NOTE PURCHASE AND OPTION AGREEMENT

     This Note Purchase and Option Agreement (the OAgreementO) is
made  and  entered  into  as of March  27,  1997,  by  and  among
Electrosource, Inc., a Delaware corporation (the OCompanyO),  and
Corning  Incorporated, a corporation organized under the laws  of
the State of New York (the OInvestorO).

     WHEREAS, Investor wishes to purchase a note from the Company
with the right to convert the note to common stock and thereafter
have  the  right  to  further increase  its  equity  interest  by
exercise of a stock option;

     NOW, THEREFORE, the parties hereto agree as follows:

     1.   Purchase and Sale of Note

           Note.      The Company agrees to sell to the  Investor
and,  subject to the terms and conditions set forth  herein,  the
Investor  agrees  to purchase from the Company a  5%  Convertible
Promissory  Note  (the "Note") in the principal  amount  of  Four
Million  Dollars  ($4,000,000.00) for the consideration  of  Four
Million  Dollars ($4,000,000.00), payable as set forth in Section
3.   The Note shall be for a five (5) year term, bearing interest
at  5%  per  annum, payable in kind and will be convertible  into
common  stock  ("Common Stock") of the Company  at  a  conversion
price  of  Five  and 50/100 dollars ($5.50) per share  for  Seven
Hundred Twenty-seven Thousand Two Hundred Seventy-three (727,273)
shares  of  Common Stock, subject to adjustment of the conversion
price as provided in the Note.  The form of the Note is set forth
in Exhibit "A" attached hereto.

     2.   Option to Purchase Common Stock

           Investor shall also have the option ("Option")  for  a
period  of two (2) years from the date hereof to purchase  up  to
Five  Hundred Thousand (500,000) shares of original issue  Common
Stock  ("Common  Stock") from the Company.  The  exercise  prices
shall  be  Seven  and No/100 Dollars ($7.00) per  share  for  Two
Hundred  Seventy-five Thousand (275,000) of such shares and  Nine
and  No/100 Dollars ($9.00) per share for Two Hundred Twenty-five
Thousand (225,000) of such shares, subject to adjustment of  such
amounts  as  provided in the Option Agreement, which is  attached
hereto  as Exhibit "B."  The Option may be exercised by providing
written  notice  to the Company and by delivery of  the  purchase
price  as set forth in the Option Agreement.  The Option may  not
be  exercised more than thirty (30) days after prepayment of  the
Note  in full.  Upon full conversion of the Note and exercise  of
the  Option, Investor would hold One Million Two Hundred  Twenty-
seven  Thousand Two Hundred Seventy-three (1,227,273)  shares  of
Common Stock.

     3.   Closing

           The  closing of the purchase and sale of the Note (the
OClosingO)  will  take  place  by mail  or  as  the  Parties  may
otherwise  agree.  At Closing, the Company will  deliver  to  the
Investor the Note and Option upon payment of Four Million Dollars
($4,000,000.00)  of  which  Three Million  Five  Hundred  Dollars
($3,500,000)  will be paid in the form of a check or  by  a  wire
transfer  of  funds to an account designated by the Company,  and
the balance of Five Hundred Thousand Dollars ($500,000) shall  be
paid  by  a  credit  of  the  unpaid principal  of  that  certain
Promissory Note of March 6, 1997 in the principal amount of  Five
Hundred  Thousand  Dollars ($500,000) between  Investor  and  the
Company (the "Interim Note"), which Interim Note shall be  marked
"paid"  and surrendered to the Company. The Closing will be  held
on  or  before April 1, 1997, unless the parties otherwise agree.
Interest  on the Interim Note accrued and unpaid at the  date  of
Closing shall be paid by the Company to Investor by check or wire
transfer  immediately  after  Closing,  or  may  be  deducted  by
Investor  from  the Three Million Five Hundred  Thousand  Dollars
($3,500,000)  to  be transferred at Closing, at the  election  of
Investor.

     4.   Covenants

           The Company covenants and agrees with the Investor  as
follows:

           4A.  Financial Statements and Other Information.   The
Company  will deliver to Investor so long as such Investor  holds
the  Note, Option or any other Notes issued in payment of accrued
interest thereon (sometimes referred to herein collectively  with
the  Note  as the ONotesO) copies of all reports required  to  be
filed  by  the  Company pursuant to sections 13  and  14  of  the
Securities Exchange Act of 1934.

           4B.  Representation on Board of Directors and Investor
Information  Meetings.  At the election of Investor and  when  so
notified  by  the  Investor,  the  Company  shall  use  its  best
reasonable efforts to appoint a qualified representative  of  the
Investor  to  the Company's Board of Directors and will  nominate
such  person, or his qualified replacement, for election  at  the
then  next  Annual  General Meeting of the  Shareholders  of  the
Company  for  which such seat stands for election.  Additionally,
for  so long as the Investor holds the Note or Option convertible
in  the  aggregate  into  shares of the  CompanyOs  Common  Stock
representing  at  least one percent (1%) of the total  shares  of
Common  Stock  outstanding  or  holds  shares  of  Common   Stock
representing  at  least one percent (1%) of the total  shares  of
Common  Stock  outstanding, the Company shall hold meetings  with
representatives of the Investor at reasonable intervals from time
to time to discuss the business and prospects of the Company.

           4C.  Reservation of Common Stock.  The Company will at
all  times  reserve and keep available out of its authorized  but
unissued shares of Common Stock, for the purpose of issuance upon
the  conversion  of  the Note and exercise of  the  Option,  such
number  of  shares  of  Common Stock as  are  issuable  upon  the
conversion of the Note and exercise of the Option. All shares  of
Common Stock which are so issuable will, when issued, be duly and
validly  issued, fully paid and non-assessable and free from  all
taxes,  liens and charges. The Company will take all such actions
as  may  be  necessary to assure that all such shares  of  Common
Stock may be so issued without violation of any applicable law or
governmental  regulation  or  any requirements  of  any  domestic
securities  exchange  upon which shares of Common  Stock  may  be
listed.

           4D.  Ranking of Note.  The Company's obligations under
the Note will rank at least pari passu in priority of payment and
in  all  other respects with all other unsecured loans, debts  or
obligations  of the Company entered into after the  date  hereof.
The  Company  shall  not, while any amount of  the  Note  remains
outstanding, offer to borrow funds from any third party on  terms
more  favorable to the third party lender than those extended  to
Investor  for  the Note with respect to security  for  the  Note,
financial covenants or negative pledges of the Company  in  favor
of  such  third  party,  repayment terms,  or  other  significant
matters, without offering such terms to Investor in writing.

     5.   Representations and Warranties

            5A.    Representations   by  Company.   The   Company
represents, warrants and agrees as follows:

                (i)  The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State
of  Delaware and is in good standing as a foreign corporation  in
each jurisdiction where the properties owned, leased or operated,
or  the  business  conducted  by it require  such  qualification,
except  for  such  failure  to so qualify  or  be  in  such  good
standing,  which,  when  taken  together  with  all  other   such
failures,  is  not  reasonably likely to have a material  adverse
effect  on  the  financial  condition,  properties,  business  or
results  of  operations  of  the  Company  or  the  interest   of
shareholders  in the Company (a OMaterial Adverse  EffectO).  The
Company has the requisite corporate power and authority to  carry
on its business as it is now being conducted.

                (ii)  The authorized capital stock of the Company
as  of  the  date  hereof consists of Fifty Million  (50,000,000)
shares of $1.00 par value Common Stock, of which Four Million One
Hundred    Forty-three   Thousand   Four   Hundred   Seventy-five
(4,143,475)  shares were issued and outstanding as of  March  20,
1997,  none  of  which  are  held in treasury,  and  Ten  Million
(10,000,000) shares of Preferred Stock, par value $1.00 per share
(OPreferred  StockO),  of  which  no  shares  were   issued   and
outstanding on the date hereof. All of the outstanding shares  of
Common  Stock  have been duly authorized and are validly  issued,
fully  paid  and nonassessable. As of March 20, 1997, there  were
reservations for outstanding options, warrants and agreements  to
purchase up to an aggregate of approximately Two Million Seventy-
two  Thousand  Three Hundred Eight (2,072,308) shares  of  Common
Stock, at prices ranging from Five and 25/100 Dollars ($5.25)  to
Fifty-five and No/100 Dollars ($55.00) per share.

                (iii)      The  Note and Option  when  issued  in
compliance  with the provisions of this Agreement, will  be  duly
authorized  and  validly issued. The issuance  of  the  Note  and
Option will not be subject to any preemptive rights or rights  of
first  refusal created by the Company. The shares of Common Stock
issuable  upon conversion of the Note and exercise of the  Option
have  been duly and validly reserved. The shares of Common  Stock
issuable  upon conversion of the Note and exercise of the  Option
are  not  subject  to any preemptive rights or  rights  of  first
refusal   created  by  the  Company,  and  upon  conversion   and
cancellation of the Note and exercise of the Option will be  duly
authorized, validly issued, fully paid and nonassessable.

               (iv) The Company has the requisite corporate power
and  authority  and has taken all corporate action  necessary  in
order  to  authorize, execute and deliver this Agreement  and  to
consummate  the transactions contemplated hereby and  to  perform
the acts contemplated on its part hereunder. This Agreement is  a
valid  and  legally binding agreement of the Company  enforceable
against  the Company in accordance with its terms except as  such
enforcement may be limited by bankruptcy, insolvency,  moratorium
or other similar laws affecting creditorsO rights generally or by
equitable principles.

                (v)   Except as the same shall have been made  or
obtained  at or prior to the Closing, and except for Form  D  and
related  state  securities law filings with  the  Securities  and
Exchange Commission and applicable state securities boards to  be
made  following the Closing, no notices, reports or other filings
are  required  to  be  made  by the Company  with,  nor  are  any
consents,  registrations,  approvals, permits  or  authorizations
required to be obtained by the Company from, any governmental  or
regulatory authority, agency, commission, court or other  entity,
domestic  or foreign (OGovernmental EntityO), in connection  with
the  execution and delivery of this Agreement by the Company, the
consummation  by  the  Company of the  transactions  contemplated
hereby  and the performance of the acts contemplated on the  part
of the Company hereunder.

                (vi) The execution and delivery of this Agreement
by the Company do not, and the consummation by the Company of the
transactions contemplated hereby and the performance of the  acts
contemplated  on  the  part of the Company  hereunder  will  not,
constitute  or  result  in (A) a breach or  violation  of,  or  a
default under, the Certificate of Incorporation or By-Laws of the
Company, or (B) a breach, violation or event triggering  a  right
of  termination of, or a default under, or the acceleration of or
the  creation  of  a  lien, pledge, security  interest  or  other
encumbrance  on assets (with or without the giving of  notice  or
the  lapse  of  time or both) pursuant to any provisions  of  any
agreement,  lease of real or personal property,  contract,  note,
mortgage,    indenture,   arrangement   or    other    obligation
(OContractsO)  of  the  Company or any law,  rule,  ordinance  or
regulation, agreement, instrument or judgment, decree,  order  or
award to which the Company is subject or any governmental or non-
governmental   authorization,  consent,  approval,  registration,
franchise, license or permit under which the Company conducts its
business.

                (vii)      No investment banker, broker or finder
is  entitled to any financial advisory, brokerage or finderOs fee
or  other similar payment from either the Investor or the Company
based  on  agreements, arrangements or undertakings made  by  the
Company  or  any  of  its  directors, officers  or  employees  in
connection with the transactions and acts contemplated hereby.

                (viii)     In furnishing information to  Investor
for  purposes  of  this Agreement, it has  not  made  any  untrue
statements of a material fact to Investor or omitted to  state  a
material fact necessary to make such statements not misleading to
Investor  in  light of the circumstances under  which  they  were
made.

          5B.  Representations by Investor

                The  Investor represents, warrants and agrees  as
follows:

                (i)   Investor is purchasing the Note and  Option
for its own account for the purpose of investment and not with  a
view  toward  the redistribution or resale of any  part  thereof.
Investor  has no present arrangement, understanding or  agreement
for transferring or disposing of the Note;

                (ii)  Investor is aware that the purchase of  the
Note and Option represent speculative investments;

                 (iii)       Before  executing  this   Agreement,
representatives  of Investor were furnished all information  with
respect to the Company that they requested and representatives of
Investor were given the opportunity to ask Company executives all
questions  that  such  representatives had  and  to  inspect  the
Company's operations as well as meet with the Company's principal
customers;

                (iv)  Investor confirms that it is an OAccredited
Investor,O  as such term is defined in Rule 501 of  Regulation  D
promulgated under the Securities Act;

               (v)  Investor confirms that it is able to bear the
economic  risk  inherent in its investment and  understands  that
there  currently  is  no, and that there may  not  ever  be  any,
private  or public market for the Note in the event that Investor
needs to liquidate its investment;

                (vi)  Investor agrees that it will not  offer  or
sell  the Note, Option or any of the shares of Common Stock  into
which the Note is convertible or which are issuable upon exercise
of  the Option unless the Note or such shares of Common Stock are
registered  under  the  Securities Act and under  all  applicable
state  securities  laws, unless Investor has established  to  the
reasonable  satisfaction of the Company that no such registration
is required;

                 (vii)       Investor  agrees  that   appropriate
restrictive  endorsements  will  be  placed  on  the   instrument
evidencing  the Note, Option and on the certificate(s) evidencing
the  shares  of Common Stock into which the Notes are convertible
or  which are issuable upon exercise of the Option to reflect the
foregoing  and  that  the  Company  will  give  appropriate  stop
transfer instructions to the person in charge of the transfer  of
its  securities, including the Note, Option and the Common Stock;
and

                (viii)    No investment banker, broker or  finder
is  entitled to any financial advisory, brokerage or finderOs fee
or  other similar payment from either the Investor or the Company
based  on  agreements, arrangements or undertakings made  by  the
Investor  or  any  of  its directors, officers  or  employees  in
connection with the transactions and acts contemplated hereby.

     6.   Registration Rights

           6A.   The  Investor  shall have the  following  demand
registration rights:

               (i)  Upon purchase of the Note, the Investor shall
have the right, by written notice to the Company, to require  the
Company to use its best reasonable efforts to file within  thirty
(30)  days thereafter a Form S-3 registration statement  for  all
shares of Common Stock issued or issuable upon conversion of  the
Note  and  exercise  of the Option owned by  the  Investor  (also
ODemand  Covered SharesO).  If a Form S-3 is not  available,  the
Company  will  attempt  to  use a  Form  S-2  or  other  Form  as
appropriate.

               (ii) The Company shall be entitled to defer filing
any such registration statement for a period of up to ninety (90)
days  after  such notice upon a good faith determination  by  the
CompanyOs  management that the filing of a registration statement
at  such  time  would be detrimental to the Company  due  to  the
pendency  of  a material acquisition or financing  or  for  other
reasonable cause. Investor may request that the Company  withdraw
any  such  registration  statement  at  any  time  prior  to  its
effectiveness;  provided  that, any such  withdrawn  registration
statement shall be treated as a completed registration fulfilling
the  obligations of the Company pursuant to this  section  unless
the Investor shall reimburse the Company for all of the CompanyOs
costs  and  expenses incurred in connection with  such  withdrawn
registration  within  thirty  days  following  the   request   to
withdraw.

                 (iii)       The  Investor  may  elect  to   have
conversion of the Note and exercise of the Option contingent upon
a registration statement hereunder being declared effective.

               (iv) In the event a registration statement on Form
S-3 (or on another form at the Company's discretion) has not been
declared effective within one hundred fifty (150) days of demand,
then  for  each  thirty  (30)  day  period  thereafter  until   a
registration  statement becomes effective, the Company  shall  be
required to issue to Investor an additional five percent (5%)  of
the  shares  issuable upon conversion of such  Note  and  if  the
Option  has  been  exercised, five percent (5%) of  those  shares
also.

            6B.    The   Investor  shall  also  have  "piggyback"
registration rights.  If the Company proposes to sell  shares  of
Common Stock for its own account and to register the sale of such
shares  under the Securities Act, or if the Company  proposes  to
register  the sale of shares of Common Stock to be sold  for  the
account of any other shareholder Registration Statement, it shall
give written notice of such proposed registration to Investor  as
promptly  as  possible  and shall use its reasonable  efforts  to
include  in  the offering such number of shares of  Common  Stock
received by Investor upon conversion of the Note and exercise  of
the Option ("Piggyback Covered Shares") then owned by Investor as
Investor  shall request, within twenty-five (25) days  after  the
giving  of  such notice such offering to be upon the  same  terms
(including  method of distribution) as the securities being  sold
by  the  Company or any selling shareholder pursuant to any  such
offering.  The Company's obligation to include Piggyback  Covered
Shares  owned by Investor in any offering shall in all  cases  be
subject to the following limitations and qualifications:

                (i)   The Company shall not be required  to  give
notice   to  Investor  or  include  such  shares  in   any   such
registration  if the proposed registration is (A) a  registration
of  a stock option or compensation plan or of Common Stock issued
or  issuable  pursuant to any such plan, (B)  a  registration  of
Common Stock proposed to be issued in exchange for securities  or
assets of, or in connection with a merger or consolidation  with,
another  corporation,  or (C) to be on  a  form  of  registration
statement  for  which  the  Piggyback  Covered  Shares  are   not
eligible;

                (ii)  The Company may require that the number  of
Piggyback  Covered  Shares  requested  to  be  included  in  such
registration be reduced, or that all such shares be excluded from
any  such  registration,  if  it is advised  in  writing  by  its
managing  underwriter (or, if the offering is  not  underwritten,
upon  a  good  faith  determination by  the  Company's  board  of
directors) that such reduction or exclusion, as the case may  be,
is  necessary to avoid materially adversely affecting the  public
offering of the securities being offered by the Company.  If  the
Company  shall require such a reduction, Investor shall have  the
right to withdraw from the offering;

                (iii)      In the event that the number of shares
of  Common  Stock included in any registration is to  be  reduced
pursuant to Section 6B(ii):

                     (A)  If the registration in question is  one
initiated  by  the Company in order to allow the sale  of  Common
Stock  for the account of the Company, then any reduction in  the
number of shares to be included in such registration shall  first
affect only shares other than the shares the Company proposes  to
sell for its own account.

                     (B)  If the registration in question is  one
initiated  by  any  person  or persons  other  than  the  Company
exercising demand registration rights in order to allow the  sale
of  Common Stock for the account of such person or persons,  then
any  reduction  in  the number of shares to be included  in  such
registration shall first affect only shares other than the shares
of  Common Stock requested to be included by the person or person
initiating   the   registration  by  the   exercise   of   demand
registration  rights requested to be included in the registration
by Holders; and

                     (C)   Subject to subparagraphs (A)  and  (B)
above, in the event that the Company requires that the number  of
shares  to  be  included  in  a  registration  be  reduced,  such
reduction  shall  be  applied pro rata among all  parties  having
registration  rights  in  proportion  to  the  number  of  shares
requested to be registered by each.

                (iv) The Company shall not be required to include
any  Piggyback Covered Shares in any registration to  the  extent
that  the  inclusion thereof would result in a reduction  in  the
number of shares requested to be included in the registration  by
the  person  or  persons (including the Company)  initiating  the
registration in question or would reduce the per share  price  of
the offering.

                (v)  The Company may, in its sole discretion  and
without  the  consent  of  Investor, withdraw  such  registration
statement and abandon the proposed offering in which Investor had
requested to participate.

           6C.   In  connection  with a registration  of  Covered
Shares  undertaken by the Company pursuant to this  Part  6,  the
Company shall:

                (i)   prepare  and file with the Commission  such
amendments and supplements to such registration statement and the
prospectus  used in connection therewith as may be  necessary  to
keep such registration statement current as long as is reasonably
possible  as  Investor  shall request  and  to  comply  with  the
provisions of the Securities Act with respect to the sale of  all
Covered Shares covered by such registration statement during such
period;

                (ii) provide Investor a reasonable opportunity to
review  prior to filing any registration statement filed  by  the
Company  in  connection with a registration in which Investor  is
participating, any amendments or supplements to such registration
statement and any prospectus used in connection therewith;

                (iii)      furnish  to Investor  such  number  of
conformed copies of such registration statement and of each  such
amendment  and  supplement thereto (in each  case  including  all
exhibits),  such number of copies of the prospectus  included  in
such  registration statement, in conformity with the requirements
of  the Securities Act, and such other documents as Investor  may
reasonably request in order to facilitate the sale of the Covered
Shares covered by such registration statement;

                (iv)  use its best efforts to register or qualify
the  Covered Shares covered by such registration statement  under
such  other securities or blue sky laws of such jurisdictions  as
Investor shall reasonably request, and do any and all other  acts
and  things  which may be reasonably necessary  or  advisable  to
enable  Investor to consummate the sale in such jurisdictions  of
such  shares;  provided that the Company shall not for  any  such
purpose  be  required to register or qualify the  covered  shares
covered  by  such  registration statement in any jurisdiction  in
which  the Common Stock is not then qualified for public trading,
to  qualify generally to do business as a foreign corporation  in
any jurisdiction wherein it would not but for the requirements of
this  section be obligated to be so qualified, to subject  itself
to  taxation  in any such jurisdiction or to consent  to  general
service of process in any such jurisdiction;

               (v)  notify Investor at any time when a prospectus
relating  to  the  Covered Shares covered  by  such  registration
statement  is required to be delivered under the Securities  Act,
of  the CompanyOs becoming aware that the prospectus included  in
such  registration  statement, as then  in  effect,  includes  an
untrue  statement  of  a  material fact or  omits  to  state  any
material fact required to be stated therein or necessary to  make
the   statements  therein  not  misleading  in   light   of   the
circumstances  then  existing, and at  the  request  of  Investor
promptly  prepare and furnish to Investor a reasonable number  of
copies  of  a  prospectus supplemented or  amended  so  that,  as
thereafter  delivered  to the purchasers  of  such  shares,  such
prospectus  shall not include an untrue statement of  a  material
fact  or  omit  to state a material fact required  to  be  stated
therein   or  necessary  to  make  the  statements  therein   not
misleading in light of the circumstances then existing;

                (vi)  use  its best efforts to cause all  of  the
Covered  Shares  included in such registration  statement  to  be
listed  on  each securities exchange on which securities  of  the
same  class  issued by the Company are then listed or,  if  there
shall  then  be no such listing, to be accepted for quotation  on
NASDAQ;

                (vii)      provide a transfer agent and registrar
for the Covered Shares covered by such registration statement not
later than the effective date of such registration statement; and

          6D.  For as long as Investor shall continue to hold any
Covered Shares, the Company shall use reasonable efforts to file,
on  a  timely  basis,  all annual, quarterly  and  other  reports
required  to  be filed by it under Sections 13 and 15(d)  of  the
Exchange  Act,  and the rules and regulations of  the  Commission
thereunder,  as amended from time to time. In the  event  of  any
proposed sale of Covered Shares by Investor pursuant to Rule  144
(or  any  successor rule) under the Securities Act,  the  Company
shall  cooperate with Investor so as to enable such sales  to  be
made  in  accordance with applicable laws, rules and regulations,
the  requirements  of  the  CompanyOs transfer  agents,  and  the
reasonable requirements of the broker through which the sales are
proposed to be executed.

           6E.   The  costs  and  expenses  of  any  registration
effected  pursuant to this Part 6 shall be allocated as  provided
in this Section 6E:

                 (i)   "Registration  Expenses"  shall  mean  all
expenses incurred by the Company in complying with this  Part  6,
including,  without  limitation, all registration,  qualification
and filing fees, printing expenses, escrow fees, transfer agents'
and  registrars' fees, fees and disbursements of counsel for  the
Company,  blue  sky  fees  and  expenses,  and  the  expense  the
Company's  accountants, including the cost of any special  audits
incident  to or required by any such registration (but  excluding
the  compensation of regular employees of the Company which shall
be paid in any event by the Company);

                 (ii)   "Selling   Expenses"   shall   mean   all
underwriting discounts and selling commissions applicable to  the
sale and all fees and disbursements of counsel for any holder;

                (iii)      In  connection with  any  registration
pursuant  to  Section 6A, the company shall pay all  Registration
Expenses and Investor shall pay all Selling Expenses;

               (iv) In connection with any registration initiated
by the Company in which Investor participates pursuant to Section
6B, the Company or other person initiating the registration shall
pay all Registration Expenses, and Investor shall pay all Selling
Expenses  attributable to the inclusion in the  offering  of  the
Covered Shares being sold by Investor.

           6F.   In the case of the registration effected by  the
Company  pursuant to this part, the Company agrees  to  indemnify
and  hold  harmless  Investor, each underwriter  of  the  Covered
Shares  so  registered  and each person  who  controls  any  such
underwriter  within the meaning of Section 15 of  the  Securities
Act,  against any and all losses, claims, damages or  liabilities
to  which  they  or  any  of them may become  subject  under  the
Securities Act or any other statute or common law, including  any
amount  paid  in  settlement  of  any  litigation,  commenced  or
threatened,  if  such  settlement is effected  with  the  written
consent  of the Company, and to reimburse them for any  legal  or
other  expenses incurred by them in connection with investigating
any claims and defending any actions, insofar as any such losses,
claims, damages, liabilities or actions arise out of or are based
upon  (i) any untrue statement or alleged untrue statement  of  a
material fact contained in the registration statement relating to
the  sale  of the Covered Shares, or any post-effective amendment
thereto,  or the omission or alleged omission to state therein  a
material fact required to be stated therein or necessary to  make
the  statements  therein  not  misleading,  or  (ii)  any  untrue
statement  or  alleged  untrue  statement  of  a  material   fact
contained  in  any preliminary prospectus, if used prior  to  the
effective  date of such registration statement, or  contained  in
the  final prospectus (as amended or supplemented if the  Company
shall  have  filed with the Commission any amendment  thereof  or
supplement  thereto) if used within the period during  which  the
Company  is required to keep the registration statement to  which
such  prospectus  relates  current, or the  omission  or  alleged
omission  to state therein (if so used) a material fact necessary
in  order  to  make  the  statements therein,  in  light  of  the
circumstances  under  which  they  were  made,  not   misleading;
provided,  however, that the indemnification agreement  contained
in  this  section  shall not (x) apply to  such  losses,  claims,
damages,  liabilities or actions arising out of, or  based  upon,
any  such  untrue statement or alleged untrue statement,  or  any
such  omission or alleged omission, if such statement or omission
was  made  in  reliance upon and in conformity  with  information
furnished  in  writing  to  the  Company  by  Investor  or   such
underwriter  for  use in connection with the preparation  of  the
registration  statement,  any  preliminary  prospectus  or  final
prospectus  contained  in  the  registration  statement,  or  any
amendment  or supplement thereto, or (y) inure to the benefit  of
any  underwriter  or any person controlling such underwriter,  if
such  underwriter  failed to send or give a  copy  of  the  final
prospectus to the person asserting the claim at or prior  to  the
delivery  of  certificates  representing  Covered  Shares  or  of
written confirmation of the sale of Covered Shares to such person
and  if  the  untrue  statement or omission  concerned  had  been
corrected in such final prospectus.

           6G.   In  the case of a registration effected  by  the
Company  pursuant to this part, Investor and each underwriter  of
the  Covered  Shares to be registered shall  agree  in  the  same
manner and to the same extent as set forth above to indemnify and
hold  harmless the Company, each person who controls the Company,
the  directors of the Company and those of its officers who shall
have signed any such registration statement, with respect to  any
untrue  statement or alleged untrue statement in, or omission  or
alleged  omission from, such registration statement or any  post-
effective  amendment  thereto or any  preliminary  prospectus  or
final  prospectus (as amended or as supplemented, if  amended  or
supplemented   as  aforesaid)  contained  in  such   registration
statement,  if  such statement or omission was made  in  reliance
upon  and in conformity with information furnished in writing  to
the  Company  by  Investor or any such  underwriter  for  use  in
connection with the preparation of such registration statement or
any  preliminary prospectus or final prospectus contained in such
registration  statement  or  any  such  amendment  or  supplement
thereto.

           6H.   Each  indemnified party shall,  with  reasonable
promptness   after  its  receipt  of  written   notice   of   the
commencement  of  any  action against such indemnified  party  in
respect  of  which indemnity may be sought from  an  indemnifying
party  on  account  of an indemnity agreement contained  in  this
part,   notify   the  indemnifying  party  in  writing   of   the
commencement  thereof. In case any such action shall  be  brought
against  any  indemnified  party  and  it  shall  so  notify   an
indemnifying  party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent
it  may wish, jointly with any other indemnifying party similarly
notified,  to assume the defense thereof with counsel  reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its  election  so
to  assume the defense thereof, the indemnifying party shall  not
be liable to such indemnified party under this part for any legal
or other expenses subsequently incurred by such indemnified party
in  connection  with  the defense thereof other  than  reasonable
costs  of  investigation. The indemnity agreements in  this  part
shall  be  in  addition to any liabilities that the  indemnifying
parties may have pursuant to law.

           6I.   If the indemnification provided for in this part
shall  be  unavailable to or insufficient  to  hold  harmless  an
indemnified party under sections above in respect of any  losses,
claims,  damages  or liabilities (or actions in respect  thereof)
referred   to  therein,  then  the  indemnifying  parties   shall
contribute  to  the  amount paid or payable by  such  indemnified
party  as a result of such losses, claims, damages or liabilities
(or  actions  in  respect  thereof) in such  proportions  as  are
appropriate to reflect to the relative benefits received  by  the
respective indemnifying parties from the offering of the  Covered
Shares.  If,  however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law, or if  the
indemnified  party  failed  to give  the  notice  required  under
section  6H  above, then each indemnifying party shall contribute
to  such  amount paid by or payable by such indemnified party  in
such  proportion  as  is  appropriate to reflect  not  only  such
relative benefits but also the relative fault of the indemnifying
parties  in  connection with the statements  or  omissions  which
resulted  in  such  losses, claims, damages  or  liabilities  (or
actions  in  respect  thereof) as  well  as  any  other  relevant
equitable considerations. The relative benefits received  by  the
indemnifying parties shall be deemed to be in the same proportion
as  the  net  proceeds to any such party bear to  the  total  net
proceeds  from  the  offering  before  deducting  expenses.   The
relative  fault shall be determined by reference to, among  other
things,  whether  the  untrue or alleged untrue  statement  of  a
material  fact  or the omission or alleged omission  to  state  a
material  fact relates to information supplied by the  respective
indemnifying  party and the partiesO relative intent,  knowledge,
access to information and opportunity to correct or prevent  such
statement  or  omission.  Provided in no event  shall  Investor's
liability pursuant to these indemnity provisions be greater  than
the amount paid for the Note and shares of Common Stock purchased
pursuant to this Agreement and the Exhibits.

     7.   Miscellaneous

           7A.   Successors  and  Assigns.  Except  as  otherwise
expressly provided herein, all covenants and agreements contained
in  this  Agreement by or on behalf of any of the parties  hereto
will  bind  and inure to the benefit of the respective successors
and  assigns of the parties hereto whether so expressed  or  not;
provided  that, the registration rights granted to  the  Investor
shall not be transferred or assigned by Investor.

           7B.   Severability.  Whenever possible, each provision
of  this  Agreement will be interpreted in such manner as  to  be
effective and valid under applicable law, but if any provision of
this  Agreement  is  held to be prohibited by  or  invalid  under
applicable  law, such provision will be ineffective only  to  the
extent  of  such prohibition or invalidity, without  invalidating
the remainder of this Agreement.

           7C.   Counterparts.  This Agreement  may  be  executed
simultaneously in two or more counterparts, any one of which need
not  contain the signatures of more than one party, but all  such
counterparts  taken together will constitute  one  and  the  same
Agreement.

          7D.  Descriptive Headings.  The descriptive headings of
this  Agreement  are inserted for convenience  only  and  do  not
constitute a part of this Agreement.

           7E.   Governing  Law;  Venue.  The  corporate  law  of
Delaware will govern all issues concerning the relative rights of
the  Company and its stockholders. All other questions concerning
the  construction, validity and interpretation of this  Agreement
and  the  exhibits, including the Note and Option, and  schedules
hereto  will be governed by the internal law, and not the law  of
conflicts,  of Delaware. It is the intention of the parties  that
proper  venue for any action, suit or proceeding arising pursuant
to   this  Agreement  or  in  connection  with  the  transactions
contemplated herein shall be in Delaware.  Each party agrees that
any  such  action, suit or proceeding shall be brought  before  a
state  or  federal  court sitting in the State  of  Delaware  and
waives  any  objection to venue in such court. Each party  waives
the  right  to  demand a jury in any action, suit  or  proceeding
arising pursuant to this Agreement.

            7F.    Notices.   All  notices,  demands   or   other
communications to be given or delivered under or by reason of the
provisions  of this Agreement (other than notice of a  telephonic
meeting  of the CompanyOs board of directors, which may be  given
by  telephone) will be in writing and will be deemed to have been
given either when delivered personally or three (3) business days
after  having been mailed by certified or registered mail, return
receipt  requested  and postage prepaid, to the  recipient.  Such
notices,  demands and other communications will be  sent  to  the
Investor and to the Company at the address indicated below:

If to the Company:

Electrosource, Inc.
2809 Interstate 35 South
San Marcos, Texas 78666
Attention:  President

With a copy to:

Bret Van Earp
Attorney-at-Law
100 Congress Avenue, Suite 1800
Austin, Texas 78701




If to the Investor:

Corning Incorporated
Attn:  Howard Zingler, Vice President
MP-BH-03-1
Corning, New York 14831

or to such other address or to the attention of such other person
as  the recipient party has specified by prior written notice  to
the sending party.

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


ELECTROSOURCE, INC.                CORNING INCORPORATED



By:     /s/                        By:       /s/
  Michael G. Semmens                  Howard J. Zingler
  President, CEO and                  Vice President, Finance
  Chairman of the Board               & Bus. Dev.



                            EXHIBIT A

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

Dated March 27, 1997                                $4,000,000.00

       FOR   VALUE  RECEIVED,  Electrosource,  Inc.,  a  Delaware
corporation (the OCompanyO), hereby promises to pay to the  order
of Corning Incorporated, a New York corporation (OCorningO or the
Ooriginal  holderO),  the principal sum of Four  Million  Dollars
($4,000,000.00)  together with interest thereon  calculated  from
the date hereof, in accordance with the provisions of this Note.

     This Note is the 5% Convertible Promissory Note (the ONoteO)
issued pursuant to a Note Purchase and Option Agreement dated  as
of March 27, 1997, between the Company and Corning (the OPurchase
AgreementO). The Purchase Agreement contains terms governing  the
rights  and  obligations of the holder  of  this  Note,  and  all
provisions of the Purchase Agreement are incorporated  herein  by
reference.  Unless otherwise indicated herein, capitalized  terms
used  in  this  Note have the same meanings as set forth  in  the
Purchase Agreement.

Part 1.   Payment of Interest

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

      lB.   Payment  Dates. On September 27, 1997,  and  on  each
subsequent  September 27 and March 27 (each of which dates  shall
be a OPayment DateO), all unpaid interest that has accrued on the
unpaid principal amount of this Note on and prior to such Payment
Date or on any overdue interest on this Note shall become due and
payable.

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

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

Part 2.   Payment of Principal

      2A.   Payment  upon Maturity. The entire  unpaid  principal
amount hereof shall be due and payable on March 27, 2002.

      2B.  Prepayment.  The Company may prepay all or any part of
this  Note  at any time in One Hundred Thousand Dollar ($100,000)
increments.   The  Company shall give not less than  thirty  (30)
days prior written notice of its intention to prepay this Note.

Part 3.   Registration of Transfer

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

Part 4.   Replacement

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

Part 5.   Cancellation

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

Part 6.   Waiver of Notice, etc.

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

Part 7.   Events of Default

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

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

          (ii) the Company makes an assignment for the benefit of
creditors  or  admits in writing its inability to pay  its  debts
generally as they become due; or an order, judgment or decree  is
entered  adjudicating the Company bankrupt or insolvent;  or  the
Company  petitions or applies to any tribunal for the appointment
of  a  trustee, receiver or liquidator of the Company or  of  any
substantial  part of the assets of the Company, or commences  any
proceeding  under  any  bankruptcy, reorganization,  arrangement,
insolvency, readjustment of debt, dissolution or liquidation  law
of  any  jurisdiction;  or any such petition  or  application  is
filed,  or  any such proceeding is commenced against the  Company
and  either the Company takes any action indicating its  approval
thereof,  consent  thereto,  or  acquiescence  therein  or   such
petition,  application  or proceeding  is  not  dismissed  within
ninety (90) days;

          (iii)     the sale by the Company of a material part of
the  business or assets of the Company other than in the ordinary
course of business;

           (iv)  the  taking,  closing or  nationalization  of  a
material  part  of  the  business or assets  of  the  Company  by
governmental  or legal action.  A "material part of the  business
or  assets of the Company" means more than one-third of the gross
assets  of  the  Company as set forth in its most recent  audited
consolidated financial statements;

           (v)  any representation or warranty of the Company set
forth  in the Purchase Agreement is shown to be, or becomes false
or untrue as of the date of this Note.

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

Part 8.   Conversion

     8A.  Conversion Procedure.

           (i)   The holder of this Note may convert all  or  any
portion  of the outstanding principal amount hereof (plus accrued
but  unpaid interest on such principal amount or portion thereof)
held  by  such  holder into a number of shares of  the  CompanyOs
Common  Stock computed by dividing the principal amount  of  this
Note  (plus accrued but unpaid interest thereon) to be  converted
by the OConversion PriceO (as defined below in Part 8B).

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

           (iii)      As soon as possible after a conversion  has
been effected (but in any event within three (3) business days in
the case of subparagraph (a) below), the Company will deliver  to
the converting holder:

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

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

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

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

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

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

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

      8B.   Conversion Price. The Conversion Price shall be  Five
and  50/100 Dollars ($5.50).  In order to prevent dilution of the
conversion rights granted under this part 8, the Conversion Price
will  be subject to adjustment from time to time pursuant to this
part  8;  provided that the Conversion Price will in no event  be
less than One and No/100 Dollars ($1.00), the par value.

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

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

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

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

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

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

Part 9.   Amendment and Waiver

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

Part 10.  Notices

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

      IN  WITNESS WHEREOF, the Company has executed and delivered
this Note on March 27, 1997.

ELECTROSOURCE, INC.



By:    
  James M. Rosel
  Vice President Finance
  and General Counsel



                           EXHIBIT B

                                           Date of Grant:  March 27, 1997

                       ELECTROSOURCE, INC.
                     STOCK OPTION AGREEMENT

     THIS   OPTION  HAS  NOT  BEEN  REGISTERED   UNDER   THE
     SECURITIES  ACT  OF 1933, AS AMENDED  (THE  OACTO),  OR
     UNDER  THE  SECURITIES  LAWS OF ANY  STATE  (OBLUE  SKY
     LAWSO),  AND  MAY  NOT BE SOLD OR  TRANSFERRED  IN  THE
     ABSENCE  OF  AN EFFECTIVE REGISTRATION STATEMENT  UNDER
     THE   ACT  OR  DELIVERY  TO  THE  COMPANY  OF  EVIDENCE
     SATISFACTORY  TO  THE COMPANY TO  THE  EFFECT  THAT  AN
     EXEMPTION FROM REGISTRATION THEREUNDER IS AVAILABLE.

Corning Incorporated
Corning, New York 14831


          The undersigned, Electrosource, Inc. (the "Company"), a
Delaware corporation, for good and valuable consideration desires
to  grant  to  Corning Incorporated ("Corning"  or  "Holder")  an
option  to  acquire shares of Common Stock in the  Company.   The
option covered hereby is granted pursuant to the terms of a  Note
Purchase and Option Agreement ("Purchase Agreement") dated as  of
March  27,  1997  between  the  Company  and  Corning,  and   all
provisions   of  that  Agreement  are  incorporated   herein   by
reference.  Defined terms shall have the same meaning as  in  the
Purchase Agreement.

      1.    Option.  The Company does hereby grant to Corning the
exclusive option to purchase from the Company all or any part  of
an aggregate of Five Hundred Thousand (500,000) shares ("shares")
of  Common  Stock of the Company.  The exercise prices  shall  be
Seven  and  No/100  Dollars ($7.00) per  share  for  Two  Hundred
Seventy-five  Thousand  (275,000)  shares  and  Nine  and  No/100
Dollars  ($9.00)  per share for Two Hundred Twenty-five  Thousand
(225,000) shares.

      2.   Term.  The Option shall be exercisable as provided  in
the  Purchase Agreement and otherwise at any time or times  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 or any part thereof,
Corning 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.  Exercise  of  the
option may be made in multiple parts, but in amounts of at  least
Five Hundred Thousand and No/100 Dollars ($500,000) per exercise.

      4.    Share  Issue.  Upon receipt by the Company of  proper
notice  of  exercise of this Option, the Company as  promptly  as
practicable  and subject to the other provisions in this  Option,
shall  deliver a certificate or certificates representing  shares
so  purchased,  and shall pay all original issuance  or  transfer
taxes  on  the  exercise of this Option, 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 Purchase Agreement.

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

     6.   Reorganization, Reclassification, Consolidation, Merger
or  Sale.  Any  reorganization, reclassification,  consolidation,
merger  or  sale  of all or substantially all  of  the  CompanyOs
assets  to  another entity which is effected in such a  way  that
holders  of Common Stock are entitled to receive (either directly
or  upon  subsequent liquidation), stock, securities  or  amounts
with  respect to or in exchange for Common Stock is  referred  to
herein  as an OOrganic Change.O Prior to the consummation of  any
Organic Change, the Company will make appropriate provisions  (in
form  and substance satisfactory to the holder of the outstanding
principal  amount of the Option then outstanding) to insure  that
the  holder  of the Option will thereafter (for so long  as  such
holder  has the right to exercise the Option) have the  right  to
receive, in lieu of or in addition to the shares of Common  Stock
immediately theretofore issuable upon the exercise of the Option,
such  shares of stock, securities or assets as such holder  would
have  received  in connection with such Organic  Change  if  such
holder had exercised the Option immediately prior to such Organic
Change.  In  any  such  case, the Company will  make  appropriate
provisions (in form and substance satisfactory to the  holder  of
the  Option)  to insure that the provisions of this part  6  will
thereafter (for so long as such holder has the right to  exercise
the Option) be applicable to the Option.

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

ELECTROSOURCE, INC.                CORNING INCORPORATED



By:                                By:
  James M. Rosel
  Vice President Finance           Printed Name:
  and General Counsel
                                   Its: