public  policy.  The  Shares  and  Warrants
     issued  in  compliance with the provisions of this Agreement
     will  be  validly issued, fully paid and non-assessable  and
     free  of any liens or encumbrances; provided, however,  that
     the  Shares  and  Warrants are subject  to  restrictions  on
     transfer under state and/or federal securities laws  as  set
     forth  herein.  The Shares and Warrants are not  subject  to
     any preemptive rights or rights of first refusal.

3.   Purchaser Representation.

      The Purchaser hereby represents and warrants to the Company
as  follows,  and acknowledges and agrees that the  Company  will
rely  upon  such representations and warranties in accepting  the
subscription of the undersigned for the purchase of the Shares:

     (a)   The  Purchaser is an executive officer of the  Company
     and  is  fully  familiar  with its  business  and  financial
     condition.

     (b)   No representations or warranties have been made to the
     Purchaser  by  the  Company,  or  any  agent,  employee   or
     affiliate  of  the  Company,  and  in  entering  into   this
     transaction   the   Purchaser  is  not  relying   upon   any
     information  other  than the information  contained  in  the
     documents  and  reports  filed  by  the  Company  with   the
     Securities  and  Exchange Commission  under  the  Securities
     Exchange Act of 1934 (the "SEC filings").

     (c)  The Purchaser is aware that:

          (i)   there  are  substantial  risks  incident  to   an
          investment  in  the  Shares,  and  such  investment  is
          speculative and involves a high degree of risk of  loss
          of its entire investment in the Company;

          (ii)  no  Federal or State agency has passed  upon  the
          sale of the Shares or made any finding or determination
          concerning  the  fairness of this investment,  and  the
          terms of the offering may not conform to the guidelines
          of certain state securities administrators;

          (iii)      the Company has and may continue to  have  a
          significant  need for cash for operating  expenses  and
          other  purposes; that the aggregate proceeds  from  the
          sale  of  the  Shares alone may not  be  sufficient  to
          satisfy  the cash requirements of the Company  for  any
          appreciable period of time; that other sources of funds
          may not be available;

          (iv)  the  industry in which the Company is engaged  is
          occupied  by  several  firms, some  of  which  will  be
          substantially  greater  in  size  and  have   financial
          resources   and   personnel  staff  larger   and   more
          established than those of the Company, and there can be
          no  assurance that the Company will be able to  compete
          in the market effectively;

     (d)   The  Purchaser understands that an investment  in  the
     Company is an illiquid investment and further recognizes and
     agrees  that  because  the Shares have not  been  registered
     under  applicable securities laws or an exemption from  such
     registration  is  available, the  Purchaser  must  bear  the
     economic risk of the investment for an indefinite period  of
     time.    The   Purchaser  further  acknowledges  that   each
     certificate  representing Shares will bear a legend  to  the
     effect  that the Shares have not been registered  under  any
     securities  law  and  setting  forth  or  referring  to  the
     restrictions on transferability and sale of the shares.  The
     Purchaser  further acknowledges that the Company will  issue
     stop  transfer  orders  to  its transfer  agent  restricting
     transfer of the Shares in the absence of registration  under
     the securities laws or exemption therefrom.

     (e)   The  Purchaser acknowledges that there are substantial
     restrictions  on the transferability of the Shares.   Unless
     the  Shares are registered under the Securities Act and  any
     applicable state securities law, the Shares may not be,  and
     the  Purchaser  agrees that they shall not be,  sold  unless
     such  sale  is  exempt  from  such  registration  under  the
     Securities Act and any other applicable state blue sky  laws
     or regulations.  The Purchaser further acknowledges that the
     Company  is  under no obligation to aid it in obtaining  any
     exemption from the registration requirements.  The Purchaser
     also  acknowledges  responsibility for compliance  with  all
     conditions   on   transfer   imposed   by   any   securities
     administrator of any state.

     (f)   The  Purchaser  is acquiring the Shares  for  its  own
     account, as principal, and not for the account of any  other
     person.

4.   Shareholder Approval.

     Purchase  of  the  Shares and Warrants  is  subject  to  the
     approval  of  the shareholders of the Company  at  the  next
     annual  general meeting.  If the purchase is  not  approved,
     the  purchase  price will be returned with interest  at  the
     prime rate.

ELECTROSOURCE, INC.                (PURCHASER)



By: /s/ William F. Griffin         By:  /s/ James M. Rosel
Printed Name:  William F. Griffin  Printed Name:  James M. Rosel
Its:  Executive VP, Marketing



                                                         EXHIBIT A
                                        to Securities Subscription Agreement
                                            Executive Officers (Exhibit B-1)
                                
                                         (Warrant No.) WT-_______

                       ELECTROSOURCE, INC.
                        WARRANT AGREEMENT

     NEITHER  THIS WARRANT NOR THE SECURITIES ISSUABLE  UPON
     ITS  EXERCISE HAVE BEEN REGISTERED UNDER THE SECURITIES
     ACT  OF 1933, AS AMENDED, OR UNDER THE SECURITIES  LAWS
     OF  ANY STATE.  THIS WARRANT MAY NOT BE EXERCISED,  AND
     NEITHER  THIS WARRANT NOR THE SECURITIES ISSUABLE  UPON
     ITS  EXERCISE  MAY  BE SOLD, TRANSFERRED,  ASSIGNED  OR
     HYPOTHECATED,   IN   THE  ABSENCE   OF   AN   EFFECTIVE
     REGISTRATION STATEMENT UNDER SUCH ACT AND SUCH LAWS  OR
     AN  OPINION  OF COUNSEL FOR THE HOLDER OF THIS  WARRANT
     REASONABLY  SATISFACTORY TO THE ISSUER  TO  THE  EFFECT
     THAT  AN  EXEMPTION  FROM  REGISTRATION  THEREUNDER  IS
     AVAILABLE.   NEITHER THE OFFERING OF THIS  WARRANT  NOR
     ANY  OFFERING  MATERIALS  HAVE  BEEN  REVIEWED  BY   AN
     ADMINISTRATOR  UNDER SUCH ACT OR ANY  APPLICABLE  STATE
     LAW.

                                              Warrant to Purchase
January 17, 1997                                 _________ Shares
                                                  of Common Stock

          The undersigned, Electrosource, Inc. (the "Company"), a
Delaware corporation, for good and valuable consideration desires
to  grant  to __________________________________ ("Purchaser")  a
warrant  or  option  to acquire shares of  Common  Stock  in  the
Company.   The option covered hereby is granted pursuant  to  the
terms  of  a  Subscription  Agreement ("Subscription  Agreement")
dated  as of December 20, 1996 between the Company and Purchaser,
and  all provisions of that Agreement are incorporated herein  by
reference.  Defined terms shall have the same meaning as  in  the
Subscription Agreement.

      1.    Warrant.  The Company does hereby grant to  Purchaser
the exclusive option to purchase from the Company all or any part
of  an  aggregate  of  ____________________________  (__________)
shares ("Shares") of Common Stock of the Company at the price  of
Seven and 56/100 Dollars ($7.56) per share.

      2.   Term.  The Option shall be exercisable as provided  in
the  Subscription Agreement and otherwise at any time  until  the
option  expires  or terminates in accordance with the  provisions
hereof.  This option shall in any event terminate at 5:00 o'clock
P.M.,  San  Marcos, Texas time two (2) years after  its  date  of
grant.

      3.    Exercise.   To exercise this option, Purchaser  shall
give  written  notice  of such election to  the  Company  at  its
Corporate Headquarters, Attention Corporate Secretary, so  as  to
be  received  by  the Company within the period  this  option  is
exercisable, which notice shall specify the number of  shares  to
be  purchased and be accompanied by payment in full.  Payment for
such shares may be by check or wire transfer, as directed by  the
Company.

      4.    Share  Issue.  Upon receipt by the Company of  proper
notice  of  exercise of this Warrant, the Company as promptly  as
practicable and subject to the other provisions in this  Warrant,
shall  deliver a certificate or certificates representing  Shares
so  purchased,  and shall pay all original issuance  or  transfer
taxes  on  the exercise of this Warrant, and all other  fees  and
expenses  necessarily  incurred  by  the  Company  in  connection
therewith.  Certificates evidencing such Shares may have endorsed
thereon such language as may be deemed necessary or advisable  by
counsel  for the Company in order to ensure compliance  with  the
applicable  securities laws or regulations.  Registration  rights
shall be as set forth in the Subscription Agreement.

      5.    Change  in Capitalization; Merger; Liquidation.   The
number of Shares of Common Stock covered by this Warrant, and the
price  per  share  shall  be  proportionately  adjusted  for  any
increase  or  decrease in the number of issued shares  of  Common
Stock  resulting from a subdivision or combination of  shares  or
the  payment  of  a stock dividend in shares of Common  Stock  to
holders  of  outstanding shares of Common Stock.  If the  Company
shall   be   the   surviving  corporation  in   any   merger   or
consolidation, recapitalization, reclassification  of  shares  or
similar  reorganization, Purchaser shall be entitled to purchase,
at  the same times and upon the same terms and conditions as  are
provided in this Warrant, the number and class of shares of stock
or  other  securities  to which it would have  been  entitled  to
receive  as a result of such transaction as if the Purchaser  had
exercised  the  Warrant  in  full on  the  record  date  for  the
transaction  in  question.   In the event  of  a  dissolution  or
liquidation of the company or a merger or consolidation in  which
the  Company is not the surviving corporation, this Warrant shall
terminate  upon the effective date thereof, except to the  extent
that  another  corporation assumes such  Warrant  or  substitutes
another  option  therefore.  In the event  of  a  change  of  the
Company's  shares of Common Stock with par value  into  the  same
number of shares with a different par value or without par value,
the  shares resulting from any such change shall be deemed to  be
Common Stock.

           IN  WITNESS  WHEREOF, the Parties have  executed  this
Agreement on the date first written above.

ELECTROSOURCE, INC.                (PURCHASER)



By:                                By:
Printed Name:                      Printed Name:
Its:                               Its:



EXHIBIT B-2
to Severance Agreement
dated August 31, 1998


ELECTROSOURCE, INC.
                     STOCK PURCHASE WARRANT
              To Purchase Shares of Common Stock of
                       ELECTROSOURCE, INC.
                    Expiring January 23, 1999
                                                    No.  W10A-102

     NEITHER  THIS WARRANT NOR THE SECURITIES ISSUABLE  UPON
     ITS  EXERCISE HAVE BEEN REGISTERED UNDER THE SECURITIES
     ACT  OF 1933, AS AMENDED, OR UNDER THE SECURITIES  LAWS
     OF  ANY STATE.  THIS WARRANT MAY NOT BE EXERCISED,  AND
     NEITHER  THIS WARRANT NOR THE SECURITIES ISSUABLE  UPON
     ITS  EXERCISE  MAY  BE SOLD, TRANSFERRED,  ASSIGNED  OR
     HYPOTHECATED,   IN   THE  ABSENCE   OF   AN   EFFECTIVE
     REGISTRATION STATEMENT UNDER SUCH ACT AND SUCH LAWS  OR
     AN  OPINION  OF COUNSEL FOR THE HOLDER OF THIS  WARRANT
     REASONABLY  SATISFACTORY TO THE ISSUER  TO  THE  EFFECT
     THAT  AN  EXEMPTION  FROM  REGISTRATION  THEREUNDER  IS
     AVAILABLE.   NEITHER THE OFFERING OF THIS  WARRANT  NOR
     ANY  OFFERING  MATERIALS  HAVE  BEEN  REVIEWED  BY   AN
     ADMINISTRATOR  UNDER SUCH ACT OR ANY  APPLICABLE  STATE
     LAW.
                                              Warrant to Purchase
January 23, 1997                                    25,003 Shares
                                                  of Common Stock

      The  undersigned,  Electrosource, Inc. (the  "Company"),  a
Delaware corporation, for good and valuable consideration desires
to  grant to James M. Rosel ("Purchaser") a warrant or option  to
acquire  shares  of  Common Stock in  the  Company.   The  option
covered hereby is granted pursuant to the terms of a Subscription
Agreement ("Subscription Agreement") dated as of January 23, 1997
between  the  Company and Purchaser, and all provisions  of  that
Agreement  are  incorporated herein by reference.  Defined  terms
shall have the same meaning as in the Subscription Agreement.

      1.    Warrant.  The Company does hereby grant to  Purchaser
the exclusive option to purchase from the Company all or any part
of  an  aggregate  of Twenty-five Thousand Three (25,003)  shares
("Shares") of Common Stock of the Company at the price  of  Seven
and 56/100 Dollars ($7.56) per share.

     2.   Term.  The Option shall be exercisable upon shareholder
approval  and otherwise as provided in the Subscription Agreement
and  otherwise at any time until the option expires or terminates
in  accordance with the provisions hereof.  This option shall  in
any  event terminate at 5:00 o'clock P.M., San Marcos, Texas time
two years after its date of grant.

      3.    Exercise.   To exercise this option, Purchaser  shall
give  written  notice  of such election to  the  Company  at  its
Corporate Headquarters, Attention Corporate Secretary, so  as  to
be  received  by  the Company within the period  this  option  is
exercisable, which notice shall specify the number of  shares  to
be  purchased and be accompanied by payment in full.  Payment for
such shares may be by check or wire transfer, as directed by  the
Company.

      4.    Share  Issue.  Upon receipt by the Company of  proper
notice  of  exercise of this Warrant, the Company as promptly  as
practicable and subject to the other provisions in this  Warrant,
shall  deliver a certificate or certificates representing  Shares
so  purchased,  and shall pay all original issuance  or  transfer
taxes  on  the exercise of this Warrant, and all other  fees  and
expenses  necessarily  incurred  by  the  Company  in  connection
therewith.  Certificates evidencing such Shares may have endorsed
thereon such language as may be deemed necessary or advisable  by
counsel  for the Company in order to ensure compliance  with  the
applicable  securities laws or regulations.  Registration  rights
shall be as set forth in the Subscription Agreement.

      5.    Change  in Capitalization; Merger; Liquidation.   The
number of Shares of Common Stock covered by this Warrant, and the
price  per  share  shall  be  proportionately  adjusted  for  any
increase  or  decrease in the number of issued shares  of  Common
Stock  resulting from a subdivision or combination of  shares  or
the  payment  of  a stock dividend in shares of Common  Stock  to
holders  of  outstanding shares of Common Stock.  If the  Company
shall   be   the   surviving  corporation  in   any   merger   or
consolidation, recapitalization, reclassification  of  shares  or
similar  reorganization, Purchaser shall be entitled to purchase,
at  the same times and upon the same terms and conditions as  are
provided in this Warrant, the number and class of shares of stock
or  other  securities  to which it would have  been  entitled  to
receive  as a result of such transaction as if the Purchaser  had
exercised  the  Warrant  in  full on  the  record  date  for  the
transaction  in  question.   In the event  of  a  dissolution  or
liquidation of the company or a merger or consolidation in  which
the  Company is not the surviving corporation, this Warrant shall
terminate  upon the effective date thereof, except to the  extent
that  another  corporation assumes such  Warrant  or  substitutes
another  option  therefore.  In the event  of  a  change  of  the
Company's  shares of Common Stock with par value  into  the  same
number of shares with a different par value or without par value,
the  shares resulting from any such change shall be deemed to  be
Common Stock.

           IN  WITNESS  WHEREOF, the Parties have  executed  this
Agreement on the date first written above.

ELECTROSOURCE, INC.                PURCHASER



By:  /s/ Michael G. Semmens        By:  /s/ James M. Rosel
Printed Name: Michael G. Semmens   Printed Name: James M. Rosel
Its:          President            Its: