Shoreline Pacific
                      Institutional Finance
                                
October 3, 1995     The Institutional Division
                     of Financial West Group
Via Facsimile
(512-445-0583)

Mr. Michael G. Semmens
Chairman
Electrosource, Inc.
3800 Drossett Drive
Austin, Tx   78744

Dear Mr. Semmens:

We are writing to confirm our understanding with respect to the
placement of up to Five Million Dollars ($5,000,000) U.S. of
common stock (the "Shares") of Electrosource, Inc. (ELSI) (the
"Company") at Forty (40%) Percent off the Closing Price of the
Shares.  You agree that Shoreline Pacific, Institutional Finance
Division of Financial West Group ("Shoreline Pacific") shall be
entitled to a commission equal to the difference between the
actual purchase price of the Shares and the amount which is 40%
off the Closing Price, such amount to be deducted from the gross
proceeds held in escrow for the closing of this transaction.  You
further agree to pay Shoreline Pacific with 15,000 two (2) year
warrants per million dollars of Shares sold, and the pro-rata
portion of any amount that is not a multiple of $1,000,000,
payable to Shoreline Pacific or its designee.  The warrants will
be issued at the Closing Price of the Shares and will be in the
form annexed hereto as Exhibit 2.  As used herein, the term
"Closing Price" refers to the average closing price of the Shares
as reported by Bloomberg, L.P. over the five-day trading period
ending on the date on which verbal agreement to purchase with
respect to each Closing (as defined below) is reached with a
minimum net price to the Company of $0.80 per share after all
discounts.  Our engagement shall be for a period (the "Engagement
Period") commencing on the date Shoreline Pacific receives
written approval, in the form attached hereto as Attachment "A:,
of the form of subscription agreement, and extending through and
including Thirty (30) days from such date.  There may be multiple
closings within the Engagement Period (each a "Closing").

During the Engagement Period, we shall have the exclusive right
to identify buyers for the Shares.  We will also assist in
arrangements for the Closings.  Our identification and
solicitation of potential investors will be conducted in
compliance with Rule 903 of Regulation S, promulgated under the
Securities Act of 1933, as amended, and in compliance with the
laws of each jurisdiction in which the offering is conducted.  We
will use no offering materials other than your publicly-filed
reports and such other materials, including a subscription
agreement, as you shall have approved.  Each investor will be
required to execute a standard form of subscription agreement,
which will include, without limitation, representations regarding
domicile, method of offering, and reliance only on specified
offering materials.

In the event the placement is completed in the amount of at least
$4,000,000, you agree not to offer any other shares of the
Company's common stock, or any other securities convertible into
shares of the Company's common stock, pursuant to a discounted
transaction for 90 days from the end of the Engagement Period.
If you wish to make any further sales within that 90-day period,
you will offer the stock on a right-of-first-refusal basis to
Shoreline Pacific, which will have five (5) business days from
the time of the offer to accept or reject it.  If Shoreline
Pacific rejects the offer, the Company shall be permitted to
proceed with the additional offering.

You hereby agree to the foregoing, agree to use your reasonable
best efforts to assist our participation in this transaction, and
agree not to take any actions which will be materially
detrimental to our selling efforts.  You undertake and represent
to us that the number of Shares necessary to fulfill the
$5,000,000 placement referred to herein will be available at the
Closings.  You further agree, in consideration of our
identification of buyers for the Shares as set out above, to be
fully bound by the Indemnification Provisions which are attached
hereto as Attachment "B" and which are hereby incorporated by
reference.

Please acknowledge by your signature below that, for a period of
two (2) years after the date of this letter agreement, you will
not contact any purchaser of Shares for the purpose of entering
into a securities transaction with such institution unless such
transaction is effected through Shoreline Pacific upon terms
acceptable to Shoreline Pacific.

We look forward to working with you,

Sincerely,                              Agreed and Accepted:

        /s/                                       /s/
Harlan P. Kleiman                       Michael G. Semmens
Executive Vice President                Chairman
Institutional Sales                     Electrosource Inc.
                                   Date:



                                LETTER AGREEMENT #1, Attachment A
                                
                            APPROVAL
                                
     The undersigned hereby approves the use of the Form of
Offshore Convertible Securities Subscription Agreement attached
hereto as Exhibit 1 and the Form of Warrants attached hereto as
Exhibit 2 in connection with the placement of common stock of
Electrosource Inc. ("ELSI") by Shoreline Pacific, Institutional
Finance Divisions of Financial West Group ("Shoreline Pacific")
referred to in the Engagement Letter between Electrosource and
Shoreline Pacific dated October 3, 1995.  This Approval may be
sent to Shoreline Pacific by facsimile to (415) 380-8911 and
shall be effective upon transmission thereof, or may be sent by
any other method so long as Shoreline Pacific receives proof of
the date of such delivery.  The Thirty (30) day period referred
to in the Engagement Letter will commence following receipt of
this Approval by Shoreline Pacific, in the manner set forth
above.  In the event this Approval is not received by Shoreline
Pacific until after 12:00 noon Pacific Standard Time, the
Engagement Period will commence the following day.



                                             /s/
                                        Michael G. Semmens
                                        Chairman
                                        Electrosource Inc.
                                        Date:

                                LETTER AGREEMENT #1, Attachment B
                                
                   Indemnification Provisions
                                
      Electrosource, Inc. (the "Company") agrees to indemnify and
hold  harmless Shoreline Pacific, Institutional Finance  Division
of  Financial  West Group ("Shoreline Pacific") and  its  agents,
employees,  affiliates,  control  persons,  and  successors   and
assignees  (collectively, the "Indemnitees" and each individually
an  "Indemnitee")  from and against any and all  losses,  claims,
damages, liabilities, obligations, penalties, judgments,  awards,
costs,  expenses,  and disbursements (and any  and  all  actions,
suits,  proceedings, and investigations in respect  thereof)  and
any  and  all  legal and other costs, expenses, or  disbursements
relating   thereto,  including,  without  limitation,  any   loss
occasioned  by the Indemnitees or prospective purchasers  of  the
Shares  identified by Shoreline Pacific by reason of  the  Shares
not  being  available upon any Closing, for whatever reason,  and
including  the costs, expenses, and disbursements,  as  and  when
incurred,  of  investigating, preparing, or  defending  any  such
action,  suit, proceeding, or investigation (whether  or  not  in
connection with litigation in which any Indemnitee is  a  party),
directly  or  indirectly,  caused by, relating  to,  based  upon,
arising  out  of or in connection with (a) any Indemnitee  acting
for  the  Company,  including, without  limitation,  any  act  or
omission  by any Indemnitee in connection with its acceptance  of
or   the  performance  or  non-performance  of  the  Indemnitee's
obligation  under  the letter agreement dated  October  3,  1995,
between  Shoreline Pacific and the Company, as it may be  amended
from  time to time (the "Agreement"), or (b) any untrue statement
or  alleged untrue statement of a material fact contained in,  or
omissions or alleged omissions from, information furnished by the
Company to any Indemnitee or any prospective purchaser, provided,
however, such indemnity agreement shall not apply to any  portion
of  any  such loss, claim, damage, obligation, penalty, judgment,
award, liability, cost, expense or disbursement to the extent  it
is found in a final judgment by a court of competent jurisdiction
(not  subject  to further appeal) to have resulted primarily  and
directly from the gross negligence or willful misconduct  of  the
Indemnitee  seeking indemnification hereunder.  The Company  also
agrees that the Indemnitees shall not have any liability (whether
direct  or  indirect, in contract or tort or  otherwise)  to  the
Company  or to any person (including, without limitation, Company
shareholders)  claiming through the Company for or in  connection
with  the engagement of Shoreline Pacific or for or in connection
with the acts or omissions of any Indemnitee except to the extent
that  any such liability is found in a final judgment by a  court
of competent jurisdiction (not subject to further appeal) to have
resulted  primarily  and directly from the  gross  negligence  or
willful  misconduct  of  the Indemnitee seeking  indemnification.
These  Indemnification Provisions shall be  in  addition  to  any
liability which the Company may otherwise have to the Indemnitees
or the buyer in the transaction contemplated by the Agreement.

       If  any  action,  suit,  proceeding  or  investigation  is
commenced,  as  to  which  any  Indemnitee  proposes  to   demand
indemnification,  the Indemnitee shall notify  the  Company  with
reasonable promptness; provided, however, that any failure by  an
Indemnitee  to notify the Company shall not relieve  the  Company
from  its obligations hereunder.  Each Indemnitee shall have  the
right  to retain counsel of its own choice to represent  it,  and
the  Company  shall pay the fees, expenses and  disbursements  of
such  counsel;  and such counsel shall, to the extent  consistent
with  its  professional  responsibilities,  cooperate  with   the
Company  and any counsel designated by the Company.  The  Company
shall be liable for any payment of any award or settlement of any
claim  against  any  Indemnitee made with the  Company's  written
consent,  which consent shall not be unreasonably withheld.   The
Company  shall  not,  without the prior written  consent  of  the
Indemnitee  seeking  indemnification, settle  or  compromise  any
claim,  or  permit  a  default or consent to  the  entry  of  any
judgment  in respect thereof, unless such settlement,  compromise
or consent includes, as an unconditional term thereof, the giving
by  the  claimant  to  the Indemnitee seeking indemnification  an
unconditional  release  from all liability  in  respect  of  such
claim.

      In order to provide for just and equitable contribution, if
a  claim  for  indemnification pursuant to these  Indemnification
Provisions is made but is found in a final judgment by a court of
competent jurisdiction (not subject to further appeal) that  such
indemnification may not be enforced in such case, even though the
express  provisions  hereof provide for indemnification  in  such
case,  then the Company, on the one hand, and the Indemnitees  on
the  other hand, shall contribute to the losses, claims, damages,
obligations,  penalties, judgments, awards,  liabilities,  costs,
expenses  and disbursements to which the indemnified persons  may
be  subject in accordance with the relative benefits received  by
the  Company, on the one hand, and the Indemnitees, on the  other
hand,  in connection with the statements, acts or omissions which
resulted in such losses, claims, damages, obligations, penalties,
judgments,    awards,    liabilities,   costs,    expenses    and
disbursements,  and  the relevant equitable considerations  shall
also  be  considered.  No person found liable  for  a  fraudulent
misrepresentation  shall  be entitled to  contribution  from  any
person   who  is  not  also  found  liable  for  such  fraudulent
misrepresentation.     Notwithstanding   the    foregoing,    the
Indemnitees  shall  not  be obligated to  contribute  any  amount
hereunder  that exceeds the amount of fees actually  received  by
Shoreline Pacific pursuant to the Agreement.

      Neither  termination nor completion of  the  engagement  of
Shoreline   Pacific   referred  to  above  shall   affect   these
Indemnification Provisions, which shall then remain operative and
in full force and effect.
                                              LETTER AGREEMENT #1
                                         ATTACHMENT A,  EXHIBIT 1
                                
           OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
                    Electrosource, Inc./Buyer
                                
                                                           [Date]
                                                                 
THE  SECURITIES  OFFERED HEREBY HAVE NOT BEEN  AND  WILL  NOT  BE
REGISTERED  UNDER THE UNITED STATES SECURITIES ACT  OF  1933,  AS
AMENDED,  AND  THE  RULES AND REGULATIONS PROMULGATED  THEREUNDER
(THE  "1933  ACT"),  AND MAY NOT BE OFFERED OR  SOLD  WITHIN  THE
UNITED STATES (AS DEFINED IN REGULATION S OF THE 1933 ACT) OR TO,
OR  FOR  THE  ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED  IN
REGULATION  S  OF  THE 1933 ACT) EXCEPT PURSUANT TO  REGISTRATION
UNDER  OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF  THE
1933 ACT.

     THIS OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT (hereinafter
the  "Agreement")  has  been  executed  by  the  undersigned   in
connection  with  the  sale of certain  shares  of  common  stock
(hereinafter the "Shares") of Electrosource, Inc. (ELSI), 3800  B
Drossett Drive, Austin, Texas, a corporation organized under  the
laws  of  Delaware  (hereinafter "Seller")  to  [Buyer],  located
[Address],  a corporation organized under the laws  of  [area  of
incorporation]   (hereinafter   "Buyer").    Seller   and   Buyer
(hereinafter collectively the "parties") each hereby  represents,
warrants and agrees as follows:

                            Section 1
                                
              AGREEMENT TO SUBSCRIBE PURCHASE PRICE
                                
           1.1   Buyer hereby subscribes for [written  amount  of
     shares] (#) Shares of (ELSI) common stock at ($___) U.S. per
     share  for  an  aggregate purchase price of [written  dollar
     amount] ($) U.S. payable in United States Dollars.
     
           1.2   Buyer shall pay the purchase price by delivering
     same  day funds in United States Dollars to an escrow  agent
     or  as otherwise agreed between the parties, to be delivered
     to the order of Seller upon Delivery of the Shares.
     
           1.3   This  Agreement has been executed in  connection
     with  an  offering (the "Offering") by Seller of its  common
     stock  (including  the  Shares)  pursuant  to  Regulation  S
     ("Regulation  S")  promulgated under the Securities  Act  of
     1933,  as  amended (the "Securities Act").   Buyer  will  be
     notified of the date of the conclusion of the Offering.
     
                            Section 2
                                
                     BUYER'S REPRESENTATIONS
                                
       Buyer represents and warrants to Seller as follows:
                                
           2.1   Buyer is not a "U.S. Person" as defined by  Rule
     902 of Regulation S, was not organized under the laws of any
     U.S.  jurisdiction, and was not formed for  the  purpose  of
     investing  in securities not registered under the Securities
     Act;
     
          2.2  At the time the buy order for this transaction was
     originated, Buyer was outside the United States;
     
           2.3   No offer to purchase the Shares was made in  the
     United States;
     
           2.4  Buyer is either (a) purchasing the Shares for its
     own  account  for investment purposes and not  with  a  view
     towards distribution, or (b) acting as agent for a principal
     that  has  made the representations contained in  Exhibit  A
     hereto;
     
          2.5  All subsequent offers and sales of the Shares will
     be  made  (a)  outside the United States in compliance  with
     Rule  903  or  Rule  904 of Regulation S,  (b)  pursuant  to
     registration of the Shares under the Securities Act, or  (c)
     pursuant  to  an  exemption from such  registration.   Buyer
     understands   the   conditions   of   the   exemption   from
     registration afforded by Section 4(1) of the Securities  Act
     and acknowledges that there can be no assurance that it will
     be  able to rely on such exemption.  In any case, Buyer will
     not  resell  the shares to U.S. Persons or with  the  United
     States  until  after the end of the forty  (40)  day  period
     commencing  on  the date of completion of the  Offering  (as
     defined above) (the "Restricted Period");
     
          2.6  Buyer agrees that it has not entered into and will
     not  enter  into any short sales with respect to the  common
     stock  of  Seller  at any time after the execution  of  this
     Agreement  by  Buyer  and prior to  the  expiration  of  the
     Restricted Period.  Buyer further agrees that, at all  times
     after  the  Restricted Period, it will keep its purchase  of
     the  Shares  confidential, except as  required  by  law  and
     except  as  necessary  in  the ordinary  course  of  Buyer's
     business;
     
           2.7   Buyer  understands that  the  Shares  are  being
     offered and sold to it in reliance on specific provisions of
     federal and state securities laws and that Seller is relying
     upon   the   truth  and  accuracy  of  the  representations,
     warranties,  agreements, acknowledgments and  understandings
     of  Buyer  set  forth  herein  in  order  to  determine  the
     applicability of such provisions.  Accordingly, Buyer agrees
     to  notify  Seller  of  any events  which  would  cause  the
     representations  and warranties of Buyer  to  be  untrue  or
     breached  at any time after the execution of this  Agreement
     by  Buyer  and  prior to the expiration  of  the  Restricted
     Period;
     
           2.8   This Agreement has been duly authorized, validly
     executed,  and delivered on behalf of Buyer and is  a  valid
     and  binding  agreement enforceable in accordance  with  its
     terms,  subject  to  general principles  of  equity  and  to
     bankruptcy  or  other  laws  affecting  the  enforcement  of
     creditors' rights generally;
     
           2.9   Any offering documents received by Buyer include
     statements  to  the  effect that the Shares  have  not  been
     registered  under the Securities Act and may not be  offered
     or  sold in the United States or to U.S. Persons during  the
     Restricted Period;
     
           2.10  Buyer,  in making the decision to  purchase  the
     Shares   subscribed   for,  has  relied   upon   independent
     investigations  made  by  it  and  has  not  relied  on  any
     information or representations made by third parties;
     
           2.11  In the event of resale of the Shares during  the
     Restricted   Period,   Buyer   shall   provide   a   written
     confirmation  or  other written notice to  any  distributor,
     dealer,  or person receiving a selling concession,  fee,  or
     other  remuneration  in respect of the Shares  stating  that
     such purchaser is subject to the same restrictions on offers
     and  sales that apply to the undersigned, and shall  require
     that   any   such  purchaser  shall  provide  such   written
     confirmation  or  other  notice  upon  resale   during   the
     Restricted Period; and
     
           2.12  Buyer has not taken any action that would  cause
     Seller  to be subject to any claim for commission  or  other
     fee  or  remuneration by any broker, finder, or other person
     and  Buyer hereby indemnifies Seller against any such  claim
     caused  by  the actions of Buyer or any of its employees  or
     agents.
     
                            Section 3
                                
                    SELLER'S REPRESENTATIONS
                                
       Seller represents and warrants to Buyer as follows:
                                
           3.1   Seller  is a "Domestic Issuer" and a  "Reporting
     Issuer," as such terms are defined by Rule 902 of Regulation
     S.   Seller  has  registered its common  stock  pursuant  to
     Section 12(b) or (g) of the Securities Exchange Act of 1934,
     as  amended (the "Exchange Act"), is in full compliance with
     all  reporting requirements of either Section 13(a) or 15(d)
     of the Exchange Act, and Seller's common stock trades on the
     NASDAQ Small Cap Market;
     
          3.2  Seller has furnished Buyer with copies of Seller's
     most  recent Annual Report on its Form 10-K filed  with  the
     Securities  and Exchange Commission, all Forms 10-Q  and  8K
     filed  thereafter, and the use of process and risk  factors,
     prepared by Seller, which are attached hereto as Exhibit B;
     
          3.3  Seller has not offered the Shares to any person in
     the  United States, any identifiable group of U.S.  citizens
     abroad, or to any U.S. Person;
     
           3.4   At the time the buy order was originated, Seller
     and/or its agents reasonably believed Buyer was outside  the
     United States and was not a U.S. Person;
     
           3.5   Seller and/or its agents reasonably believe that
     the sale of the Shares has not been prearranged with a Buyer
     in the United States.
     
           3.6   Seller  has not conducted any "directed  selling
     efforts" with respect to the Shares nor has Seller conducted
     any general solicitation (as that term is used in Regulation
     D  under  the  Securities Act) with respect to  any  of  its
     securities;
     
           3.7  The Shares when issued and delivered will be duly
     and   validly   authorized   and  issued,   fully-paid   and
     nonassessable  and will not subject the holders  thereof  to
     personal  liability by reason of being such holders.   There
     are  no preemptive rights of any shareholder of Seller  with
     respect to the Shares;
     
           3.8   This Agreement has been duly authorized, validly
     executed  and delivered on behalf of Seller and is  a  valid
     and  binding agreement in accordance with its terms, subject
     to  general principles of equity and to bankruptcy or  other
     laws   affecting   the  enforcement  of  creditors'   rights
     generally;
     
           3.9  The execution and delivery of this Agreement  and
     the  consummation  of the issuance of  the  Shares  and  the
     transactions contemplated by this Agreement do not and  will
     not conflict with or result in a breach by Seller of any  of
     the  terms or provisions of, or constitute a default  under,
     the  articles of incorporation or bylaws of Seller,  or  any
     indenture,  mortgage,  deed  of  trust  or  other   material
     agreement  or instrument to which Seller is a  party  or  by
     which  it  or any of its properties or assets are bound,  or
     any  existing  applicable decree, judgment or order  of  any
     court,  Federal  or  State regulatory  body,  administrative
     agency  or other governmental body having jurisdiction  over
     Seller or any of its properties or assets;
     
          3.10 Seller is not aware of any authorization, approval
     or  consent  of  any  governmental  body  which  is  legally
     required  for  the  issuance  and  sale  of  the  Shares  as
     contemplated by this Agreement;
     
           3.11  Seller will instruct its transfer agent to issue
     one  or  more  share  certificates representing  the  Shares
     without restrictive legend in the name of Buyer and in  such
     denominations  to  be specified by Buyer prior  to  closing.
     Seller  further  warrants  that no instructions  other  than
     these  instructions, and instructions for a "stop  transfer"
     until  the end of the Restricted Period, have been given  to
     the  transfer agent and also warrants that the Shares  shall
     otherwise be freely transferable on the books and records of
     Seller.   Seller will notify the transfer agent of the  date
     of  completion of the Offering and of the date of expiration
     of  the  Restricted Period.  Nothing in this  section  shall
     affect  in  any  way Buyer's obligations  and  agreement  to
     comply  with all applicable securities laws upon  resale  of
     the Shares;
     
          3.12 Seller has taken and will take no action that will
     affect  in  any way the running of the Restricted Period  or
     the  ability  of  Buyer  to  freely  resell  the  Shares  in
     accordance   with  applicable  securities  laws   and   this
     Agreement; and
     
           3.13 Seller will comply with all applicable securities
     laws  with respect to the sale of the Shares, including  but
     not  limited  to  the filing of all reports required  to  be
     filed  in  connection  therewith  with  the  Securities  and
     Exchange  Commission  or any stock exchange  or  the  NASDAQ
     stock market or any other regulatory authority.
     
                            Section 4
                                
                             CLOSING
                                
          4.1  Share certificates shall be delivered to Buyer and
     the   funds  therefor  shall  be  delivered  to  Seller   on
     ________________ or at such time to be mutually agreed.
     
                            Section 5
                                
                      CONDITIONS TO CLOSING
                                
          5.1  Buyer understands that Seller's obligation to sell
     the  Shares  is  conditioned upon delivery  into  escrow  or
     otherwise as agreed between Buyer and Seller by Buyer of the
     amount set forth in Section 1 hereof.
     
           5.2   Seller  understands that Buyer's  obligation  to
     purchase   the  Shares  is  conditioned  upon  delivery   of
     certificate(s) representing shares of common  stock  without
     restrictive legend as described herein and provision  of  an
     opinion  of counsel confirming the matters et out in Section
     3.1, 3.7, 3.8, 3.9, and 3.10 above.
     
                            Section 6
                                
                  GOVERNING LAW; INTERPRETATION
                                
            6.1    This  Agreement  shall  be  governed  by   and
     interpreted in accordance with the laws of the State of  New
     York.   Facsimile  signatures of  this  Agreement  shall  be
     binding  on all parties hereto.  All terms used herein  that
     are  defined in Regulation S under the Securities Act  shall
     have the meanings set forth therein.
     

      IN WITNESS WHEREOF, this Agreement was duly executed on the
date first written above.


Official Signatory of Buyer:


Official Signatory of Seller:
Electrosource, Inc.



Michael G. Semmens
President

                               SUBSCRIPTION AGREEMENT,  EXHIBIT A
                                                                 
In connection with the Offshore Securities Subscription Agreement
between  Electrosource,  Inc. ("Seller") and  ____________  dated
_________________  (the "Agreement"), the undersigned  represents
and warrants as follows:

     (i)  The undersigned is not a U.S. Person as defined by Rule
902 of Regulation S, was not organized under the laws of any U.S.
jurisdiction, and was not formed for the purpose of investing  in
securities  not registered under the Securities Act of  1933,  as
amended (the "Securities Act");

      (ii) At the time the buy order for the Shares (as such term
is  defined in the Agreement) was originated, the undersigned was
outside the United States;

      (iii)      No offer to purchase the Shares was made in  the
United States;

      (iv)  The undersigned is purchasing the Shares for its  own
account  for  investment purposes and not  with  a  view  towards
distribution;

      (v)  All subsequent offers and sales of the Shares will  be
made  (a) outside the United States in compliance with Rule  9033
or  Rule 904 of Regulation S, (b) pursuant to registration of the
Shares  under the Securities Act or (c) pursuant to an  exemption
from   such   registration.   The  undersigned  understands   the
conditions of the exemption from registration afforded by Section
4(1) of the Securities Act and acknowledges that there can be  no
assurance that it will be able to rely on such exemption.  In any
case, the Shares will not be resold to U.S. Persons or within the
United States until after the end of the "Restricted Period"  (as
such term is defined in the Agreement);

      (vi)  The  undersigned agrees not to enter into  any  short
sales  with  respect to the common stock of Seller  at  any  time
after  the  execution of these representations by the undersigned
and  prior  to  the  expiration of the  Restricted  Period.   The
undersigned further agrees that, at al times after the  execution
of  these  representations by the undersigned and  prior  to  the
expiration of the Restricted Period, it will keep its purchase of
the Shares confidential, except as required by law and except  as
necessary in the ordinary course of the undersigned's business;

      (vii)      The undersigned understands that the Shares  are
being  offered and sold to it in reliance on specific  provisions
of  federal and state securities laws and that Seller is  relying
upon  the  truth and accuracy of the representations, warranties,
agreements,  acknowledgments and understandings set forth  herein
in  order  to  determine the applicability  of  such  provisions.
Accordingly,  the  undersigned agrees to  notify  Seller  of  any
events  which  would cause the representations and warranties  of
the  undersigned to be untrue or breached at any time  after  the
execution  of these representations by the undersigned and  prior
to the expiration of the Restricted Period;

     (viii)    Any offering documents received by the undersigned
include  statements to the effect that the Shares have  not  been
registered  under the Securities Act and may not  be  offered  or
sold  in  the  United  States  or  to  U.S.  Persons  during  the
Restricted Period;

     (ix) The undersigned, in making the decision to purchase the
Shares subscribed for, has relied upon independent investigations
made   by   it   and  has  not  relied  on  any  information   or
representations made by third parties;

      (x)   In  the  event  of resale of the  Shares  during  the
Restricted  Period,  the  undersigned  shall  provide  a  written
confirmation  or other written notice to any distributor,  dealer
or   person  receiving  a  selling  concession,  fee   or   other
remuneration in respect of the Shares stating that such purchaser
is  subject  to  the same restrictions on offers and  sales  that
apply  to  the  undersigned, and shall  required  that  any  such
purchaser shall provide such written confirmation or other notice
upon resale during the Restricted Period; and

      (xi)  The  undersigned has not taken any action that  would
cause  Seller to be subject to any claim for commission or  other
fee  or  remuneration by any broker, finder or other  person  and
hereby  indemnifies Seller against any such claim caused  by  the
actions of the undersigned or any of its employees or agents.
                               SUBSCRIPTION AGREEMENT,  EXHIBIT B
                                                                 
                         USE OF PROCEEDS
                                
                          RISK FACTORS
                                

USE OF PROCEEDS

      The  proceeds  from the Reg S offering  will  be  used  for
working capital and general corporate purposes.


RISK FACTORS

      An investment in the Common Stock offered hereby involves a
high  degree of risk.  The following factors should be considered
in evaluating an investment in the Company.


  Contingencies Related to Business Plan and Commercialization of
Product. In June 1994 the Company determined to become the  North
American  manufacturer of the Horizonr battery, while  continuing
its  previous  plans  with respect to licensing  of  third  party
manufacturers  overseas. The shift from research and  development
to  manufacturing will require significant additional outlays for
capital  equipment  as well as greatly increased  managerial  and
production  staffing,  which  will in  turn  require  significant
amounts  of  new  capital. There can be  no  assurance  that  the
Company  will be able to raise this capital on terms satisfactory
to  the Company, or at all.  Development of the Horizon batteries
and  manufacturing processes continue and there is  no  assurance
that the battery will be successfully commercialized.

    Limited   Cash   Resources.  The  Company  had  approximately
$1,100,000 in unrestricted cash available at September 26,  1995.
The  Company  is in discussions concerning potential  sources  of
additional  capital.  If the Company is  able  to  close  certain
financing   transactions  and  to  meet  its   sales   forecasts,
management believes that there will be sufficient cash  resources
to  finance  operations through the end of 1995.  Otherwise,  the
Company may not be able to continue operations.

   Possible Loss of Trading Liquidity. The Company's Common Stock
is  currently traded on the NASDAQ market. Listing standards  for
NASDAQ  stocks  require a minimum of $1,000,000  in  shareholders
equity. At June 30, 1995, the Company reported a negative balance
in  shareholders  equity of $1,625,494, although  the  amount  of
shareholders  equity has subsequently increased (to approximately
$1,374,506 on a pro forma basis as of June 30, 1995) due  to  the
conversion of certain outstanding convertible debentures.  Unless
the  Company achieves profitability on a sustainable basis or  is
able  to  raise sufficient new equity capital to offset operating
losses  such  that shareholders equity remains above the  minimum
required level, its shares may no longer be eligible for  trading
on  the  NASDAQ  system. Loss of NASDAQ trading privileges  would
have a material adverse effect on the liquidity of any investment
in  the Company's Common Stock, and would constitute an event  of
default  with  respect to indebtedness of the Company  having  an
outstanding  principal  amount  as  of  September  26,  1995,  of
approximately $2,900,000.

   Limited  Operating  History. The Company has  only  a  limited
operating history. The Company was incorporated in June 1987  and
became  subject  to the reporting requirements of the  Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in January
1988.  The  Company  was  until  the  first  quarter  of  1995  a
development stage company. The Company has generated a  net  loss
from  the  development  program  in  each  fiscal  quarter  since
inception.  There can be no assurance that the  Company  will  be
able   to  generate  sufficient  income  to  cover  losses.   The
likelihood of the Company's future success must be considered  in
light  of the risks, expenses, difficulties and delays frequently
encountered in connection with the operation and development of a
new business and research and development activities generally.

  Termination of Technology License. The Company holds the rights
to  develop  and use the coextrusion technology in the  field  of
lead-acid  battery applications under an exclusive  license  from
Blanyer-Mathews   Associates,  Inc.   ("Blanyer-Mathews").   This
license is subject to termination by Blanyer-Mathews in the event
that the Company enters bankruptcy proceedings or defaults in its
obligation  to  pay  royalties.  Loss  of  the  rights   to   the
coextrusion  technology would have a severe adverse  impact  upon
the Company's continued viability.

   Loss  of  Trade Secret Protection. The Company has elected  to
protect  certain  aspects  of its technology  under  state  trade
secret  laws, rather than under federal patent laws. Trade secret
protection requires that the Company preserve the confidentiality
of  the  technology subject to trade secret status. In the  event
that  such  confidentiality cannot be  maintained,  or  if  third
parties   can   successfully  "reverse-engineer"   the   affected
technology, trade secret status may be lost. Loss of trade secret
protection  would allow third parties to utilize  the  technology
without obtaining a license from the Company.

    Competition.  The  lead-acid  battery  industry   is   highly
competitive  and  includes a number of firms, many  with  greater
financial,  technological,  manufacturing,  marketing  and  other
resources and longer operating histories than the Company.  There
is  no  assurance  that  the Company  will  be  able  to  compete
successfully in this highly competitive environment  due  to  the
Company's  limited  financial resources and lack  of  established
products.

   Conflicts  of  Interest.  Charles  Mathews  and  John  Malone,
directors  of the Company, are also directors of Blanyer-Mathews,
which holds the coextrusion patents under which the Company is  a
licensee.  This  relationships may  give  rise  to  conflicts  of
interest  on  the  part  of  such  persons  in  connection   with
transactions  of the Company involving Blanyer-Mathews  in  which
such  persons  may  have an incentive to  put  the  interests  of
Blanyer-Mathews above those of the Company.

   Dependence  on  Key  Personnel. Executive  management  of  the
Company  is  primarily  the responsibility  of  Michael  Semmens,
President, Chief Executive Officer and Chairman of the Board. The
loss  of  Mr. Semmens or other executives could have  a  material
adverse effect on the Company.  Michael Weinstein, Vice President
of   Communications,  ceased  employment  with  the  Company   on
September 15, 1995.

   Dilution. The market price of $1.72 per share of Common  Stock
as  of  September  25, 1995, was substantially greater  than  the
Company's actual net negative tangible book value of ($0.17)  per
outstanding share of Common Stock at June 30, 1995. Purchasers of
Common  Stock at the recent market price will suffer an immediate
dilution  of $1.89 per share, measured by the difference  between
the  market  price and the Company's net negative  tangible  book
value per share. See "Dilution."

   Certain Antitakeover Effects. Certain provisions contained  in
the  Delaware  General  Corporation  Law  and  in  the  Company's
Restated  Certificate of Incorporation and  bylaws  may  make  it
difficult for any third party to effect or attempt an acquisition
of  the  Company without the approval of the Company's  Board  of
Directors. The Restated Certificate of Incorporation also divides
the  Company's  Board  of Directors into  three  classes  serving
staggered  terms. This provision may hinder or delay any  attempt
to  gain  control  of  the  Company by  replacing  the  Board  of
Directors.  Such potential antitakeover effects may  depress  the
market value of the Common Stock. In addition, certain provisions
of the Company's Restated Certificate of Incorporation and bylaws
require  the affirmative vote of 90% of the Company's outstanding
Common Stock.

   Absence of Dividends. The Company has never declared  or  paid
any dividends on its outstanding Common Stock, and it is unlikely
that it will do so in the foreseeable future.

                                              LETTER AGREEMENT #1
                                          ATTACHMENT A, Exhibit 2
                                                                 
NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON
THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER (THE "SECURITIES ACT").  THIS WARRANT AND
THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
REGISTRATION  UNDER THE SECURITIES ACT OR SUCH OFFER, SALE OR
TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

            COMMON STOCK PURCHASE WARRANT CERTIFICATE
                                
                   Dated:  October ____, 1995
                                
                      [Number ( )] Warrants
                                
                 to Purchase [Number ( )] Shares
                                
           of Common Stock, $0.10 Par Value Per Share
                                
     ELECTROSOURCE, INC., a Delaware corporation (the "Company"),
hereby certifies that [Holder], its permissible transferees,
designees, successors and assigns (collectively, the "Holder"),
for value received, is entitled to purchase from the Company at
any time commencing on October __, 1995 up to [Number] ( ) shares
(the "Shares") of the Company's common stock, par value $0.10 per
share (the "Common Stock"), at [$_____] per share (the "Exercise
Price").

     1.  Exercise of Warrants.  Upon presentation and surrender
of this Common Stock Purchase Warrant Certificate ("Warrant
Certificate" or "this Certificate"), with the attached Purchase
Form duly executed, at the principal office of the Company at
3800 Drossett Drive, Austin, TX 78744, together with a check
payable to the Company in the amount of the Exercise Price
multiplied by the number of Shares being purchased, the Company,
or the Company's Transfer Agent as the case may be, shall deliver
to the holder hereof, certificates of Common Stock which in the
aggregate represent the number of Shares being purchased.  All or
less than all of the Warrants represented by this Certificate may
be exercised and, in case of the exercise of less than all, the
Company, upon surrender hereof, will deliver to the holder a new
Warrant Certificate or Certificates of like tenor and dated the
date hereof entitling said holder to purchase the number of
Shares represented by this Certificate which have not been
exercised and to receive Registration Rights with respect to such
Shares.

     2.  Exchange and Transfer.  This Certificate at any time
prior to the exercise hereof, upon presentation and surrender to
the Company, may be exchanged, alone or with other Certificates
of like tenor registered in the name of the same holder, for
another Certificate or Certificates of like tenor in the name of
such holder exercisable for the aggregate number of Shares as the
Certificate or Certificates surrendered.

     3.  Rights and Obligations of Holders of this Certificate.
(a)  The holder of this Certificate shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Company, either
at law or in equity; provided, however, that in the event any
certificate representing shares of Common Stock or other
securities is issued to the holder hereof upon exercise of some
or all of the Warrants, such holder shall, for all purposes, be
deemed to have become the holder of record of such Common Stock
on the date on which this Certificate, together with a duly
executed Purchase Form, was surrendered and payment of the
aggregate Exercise Price was made, irrespective of the date of
delivery of such share certificate.

     (b)  In case the Company shall (i) pay a dividend in Common
Stock or make a distribution in Common Stock, (ii) subdivide its
outstanding Common Stock into a greater number of shares, or
(iii) combine its outstanding Common Stock into a smaller number
of shares (including a recapitalization in connection with a
consolidation or merger in which the Company is the continuing
corporation), then (x) the Exercise Price on the record date of
such division or the effective date of such action shall be
adjusted by multiplying such Exercise Price by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately before such event and the denominator of
which is the number of shares of Common Stock outstanding
immediately after such event and (y) the number of shares of
Common Stock for which this Warrant Certificate may be exercised
immediately before such event shall be adjusted by multiplying
such number by a fraction, the numerator of which is the Exercise
Price immediately before such event and the denominator of which
is the Exercise Price immediately after such event.

     (c)  In case of any consolidation or merger of the Company
with or into another corporation (other than any consolidation or
merger in which the Company is the continuing corporation and
which does not result in any reclassification of the outstanding
shares of Common Stock or the conversion of such outstanding
shares of Common Stock into shares or other stock or other
securities or property), or the sale or transfer of the property
of the Company as an entirety or substantially as an entirety,
there shall be deliverable upon exercise of the Warrant
Certificate (in lieu of the number of shares of Common Stock
theretofore deliverable) the number of shares of stock or other
securities or property to which a holder of the number of shares
of Common Stock which would otherwise have been deliverable upon
the exercise of this Warrant Certificate would have been entitled
upon such action if this Warrant Certificate had been exercised
immediately prior to such action.

     4.  Common Stock.  (a)  The Company covenants and agrees
that all shares of Common Stock of this Warrant Certificate
will, upon delivery, be duly and validly authorized and issued,
fully-paid and non-assessable.

     (b)  The Company covenants and agrees that it will at all
times reserve and keep available an authorized number of shares
of its Common Stock and other applicable securities sufficient to
permit the exercise in full of all outstanding options, warrants
and rights, including the Warrants.

     5.  Issuance of Certificates.  As soon as possible after
full or partial exercise of this Warrant, the Company, at its
expense, will cause to be issued in the name of and delivered to
the holder of this Warrant, a certificate or certificates for the
number of fully paid and non-assessable shares of Common Stock to
which that holder shall be entitled on such exercise.  No
fractional shares will be issued on exercise of this Warrant.  If
on any exercise of this Warrant a fraction of a share results,
the Company will pay the cash value of that fractional share,
calculated on the basis of the Exercise Price.  All such
certificates shall bear a restrictive legend to the effect that
the Shares represented by such certificate have not been
registered under the Securities Act of 1933, as amended, and the
Shares may not be sold or transferred in the absence of such
registration or an exemption therefrom, such legend to be
substantially in the form of the bold face language appearing on
Page 1 of this Warrant Certificate.

     6.  Disposition of Warrants or Shares.  The holder of this
Warrant Certificate, each transferee hereof and any holder and
transferee of any Shares, by his or its acceptance thereof,
agrees that no public distribution of Warrants or Shares will be
made in violation of the provisions of the Securities Act of
1933, as amended, and the rules and regulations promulgated
thereunder (collectively, the "Act").  Furthermore, it shall be a
condition to the transfer of the Warrants that any transferee
thereof deliver to the Company his or its written agreement to
accept and be bound by all of the terms and conditions contained
in this Warrant Certificate.

     7.  Notices.  Except as otherwise specified herein to the
contrary, all notices, requests, demands and other communications
required or desired to be given hereunder shall only be effective
if given in writing by certified or registered mail, return
receipt requested, postage prepaid, or by U. S. express mail
service, or by private overnight mail service (e.g. Federal
Express).  Any such notice shall be deemed to have been given (a)
on the business day immediately subsequent to mailing, if sent by
U. S. express mail service or private overnight mail service, or
(b) three (3) business days following the mailing thereof, if
mailed by certified or registered mail, postage prepaid, return
receipt requested, and all such notices shall be sent to the
following addresses (or to such other address or addresses as a
party may have advised the other in the manner provided in this
Section 7):

          If to the Company:

          [Name]
          Electrosource, Inc.
          3800 Drossett Drive
          Austin, TX 78744

          If to the Holder:

          Harlan P. Kleiman
          Shoreline Pacific
          591 Redwood Highway, Suite 2255
          Mill Valley, CA 94941

     8.  Governing Law.  This Warrant Certificate and all rights
and obligations hereunder shall be deemed to be made under and
governed by the laws of the State of California without giving
effect to the conflicts of laws provisions.  The Holder hereby
irrevocably consents to the venue and jurisdiction of the State
and Federal Courts located in the State of California, County of
Marin.

     9.  Successors and Assigns.  This Warrant Certificate shall
be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.

     10.  Headings.  The headings of various sections of this
Warrant Certificate have been inserted for reference only and
shall not be a part of this Certificate.

     IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed, manually or by facsimile, by one
of its officers thereunto duly authorized.

                              ELECTROSOURCE, INC.

Date:_____________            By:____________________________
                                      [Name and Title]

                      ELECTION TO PURCHASE
                                
                  To Be Executed by the Holder
              in Order to Exercise the Common Stock
                  Purchase Warrant Certificate
                                
     The undersigned Holder hereby irrevocably elects to exercise
_______ of the Warrants represented by this Common Stock Warrant
Certificate, and to purchase the shares of Common Stock issuable
upon the exercise of such Warrants and requests that certificates
for securities be issued in the name of:

          _________________________________________________
            (Please type or print name and address)

          _________________________________________________

          _________________________________________________

          _________________________________________________
               (Social Security or tax identification number)

and delivered to_________________________________________________
_________________________________________________________________
          (Please type or print name and address)
and, if such number of Warrants shall not be all the Warrants
evidenced by this Common Stock Warrant Certificate, that a new
Common Stock Warrant Certificate for the balance of such Warrants
be registered in the name of, and delivered to, the Holder at the
address stated below.

     In full payment of the purchase price with respect to the
Warrants exercised and transfer taxes, if any, the undersigned
hereby tenders payment of $__________ by check or money order
payable in United States currency to the order of Electrosource,
Inc.

                                   [HOLDER]

Dated:___________________          By:___________________________
                                      Name:
                                      Title:

                                   ________________________________
                                        (Address)
                                   ________________________________

                                   ________________________________
                                  (Social Security or tax identification
                                            number)