SCHEDULE 14A

                                 (Rule 14a-101)

                     INFORMATION REQUIRED IN PROXY STATEMENT

                            SCHEDULE 14A INFORMATION

                Proxy Statement Pursuant to Section 14(a) of the
               Securities Exchange Act of 1934 (Amendment No.   )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_]  Preliminary Proxy Statement
[_]  Confidential, For Use of the
     Commission Only (as permitted by Rule 14a-6(e)(2))
[X]  Definitive Proxy Statement
[_]  Definitive Additional Materials
[_]  Soliciting Material Under Rule 14a-12


                         Espey Mfg. & Electronics Corp.
--------------------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)



--------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)


Payment of Filing Fee (Check the appropriate box):

[X]  No fee required.
[_]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1)   Title of each class of securities to which transaction applies:

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2)   Aggregate number of securities to which transaction applies:

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3)   Per unit price or other underlying value of transaction  computed  pursuant
     to Exchange  Act Rule 0-11 (set forth the amount on which the filing fee is
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[_]  Fee paid previously with preliminary materials:

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[_]  Check box if any part of the fee is offset as provided by Exchange Act Rule
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     previously.  Identify the previous filing by registration statement number,
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     1)   Amount previously paid:

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     2)   Form, Schedule or Registration Statement No.:

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                         ESPEY MFG. & ELECTRONICS CORP.

                           ---------------------------
                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                          TO BE HELD NOVEMBER 30, 2007
                           ---------------------------

                                                                October 23, 2007

To the Shareholders of

     ESPEY MFG. & ELECTRONICS CORP.:

     You are cordially  invited to attend the Annual Meeting of  Shareholders of
Espey  Mfg.  &  Electronics  Corp.,  which  will be held  at The  Saratoga,  534
Broadway,  Saratoga  Springs,  New York,  on November  30,  2007,  at 9:00 a.m.,
Eastern Standard Time, for the following purposes:

          1.   To elect two  Class B  Directors  to serve for a three  year term
               expiring  at the 2010 Annual  Meeting or until  their  respective
               successors are duly elected and qualify; and

          2.   To ratify the  appointment  of  Rotenberg  & Company,  LLP as the
               Company's  independent  public  accountants  for the fiscal  year
               ending June 30, 2008; and

          3.   To approve  the  adoption of the Espey Mfg. &  Electronics  Corp.
               2007 Stock Option and Restricted Stock Plan.

     No other business may be transacted at the meeting.

     The Board of Directors  has fixed the close of business on October 9, 2007,
as the record  date for the  purpose of  determining  shareholders  entitled  to
notice of, and to vote at, said meeting or any  adjournment  thereof.  The books
for transfer of the Company's capital stock will not be closed.

     Even if you  expect to attend the  meeting  in  person,  it is urged by the
Company that you mark,  sign, date and return the enclosed proxy.  The proxy may
be revoked at any time before it is voted and  shareholders  who execute proxies
may  nevertheless  attend the  meeting  and vote their  shares in person.  Every
properly signed proxy will be voted as specified unless previously revoked.


                                            By Order of the Board of Directors,

                                                 /S/ PEGGY A. MURPHY

                                                    PEGGY A. MURPHY
                                                  Corporate Secretary


     Please make your  specification  and sign and date the  enclosed  proxy and
mail it promptly in the accompanying pre-addressed, postage-free envelope.



                         ESPEY MFG. & ELECTRONICS CORP.
                               233 Ballston Avenue
                        Saratoga Springs, New York 12866

                                 PROXY STATEMENT

     The  enclosed  proxy is solicited by the Board of Directors of Espey Mfg. &
Electronics Corp. (the "Company") for use in voting at the Annual Meeting of the
Shareholders of the Company to be held at The Saratoga,  534 Broadway,  Saratoga
Springs,  New York, on November 30, 2007, at 9:00 a.m.,  Eastern  Standard Time,
and at any  postponement or adjournment  thereof,  for the purposes set forth in
the  attached  Notice of Meeting.  It is  anticipated  that the Notice of Annual
Meeting  of  Shareholders,  this Proxy  Statement  and the form of proxy will be
mailed on or about October 23, 2007.

                       VOTING AND REVOCABILITY OF PROXIES

     Every  properly  dated,  executed and  returned  proxy will be voted at the
Annual Meeting in accordance  with the  instructions of the  shareholder.  If no
specific  instructions are given,  the shares  represented by such proxy will be
voted (i) For the  election of the Class B Directors  nominated  by the Board of
Directors,  (ii) For ratification of the appointment of Rotenberg & Company, LLP
as the Company's  independent public accountants for the fiscal year ending June
30, 2008 and (iii) For approval of the adoption of the Espey Mfg. &  Electronics
Corp.  2007 Stock Option and  Restricted  Stock Plan. Any  shareholder  giving a
proxy  has the power to revoke it at any time  prior to the  voting  thereof  by
voting  in  person  at the  Annual  Meeting,  by  giving  written  notice to the
Secretary prior to the Annual Meeting,  or by signing and delivering a new proxy
card bearing a later date.

     The Company's  only class of voting  securities  is its Common  Stock,  par
value  $.33-1/3  per share (the  "Common  Stock").  Each  share of Common  Stock
outstanding  on the record date will be entitled to one vote on all matters.  In
accordance with the Company's  By-Laws and applicable state law, the election of
directors  will be determined by a plurality of the votes cast by the holders of
shares of Common  Stock  present and entitled to vote  thereon,  in person or by
proxy, at the Annual Meeting.  Shares present which are properly  withheld as to
voting with respect to any one or more nominees, and shares present with respect
to which a broker  indicates  that it does not have  authority to vote  ("broker
non-vote")  will  not be  counted.  Cumulative  voting  in  connection  with the
election  of  directors  is  not  permitted.  The  affirmative  vote  of  shares
representing  a majority of the votes cast by the holders of shares  present and
entitled to vote is required to approve the other  matters to be voted on at the
Annual Meeting. Shares, which are voted to abstain and broker non-votes, are not
counted as votes cast on any matter to which they relate.

     The By-Laws of the Company  provide  that the majority of the shares of the
Common Stock of the Company issued and outstanding and entitled to vote, present
in person or by proxy, shall constitute a quorum at the Annual Meeting.  Shares,
which are voted to abstain,  are considered as present at the Annual Meeting for
the purposes of determining a quorum. Broker non-votes are considered as present
at the Annual Meeting for the purposes of determining a quorum.

                         RECORD DATE AND SHARE OWNERSHIP

     Only  holders of Common  Stock of record on the books of the Company at the
close of business  on October 9, 2007 will be  entitled to vote at the  meeting.
There were outstanding and entitled to vote on October 9, 2007, 2,317,750 shares
of Common Stock.

                                 PROPOSAL NO. 1

                              ELECTION OF DIRECTORS

     The Company's Certificate of Incorporation,  as amended,  provides that the
Board of  Directors  shall  consist  of not less  than  three nor more than nine
persons with the actual  number  determined  in  accordance  with the  Company's
bylaws.  The Certificate of  Incorporation  further provides that there shall be
three  classes  of  directors  (Class A,  Class B and Class C) with  overlapping
three-year  terms and that all  classes  shall be as  nearly  equal in number as
possible.

     The Board of Directors fixed the present number of directors at seven.  The
terms of two Class B Directors expire at the Annual Meeting. There are presently
two Class C Directors,  whose terms expire at the 2008 Annual Meeting, and three
Class A Directors, whose terms expire at the 2009 Annual Meeting.

     The Board of Directors  has  nominated two persons to stand for election as
Class B Directors.

     The votes will be cast  pursuant to the enclosed  proxy for the election of
each of the Class B nominees named unless specification is made withholding such
authority.  Each of the nominees is presently a director of the Company.  Should
any of said  nominees  for Class B Directors  become  unavailable,  which is not
anticipated,  the proxies named in the enclosed proxy will vote for the election
of such other persons as the Board of Directors may  recommend.  Proxies may not
be voted for a greater number of persons than the nominees named.



     The  names  and  business  experience  for the past  five  years of the two
persons who have been  nominated by the Board of Directors to stand for election
as Class B Directors at the Annual  Meeting and the  remaining  directors  whose
terms are continuing until the 2008 or 2009 Annual Meeting appear below.

     The Board has  determined  that the Board  members  with the  exception  of
Howard Pinsley and Barry Pinsley are  independent in accordance with the listing
standards of the American Stock Exchange and the Bylaws of the Company.

     The Board  determined  that the payments for  miscellaneous  legal services
made to the law firm  Langrock,  Sperry & Wool,  of which  Michael  W. Wool is a
Senior  Partner,  and  described  under the heading  "Certain  Relationship  and
Related  Transactions",  did not  prevent it from  concluding  that Mr.  Wool is
independent, because the amount of the payments constituting legal fees have not
exceeded $60,000 during any of the three previous years.

     The  independent  members of the Board met one time  during the fiscal year
ended June 30, 2007 with no members of management present.

     THE BOARD OF DIRECTORS  RECOMMENDS A VOTE FOR THE ELECTION OF THE FOLLOWING
NOMINEES FOR CLASS B DIRECTORS.

                  NOMINEES FOR CLASS B DIRECTORS -- SERVING FOR
              A THREE YEAR TERM EXPIRING AT THE 2010 ANNUAL MEETING


                                                                                          Period to
                             Offices and                                                     Date
                           Positions Held                                                 Served as
        Name          Age   with Company         Principal Occupation or Employment        Director
        ----          ---   ------------         ----------------------------------        --------
                                                                                 
Barry Pinsley (1) .... 66        --       Certified Public Accountant who for five           1994
                                          years acted as a consultant to the Company
                                          prior to his election as a Vice President-
                                          Special Projects on March 25, 1994. On
                                          December 6, 1997, Mr. Pinsley was elected
                                          to the position of Vice President-Investor
                                          Relations and Human Resources, from which
                                          he resigned on June 9, 1998. He continued as
                                          a non-executive officer through December 31,
                                          2005.  Mr.  Pinsley  was a  practicing
                                          Certified Public Accountant in Saratoga
                                          Springs, New York since 1975, and is
                                          currently semi-retired.

Seymour Saslow ....... 86        --       Mr. Saslow was Senior Vice President from          1992
                                          1992 until December 31, 1999. From 1973
                                          until being elected Senior Vice President, he
                                          served as Vice President. He joined the Company
                                          on July 22, 1952. Mr. Saslow graduated from the
                                          City College of New York in 1944 with a degree
                                          in electrical engineering and is a senior member
                                          of the Institute of Electrical and Electronics
                                          Engineers Inc. He holds many patents and serves
                                          on the board of several charitable
                                          organizations.


                  CONTINUING CLASS C DIRECTORS -- SERVING FOR A
               THREE YEAR TERM EXPIRING AT THE 2008 ANNUAL MEETING

                                                                                          Period to
                             Offices and                                                     Date
                           Positions Held                                                 Served as
        Name          Age   with Company         Principal Occupation or Employment        Director
        ----          ---   ------------         ----------------------------------        --------
                                                                                 

Paul J. Corr ......... 63        --       Certified Public Accountant who has been a         1992
                                          Principal, at Capital Financial Advisors of
                                          New York, LLC, Clifton Park, NY, since 2003.
                                          Mr. Corr is also a shareholder  in the Clifton
                                          Park, NY  accounting  firm of Rutnik & Corr, P.C.
                                          In May 2007 he retired from Skidmore College
                                          where he had been a Professor of Management
                                          and Business since 1981.



                                       2


                            CONTINUING CLASS C DIRECTORS -- SERVING FOR A
                        THREE YEAR TERM EXPIRING AT THE 2008 ANNUAL MEETING


                                                                                            Period to
                             Offices and                                                       Date
                           Positions Held                                                   Served as
        Name          Age   with Company         Principal Occupation or Employment          Director
        ----          ---   ------------         ----------------------------------          --------
                                                                                  

Michael W. Wool       61         --           Attorney engaged in private practice              1990
                                              of law and Senior Partner since 1982 in
                                              the law firm of Langrock, Sperry & Wool,
                                              with offices in Burlington, VT and
                                              Middlebury, VT. Mr. Wool also serves on
                                              the board of the New England Board of
                                              Higher Education and the Burlington Boys
                                              and Girls Club.


                            CONTINUING CLASS A DIRECTORS -- SERVING FOR A
                        THREE YEAR TERM EXPIRING AT THE 2009 ANNUAL MEETING

                                                                                            Period to
                             Offices and                                                       Date
                           Positions Held                                                   Served as
        Name          Age   with Company         Principal Occupation or Employment          Director
        ----          ---   ------------         ----------------------------------          --------
                                                                                  

Howard Pinsley (1)    67  President, Chief    Howard Pinsley has spent his entire career         1992
                          Executive Officer   with the Company. He served as Program
                          and Chairman of     Director prior to being elected Vice President
                          the Board           -Special Power Supplies on April 3, 1992.
                                              On December 6, 1996, Mr. Pinsley was
                                              elected to the position of Executive Vice
                                              President. On June 9,1998 he was elected to
                                              the positions of President and Chief Operating
                                              Officer. Subsequently he became Chief
                                              Executive Officer and Chairman of the Board.

Alvin O. Sabo         64         --           Attorney engaged in private practice of law        1999
                                              and Of Counsel to the law firm of Donohue,
                                              Sabo, Varley & Huttner, LLP in Albany, NY.
                                              He was a partner with a predecessor firm
                                              begining in 1980. Prior to that position, he was
                                              Assistant Attorney General, State of New York,
                                              Department of Law for eleven years.

Carl Helmetag         59         --           President and CEO of UVEX Sports Inc. in           1999
                                              Cranston, RI. From 1996 to 1999, he was
                                              President and CEO of HEAD USA Inc.
                                              Prior to that position, Mr. Helmetag was
                                              Executive Vice President and then President
                                              at Dynastar Inc. from 1978 to 1996. He is a
                                              MBA graduate from The Wharton School
                                              of Business, University of Pennsylvania.


----------

(1) Barry Pinsley and Howard Pinsley are cousins.

     None of the  directors  holds a  directorship  in any other  company with a
class of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or subject to the  requirements  of Section 15(d) of the  Securities
Act of 1933  or any  company  registered  as an  Investment  Company  under  the
Investment Company Act of 1940.

                                       3


     The only individuals currently considered executive officers of the Company
not identified previously are:

     James  Clemens,  58, Vice  President of Sales and  Marketing of the Company
since March 1, 2004. He was elected as an executive officer on May 19, 2006. Mr.
Clemens held various  positions  in the power  systems  industry for seven years
prior to joining the  Company.  From 1997 to 1999,  he was  President  and Chief
Executive Officer of Ling Electronics,  Inc., which was acquired by SatCon Power
Systems.  He then served as  Transition  Manager and  consultant to SatCon until
2003.

     Katrina L.  Sparano,  36,  Assistant  Treasurer  and  Principal  Accounting
Officer of the Company  since  November  12,  2004.  Ms.  Sparano is a Certified
Public  Accountant.  Prior to joining the Company on July 29, 2004,  she was the
Assistant Controller for Cambridge Heart, Inc.

     Peggy A. Murphy,  49, Secretary of the Company since December 11, 1998. She
has been  employed by the Company as Director of Human  Resources  since October
1998.

     David A. O'Neil,  42,  Treasurer  and  Principal  Financial  Officer  since
January 4, 2000.  Mr.  O'Neil is a Certified  Public  Accountant  who,  prior to
joining the Company, was a Senior Manager at the accounting firm of KPMG LLP.

     The terms of office of all  executive  officers  are until the next  annual
meeting of the Board of Directors unless  successors are sooner appointed by the
Board of Directors.

                   BOARD OF DIRECTORS MEETINGS AND COMMITTEES

     During  the  Company's  fiscal  year  ended  June 30,  2007,  the  Board of
Directors  held a total of four  meetings,  and  each  director  then in  office
attended  at least  75% of such  meetings.  Under  the  policies  of the  Board,
Directors  are  expected  to attend  regular  Board  meetings,  Board  committee
meetings,  as  applicable,  and  the  annual  stockholder  meeting.  All  of the
Company's directors attended the 2006 Annual Meeting.

     The Board has a standing  Audit  Committee  whose members are Paul J. Corr,
Chairman,  Alvin O. Sabo and Carl  Helmetag.  The  functions  of this  Committee
include reviewing the engagement of the independent  accountants,  the scope and
timing of the audit and any non-audit services to be rendered by the independent
accountants,  reviewing  with the  independent  accountants  and  management the
Company's policies and procedures with respect to internal auditing,  accounting
and financial controls, and reviewing the report of the independent  accountants
upon  completion of its audit.  During the fiscal year ended June 30, 2007,  the
Audit Committee held four meetings,  and each Committee member attended at least
75% of such meetings.

     The  Board has a  standing  Nominating  Committee  whose  members  are Carl
Helmetag,  Chairman,  Michael  Wool,  and Paul J.  Corr.  The  function  of this
Committee is to identify and recommend to the Board  individuals  for nomination
to fill  vacancies in, and for  renomination  to,  positions as Directors of the
Corporation.  During fiscal year ended June 30, 2007, the  Nominating  Committee
held one meeting and each Committee member attended the meeting.

     The Board has determined that all of the members of the Audit Committee and
the Nominating Committee meet the independence  criteria for audit committee and
nominating  committee  members  as set  forth in the  listing  standards  of the
American  Stock  Exchange.  The  Board  has  further  determined  that Mr.  Corr
qualifies as an audit committee financial expert in accordance with the rules of
the United States Securities and Exchange Commission ("SEC").

     The Board of Directors does not have a standing compensation  committee and
believes that it is not necessary to have such a committee because all directors
participate in the consideration of executive officer and director compensation.
Howard Pinsley,  President and Chief Executive Officer, makes recommendations to
the full  Board as to salary  increases  and  bonuses  for the  other  executive
officers and also advises the other directors as to salary increases and bonuses
to which he believes he is entitled based upon performance. Mr. Pinsley does not
participate in the Board's deliberations regarding his own compensation.

     The Board has a standing Stock Option  Committee  whose current members are
Paul J. Corr, Chairman, Howard Pinsley, and Barry Pinsley. The functions of this
Committee include  recommending to the full Board to whom, and the time or times
at which,  options  will be granted,  the number of shares of common  stock that
underlie  each option and the  exercise  price and vesting  schedule for options
granted  pursuant to the Company's  2000 Stock Option Plan.  The Committee  will
perform the same  function with respect to the Espey Mfg. &  Electronic's  Corp.
2007  Stock  Option  and  Restricted  Stock  Plan  if  it  is  approved  by  the
shareholders at the Annual Meeting.  During the fiscal year ended June 30, 2007,
the Stock Option  Committee held one meeting and each Committee  member attended
such meetings.

     The Board  also has a  Succession  Committee,  members of which are Paul J.
Corr,  Howard  Pinsley,  Alvin  O.  Sabo and  Michael  Wool  and a  Mergers  and
Acquisition  Committee,  members of which are Howard Pinsley,  Barry Pinsley and
Michael Wool.

                       NON-EMPLOYEE DIRECTOR COMPENSATION

     Company employees who also serve on the Company's Board of Directors do not
receive  director's  fees. The non-employee  Directors  receive an annual fee of
$21,000 for being a member of the Board of  Directors.  Each  Director  who also
serves as a member of the Audit  Committee is compensated  an additional  annual
fee of $5,000. Each Director who serves as a member of the Succession  Committee
or the Mergers and Acquisition Committee is compensated an additional $2,500 for
each committee. These fees are paid in monthly installments to the Directors.


                                       4


     The  following   table  sets  forth  the   compensation  of  the  Company's
non-employee Directors for the fiscal year ending June 30, 2007:

                        Fees Earned or    Option        All Other
                         Paid in Cash     Awards      Compensation    Total
     Name                     ($)       ($)(a),(c)       ($)(b)        ($)
     ----                ------------   ----------    ------------   -------
     Seymour Saslow         $21,000       $3,890         $5,752      $30,642
     Barry Pinsley          $23,500       $5,446         $7,566      $36,512
     Michael W. Wool        $26,000       $6,224         $5,824      $38,048
     Paul J. Corr           $28,500       $7,780             --      $36,280
     Alvin O. Sabo          $28,500       $5,446             --      $33,946
     Carl Helmetag          $26,000       $5,446             --      $31,446

     -------------------
     (a)  Represents  the  dollar  amount  recognized  for  financial  statement
          reporting purposes with respect to the fiscal year ended June 30, 2007
          in  accordance  with  FAS  123(R).  For  information   concerning  the
          assumptions  made  in the  valuation  of  awards,  see  Note 12 of our
          financial statements for the fiscal year ended June 30, 2007.

     (b)  Represents  the amount  reported to  Directors as income in respect of
          Company  provided health insurance for fiscal year ended June 30, 2007
          and in the case of Mr.  Barry  Pinsley  this  amount  includes  earned
          income on his account in the Company's ESOP.

     (c)  The non-employee  Directors held the following  unexercised options at
          fiscal year end 2007:

                          Number of       Number of
                         Securities      Securities
                         Underlying      Underlying       Option        Option
                         Unexercised     Unexercised     Exercise     Expiration
                           Options         Options         Price         Date
                              #               #              $
     Name                Exercisable    Unexercisable
     ----                -----------    -------------    --------     ----------
     Paul J. Corr           1200                          $11.25       8/20/2014
                                            2000          $17.36      10/13/2015
                                            2000          $17.80       5/19/2016
                                            2000          $18.29       2/21/2017

     Carl Helmetag           800                          $ 9.93        3/1/2012
                             800                          $ 9.25        3/4/2013
                             800                          $11.25       8/20/2014
                                            1400          $17.36      10/13/2015
                                            1400          $17.80       5/19/2016
                                            1400          $18.29       2/21/2017

     Barry Pinsley                          1400          $17.36      10/13/2015
                                            1400          $17.80       5/19/2016
                                            1400          $18.29       2/21/2017

     Alvin O. Sabo          1000                          $11.25       8/20/2014
                                            1800          $17.36      10/13/2015
                                            1400          $17.80       5/19/2016
                                            1400          $18.29       2/21/2017

     Seymour Saslow         1000                          $ 9.25        3/4/2013
                            1000                          $11.25       8/20/2014
                                            1000          $17.36      10/13/2015
                                            1000          $17.80       5/19/2016
                                            1000          $18.29       2/21/2017

                                       5


                                       Option Awards
                          Number of       Number of
                         Securities      Securities
                         Underlying      Underlying       Option        Option
                         Unexercised     Unexercised     Exercise     Expiration
                           Options         Options         Price         Date
                              #               #              $
     Name                Exercisable    Unexercisable
     ----                -----------    -------------    --------     ----------
     Michael W. Wool        1000                           $ 8.98       3/1/2011
                            1000                           $ 9.93       3/1/2012
                            1000                           $ 9.25       3/4/2013
                            1000                           $11.25      8/20/2014
                                            1600           $17.36     10/13/2015
                                            1600           $17.80      5/19/2016
                                            1600           $18.29      2/21/2017

                       COMPENSATION OF EXECUTIVE OFFICERS

     The following  table  summarizes  the annual  compensation  for each of the
fiscal  years ended June 30, 2007 and June 30,  2006  received by the  Company's
principal  executive  officer  and the  Company's  two most  highly  compensated
executive officers other than the principal  executive officer who received over
$100,000  in  total  compensation  for the  fiscal  year  ended  June  30,  2007
(collectively, the "Named Executive Officers"):

                           SUMMARY COMPENSATION TABLE


                                                         Option       All Other
          Name and                  Salary     Bonus   Awards (a)  Compensation (b)   Total
     Principal Position     Year       $         $          $             $             $
     ------------------     ----   --------   -------    -------   ---------------  --------
                                                                  
     Howard Pinsley         2007   $206,048   $40,000    $15,560       $40,175      $301,783
                            2006   $198,024   $30,000    $32,932       $27,237      $288,193

     David A. O'Neil        2007   $123,924   $20,000    $ 7,780       $22,869      $174,573
                            2006   $119,082   $15,000    $14,778       $15,568      $164,428

     James Clemens          2007   $139,897   $10,000    $ 7,780       $ 3,834      $161,511
                            2006   $132,540   $ 5,000    $14,778       $  0.00      $152,318

---------------
     (a)  Represents  the  dollar  amount  recognized  for  financial  statement
          reporting purposes with respect to the fiscal year ended June 30, 2007
          in  accordance  with  FAS  123(R).  For  information   concerning  the
          assumptions  made  in the  valuation  of  awards,  see  Note 12 of our
          financial statements for the fiscal year ended June 30, 2007.

     (b)  All other compensation for fiscal years 2007 and 2006 was as follows:.

                                   Value of
                                 vested shares       Company
                                  and cash in     Contributions
                                    Company         to 401(k)
     Name                Year       ESOP ($)         Plan ($)      Total
     ----                ----       --------         --------      -----
     Howard Pinsley      2007       $38,907           $1,268      $40,175
                         2006       $26,329           $  908      $27,237

     David A. O'Neil     2007       $21,347           $1,522      $22,869
                         2006       $14,034           $1,534      $15,568

     James Clemens       2007        $3,834               --      $ 3,834
                         2006            --               --           --

                                       6


                  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

     The following table sets forth information  concerning  outstanding  equity
awards held by the Company's Named Executive Officers at fiscal year end:

                          Number of        Number of
                         Securities       Securities
                         Underlying       Underlying       Option       Option
                         Unexercised      Unexercised     Exercise    Expiration
                           Options          Options         Price        Date
                              #                #              $
     Name                Exercisable     Unexercisable
     ----                -----------     -------------    --------    ----------
     Howard Pinsley         4000                           $11.25      8/20/2014
                                             4000          $17.36     10/13/2015
                                             4000          $17.80      5/19/2016
                                             4000          $18.29      2/21/2017

     David O'Neil           1600                           $ 9.93       3/1/2012
                            1600                           $ 9.25       3/4/2013
                            1600                           $11.25      8/20/2014
                                             1600          $17.36     10/13/2015
                                             2000          $17.80      5/19/2016
                                             2000          $18.29      2/21/2017

     James Clemens           800                           $11.25      8/20/2014
                                             1600          $17.36     10/13/2015
                                             2000          $17.80      5/19/2016
                                             2000          $18.29      2/21/2017



                           SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS


                              Number of securities to      Weighted-average          Number of Securities remaining
                              be issued upon exercise      exercise price of      available for future issuance under
                              of outstanding options,    outstanding options,     equity compensation plan (excluding
Plan Category                   warrants and rights      warrants and rights       securities reflected in column (a))
----------------------------------------------------------------------------------------------------------------------
                                        (a)                        (b)                              (c)
----------------------------------------------------------------------------------------------------------------------
                                                                                         
Equity compensation
    plans approved by
    security holders                 138,800                     $15.77                           75,400
Equity compensation
    plans not approved
    by security holders                 --                          --                              --
                                     -------                                                      ------
            Total                    138,800                                                      75,400
                                     =======                                                      ======


                                    INSURANCE

     The executive officers and directors of the Company can elect to be covered
under the company-sponsored  health plans, which do not discriminate in favor of
the officers,  or directors of the Company and which are available  generally to
all  employees.  In addition,  the executive  officers are covered under a group
life plan, which does not discriminate, and is available to all employees.

     The Company maintains insurance  coverage,  as authorized by Section 726 of
the New York Business  Corporation Law,  providing for (a)  reimbursement of the
Company  for  payments  it makes to  indemnify  officers  and  directors  of the
Company,  and (b) payment on behalf of officers and directors of the Company for
losses, costs and expenses incurred by such individuals in any actions.

                       EMPLOYEE RETIREMENT PLAN AND TRUST

     Under the  Company's  ESOP,  approved by the Board of  Directors on June 2,
1989, effective July 1, 1988, all non-union employees of the Company,  including
the Company's executive and non-executive  officers are eligible to participate.

                                       7


The ESOP is a  non-contributory  plan,  which is designed to invest primarily in
shares  of  common  stock  of the  Company.  Certain  technical  amendments  not
considered  material were adopted  effective as of June 10, 1994,  July 1, 2003,
and July 1, 2005.

     Of the  446,418  shares  of  common  stock  of  the  Company  allocated  to
participants  of the ESOP as of June 30, 2007,  24,928 shares were  allocated to
Howard  Pinsley,  6,539 shares were  allocated to David A. O'Neil,  5,301 shares
were allocated toBarry Pinsley and 1,549 shares were allocated to James Clemens.

     The ESOP's  purchase of common stock from the Company has been  financed by
loans from the Company to the ESOP. Each year the Company makes contributions to
the ESOP which are used to make loan  interest  and  principal  payments  to the
Company.  Following  each  payment of  principal  on the loan,  a portion of the
unallocated shares held by the ESOP is allocated to participants.

               EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT

     None  of  the  Company's   executive  officers  has  a  written  employment
agreement. The Company has an agreement with Howard Pinsley, President and Chief
Executive  Officer,  most  recently  amended and restated as of August 17, 2007,
under which upon Mr.  Pinsley's  termination or  resignation as chief  executive
officer,  he becomes a  non-executive  officer of the Company for a period of 36
months.  In consideration  for the performance of services to be provided by Mr.
Pinsley for the equivalent of nine days per month, he will receive full benefits
plus  $15,000 per month for the first three  months and $4,333 per month for the
next 33 months. The agreement expires on December 31, 2009

                             AUDIT COMMITTEE REPORT

     The  Audit  Committee  of the  Board  of  Directors  (the  "Committee")  is
comprised of three  independent  directors and operates under a written charter,
revised  most  recently by the Board on  February  16, 2007 which is attached as
Appendix A to this Proxy Statement.

     In  fulfilling  its  responsibilities,   the  Committee  has  reviewed  and
discussed the Company's audited consolidated financial statements for the fiscal
year ended June 30, 2007 with management and the independent auditors.

     The  Committee  has  discussed  with the  independent  auditors the matters
required to be discussed by Statement on Auditing  Standards  No. 61, as amended
Communication with Audit Committees. In addition, the Committee has received and
reviewed the written  disclosures and the letter from the  independent  auditors
required by Independence  Standard No.1,  (Independence  Discussions  with Audit
Committees), and has discussed with the auditors the auditors' independence.

     The  Committee  considered  and  concluded  that the provision of non-audit
services by the  independent  auditors was  compatible  with  maintaining  their
independence.

     In reliance on the reviews and discussions referred to above, the Committee
recommended  to the Board of Directors that the audited  consolidated  financial
statements  referred to above be included in the Company's Annual Report on Form
10-KSB for the fiscal year ended June 30, 2007.

     The Audit Committee  Charter is available on our website at  www.espey.com,
                                                                  -------------
under the tab "Investors".

                                                          Audit Committee:
                                                          Paul J. Corr, Chairman
                                                          Carl Helmetag
                                                          Alvin O. Sabo

                  CORPORATE GOVERNANCE AND NOMINATING COMMITTEE

     The  Nominating  Committee  of the  Board  of  Directors  (the  "Nominating
Committee")  is comprised of three  independent  directors and operates  under a
written charter,  which was most recently filed with the SEC as Exhibit B to the
Company's  Proxy  Statement for its Annual  Meeting held on November 12, 2004. A
copy of the charter is available on the Company's website, www.espey.com,  under
the tab "Investors".

     The  Nominating  Committee  will review the present  needs of the Board and
establish  criteria as to particular  qualifications  in terms of background and
experience  that could meet such needs. At a minimum,  the Nominating  Committee
believes  that  nominees  for  Directors  should have either  experience  in the
industry  in which the  Company  engages or  professional,  business or academic
qualifications  that differ from existing members of the Board and could augment
the aggregate expertise possessed by Board members. The Company further believes
that all nominees  should be able to make a contribution  to the Board that will
enhance the  development  and growth of the  Company  business  and  shareholder
value;  devote adequate time to service as a Director;  and work well with other
Board members in a collegial manner.

                                       8


     The Nominating  Committee evaluates  prospective nominees identified on its
own  initiative  or  referred  to  it  by  other  Board   members,   management,
shareholders  or  external  sources  and  all  self  nominated  candidates.  The
Nominating Committee uses the same criteria for evaluating  candidates nominated
by shareholders  and self nominated as it does for those proposed by other Board
members, management and search companies.

     The  Nominating  Committee  will  consider  bona  fide  recommendations  by
shareholders as to potential Director nominees,  who meet the above standards. A
shareholder  wishing  to  submit  such a  recommendation  should  send a letter,
postmarked  no  later  than 120 days  prior to the date on which  the  Company's
annual  meeting was held during the prior year, to the Secretary of the Company.
The letter must  identify its writer as a  shareholder  of the Company,  provide
evidence of the writer's stock ownership and provide:

     o    The name, address,  telephone number and social security number of the
          candidate to be considered;

     o    A description  of  understandings,  contractual,  business or familial
          relationships  between the shareholder and the candidate,  if any, and
          an unexecuted  written consent of the candidate to serve as a director
          of the Company, if nominated and elected;

     o    The candidate's resume and at least three references;

     o    A statement of the candidate's qualifications to serve on the Board of
          Directors  and  specified  Board  committees  which  shall  include an
          explanation  as to how  elements  of the  candidate's  background  and
          experience would be a benefit to the Company and its business.

     All  candidates  recommended  to the  Nominating  Committee  must  meet the
independence  standards of the American  Stock  Exchange and the  definition  of
"independent director" in the Company by-laws.

     All nominees for election at this Annual Meeting were previously elected by
the shareholders and are standing for re-election.

                    SHAREHOLDER COMMUNICATIONS WITH THE BOARD

     Mail can be addressed to Directors in care of the Office of the  Secretary,
Espey Mfg. & Electronics Corp. 233 Ballston Avenue,  Saratoga Springs,  New York
12866.  At the  direction of the Board of  Directors,  all mail received will be
opened and screened for security purposes.  The mail will then be logged in. All
mail, other than trivial or obscene items, will be forwarded. Trivial items will
be  delivered  to the  Directors  at the  next  scheduled  Board  meeting.  Mail
addressed  to a  particular  Director  will be  forwarded  or  delivered to that
Director.  Mail addressed to "Outside  Directors" or "Non-Management  Directors"
will be forwarded or  delivered  to the  Chairman of the Audit  Committee.  Mail
addressed  to the "Board of  Directors"  will be  forwarded  or delivered to the
Chairman of the Board.

                 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

     The  following  table sets forth  information  regarding  ownership  of the
Company's  outstanding  Common  Stock as of October 9, 2007,  by each  person or
group who is known to the Company to be the  beneficial  owner of more than five
percent of the outstanding shares of Common Stock.




Title                 Name and Address of                 Amount and Nature        Percent
Class                  Beneficial Owner                of Beneficial Ownership    of Class
-----                 -------------------              -----------------------    --------
                                                                           
Common Stock     Franklin Resources, Inc.                 156,000 - Direct (1)       6.7%
                 One Franklin Parkway
                 San Mateo, CA 94403-1906

Common Stock     Espey Mfg. & Electronics Corp.           683,720 - Direct (2)      29.5%
                 Employee Retirement Plan and Trust
                 233 Ballston Ave
                 Saratoga Springs, NY 12866

Common Stock     Advisory Research, Inc.                  219,640 - Direct (3)       9.5%
                 180 North Stetson St.
                 Suite 5500
                 Chicago, IL 60601

Common Stock     Howard Pinsley,                          103,768 - Direct (4)       5.4%
                 233 Ballston Avenue                     24,928 - Indirect (4)
                 Saratoga Springs, NY 12866


                                       9


------------------

(1)  The  information as to the number of shares of Common Stock and the percent
     of class ownership of the Company that may be deemed  beneficially owned by
     Franklin  Advisory  Services,  LLC  ("Franklin")  is from the Schedule 13G,
     dated   October  12,   2006  filed  with  the   Securities   and   Exchange
     Commission(the  "SEC").  The Franklin  statement  indicated that Franklin's
     investment  "management  subsidiaries,"  have sole  voting and  dispositive
     power with  respect to all of the shares of Common Stock shown in the table
     above for Franklin.  The Franklin statement indicates that the Common Stock
     set  forth  in the  table  is  beneficially  owned  by one or more  open or
     closed-end investment companies or other managed accounts which are advised
     by direct and indirect Franklin  investment  management  subsidiaries.  The
     statement also indicated that it filed the Schedule 13G on behalf of itself
     and  Franklin's  principal  shareholders,  Charles B. Johnson and Rupert H.
     Johnson,  Jr.  (the  "Principal  Shareholders"),  all of which  are  deemed
     beneficial  owners of the shares of Common  Stock  shown in the above table
     for Franklin. Franklin and the Principal Shareholders disclaim any economic
     interest or  beneficial  ownership  in any of the Common Stock shown in the
     table for Franklin.

(2)  The  shares  of  common  stock  owned by the ESOP  Trust  are  voted by the
     Trustees in the manner directed by the ESOP Committee. The Trustees, Howard
     Pinsley and Peggy A. Murphy, are the Chairman of the Board, Chief Executive
     Officer  and  President  of the  Company  and  Secretary  of  the  Company,
     respectfully.  The ESOP  Committee,  which  is  appointed  by the  Board of
     Directors, is comprised of Mr. Howard Pinsley, Ms. Murphy, Director Michael
     W. Wool and David A. O'Neil, the Treasurer and Principal  Financial Officer
     of the  Company.  As to shares that have been  allocated to the accounts of
     participants  in the ESOP,  the Trustees  are directed by the  Committee to
     vote such shares in accordance with instructions of the participants. As to
     unallocated shares and allocated shares for which voting  instructions have
     not been received from participants, the Committee instructs the Trustee to
     vote  such  votes   proportionately  to  the  shares  as  to  which  voting
     instructions have been received. As of October 9, 2007, 434,553 shares were
     allocated  to  the  accounts  of  participants   and  249,167  shares  were
     unallocated.

(3)  The  information as to the number of shares of Common Stock and the percent
     of class ownership of the Company that may be deemed  beneficially owned by
     advisory  clients  of  Advisory  Research,  Inc.  ("Advisory")  is from the
     Schedule  13G dated  February  25,  2007  filed with the SEC.  Advisory,  a
     registered  investment advisor,  is deemed to have beneficial  ownership of
     219,640  shares of the Company's  Common Stock as of February 20, 2007, all
     of which  shares  are held in  Advisory  investment  companies,  trusts and
     accounts.  Advisory,  in its role as  investment  advisor  and/or  manager,
     reported sole voting power with respect to 219,640 shares.

(4)  This  information  is from Form 4 dated August 27, 2007 filed with the SEC.
     Indirect  shares  represent  stock being held in the Company  ESOP.  Direct
     shares  include  options to acquire  8,000 shares of Common Stock which are
     exercisable within 60 days.

                        SECURITY OWNERSHIP OF MANAGEMENT

     The  following  information  is  furnished  as of October  9, 2007  (unless
otherwise  indicated),  as to each  class of equity  securities  of the  Company
beneficially  owned by all Directors and Executive Officers and by Directors and
Executive Officers of the Company as a Group:

Title              Name and Address of          Amount and Nature        Percent
Class               Beneficial Owner         of Beneficial Ownership    of Class
-----              -------------------       -----------------------    --------

Common Stock       James Clemens...........       1,600-Direct                *
                                                  1,549-Indirect (2)

Common Stock       Paul J. Corr ...........       8,439-Direct (1)            *

Common Stock       Carl Helmetag ..........      12,300-Direct (1)            *

Common Stock       Peggy A. Murphy ........       2,400-Direct (1)            *
                                                  8,425-Indirect (2)

Common Stock       David A. O'Neil ........      11,200-Direct (1)            *
                                                  6,539-Indirect (2)

Common Stock       Barry Pinsley                 56,260-Direct (1)         2.4%

Common Stock       Howard Pinsley .........     103,768-Direct (1)         5.5%
                                                 24,928-Indirect (2)

Common Stock       Alvin O. Sabo ..........       9,300-Direct (1)            *

Common Stock       Seymour Saslow .........      12,016-Direct (1)            *

                                       10



Title           Name and Address of             Amount and Nature        Percent
Class            Beneficial Owner            of Beneficial Ownership    of Class
-----           -------------------          -----------------------    --------


Common Stock    Katrina Sparano...........          600-Direct (1)             *
                                                    827-Indirect (2)

Common Stock    Michael W. Wool...........        6,300-Direct (1)             *

Common Stock    Officers and Directors....      224,183-Direct (1)         11.3%
                as a Group (13 persons)          42,268-Indirect (2)

------------------

* Less than one percent

(1)  Direct  shares  include  options to acquire  shares  which are  exercisable
     within 60 days as follows:

     Name of                  Exercisable      Name of               Exercisable
     Beneficial Owner           Options        Beneficial Owner        Options
     ----------------         -----------      ----------------      -----------
     James Clemens                1,600        Howard Pinsley           8,000

     Paul Corr                    2,000        Alvin O. Sabo            1,800

     Carl Helmetag                3,000        Seymour Saslow           1,000

     Peggy A. Murphy              2,400        Katrina Sparano            600

     David A. O'Neil              3,200        Michael W. Wool          3,600

     Barry Pinsley                1,400

(2)  Includes shares  allocated to named director or officer as of June 30, 2007
     as a participant in the Company's  ESOP.  Each such person has the right to
     direct the manner in which such  shares  allocated  to him or her are to be
     voted by the ESOP Trustee.

     There are no arrangements known to the Company,  the operation of which may
at a subsequent date, result in change of control of the Company.

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The Company paid the law firm of Langrock,  Sperry & Wool, of which Michael
W. Wool,  a  director  of the  Company,  is a  partner,  a total of $19,658  and
$72,979,  for legal  services  during fiscal years ended June 30, 2006 and 2005,
respectively.  Included  in the  payment of $19,658  and $72,979 for fiscal year
ended June 30,  2006 and 2005,  was $9,085 and  $23,750,  respectively,  held in
trust  by the firm and paid to  other  service  providers  relating  to the ESOP
transaction described above.

                                 CODE OF ETHICS

     The Company has adopted a Code of Ethics  which is available on our website
at www.espey.com, under the tab "Investors".
   -------------

                                       11


                                 PROPOSAL NO. 2
          RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS

     The Audit Committee has selected Rotenberg & Company,  LLP as the Company's
independent  public  accountants  for the  fiscal  year  ending  June 30,  2008.
Rotenberg  &  Company,  LLP was first  selected  by the Audit  Committee  as the
Company's  independent  public  accountants  for the fiscal year ending June 30,
2006.

     Unless otherwise  specified by the shareholders,  the shares represented by
their  properly   executed  proxies  will  be  voted  for  ratification  of  the
appointment  of  Rotenberg & Company,  LLP as  independent  accountants  for the
fiscal  year  ending  June 30,  2008.  The  Company is advised by said firm that
neither the firm nor any of its partners now has, or during the past three years
had, any direct financial  interest or material indirect  financial  interest or
any connection with the Company.

     A representative  of Rotenberg & Company,  LLP is expected to be present at
the Annual Meeting with the opportunity to make a statement if he or she desires
to do so and to be  available  to  respond  to  appropriate  questions  from the
shareholders.

     THE  BOARD  OF  DIRECTORS   RECOMMENDS  A  VOTE  FOR  RATIFICATION  OF  THE
APPOINTMENT OF ROTENBERG & COMPANY,  LLP AS INDEPENDENT  PUBLIC  ACCOUNTANTS FOR
THE COMPANY FOR FISCAL YEAR ENDING JUNE 30, 2008.

     The  Company's   Audit  Committee  has  had  policies  and  procedures  for
pre-approving  all audit and non-audit work performed by Rotenberg & Company LLP
for the fiscal year ended June 30, 2006 and 2007 respectively. Specifically, the
Audit  Committee  has  pre-approved  the  use of  Rotenberg  &  Company  LLP for
performance  of audit services and detailed,  specific types of services  within
the following categories of audit-related and tax services.  In each other case,
the Audit Committee requires management to obtain specific pre-approval from the
Audit Committee for any other work to be performed by its outside auditors.

     The aggregate fees billed for professional  services by Rotenberg & Company
LLP,  and its  predecessor  auditor KPMG LLP, in the fiscal years ended June 30,
2006 and 2007, respectively, for these various services were:

          TYPES OF FEES                               2007             2006
                                                      ----             ----
                                                 Amount Billed    Amount Billed
                                                 -------------    -------------

          (1) Audit Fees                            $ 52,500         $ 77,500

          (2) Audit Related Fees                        None             None

          (3) Tax Fees                                 8,000           12,900

          (4) All Other Fees                            None           10,750
                                                    --------         --------

          Total                                     $ 60,500         $101,150
                                                    ========         ========

     In the  above  table,  in  accordance  with  the  Securities  and  Exchange
Commission's  definitions and rules,  "audit fees" are fees the Company paid for
professional  services rendered by the principal accountant for the audit of the
Company's  annual  financial  statements  included  in Form 10-KSB and review of
financial  statements  included  in Form  10-QSBs,  and for  services  that  are
normally  provided by the principal  accountant in connection with statutory and
regulatory filings or engagements;  "audit-related  fees" are fees for assurance
and related services by the principal  accountant that are reasonably related to
the  performance of the audit or review of the Company's  financial  statements;
"tax fees" are fees for tax compliance,  tax advice and tax planning rendered by
the  principal  accountant;  and "all other  fees" are fees paid to KPMG LLP for
services  rendered in connection with the review of Form S-8 with respect to the
Espey Mfg. &  Electronics  Corp.  2000  Stock  Option  Plan and a consent to the
incorporation of its report on the Company's financial  statements for the years
ended  June 30,  2004 and June 30,  2005 in  connection  therewith.  100% of the
services set forth in sections (1) through (4) above were  approved by the Audit
Committee in accordance with its charter.


                                       12


                                 PROPOSAL NO. 3
             APPROVAL OF 2007 STOCK OPTION AND RESTRICTED STOCK PLAN

     At the Annual  Meeting,  the  shareholders  are being  asked to approve the
Espey Mfg. & Electronics  Corp. 2007 Stock Option and Restricted Stock Plan (the
"2007  Plan").  Unless  otherwise  specified  by the  shareholders,  the  shares
represented by their properly executed proxies will be voted for the approval of
the adoption of the 2007 Plan.

     The following is a summary description of the 2007 Plan and is qualified in
its  entirety  by  reference  to the text of the 2007 Plan which is set forth as
Appendix B to this proxy statement.

Description of The Plan

     The  purpose  of the 2007  Plan is to  provide  an equity  interest  in the
Company  to  the  Company's  directors,   officers,   employees,   advisors  and
consultants so as to increase  their interest in the economic  well-being of the
Company.

     Under the 2007 Plan,  the Company may grant options  intended to qualify as
incentive stock options under Section 422 of the Internal  Revenue Code of 1986,
as amended ("incentive stock options"),  other options which are not intended to
so qualify  ("nonqualified  stock  options")  and awards of common stock without
payment therefore ("award shares").  Incentive stock options may only be granted
to persons who are key employees of the Company at the time of grant,  which may
include  officers  and  directors  who are also  employees.  Nonqualified  stock
options and award shares may be granted to persons who are  officers,  directors
or employees of or consultants or advisors to the Company at the time of grant.

     The 2007 Plan will be  administered by the Company's Board unless the Board
appoints a compensation  committee or other  committee of the Board charged with
the  responsibility  for  administering  the 2007 Plan. At present,  the Board's
Stock Option  Committee  makes  recommendations  to the full Board regarding the
award of equity  incentives.  Subject to the terms of the 2007  Plan,  the Stock
Option  Committee will recommend the persons to whom options or award shares are
granted,  the number of shares  covered  by an option or award,  the term of any
option, the terms of agreements with respect to award shares and the time during
which any  option  is  excercisable  or any  restrictions  on any  award  shares
continue.

     If the 2007 Plan is  approved,  a total of 400,000  shares of Common  Stock
will be reserved  for  issuance  under the plan.  The shares  issued may include
treasury shares,  authorized but unissued shares and shares previously  reserved
for issuance upon exercise of options which have expired or terminated or shares
awarded which have been  forfeited.  Shares  subject to options that cease to be
exercisable  for any reason or shares  awarded which have been forfeited will be
available for subsequent grant under the plan.

     As of the date of this proxy  statement,  no options  have been  granted or
awards made under the 2007 Plan.

     Nonqualified stock options may be granted at an exercise price greater than
or lesser than the fair market  value of the Common  Stock on the date of grant,
in the discretion of the Board.  Incentive  stock options,  however,  may not be
granted  at less  than the fair  market  value of the  Common  Stock  and may be
granted  to holders  of more than 10% of the  Common  Stock only at an  exercise
price of at least 110% of the fair market  value of the Common Stock on the date
of grant.  The exercise  price may be paid in cash or, in the  discretion of the
Board, (i) in shares of Common Stock,  (ii) by delivery of any other property or
(iii) by any combination of cash, Common Stock and other property. The Board may
also grant awards entitling recipients to receive shares of Common Stock without
payment  therefor,  upon such terms and  conditions as the Board may  determine,
including,  without  limitation,  restrictions  or risks of forfeiture  upon the
happening  of  specified   events  vesting   schedules  and  the  attainment  of
performance  objectives,  all of which shall be set forth in a restricted  stock
award  agreement.  Recipients of award shares subject to a vesting schedule will
become  fully vested in such shares upon a "change of control" as defined in the
2007 Plan.

     With respect to incentive  stock options,  to the extent that the aggregate
fair  market  value of the Common  Stock  (measured  at the time of grant)  with
respect to which  incentive  stock options are first  exercisable by an employee
during any  calendar  year under the 2007 Plan and any other plan of the Company
providing incentive stock options exceeds $100,000, such incentive stock options
shall be treated as nonqualified options.

     Options and awards  under the 2007 Plan may not be granted  after ten years
from the date of shareholder approval of the 2007 Plan. No option under the 2007
Plan may be exercised subsequent to ten years from the date of grant (five years
after the date of grant for incentive  stock options  granted to holders of more
than 10% of the Common Stock). No incentive stock option granted pursuant to the
2007 Plan may be exercised more than three months after the option holder ceases
to be an employee of the Company, except that in the event of death or permanent
and total  disability of the option  holder,  the option may be exercised by the
holder of his estate for a period of up to one year after the date of such death
or permanent  total  disability.  Options granted under the 2007 Plan may not be
assigned or transferred except as permitted in the discretion of the Board.


                                       13


     The employment relationship is treated as continuing intact while an option
or award  holder is on  military  leave,  sick leave or other bona fide leave of
absence  if the  period of leave does not exceed six months or, if by statute or
contract.

     The 2007 Plan may be amended by the Board subject to  shareholder  approval
to the extent required by applicable law, regulation or rule of any stock market
on which the Company's stock is traded. No amendment,  suspension or termination
of the 2007 Plan, except as described in the 2007 Plan, may adversely affect the
rights of an option or award  holder  under the 2007 Plan  without the  holder's
consent.

     If  approved,  the 2007 Plan will replace the  Company's  2000 Stock Option
Plan and no  further  options  would be  granted  under  that  plan.  Options to
purchase an aggregate of 121,200  shares of Common Stock at prices  ranging from
$6.63 to $18.29 per share remain outstanding under the 2000 Stock Option Plan.

Federal Income Tax Consequences of the Plan

     The following  general summary of the U.S.  Federal income tax consequences
of the  issuance  and  exercise of options  granted  under the 2007 Plan and the
grant of award  shares under the 2007 Plan is based upon the  provisions  of the
Internal  Revenue Code of 1986,  as amended (the  "Code"),  current  regulations
promulgated and proposed thereunder,  and existing administrative rulings of the
Internal  Revenue  Service,  all of which are subject to change  (possibly  with
retroactive  effect).  It is not intended to be a complete  discussion of all of
the Federal income tax  consequences  of the plan or of all of the  requirements
that must be met in order to qualify for the described tax treatment.

     Nonqualified  Options. A recipient of a nonqualified  option generally will
not  recognize any taxable  income until the option is exercised.  At that time,
subject to certain  limited  exceptions,  the recipient will recognize  ordinary
income in an amount  equal to the excess of the fair market  value of the shares
on the date of exercise over the option exercise price.

     Upon a subsequent sale of shares acquired by the exercise of a nonqualified
stock option,  a recipient  will  recognize gain or loss equal to the difference
between the selling  price of the shares and their fair market value on the date
of exercise. The gain or loss will be short-term or long-term depending upon how
long the shares were held.

     The Company  generally  will be entitled to a  compensation  deduction  for
Federal  income tax purposes in an amount equal to, and at the same time as, the
ordinary income recognized by option holders,  provided that the Company reports
the income on a Form W-2 or 1099  (whichever is applicable)  that is both timely
provided  to the  option  holder  and timely  filed  with the IRS,  and  further
provided  that such  deduction is  reasonable  and is not limited by  applicable
provisions of the Code, such as Sections 162(m), 212, or 280G.

     Incentive  Stock Options.  Incentive  stock options  granted under the 2007
Plan are intended to qualify as incentive stock options under Section 422 of the
Code.

     A participant generally will not recognize taxable income upon the grant or
exercise  of an  incentive  stock  option.  If an option  holder does not make a
"disqualifying  disposition" (as defined below), then the option holder will not
recognize  any taxable  income until the shares are sold or  exchanged,  and any
gain recognized upon such sale or exchange will be taxable as long-term  capital
gain. A "disqualifying  disposition" means any disposition of shares acquired on
the exercise of an incentive stock option where such  disposition  occurs within
two years of the date the option was  granted or within one year of the date the
shares were transferred to the option holder.

     If the option holder makes a disqualifying disposition, then the difference
between (a) the option  exercise price and (b) the lesser of (i) the fair market
value of the  shares on the date of  exercise  or (ii) the price  received  upon
disposition  of the  shares,  will be taxable to the option  holder as  ordinary
income. In the case of a gift or certain other transfers,  the amount of taxable
ordinary income is not limited to the gain that would have resulted from a sale.
Instead, it is equal to the excess of the fair market value of the shares on the
date of exercise over the option exercise price.

     In the case of a  disqualifying  disposition,  if the  amount  realized  on
disposition  of the shares  exceeds the fair  market  value of the shares on the
date of exercise,  the excess will be taxed as either  long-term  or  short-term
capital gain depending on the option holder's holding period of the shares.

     The Company will not be entitled to any deduction with respect to the grant
or exercise of  incentive  stock  options.  In addition,  no  deduction  will be
allowed to the Company upon the  disposition of stock acquired upon the exercise
of  an  incentive  stock  option,  unless  the  disposition  is a  disqualifying
disposition.  In the case of a disqualifying disposition,  the Company generally
will be entitled to a deduction at that time equal to the amount of compensation
income  that is  recognized  by the  employee  as a result of the  disqualifying
disposition,  provided that the Company reports the income on a Form W-2 or 1099
(whichever is applicable)  that is both timely provided to the option holder and
timely  filed  with the  IRS,  and  further  provided  that  such  deduction  is
reasonable  and is not limited by applicable  provisions  of the Code  including
Section 162(m), 212, or 280G.

                                       14


     Award Shares.  Since award shares will be granted  subject to a substantial
risk of forfeiture,  requiring the recipient to perform substantial services for
a period of time  specified in the grant,  and may be subject to other terms and
conditions,  the  recipient  will not  recognize  income at the time such  award
shares are issued (absent a Section 83(b) election, described below).

     Unless the  recipient  makes a Section  83(b)  election  at the time of the
grant of award shares, the recipient will recognize ordinary compensation income
at the time such shares vest in an amount equal to the then fair market value of
the shares. The recipient will have a tax basis in shares that vest equal to the
amount of ordinary  compensation income recognized with respect to those shares.
The recipient's holding period would begin just after the shares vest.

     A  recipient  may make a Section  83(b)  election  with  respect  to shares
subject to a  substantial  risk of  forfeiture.  A recipient of award shares who
makes a Section 83(b) election will recognize  ordinary  compensation  income at
the time the shares are issued and not when they vest. The amount of such income
would equal to the fair market value of the shares at the time of  issuance.  In
that event,  the recipient's tax basis in the shares would equal the fair market
value of the award shares on the date issued, and the holding period would begin
just after such date.  Any  subsequent  appreciation  that is  recognized  would
constitute capital gain rather than ordinary  compensation  income, and would be
long-term  capital gain to the extent the holding  period was longer than twelve
months at the time of the sale or exchange.

     The Company  generally  will be entitled to a  compensation  deduction  for
Federal  income tax purposes in an amount equal to, and at the same time as, the
ordinary compensation income recognized by recipients of award shares,  provided
that  the  Company  reports  the  income  on a Form  W-2 or 1099  (whichever  is
applicable)  that is both timely provided to the recipient and timely filed with
the IRS,  and further  provided  that the  deduction  is  reasonable  and is not
limited by applicable  provisions of the Code, including Section 162(m), 212, or
280G.  Accordingly,  the  amount  and timing of the  Company's  deductions  with
respect to award shares granted will depend upon the extent to which such shares
are (and remain)  subject to a substantial  risk of forfeiture and the extent to
which  Section  83(b)  elections  are made by  recipients  with respect to award
shares that are not vested at the time of grant.

     THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 2007 PLAN.

          COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
the Company's directors,  executive officers,  and persons who own more than ten
percent  of a  registered  class of the  Company's  equity  securities,  to file
reports of beneficial  ownership and changes in  beneficial  ownership  with the
Securities  and Exchange  Commission.  Based solely upon its review of copies of
such  reports  received by it, or upon  written  representations  obtained  from
certain reporting  persons,  the Company believes that its officers,  directors,
and  stockholders  who  own  more  than  ten  percent  of the  Company's  equity
securities  complied with all Section 16(a) filing  requirements  for the fiscal
year ended June 30,  2007 except  that  Director  Paul J. Corr did not file on a
timely basis Form 4 with  respect to the purchase of 39.416  shares on March 26,
2007,  ultimately  reported on Form 4 filed June 1, 2007 and  Director  Alvin O.
Sabo did not file on a timely basis Form 4 with respect to 200 shares  purchased
on September 25, 2006,  250 shares  purchased on October 4, 2006, and 750 shares
purchased on October 5, 2006,  ultimately  reported on Form 4 filed  October 10,
2006.

                                 ANNUAL REPORTS

     The  Company's  Annual Report on Form 10-KSB for the fiscal year ended June
30,  2007,  including  financial  statements  as filed with the  Securities  and
Exchange Commission, accompanies this Proxy Statement. Such financial statements
are not incorporated herein by reference.

     A copy of the Company's Annual Report on Form 10-KSB  (including  financial
statements and schedules  thereto) for the fiscal year ended June 30, 2007 filed
with the Securities and Exchange Commission will be provided without charge upon
the  written  request  of  shareholders  to  Espey  Mfg.  &  Electronics  Corp.,
attention:  Investor Relations,  233 Ballston Avenue, Saratoga Springs, New York
12866.  The  Company's  Form  10-KSB for the fiscal year ended June 30, 2007 can
also be  viewed  electronically  through  a link  at the  Company's  website  at
www.espey.com.
-------------

                                       15


                              SHAREHOLDER PROPOSALS

     Any shareholder proposal which may be a proper subject for inclusion in the
proxy  statement  and for  consideration  at the  2008  Annual  Meeting  must be
received by the Company at its principal executive office no later than June 25,
2008,  if it is to be included in the Company's  2008 proxy  statement and proxy
form. In addition,  the Company's  bylaws outline  procedures that a shareholder
must  follow  to  nominate   directors  or  to  bring  other   business   before
shareholders' meetings.

                               PROXY SOLICITATION

     The solicitation of the enclosed proxy is being made on behalf of the Board
of Directors and the cost of preparing and mailing the Notice of Meeting,  Proxy
Statement and form of proxy to shareholders is to be borne by the Company.

                                          By Order of the Board of Directors,

                                                /S/ HOWARD PINSLEY

                                                    HOWARD PINSLEY
                                          President, Chief Executive Officer
                                          and Chairman of the Board

October 23, 2007
Saratoga Springs, New York


                                       16



                                                                      APPENDIX A

                         ESPEY MFG. & ELECTRONICS CORP.
                             AUDIT COMMITTEE CHARTER

     Purpose

     The primary purpose of the Audit  Committee (the  "Committee") is to assist
the Board of Directors  (the  "Board") of Espey Mfg. &  Electronics  Corp.  (the
"Company") in fulfilling its oversight responsibilities by

     o    Overseeing  management's  conduct of the Company's financial reporting
          process and systems of internal accounting and financial controls;

     o    Monitoring the independence  and performance of the Company's  outside
          auditors; and

     o    Providing  an avenue of  communication  among  the  outside  auditors,
          management and the Board.

     The  Committee  is  empowered  to  investigate  any  matter  related to its
oversight role brought to its attention with full access to all books,  records,
facilities and personnel of the Company and the power to retain outside counsel,
auditors and other experts, as appropriate,  for this purpose. The Company shall
ensure that the  Committee  is provided  with  adequate  funding in order to pay
compensation to any advisers so retained and to pay the ordinary  administrative
expenses of the Committee  that are necessary or appropriate in carrying out its
duties.

     The Committee shall review the adequacy of this Charter on an annual basis,
and recommend to the Board any necessary amendments.

     Membership and Meetings

     The  Committee is appointed by the Board and shall be comprised of not less
than three members at all times,  each of whom must be independent of management
and the Company and otherwise meet the requirements of applicable American Stock
Exchange rules and regulations.

     Accordingly, all of the members will be directors:

     1.   Who have no  relationship  to the Company that may interfere  with the
          exercise of their independence from management and the Company; and

     2.   Who are financially literate or who become financially literate within
          a reasonable  period of time after  appointment to the  Committee.  In
          addition,  at  least  one  member  of the  Committee  will  have  such
          accounting  or  related  financial  management  expertise  in order to
          qualify as an "audit  committee  financial  expert" in compliance with
          the criteria established by the SEC.

     The Board shall name a chair of the Committee, who shall be responsible for
preparing an agenda in advance of each meeting. A majority of the members of the
Committee shall  constitute a quorum.  The Committee  shall maintain  minutes or
other records of its activities,  and shall report to the full Board  concerning
its activities.

     The Committee  shall meet as frequently as  circumstances  dictate,  but no
less than four times annually.  As part of its job to foster open communication,
the Committee  should meet at least annually  separately with each of management
and the outside  auditors to discuss any  matters  that the  Committee  believes
should be discussed privately.

     Key Responsibilities

     The  Committee's  job is one  of  oversight  and  it  recognizes  that  the
Company's  management is  responsible  for  preparing  the  Company's  financial
statements  and that the outside  auditors are  responsible  for auditing  those
financial  statements.  Additionally,  the Committee  recognizes  that financial
management,  including the internal  accounting and audit staff,  as well as the
outside auditors, have more time, knowledge and more detailed information on the
Company than do Committee members;  consequently,  in carrying out its oversight
responsibilities, the Committee is not providing any expert or special assurance
as to the Company's financial statements or any professional certification as to
the outside auditor's work.

     The following  functions  shall be the common  recurring  activities of the
Committee in carrying out its oversight function.

                                      A-1


The Committee shall:

     o    Review with management and the outside auditors the Company's  audited
          financial  statements,  review and consider with the outside  auditors
          the  matters  required  to  be  discussed  by  Statement  of  Auditing
          Standards  ("SAS") No. 61, and  determine  whether to recommend to the
          Board that the  financial  statements  be  included  in the  Company's
          Annual  Report  on Form 10-K to be filed  with the SEC (or the  Annual
          Report to  Shareholders  if  distributed  prior to the  filing of Form
          10-K) .

     o    Review with management and the outside auditors the Company's  interim
          financial results to be included in the Company's quarterly reports on
          Form  10-Q,  prior to their  filing  with  the  SEC,  and the  matters
          required to be discussed by SAS No. 61.

     o    Review the  independence  of the outside  auditors  and in  connection
          therewith:

          (i)  request  from the outside  auditors  annually,  a formal  written
               statement  delineating all relationships  between the auditor and
               the Company consistent with Independence Standards Board Standard
               Number 1;

          (ii) discuss   with  the   outside   auditors   any   such   disclosed
               relationships   and  their   impact  on  the   outside   auditors
               independence; and

          (iii)recommend  that the Board take appropriate  action, if necessary,
               to oversee the independence of the outside auditors.

     o    Review and evaluate the proposals  submitted by  prospective  auditors
          and recommend  appointment of the Company's  outside  auditors and the
          Board's  submission  of  their  appointment  to the  shareholders  for
          ratification.

     o    Oversee the work performed by the Company's outside auditors, evaluate
          the  performance  of such  auditors  and  discharge  such  auditors if
          circumstances warrant.

     o    Review and pre-approve  any non-audit  services to be performed by the
          independent outside auditors.

     o    In consultation with management and the outside  auditors,  review the
          integrity  of the  Company's  financial  reporting  processes  and the
          internal control structure (including disclosure controls and internal
          control over financial reporting).

     o    Review potential  conflicts of interest involving members of the Board
          and management and review and approve all related-party  transactions,
          defined as those transactions  required to be disclosed under Item 404
          of Regulation S-K.

     o    Establish  procedures  for the  receipt,  retention  and  treatment of
          complaints  regarding  accounting,  internal  accounting  controls  or
          auditing  matters  and  procedures  for  the  confidential,  anonymous
          submission  by  Company  employees  of  any  concerns  related  to the
          Company's  ethics  policies,  legal  issues  and  accounting  or audit
          matters.

     o    Prepare an annual report containing the information  prescribed by the
          SEC for inclusion in the Company's  proxy statement in connection with
          the annual meeting of shareholders.


February 18, 2005
(revised February 16, 2007)


                                      A-2


                                                                      APPENDIX B

                         ESPEY MFG. & ELECTRONICS CORP.
                   2007 STOCK OPTION AND RESTRICTED STOCK PLAN
1.   Purpose

     This Plan  authorizes  the  Corporation  to  provide  directors,  officers,
employees,  and consultants of the Corporation and its Subsidiaries who are in a
position  to  contribute  to the long term  success of the  Corporation  and its
Subsidiaries  with Options to acquire Common Stock and  Restricted  Stock Awards
for Common Stock.  The  Corporation  believes that this  incentive  program will
cause these persons to increase their interest in the economic well-being of the
Corporation and its Subsidiaries, and aid in attracting and retaining directors,
officers, employees, and consultants of outstanding ability.

2.   Definitions

     Unless the context  clearly shows  otherwise,  the following terms have the
meanings set forth in this section:

     (a)  "Affiliate"  means a person or entity  that  directly,  or  indirectly
through one or more  intermediaries,  controls or is controlled  by, or is under
common control with, the person or entity specified.

     (b) "Board" means the Board of Directors of Espey Mfg. & Electronics Corp.,
a New York corporation, or the governing body of any entity that succeeds to the
rights and obligations of Espey Mfg. & Electronics Corp. under this Plan.

     (c) "Cause" means, with respect to any Grantee,  any of the following:  (i)
that person's material dishonesty (including, without limitation,  embezzlement,
financial  misrepresentation,  fraud,  theft, or other similar action) in his or
her dealings with the  Corporation or its  Subsidiaries or with any other entity
that the  Corporation  or its  Subsidiaries  are engaged in commerce;  (ii) that
person's conviction of, or entry of a plea of nolo contendere to, the commission
of a felony;  (iii) any act or omission by that person that  actually  has,  and
which either that person  intends to have or that person or a reasonable  person
would  expect to have,  a  material  adverse  effect on the  Corporation  or any
Subsidiary;  or (iv) if any  Grantee  is party to an  employment  or  consulting
agreement  governing the terms of his or her employment or consultancy  with the
Corporation  or its  Subsidiaries,  and the  agreement  includes a definition of
termination  for cause,  then for  purposes  hereof  Cause also  includes  those
grounds not inconsistent with the foregoing provisions. If the provisions of the
agreement  and this Plan are  inconsistent,  the  provisions  of this Plan shall
control.

     (d) "Change in Control" means any one of the following:

          (i) any one person or entity or more than one person or entity  acting
     as a group acquires  ownership of stock of the Corporation  that,  together
     with stock held by such person or group,  constitutes more than fifty (50%)
     percent of the total fair market  value or total  voting power of the stock
     of the Corporation.  However, if any one person or entity, or more than one
     person or entity  acting as a group,  is  considered to own more than fifty
     (50%)  percent of the total fair market  value or total voting power of the
     stock of the  Corporation,  the acquisition of additional stock by the same
     person or  entity or  persons  or  entities  does not cause a change in the
     ownership of the Corporation.  An increase in the percentage of stock owned
     by any one person or entity, or persons or entities acting as a group, as a
     result of a  transaction  in which the  Corporation  acquires  its stock in
     exchange for property is treated as an acquisition of stock;

          (ii) any one  person or entity,  or more than one  person  acting as a
     group acquires (or has acquired  during the twelve (12) month period ending
     on the date of the most  recent  acquisition  by such  person  or entity or
     persons  or  entities)  ownership  of stock of the  Corporation  possessing
     thirty (30%) percent or more of the total voting power of the stock;

         (iii) a majority of members of the Corporation's  board of directors is
     replaced during any twelve (12) month period by directors whose appointment
     or  election  is  not  endorsed  by  a  majority  of  the  members  of  the
     Corporation's  board of directors  prior to the date of the  appointment or
     election; or

          (iv) one person or entity, or more than one person or entity acting as
     a group  acquires  (or has  acquired  during the twelve  (12) month  period
     ending on the date of the most recent  acquisition by such person or entity
     or persons or entities) assets from the Corporation that have a total gross
     fair market  value  equal to or more than forty (40%)  percent of the total
     gross fair market  value of all the assets of the  Corporation  immediately
     prior to such  acquisition or  acquisitions.  Gross fair market value means
     the value of the  assets  of the  Corporation,  or the value of the  assets
     being disposed of, determined without regard to any liabilities  associated
     with such assets.

     (e) "Code" means the Internal Revenue Code of 1986, as amended.

     (f) "Committee" means the Compensation  Committee of the Board, if there is
one, or such other  committee of the Board  appointed by the Board,  and charged
with the responsibility for administering this Plan, or if no such committee has
been appointed,  the Board. As used in this Plan the term "Committee"  shall not
mean an advisory  committee  which the Board may appoint  under  Section 4(b) of
this Plan.

     (g) "Common  Stock" means the common stock,  $0.33 1/3 par value per share,
     of the  Corporation.

     (h)  "Consultant"  means any  person or entity  that is  engaged to perform
services  for the  Corporation  or any of its  Subsidiaries,  or has  agreed  to
perform services for the Corporation or any of its  Subsidiaries,  other than as
an Employee or Director.



     (i) "Corporation" means Espey Mfg. & Electronics Corp.

     (j) "Director" means any member of the Board.

     (k)  "Disability"  means  (i)  the  Grantee  is  unable  to  engage  in any
substantial gainful activity by reason of any medically determinable physical or
mental  impairment that can be expected to result in death or can be expected to
last for a continuous  period of not less than twelve (12)  months;  or (ii) the
Grantee  is,  by  reason  of  any  medically  determinable  physical  or  mental
impairment  that can be  expected  to result in death or can be expected to last
for a continuous  period of not less than twelve (12) months,  receiving  income
replacement  benefits  for a period of not less than three (3)  months  under an
accident and health plan  covering  Employees of the  Corporation  or any of its
Subsidiaries.

     (l) "Employee"  means any common law employee of the  Corporation or any of
its  Subsidiaries,  or any person who has agreed to become a common law employee
of the  Corporation  or any of its  Subsidiaries.  The  term  Employee  includes
members of the Board who are common law employees of the  Corporation  or any of
its Subsidiaries.

     (m) "Exchange  Act" means the  Securities  Exchange Act of 1934 as amended,
and the rules and regulations thereunder.

     (n) "Fair  Market  Value"  means for a share of Common Stock on a specified
date:

          (i) the final  reported sales price on the specified date (or if there
     is no reported sale on that date, on the last  preceding  date on which any
     reported sale occurred) as reported in the principal consolidated reporting
     system  with  respect to  securities  listed or  admitted to trading on the
     principal United States securities  exchange  (including but not limited to
     the  American  Stock  Exchange)  on which  the  Common  Stock is  listed or
     admitted to trading; or

          (ii) if the Common  Stock is not listed or  admitted to trading on any
     such  exchange,  the closing bid quotation  with respect to a share on that
     date on the National Association of Securities Dealers Automated Quotations
     System,  or, if no such  quotation is provided,  on another  similar system
     then in use as selected by the Committee; or

          (iii) if, in the opinion of the Committee, paragraphs (i) and (ii) are
     not  applicable or  reasonable,  the fair market value of a share of Common
     Stock  as  determined  by  an  independent  appraisal  that  satisfies  the
     requirements of Code Section  401(a)(28)(C) and the regulations  thereunder
     as of a date that is no more than twelve (12) months before the transaction
     to which the valuation is applied.

     (o) "Grantee"  means a person  granted an Option or Restricted  Stock Award
under this Plan.

     (p) "Incentive Stock Option" means an Option designated by the Committee as
an incentive stock option under Code Section 422(b).

     (q)  "Nonqualified  Stock  Option" means an Option that is not an Incentive
Stock Option, or an Incentive Stock Option that, subsequent to the date of grant
thereof, fails to satisfy the requirements of Code Section 422(b) or (d).

     (r)  "Option"  means an option  granted  pursuant  to this Plan to purchase
shares of Common Stock.

     (s) "Plan" means the Espey Mfg. & Electronics  Corp.  2007 Stock Option and
Restricted Stock Plan as set forth herein and as amended from time to time. This
Plan may be referred to as the "Espey Mfg. & Electronics Corp. 2007 Stock Option
and Restricted Stock Plan."

     (t) "Restricted  Stock  Agreement"  means a written  agreement  between the
Corporation  and  the  Grantee,  or  a  certificate  accepted  by  the  Grantee,
evidencing  the grant of a Restricted  Stock Award and  containing the terms and
conditions, not inconsistent with this Plan, as the Committee and Grantee agree.

     (u) "Restricted Stock Award" means an award of shares of Common Stock

     (v) "Securities Act" means the Securities Act of 1933, as amended,  and the
rules and regulations thereunder.

     (w)  "Stock  Option  Agreement"  means  a  written  agreement  between  the
Corporation  and  the  Grantee,  or  a  certificate  accepted  by  the  Grantee,
evidencing the grant of an Option and containing the terms and  conditions,  not
inconsistent with this Plan, as the Committee and Grantee agree.

     (x)  "Subsidiary"  means (i) any  corporation  that the  Corporation  owns,
directly or indirectly, fifty (50%) percent or more of the total combined voting
power of all classes of stock, and (ii) any entity that the Committee reasonably
expects to become a Subsidiary under clause (i).

3.   Shares of Common Stock Subject to Plan

     Subject to  adjustment  as provided in Section 8, the Common Stock that may
be issued  pursuant to Options and  Restricted  Stock Awards  granted under this
Plan shall not exceed four hundred  thousand  (400,000) shares in the aggregate,
and the maximum  number of  aggregate  shares of Common Stock that may be issued
pursuant to Incentive Stock Options is four hundred thousand  (400,000).  Common
Stock  issuable  under  this  Plan may be  authorized  but  unissued  shares  or
reacquired shares of Common Stock held as treasury shares.  Common Stock subject
to Options and Restricted  Stock Awards that are forfeited,  lapse, or terminate
in whole or in part shall be available  for issuance  pursuant to other  Options
and Restricted Stock Awards.

                                      B-2


4.   Administration of Plan

     (a) The  Committee  shall  administer  this  Plan.  The  Committee  has the
exclusive  authority and discretion to take the following actions,  in each case
subject to and consistent with the provisions of this Plan:

          (i) to  select  the  Directors,  Employees,  and  Consultants  to whom
     Options and Restricted Stock Awards are granted;

          (ii) to determine the number of shares of Common Stock subject to each
     Option and Restricted Stock Award;

          (iii) to determine whether an Option is an Incentive Stock Option or a
     Nonqualified Stock Option;

          (iv)  to  determine  the  terms  and  conditions  of  any  Option  and
     Restricted Stock Award, including,  without limitation, the exercise price,
     the period,  if any,  over which Options vest and become  exercisable,  the
     period, if any, over which Restricted Stock Awards vest;

          (v) to  determine  whether any  successor  to the  Corporation  or its
     business shall assume the Plan and the Options and Restricted  Stock Awards
     previously granted and the terms and conditions of this assumption;

          (vi)  to  determine   whether,   to  what   extent,   and  under  what
     circumstances  the exercise price of an Option may be paid in cash,  Common
     Stock,  or other  securities or property,  and when an Option or Restricted
     Stock Award expires or is cancelled, forfeited, or surrendered;

          (vii) to  determine  the  restrictions  or  conditions  related to the
     delivery,  holding, and disposition of shares of Common Stock received upon
     exercise of an Option,  and upon the grant or vesting of a Restricted Stock
     Award;

          (viii)  to  prescribe  the  form  and  content  of each  Stock  Option
     Agreement and Restricted Stock Award Agreement,  which need not be the same
     for each Grantee;

          (ix) to adopt,  amend,  rescind,  suspend,  and waive  such  rules and
     regulations and appoint agents as the Committee determines  appropriate for
     the administration of this Plan;

          (x) to correct any  defect,  supply any  omission,  or  reconcile  any
     inconsistency  in the Plan, and to construe and interpret this Plan and any
     Option,  Stock Option Agreement,  Restricted Stock Award,  Restricted Stock
     Award Agreement, or other document;

          (xi) to construe and interpret the provisions of this Plan; and

          (xii) to make all other  determinations  as may be required under this
     Plan, or as the Committee determines  appropriate for the administration of
     this Plan.

     The  Committee  may,  at any  time  and from  time to  time,  grant  new or
additional  Options  and  Restricted  Stock  Awards  to any  eligible  Director,
Employee, or Consultant who has previously received Options and Restricted Stock
Awards  under this Plan,  or options and  restricted  stock  awards  under other
plans,  regardless of whether the prior Options and  Restricted  Stock Awards or
other  options and  restricted  stock  awards are still  outstanding,  have been
exercised  previously in whole or in part, or have been cancelled.  The exercise
price of the new or  additional  Options  and  Restricted  Stock  Awards  may be
established by the Committee  without regard to the previously  granted Options,
other options, Restricted Stock Awards, and other restricted stock awards.

     Notwithstanding any other provision of this Plan, the Board may perform any
function of the  Committee  under this Plan,  including  without  limitation  to
ensure that  transactions  under this Plan by Grantees  who are then  subject to
Section 16 of the Securities  Exchange Act of 1934 in respect of the Corporation
are  exempt  under  Rule 16b 3  thereunder.  In any case in which  the  Board is
performing a function of the Committee,  each reference to the Committee in this
Plan is deemed to refer to the Board.

     (b) In lieu of a broad  delegation  of authority to a Committee,  the Board
may  appoint  from among its  members an  advisory  committee  charged  with the
responsibility of making  recommendations to the Board on all matters pertaining
to the  administration  of this Plan.  In such a case no action of the  advisory
committee shall be final, conclusive and binding until confirmed by the Board.

     (c) Any  action  of the  Committee  with  respect  to this  Plan is  final,
conclusive,  and  binding  on  all  persons  and  entities,   including  without
limitation  the  Corporation,  Subsidiaries,  Grantees,  any  person  or  entity
claiming  any  rights  under  this  Plan  from  or  through  any  Grantee,   and
shareholders,  except to the extent the Committee may  subsequently  modify,  or
take further action not consistent  with, its prior action.  If not specified in
this Plan, the time at which the Committee must or may make any determination is
to be determined by the Committee,  and subject to Section 11, any determination
may thereafter by modified by the Committee.  The express grant of any authority
and discretion to the Committee,  and the taking of any action by the Committee,
is  not  to be  construed  as  limiting  any  authority  and  discretion  of the
Committee.  The  Committee  may delegate to officers of the  Corporation  or any
Subsidiary the authority and discretion,  subject to such terms as the Committee
determines,  to perform  those  functions  as the  Committee  determines  to the
fullest extent permitted by law.

     (d) Each member of the Committee is entitled to, in good faith, rely or act
on any  report or other  information  furnished  to him or her by any  Director,
officer,   or  other  Employee  of  the  Corporation  or  any  Subsidiary,   the
Corporation's  independent  certified  public  accountants,   or  any  executive
compensation consultant, legal counsel, or other professional retained by the

                                      B-3


Corporation. To the fullest extent permitted by law, no member of the Committee,
nor any Director,  officer,  or Employee of the  Corporation  or any  Subsidiary
acting on behalf of the  Committee,  shall be  personally  liable for any act or
omission  taken or made in good faith with respect to this Plan.  All members of
the Committee and any Director,  officer,  or Employee of the Corporation or any
Subsidiary  acting on its behalf shall be fully indemnified and protected by the
Corporation for any such act or omission to the fullest extent permitted by law.

5.   Option Terms

     Unless as otherwise  determined  by the  Committee and set forth in a Stock
Option  Agreement,  Options  granted under this Plan shall contain the following
terms and conditions:

     (a) Each Option granted to an Employee  shall be an Incentive  Stock Option
to the maximum extent permitted by Code Section 422(d), and any excess over such
maximum  shall be a  Nonqualified  Stock  Option.  Each  Option  granted  to non
Employee Grantees shall be a Nonqualified Stock Option.

     (b) The  exercise  price per share of Common  Stock  subject to each Option
shall  equal  the  Fair  Market  Value  on  the  date  the  Option  is  granted.
Notwithstanding  the foregoing,  the exercise price of an Incentive Stock Option
for a Grantee who owns more than ten (10%) percent of the total combined  voting
power of all  classes  of stock of the  Corporation  or any of its  Subsidiaries
shall not be less than one  hundred  and ten (110%)  percent of the Fair  Market
Value of the Common Stock on the date the Option is granted. In the case of such
Grantee,  the  Incentive  Stock  Option may be  exercised no later than five (5)
years after the date of grant.

     (c) Each Grantee  shall vest in an Option  (meaning  that the Grantee shall
have the right to exercise the option) in accordance with the terms of the Stock
Option  Agreement  between the  Corporation and that Grantee.  In addition,  all
Grantees  shall  become  fully  vested in their  Options on a Change in Control,
death and Disability.

     (d) The aggregate  Fair Market Value  (determined at the time the Option is
granted) of the Common Stock with respect to which  Incentive  Stock Options are
exercisable for the first time by any individual  during any calendar year under
all plans of the individual's employer corporation and its parent and subsidiary
corporations shall not exceed One Hundred Thousand ($100,000) Dollars. Except as
otherwise  provided in Section 5(e), no Incentive  Stock Option may be exercised
at any time unless the  Grantee  has been an  Employee  at all times  during the
period  beginning  on the date of grant and ending  three (3) months  before the
exercise date.

     (e) Options held by any Grantee shall terminate upon the earliest of:

          (i) as to unvested  Options,  immediately  upon the termination of all
     the Grantee's employment,  directorship, and consultancy relationships with
     the Corporation and its Subsidiaries, and if such termination is for Cause,
     as to all Options outstanding and unexercised, whether or not vested;

          (ii) as to vested  Options,  ninety (90) days after the termination of
     all the Grantee's employment,  directorship,  and consultancy relationships
     with the Corporation and its  Subsidiaries  (which is deemed to include the
     sale of any Subsidiary  that employs the Grantee) for any reason other than
     Cause, death, or Disability;

          (iii) one year after the termination of all the Grantee's  employment,
     directorship,  and consultancy  relationships  with the Corporation and its
     Subsidiaries by reason of death or Disability; and

          (iv) the tenth (10th)  anniversary of the date of grant.

     For purposes of this Section 5(e), the employment  relationship  is treated
as  continuing  intact while the Grantee is on military  leave,  sick leave,  or
other  bona fide leave of absence if the period of leave does not exceed six (6)
months or, if longer, so long as the Grantee's right to reemployment is provided
by statute or  contract.  If the period of leave  exceeds six (6) months and the
Grantee's  right to  reemployment  is not provided by statute or  contract,  the
employment  relationship  is deemed to terminate  on the first date  immediately
following the six (6) month period.

     (f) The  Committee  may, in its exclusive  discretion,  extend the exercise
period of an Option to a date no later than the  earlier of the latest date upon
which the Option could have expired by its original  terms,  or the tenth (10th)
anniversary of the date of grant.

6.   Exercise of Options

     (a) A Grantee shall exercise an Option by delivery of written notice to the
Corporation  setting forth the number of shares with respect to which the Option
is to be exercised,  together with bank cashier's check,  certified check,  wire
transfer,  or  postal  or  express  money  order  payable  to the  order  of the
Corporation  for an amount  equal to the  exercise  price of the  shares and all
employment,  excise,  income,  and  payroll  taxes  required  to be  withheld as
determined by the  Committee.  The Committee  may, in its exclusive  discretion,
permit a  Grantee  to pay all or a  portion  of the  exercise  price and the tax
withholding  obligations  by delivery  of Common  Stock or other  securities  or
property  (including  notes or other  contractual  obligations of the Grantee to
make payment on a deferred basis, and through cashless  exercise  arrangements),
and  determine  the methods by which Common Stock will be delivered or deemed to
be delivered to the Grantee.

                                      B-4


     (b)  Notwithstanding  anything in Section 6 to the contrary,  if the Common
Stock is publicly traded (i) the Committee shall cooperate with each Grantee and
his or her designated broker to facilitate the exercise of the Grantee's Options
using a "cashless  exercise" procedure in which the broker advances funds to the
Grantee to pay the option  exercise price and effect an immediate  resale of all
or part of the  option  shares to obtain  funds for  repayment  of the  advance;
provided,  however,  that the Grantee  shall bear the  brokerage and other costs
associated  with this procedure;  and (ii) the Committee shall not  unreasonably
exercise its  discretion to prevent the payment of the exercise price of Options
using Common Stock already owned by the Grantee.

7.   Restricted Stock Awards.

     (a)  Restricted  Stock  Awards  shall  consist  of shares  of Common  Stock
restricted  against transfer,  subject to a substantial risk of forfeiture,  and
other terms and conditions as determined by the Committee.  The Committee shall,
in its  exclusive  discretion,  determine  the  terms  and  conditions  of  each
Restricted  Stock Award,  which shall be set forth in the Restricted Stock Award
Agreement.  In  addition,  all  Grantees  shall  become  fully  vested  in their
Restricted Stock Awards on a Change in Control.

     (b)  To  protect  against  the  Corporation's  or a  Subsidiary's  loss  of
deductibility under Code Section 162(m), the Committee may make Restricted Stock
Awards  subject  to  conditions  of  attainment  of one or  more  preestablished
performance objectives that relate to corporate,  subsidiary, division, group or
unit  performance  in terms of growth in gross revenue,  earnings per share,  or
ratios  of  earnings  to  equity or  assets.  The  Committee  may  change  these
objectives  to reduce or eliminate,  but not to increase,  an Award to take into
account unforeseen events or changes in circumstances.

     (c) Upon the grant of a Restricted  Stock Award or, if the grant is subject
to a vesting schedule,  upon the vesting of shares,  the Corporation shall issue
to the Grantee a certificate  representing the vested shares.  In no event shall
the Grantee have the right to receive  dividends and to vote shares underlying a
Restricted Stock Award until the shares have vested.

     (d) Unvested  Restricted Stock Awards shall terminate  immediately upon the
termination  of all the  Grantee's  employment,  directorship,  and  consultancy
relationships  with  the  Corporation  and  its  Subsidiaries.   The  employment
relationship  is treated as  continuing  intact while the Grantee is on military
leave,  sick  leave,  or other bona fide leave of absence if the period of leave
does not exceed six (6) months or, if longer,  so long as the Grantee's right to
reemployment is provided by statute or contract.  If the period of leave exceeds
six (6)  months and the  Grantee's  right to  reemployment  is not  provided  by
statute or contract,  the employment  relationship is deemed to terminate on the
first date immediately following the six (6) month period.

8.   Other Events

     If any  combination,  consolidation,  forward  or  reverse  split,  merger,
reorganization,  repurchase,  spin off,  or  exchange  of Common  Stock or other
securities,  Common Stock dividend or other special and nonrecurring dividend or
distribution  (whether in cash,  securities,  or other  property),  liquidation,
dissolution,  or other corporate  transaction or event, affects the Common Stock
such that an adjustment is appropriate to prevent dilution or enlargement of the
rights of Grantees,  then the Committee  shall,  in such manner as it determines
appropriate in its exclusive discretion, adjust any or all of (a) the number and
kind of shares of stock deemed to be available  thereafter for grants of Options
and  Restricted  Stock Awards in the aggregate to all eligible  individuals  and
individually to any one eligible  individual;  (b) the number and kind of shares
of stock that may be delivered or deliverable in respect of outstanding  Options
and Restricted Stock Awards; and (c) the exercise price.

9.   Restrictions on Delivery of Shares

     (a) The  Corporation  shall not  deliver  shares of Common  Stock  upon the
exercise of any Option,  or the grant or vesting of any Restricted  Stock Award,
or take any other action under the Plan if the Board  determines that applicable
federal and state laws have not been satisfied,  the approvals of any regulatory
or governmental  agency have not been obtained,  and contractual  obligations to
which  the  Option  or  Restricted  Stock  Award  may be  subject  have not been
satisfied. The Board may, in its exclusive discretion,  postpone the issuance or
delivery of shares of Common Stock until  completion of a stock exchange listing
or  registration,  or  qualification of stock or other required action under any
federal or state law. The  Corporation  shall issue and deliver shares of Common
Stock at the earliest date at which the Board  reasonably  anticipates  that the
issuance and delivery shall not violate any applicable federal and state law, or
contractual obligation.

     (b) The Committee may, in its exclusive  discretion,  require a Grantee (i)
to make  representations and furnish information in connection with the issuance
and  delivery  of Common  Stock,  the  registration  of Common  Stock  under the
Securities  Act or  other  law,  and the  qualification  for an  exemption  from
registration  under the  Securities  Act or other law; and (ii) to indemnify and
hold harmless the Corporation,  all  Subsidiaries,  the Board, and the Committee
for and from all claims, damages, expenses, liabilities,  losses, and reasonable
attorney's and paralegal's fees and disbursements arising from or related to the
making  of such  representations  and the  furnishing  of such  information.  In
addition,  the  Committee  may  require a Grantee not to make any short sale of,
loan,  grant any option for the  purchase,  pledge,  or  otherwise  encumber  or
dispose of shares of stock in the  Corporation  or any  Subsidiary in connection
with the  registration  of  shares of the  Corporation  or any  Subsidiary.

10.  General Provisions

     (a) Each Option grant shall be evidenced by a Stock Option  Agreement,  and
each Restricted Stock Award shall be evidenced by a Restricted Stock Agreement.

                                      B-5


     (b) The grant of an Option or  Restricted  Stock Award in any year does not
give the Grantee any right to similar  grants in future years,  nor any right to
continue the Grantee's  employment,  directorship,  or consultancy  relationship
with  the  Corporation  and any  Subsidiary.  All  Grantees  remain  subject  to
termination  of their  services  to the same  extent as if this Plan were not in
effect.

     (c) No Grantee,  and no  beneficiary  and other  person  claiming  under or
through the Grantee,  has any right,  title, or interest by reason of any Option
or Restricted  Stock Award to any asset of the  Corporation  and any Subsidiary,
and except as  expressly  set forth  herein in this Plan to any shares of Common
Stock  allocated or reserved for the Plan or subject to any Option or Restricted
Stock Award. Neither the Corporation nor any Subsidiary is required to establish
any fund or make any other  segregation  of assets  for the  delivery  of Common
Stock on the  exercise  of any Option,  or the grant or vesting of a  Restricted
Stock Award.

     (d) Any  Option,  Restricted  Stock  Award,  or other right under this Plan
shall not be  assigned,  encumbered,  or  pledged  except by will or the laws of
intestate  descent  and  distribution.  An  Option  is  exercisable  during  the
Grantee's lifetime only by the Grantee, and with respect to a Nonqualified Stock
Option  the  Committee   may,  in  its  exclusive   discretion,   grant  greater
transferability rights.

     (e) The Corporation and its Subsidiaries,  as applicable,  may require that
the Grantee  make such  provision,  or provide  such  authorization  so that the
Corporation  or Subsidiary  can satisfy its  obligation to withhold or otherwise
pay for  employment,  excise,  income,  and payroll taxes of the Grantee arising
from the grant,  exercise,  or  cancellation  of Options,  or the sale of Common
Stock acquired on the exercise of an Option, or arising from the grant, vesting,
Code Section 83(b) election,  or cancellation of Restricted Stock Awards, or the
sale of Common  Stock  acquired  pursuant  to a  Restricted  Stock  Award.  This
authority and discretion  includes  without  limitation the right to withhold or
receive Common Stock, other securities,  and property, and to make cash payments
in respect thereof.

     (f) No  Grantee  of an Option  has any  rights of a  shareholder  until the
     Grantee exercises the Option.

     (g) This Plan is governed  by the laws of the State of New York  regardless
of the laws that  might  otherwise  apply  under the  applicable  principles  of
conflict of laws.

     (h)   References  to  any  statutory  and  regulatory   provision   include
corresponding successor provisions.

     (i) The  headings  and  captions  contained  in this Plan are inserted as a
matter of convenience,  and do not construe, define, extend, interpret, or limit
any provision of this Plan.

11.  Amendment and Termination

     (a) The Board may amend,  discontinue,  suspend,  or terminate this Plan at
any time and from time to time;  provided,  however,  that no such action  shall
adversely  affect the rights of Grantees of Options and Restricted  Stock Awards
previously granted,  and that any shareholder approval necessary or desirable to
comply with applicable law or listing requirement must be obtained.

     (b) The Board may  terminate  and liquidate  this Plan and  accelerate  the
exercisability  of Options and  vesting of  Restricted  Stock  Awards (i) within
twelve (12) months of a  dissolution  taxed under Code  Section 331, or with the
approval of a bankruptcy court under 11 U.S.C. ss.  503(b)(1)(A),  provided that
the Grantee  recognizes income upon the latest of the calendar year in which the
termination occurs, the calendar year in which an amount is no longer subject to
a  substantial  risk of  forfeiture,  and the first  calendar  year in which the
payment  is  administratively  practicable;  or (ii)  within  thirty  (30)  days
preceding or the twelve (12) months following a Change in Control.

12.  Effective Date and Duration of Plan

     This Plan shall be  effective  immediately  upon its adoption by the Board,
subject  to  the   approval  of  this  Plan  with  respect  to  Options  by  the
Corporation's  shareholders either before or within one year after the effective
date.  Options granted prior to the date that  shareholder  approval is obtained
are  conditioned on receipt of this approval;  the Options may not be exercised,
nor shall any shares of Common  Stock be  delivered  on  exercise  of an Option,
prior to the date  that  shareholder  approval  is  obtained.  This  Plan  shall
terminate  ten (10) years from the earlier of the date that this Plan is adopted
by the Board,  and the date that the  Corporation's  shareholders  approve  this
Plan;  provided,  however,  that  termination  of this Plan shall not  adversely
affect the rights of Grantees of Options and Restricted Stock Awards  previously
granted.

13.  Notices and Time

     All notices  given under this Plan must be in writing.  Except as otherwise
provided in this Plan,  all periods of time begin or end, as the case may be, on
the date the notice is sent via facsimile  transmission  and receipt  confirmed,
the date  personally  delivered to any  recipient,  the date  deposited  with an
overnight  delivery  service  with  tracking  capability  for next  business day
delivery, or on the date of mailing by certified mail, return receipt requested,
postage  prepaid,  addressed to the recipient.  In computing the number of days,
the date of facsimile  transmission and receipt confirmed,  the date of personal
delivery,  the date of deposit with an overnight  delivery service with tracking
capability for next business day delivery,  or the date of mailing, is included.
Notice of change of address is deemed given only when received.

                                      B-6


           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
                         ESPEY MFG. & ELECTRONICS CORP.

                                  PROXY FOR THE
                       2007 ANNUAL MEETING OF SHAREHOLDERS
                                November 30, 2007

                                     COMMON

The undersigned hereby appoints Alvin O. Sabo and Carl Helmetag as Proxies, each
with the power to appoint his substitute,  and hereby authorizes them or any one
of them to represent and to vote, as designated  below, all the shares of common
stock of ESPEY MFG. & ELECTRONICS  CORP. which the undersigned would be entitled
to vote if personally  present at the 2007 Annual Meeting of  Shareholders to be
held on November 30, 2007 or any adjournment thereof.

1.   TO ELECT:  two Class B Directors  Barry Pinsley and Seymour Saslow to serve
     for a three  year term  expiring  at the 2010  annual  meeting or until his
     successor is duly elected and qualifies.

     SEYMOUR SASLOW             [_]  FOR    [_]  WITHHOLD AUTHORITY
     BARRY PINSLEY              [_]  FOR    [_]  WITHHOLD AUTHORITY

     The Board of Directors recommends a vote FOR these nominees.
                                              ---

2.   TO RATIFY the  appointment of Rotenberg & Company,  LLP as the  independent
     public accountants of the Company for fiscal year ending June 30, 2008.

     [_]  FOR           [_]  AGAINST           [_]  ABSTAIN

     The Board of Directors recommends a vote FOR this proposal.
                                              ---

3.   TO APPROVE  The Espey  Mfg.  &  Electronics  Corp.  2007  Stock  Option and
     Restricted Stock Plan.

     [_]  FOR           [_]  AGAINST           [_]  ABSTAIN

     The Board of Directors recommends a vote FOR this proposal.
                                              ---

               No other business may be transacted at the meeting.

                                                        ------------------------
         Please be sure to sign and date                | Date                 |
           this Proxy in the box below.                 |                      |
--------------------------------------------------------------------------------
|                                                                              |
|                                                                              |
-----------Shareholder sign above----------Co-holder (if any) sign above-------

--------------------------------------------------------------------------------
     ^ Detach here, sign, date and mail in postage paid envelope provided. ^

                         ESPEY MFG. & ELECTRONICS CORP.
--------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE ABOVE SIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
                           FOR PROPOSALS 1, 2 AND 3.

     Please sign exactly as name appears  hereon.  When shares are held by joint
tenants,  both should sign. When signing as attorney,  executor,  administrator,
trustee or guardian,  please give full title as such. If a  corporation,  please
sign in full  corporation name by President or other  authorized  officer.  If a
partnership, please sign in partnership name by authorized person.

     PLEASE  MARK,  SIGN,  DATE AND  RETURN THE PROXY  CARD  PROMPTLY  USING THE
ENCLOSED ENVELOPE.
--------------------------------------------------------------------------------

IF YOUR ADDRESS HAS CHANGED,  PLEASE  CORRECT THE ADDRESS IN THE SPACE  PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.

---------------------------------------

---------------------------------------

---------------------------------------



           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
                         ESPEY MFG. & ELECTRONICS CORP.

                                  PROXY FOR THE
                       2007 ANNUAL MEETING OF SHAREHOLDERS
                                November 30, 2007

                                      ESOP

The undersigned hereby appoints Alvin O. Sabo and Carl Helmetag as Proxies, each
with the power to appoint his substitute,  and hereby authorizes them or any one
of them to represent and to vote, as designated  below, all the shares of common
stock of ESPEY MFG. & ELECTRONICS  CORP. which the undersigned would be entitled
to vote if personally  present at the 2007 Annual Meeting of  Shareholders to be
held on November 30, 2007 or any adjournment thereof.

1.   TO ELECT:  two Class B Directors  Barry Pinsley and Seymour Saslow to serve
     for a three  year term  expiring  at the 2010  annual  meeting or until his
     successor is duly elected and qualifies.

     SEYMOUR SASLOW             [_]  FOR    [_]  WITHHOLD AUTHORITY
     BARRY PINSLEY              [_]  FOR    [_]  WITHHOLD AUTHORITY

     The Board of Directors recommends a vote FOR these nominees.
                                              ---

2.   TO RATIFY the  appointment of Rotenberg & Company,  LLP as the  independent
     public accountants of the Company for fiscal year ending June 30, 2008.

     [_]  FOR           [_]  AGAINST           [_]  ABSTAIN

     The Board of Directors recommends a vote FOR this proposal.
                                              ---

3.   TO APPROVE  The Espey  Mfg.  &  Electronics  Corp.  2007  Stock  Option and
     Restricted Stock Plan.

     [_]  FOR           [_]  AGAINST           [_]  ABSTAIN

     The Board of Directors recommends a vote FOR this proposal.
                                              ---

               No other business may be transacted at the meeting.

                                                        ------------------------
         Please be sure to sign and date                | Date                 |
           this Proxy in the box below.                 |                      |
--------------------------------------------------------------------------------
|                                                                              |
|                                                                              |
-----------Shareholder sign above----------Co-holder (if any) sign above-------

--------------------------------------------------------------------------------
     ^ Detach here, sign, date and mail in postage paid envelope provided. ^

                         ESPEY MFG. & ELECTRONICS CORP.
--------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE ABOVE SIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
                           FOR PROPOSALS 1, 2 AND 3.

     Please sign exactly as name appears  hereon.  When shares are held by joint
tenants,  both should sign. When signing as attorney,  executor,  administrator,
trustee or guardian,  please give full title as such. If a  corporation,  please
sign in full  corporation name by President or other  authorized  officer.  If a
partnership, please sign in partnership name by authorized person.

     PLEASE  MARK,  SIGN,  DATE AND  RETURN THE PROXY  CARD  PROMPTLY  USING THE
ENCLOSED ENVELOPE.
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IF YOUR ADDRESS HAS CHANGED,  PLEASE  CORRECT THE ADDRESS IN THE SPACE  PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.

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