SECURITIES AND EXCHANGE COMMISSION
                    Washington, D. C.  20549
___________________________________________________________

                        SCHEDULE 13D
                              
          Under the Securities Exchange Act of 1934
                              
                     ELECTROSOURCE, INC.
                      (Name of Issuer)
                              
             Common Stock, par value $1.00 per share
                 (Title of Class of Securities)

                          286150  20  6
                         (CUSIP Number)

                      William C. Ughetta
                    Senior Vice President &
                         General Counsel
                      Corning Incorporated
                     One Riverfront Plaza
                       Corning, NY  14831
                   Telephone:  (607) 974-9000
(Name, Address and Telephone Number of Person Authorized to Receive Notices
                         and Communications

                           March 27, 1997
    (Date of Event which Requires Filing of this Statement)
    ____________________________________________________________
                               
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d1(b)(3) or (4), check the following box  [    ].


CUSIP No.: 286150  20  6

(1)  Names of Reporting Persons S. S. or I.R.S. Identification No. of Above
     Persons
     
     Corning Incorporated
     I.R.S. Identification No.:  16-0393470

(2)  Check the Appropriate Box if a Member of a Group (See
     Instructions)
     
   (a)  ___________________________________________________
                               
   (b)  ___________________________________________________
                               
                               
(3)  SEC Use Only _____________________________________________


(4)  Source of Funds (See Instructions):     WC


(5)  Check if Disclosure of Legal Proceedings is Required
     Pursuant to Items 2(d) or 2(e)
     ________________________________________________________

(6)  Citizenship or Place of Organization:   New York

 Number of          (7) Sole Voting Power:   1,227,273
  Shares
Beneficially        (8) Shared Voting Power:      0
 Owned by
   Each             (9) Sole Dispositive Power:   1,227,273
 Reporting
  Person            (10) Shared Dispositive Power:     0
   With

(11) Aggregate Amount Beneficially Owned by Each Reporting
     Person:
          1,227,273 shares of Common Stock

(12) Check if the Aggregate Amount in Row (11) Excludes Certain
     Shares (See Instructions)
     _________________________________________________________

(13) Percent of Class Represented by Amount in Row (11):
     Approximately 23.6%

(14) Type of Reporting Person (See Instructions):      CO


Item 1.   Security and Issuer.

     This statement relates to the Common Stock, par value
     $1.00 per share ("Common Stock") of Electrosource, Inc.
     (the "Issuer").

     Issuer:   Electrosource, Inc.

     Principal executive Offices:  2809 Interstate 35 South
                                   San Marcos, Texas  78666

Item 2.   Identity and Background.

     The person filing this statement is Corning Incorporated,
     a New York corporation ("Corning"), with principal offices
     located at One Riverfront Plaza, Corning, New York  14831.
     Information relating to Corning's business is described in
     Item 1 of Corning's Form 10-K for the fiscal year ended
     December 31, 1996, which such Item 1 is hereby
     incorporated by reference herein.

Item 3.   Source and Amount of Funds or Other Consideration.

     For purposes of the federal securities laws, Corning is
     presently the beneficial owner of 1,227,273 shares of the
     Issuer's Common Stock as a result of Corning and the
     Issuer entering into (i) a Note Purchase and Option
     Agreement, dated March 27, 1997 (the "Note Purchase
     Agreement"), whereby the principal amount of the
     Promissory Note issued thereunder may be converted into
     727,273 shares of Common Stock and (ii) a Stock Option
     Agreement, dated March 27, 1997 (the "Stock Option
     Agreement"), whereby Corning has the option to purchase
     from the Issuer 500,000 shares of Common Stock.  The
     source of funds was and is expected to be Corning's working capital.

Item 4.   Purpose of Transaction.

     Corning has entered into the transactions for investment
     purposes.  Corning has no plans or proposals which relate
     to or would result in any of the matters referred to in
     paragraphs (a) through (j) of Item 4 of Schedule 13D.
     Corning reserves the right to review or reconsider its
     position with respect to any such matters.
     
Item 5.   Interest in Securities of the Issuer.

     (a)  Corning, for the purposes of the federal securities
     laws, is presently the beneficial owner of 1,227,273
     shares of the Issuer's Common Stock as a result of Corning
     and the Issuer entering into the Note Purchase Agreement
     and the Stock Option Agreement.

     (b)  Corning has the sole power to vote and sole power to
     dispose of the shares of the Issuer's Common Stock set
     forth in Paragraph (a) above.

     (c)  Except as set forth in paragraph (a) above, no
     transactions in the Common Stock of the Issuer were
     effected during the past 60 days by Corning.

     (d)  None

     (e)  Not applicable.

Item 6.  Contracts, Arrangements, Understandings or
         Relationships With Respect to Securities of the
         Issuer.
         
     Corning and Electrosource have entered into the Note
     Purchase Agreement and the Stock Option Agreement.  The
     Note Purchase Agreement and the Stock Option Agreement
     provide Corning with certain rights to cause the Issuer to
     register any shares of Common Stock acquired under the
     Note Purchase Agreement or the Stock Option Agreement.
     
Item 7.   Material to be Filed as Exhibits.

     1.   Note Purchase and Option Agreement, dated as of March
          27, 1997, between Corning Incorporated and
          Electrosource, Inc.

     2.   5% Convertible Promissory Note, issued March 27, 1997,
          to Corning Incorporated.

     3.   Stock Option Agreement, dated as of March 27, 1997.


                           SIGNATURE
                               
     After reasonable inquiry and to the best of my knowledge
and belief, I certify that the information set forth in this
statement is true, complete and correct.

                              CORNING INCORPORATED
Date:  May 19, 1997            By: /s/ A. John Peck, Jr.
                                   Name:  A. John Peck, Jr.
                                   Title: Secretary





EXHIBIT 1

              NOTE PURCHASE AND OPTION AGREEMENT
                               
     This Note Purchase and Option Agreement (the "Agreement")
is made  and  entered  into  as of March  27,  1997,  by  and
among Electrosource, Inc., a Delaware corporation (the
"Company"),  and Corning  Incorporated, a corporation organized
under the laws  of the State of New York (the "Investor").

     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 "Closing")  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 "Notes") 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  company's  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 "Material Adverse  Effect").  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 ("Preferred  Stock"),  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 creditors' 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 ("Governmental Entity"), 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 ("Contracts")  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 nongovernmental   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
finder's 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
"Accredited Investor,"  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
finder's 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 "Demand  Covered Shares").  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 Company's  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 Company's 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 Company's 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  Company's 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 parties' 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 Company's 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/ Michael G. Semmens      By: /s/ Howard J. Zingler
   Michael G. Semmens
   President, CEO and          Printed Name:  Howard J. Zingler
   Chairman of the Board       Its:  Vice President Finance &
                      							  Bus. Dev.



EXHIBIT 2

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

Dated March 27, 1997                                  $4,000,000.00

       FOR   VALUE  RECEIVED,  Electrosource,  Inc.,  a
Delaware corporation (the "Company"), hereby promises to pay to
the  order of Corning Incorporated, a New York corporation
("Corning" or the "original  holder"),  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
"Note") issued pursuant to a Note Purchase and Option Agreement
dated  as of March 27, 1997, between the Company and Corning
(the "Purchase Agreement"). The Purchase Agreement contains
terms governing  the rights  and  obligations of the holder  of
this  Note,  and  all provisions of the Purchase Agreement are
incorporated  herein  by reference.  Unless otherwise indicated
herein, capitalized  terms used  in  this  Note 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 "Payment Date"), all unpaid interest that has
accrued on the unpaid principal amount of this Note on and
prior to such Payment Date or on any 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  Company's register. Upon the
surrender of any Note or Notes at such  place, the  Company
shall, at the request of the holder of  such  Note, execute
and  deliver (at the Company's expense) a  new  Note  or Notes
in  exchange  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  Company's Common  Stock computed by dividing the
principal amount  of  this Note  (plus accrued but unpaid
interest thereon) to be  converted by the "Conversion Price"
(as defined below 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  Company's assets  to  another Person which is effected
in such a  way  that holders  of Common Stock are entitled to
receive (either directly or  upon  subsequent liquidation),
stock, securities  or  amounts with  respect to or in exchange
for Common Stock is  referred  to herein  as an "Organic
Change."  Prior to the consummation of  any Organic Change, the
Company will make appropriate provisions  (in form  and
substance satisfactory to the holders of a majority  of the
outstanding  principal amount of Notes then outstanding)  to
insure that each of the holders of Notes will thereafter (for
so long  as  such  holders have the right to convert  the
Notes  as provided in this part 8) have the right to receive,
in lieu of or in addition to the shares of Common Stock
immediately theretofore issuable upon the conversion of such
holder's Notes, such  shares of stock, securities or assets as
such holder would have received in  connection  with  such
Organic Change  if  such  holder  had converted his Notes
immediately prior to such Organic Change.  In any  such case,
the Company will make appropriate provisions  (in form  and
substance satisfactory to the holders of a majority  of the
outstanding  principal amount of Notes then outstanding)  to
insure that the provisions of this part 8 will thereafter (for
so long  as  such  holders have the right to convert  the
Notes  as provided in this part 8) be applicable to the Notes.
     
      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 holder's address as it  appears in the Note register
maintained pursuant to part 3 hereof (unless otherwise
indicated by any such holder).

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

ELECTROSOURCE, INC.



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



EXHIBIT 3

                                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  "ACT"),  OR
     UNDER  THE  SECURITIES  LAWS OF ANY  STATE  ("BLUE  SKY
     LAWS"),  AND  MAY  NOT BE SOLD OR  TRANSFERRED  IN  THE
     ABSENCE  OF  AN EFFECTIVE REGISTRATION STATEMENT  UNDER
     THE   ACT  OR  DELIVERY  TO  THE  COMPANY  OF  EVIDENCE
     SATISFACTORY  TO  THE COMPANY TO  THE  EFFECT  THAT  AN
     EXEMPTION FROM REGISTRATION THEREUNDER IS AVAILABLE.
     
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  Company's 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 "Organic
Change."  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:/S/ James M. Rosel          By: /s/ Howard J. Zingler
  James M. Rosel
  Vice President Finance       Printed Name: Howard J. Zingler
  and General Counsel          Its:  Vice President, Finance &
                                     Bus. Dev.