The following is an agreement between John J. Pompay, Jr. and
Espey Mfg. & Electronics Corp. (The company).

     This agreement supercedes and replaces all previous
understandings.

     We will pay you a salary of $200.00 a week.

     Your job title and duties will be Vice President-Director of
Marketing. As such you will have the responsibilities and authority
to create an outside sales force of representatives as needed. You
shall establish the terms of remuneration to these representatives,
subject to the prior approval of the President. You shall also have
the authority to establish an internal contracts department to
support your responsibilities.

     You will receive a commission at 3% on all payments received 
by Espey against your current open written orders and those written
orders booked by you thru 12/31/96.

     You will receive a commission at 1% on all payments received
against written orders booked by the Company between 12/31/96 and
12/31/98. The 1% commission shall be in lieu of the prior 3%
commission.

     Expenses incurred by you in the performance of your duties
will be reimbursed by our company. These expenses must fall under
the ethics guidelines of the U. S. Government.

     In the event you voluntarily terminate your employment with
the Company, or we terminate you for cause other than as set forth
in the following paragraph, we will pay you commissions, at the
rate then prevailing as provided herein, on your written orders in 
the house at the time of such termination, when such orders are 
shipped and paid. Your salary will cease upon leaving our employ. 

     In the event you voluntarily leave our employ or are
terminated for cause, for a period of two years from the date of
termination you will not, directly or indirectly, compete with
Espey or accept employment or independent contractor status or
participate as an owner or otherwise with any competitor of Espey,
if you do, Espey's obligation to make any payments under this
agreement will terminate.

     In the event we terminate your employment, for other than 
cause, we will pay you commissions, at the rate then prevailing on
all your orders then in the house. We will continue to pay your
salary for one year and we will pay you commissions at the agreed
rates on all orders received during the year after termination
whenever shipped and paid.

     The same terms as the paragraph above will apply if you die or
become permanently disabled. This agreement shall terminate on
12/31/98.

     Commission, when payable pursuant to this agreement, shall be
based on our net billing price; that is, our billing price less
freight, discount, Federal or State taxes. Commissions are payable
only when shipment has actually been made and full payment received
by our company. Payment of commissions will be made to you, in the
month following receipt of full payment from our customer. Our
company will, between the 10th and 20th of each month, forward to
you a statement of each account and each amount collected for the
previous month and at the same time, a check will be delivered to
you for the amount of commissions to which you are entitled.

     It may be or become necessary that our company issue credits
to customers on invoices which have been paid. Such credits are
issuable at the sole discretion of our company and when such
credits are issued, you agree that your commission account will be
charged back for any commissions previously paid to you based on
paid invoices. Such charge-backs for commissions will be shown on
the statement of account forwarded to you.

     We agree to furnish you with data on all orders accepted as
above outlined and data on all invoices in connection with
shipments on all such orders.

     This agreement shall be strictly personal to and with you and
it is specifically understood that you shall not sell, assign or
encumber the same or in any way sell, assign or encumber any monies
due to you unless you have the prior written approval of our
company, which approval must be signed by the President of our
company. You will work exclusively for our company.

     This agreement may not be modified orally. It may be modified
only in writing signed by you on your behalf and by the President
of our company. This understanding shall be governed by and
interpreted under the Laws of the State of New York.

     If the above is acceptable to you, please sign a copy at the
place indicated below for your signature.

Dated:                             Very truly yours,

ACCEPTED:                     Espey MFG. & Electronics Corp.     
          

------------------------      By_________________________  
JOHN J. POMPAY, JR.           JOSEPH CANTERINO, PRESIDENT