SECOND AMENDED AND RESTATED

                                RIGHTS AGREEMENT





                                 by and between







                         ESPEY MFG. & ELECTRONICS CORP.

                                       and

                           REGISTRAR AND TRANSFER CO.

                                       as

                                  Rights Agent











                           Dated as December 18, 2009



<PAGE>
<TABLE>
<CAPTION>
<S>          <C>                                                                        <C>
Section 1.   Certain  Definitions........................................................1

Section 2.   Appointment of Rights Agent.................................................7

Section 3.   Issue Of Right Certificates.................................................8

Section 4.   Form of Right Certificates..................................................9

Section 5.   Countersignature and Registration...........................................9

Section 6.   Transfer, Split Up, Combination and Exchange of Right Certificates;

             Mutilated, Destroyed, Lost or Stolen Right Certificates....................10

Section 7.   Exercise of Rights; Purchase Price; Expiration Date of Rights..............10

Section 8.   Cancellation and Destruction of Right Certificates.........................11

Section 9.   Reservation and Availability of Common Shares..............................12

Section 10.  Common Shares Record Date..................................................13

Section 11.  Adjustment of Purchase Price, Number of Shares or Number of Rights.........13

Section 12.  Certificate of Adjusted Purchase Price or Number of Shares.................18

Section 13.  Consolidation, Merger or Sale or Transfer of Assets or Earning Power.......19

Section 14.  Fractional Rights and Fractional Shares....................................20

Section 15.  Rights of Action...........................................................21

Section 16.  Agreement of Right Holders.................................................21

Section 17.  Right Certificate Holder Not Deemed a Stockholder..........................21

Section 18.  Concerning the Rights Agent................................................22

Section 19.  Merger or Consolidation or Change of Name of Rights Agent..................22

Section 20.  Duties of Rights Agent.....................................................23

Section 21.  Change of Rights Agent.....................................................24

Section 22.  Issuance of New Right Certificates; Legends................................25

Section 23.  Redemption.................................................................25

Section 24.  Notice of Certain Events...................................................26

Section 25.  Notices....................................................................27

Section 26.  Supplements and Amendments.................................................28

Section 27.  Successors.................................................................28

Section 28.  Severability...............................................................28

Section 29.  Governing Law..............................................................28

Section 30.  Counterparts...............................................................28

Section 31.  Descriptive Headings.......................................................28
</TABLE>
<PAGE>

                  SECOND AMENDED AND RESTATED RIGHTS AGREEMENT

         This SECOND AMENDED AND RESTATED RIGHTS  AGREEMENT (this  "Agreement"),
                                                                    ---------
dated as of December 18, 2009 by and between ESPEY MFG. & ELECTRONICS  CORP.,  a
New York corporation (the "Company"),  and REGISTRAR AND TRANSFER CO., as Rights
                           -------
Agent (the "Rights Agent").
            ------------

         WHEREAS,  the  Board  of  Directors  of the  Company  adopted  a Rights
Agreement, dated as of March 31, 1989, amended on February 12, 1999; and amended
and restated on December 31, 1999 (the "Rights Agreement");
                                        ----------------

         WHEREAS, the Rights Agreement is scheduled to terminate on December 31,
2009;

         WHEREAS,  the Board of  Directors  of the Company  finds it in the best
interests of the Company and its  stockholders to continue the Rights  Agreement
and desires to amend and restate the Rights  Agreement  again,  effective  as of
January 1, 2010;

         WHEREAS, this Agreement supersedes and replaces the Rights Agreement;

         WHEREAS,  the Board of Directors of the Company authorized and declared
a dividend of one right  ("Right") for each share of Common Stock,  $.33 1/3 par
                           -----
value per share, of the Company ("Common Share")  outstanding as of the Close of
                                  ------------
Business on April 14, 1989 (the "Record  Date"),  and authorized the issuance of
                                 ------------
one Right with respect to each Common Share that shall become outstanding (other
than Common  Shares  that are issued in  connection  with the  exercise of these
Rights)  after the Record Date and on or before the earlier of the  Distribution
Date or the  Expiration  Date (as such  terms are  defined  in  Sections 3 and 7
hereof),  each Right  representing  the right to  purchase  one-half of a Common
Share (subject to adjustment as herein provided); and

         WHEREAS, the Board of Directors of the Company authorized a one-for-one
stock split in the form of a dividend of one Common  Share for each Common Share
issued and outstanding as of December 30, 2005 (the "Dividend").
                                                     --------

         NOW  THEREFORE,  in  consideration  of  the  premises  and  the  mutual
agreements herein set forth, the parties hereby agree as follows:

         Section 1. Certain  Definitions.  For purposes of this  Agreement,  the
                    --------------------
following terms have the meanings indicated:

             (a)  "Acquiring  Person"  shall  mean any  Person  (as such term is
                   -----------------
hereinafter  defined) who or which,  together with all Affiliates and Associates
(as such terms are hereinafter  defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined ) of 15% or more of the Common Shares
then  outstanding,  but shall not  include  any  Exempt  Person (as such term is
hereinafter defined).

<PAGE>

             (b) "Affiliate" and "Associate" shall have the respective  meanings
                  ----------     ----------
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations  under
the  Securities  Exchange Act of 1934, as amended (the  "Exchange  Act"),  as in
                                                         -------------
effect on the date hereof.

             (c) A Person  shall be deemed to be the  "Beneficial  Owner" of and
                                                       -----------------
shall be deemed to "beneficially own" any securities:
                    ----------------

                 (1) except as expressly  excluded by the provisions of Sections
1(c)(2) and (3) hereof,  which such Person or any of such Person's Affiliates or
Associates has "beneficial  ownership" of (as determined  pursuant to Rule 13d-3
                ---------------------
of the General Rules and Regulations under the Exchange Act, as in effect on the
date of such determination), directly or indirectly;

                 (2) which such  Person or any of such  Person's  Affiliates  or
Associates has,  directly or indirectly,  (A) the right to acquire or dispose or
direct the disposition of (whether such right is exercisable immediately or only
after  the  passage  of  time)  pursuant  to  any   agreement,   arrangement  or
understanding  (whether or not in writing),  or upon the exercise of  conversion
rights, exchange rights, rights (other than these Rights),  warrants or options,
or  otherwise;  provided,  however,  that  a  Person  shall  not be  deemed  the
Beneficial Owner of, or to beneficially own,  securities  tendered pursuant to a
tender or  exchange  offer  made by or on  behalf of such  Person or any of such
Person's  Affiliates or Associates  until such tendered  securities are accepted
for purchase or exchange;  or (B) the right to vote  pursuant to any  agreement,
arrangement or  understanding  (whether or not in writing);  provided,  however,
that a Person shall not be deemed the  Beneficial  Owner of, or to  beneficially
own, any security if the agreement,  arrangement or  understanding  to vote such
security  (i) arises  solely  from a  revocable  proxy or consent  given to such
Person in response to a public proxy or consent  solicitation  made pursuant to,
and in accordance with, the applicable rules and regulations of the Exchange Act
and (ii) is not also then  reportable on Schedule 13D under the Exchange Act (or
any comparable or successor report); or

                 (3) which are beneficially  owned,  directly or indirectly,  by
any other  Person with whom such Person or any of such  Person's  Affiliates  or
Associates has any agreement,  arrangement or  understanding  (whether or not in
writing) for the purpose of acquiring,  holding,  voting (except as described in
the proviso to clause (B) of subparagraph (2) of this Section 1(c)) or disposing
of any securities of the Company;  provided,  however,  that notwithstanding the
provisions  of clauses (1), (2) or (3) of this Section  1(c), no Person shall be
deemed  to be the  Beneficial  Owner  of,  and no  Person  shall  be  deemed  to
beneficially  own, any Common Shares held by any trust created under the will of
Nathan Pinsley (the "Trust Common Shares").  Notwithstanding the foregoing,  all
                     -------------------
Trust Common Shares shall be deemed outstanding for purposes hereof.

             (d)  "Business  Day"  shall  mean any day  other  than a  Saturday,
                   -------------
Sunday,  or a day on which  banking  institutions  in the  State of New York are
authorized or obligated by law or executive order to close.

<PAGE>

             (e) "Close of Business" on any given date shall mean 5:00 p.m., New
                  -----------------
York City time,  on such  date;  provided,  however,  that if such date is not a
Business Day it shall mean 5:00 p.m., New York City time, on the next succeeding
Business Day.

             (f) "Common  Shares"  shall mean:  (i) when used  without  specific
                  --------------
reference to any issuing entity,  the shares of Common Stock, $.33 1/3 par value
per share, of the Company or any securities which such Common Stock is converted
into or exchanged for pursuant to any  reclassification  of such Common Stock or
(ii) when used with  reference to any Person (other than the Company) the equity
security which has the greatest voting power of such Person or if such Person is
a subsidiary  of another  Person,  the Person (other than an  individual)  which
ultimately controls such first mentioned Person.

             (g) "Effective Date" shall mean January 1, 2010, which shall be the
                  --------------
effective date of this Agreement.

             (h) "Exempt  Person" shall mean the Company,  any subsidiary of the
                  --------------
Company,  any employee  benefit plan or employee stock plan of the Company or of
any  subsidiary of the Company,  or any person or entity  organized,  appointed,
established  or holding  Common  Shares for or pursuant to the terms of any such
plan.

             (i) "Person" shall mean any individual,  firm, corporation or other
                  ------
entity.

             (j) "Section 11(a)(ii) Event" shall mean the occurrence of an event
                  -----------------------
where:

                 (1) any  Acquiring  Person or any Associate or Affiliate of any
Acquiring Person, at any time after the Effective Date,  directly or indirectly,
except in a transaction or transactions covered by Section 13 shall:

                     (i) merge into the Company or  otherwise  combine  with the
Company and the Company shall be the continuing or surviving corporation of such
merger or combination;

                     (ii) in one or more  transactions,  transfer  any assets to
the Company or any of its  subsidiaries  in  exchange  (in whole or in part) for
Common  Shares or for  securities  exercisable  for or  convertible  into Common
Shares or otherwise obtain from the Company, with or without consideration,  any
additional  Common  Shares or securities  exercisable  for or  convertible  into
Common Shares (other than as part of a pro rata  distribution  to all holders of
Common Shares);

                     (iii) alone or together with its Affiliates and Associates,
become the Beneficial Owner of 15% or more of the Common Shares;

                     (iv) sell, purchase,  lease,  exchange,  mortgage,  pledge,
transfer  or  otherwise  dispose of (in one or more  transactions),  to, from or
with,  as the  case  may be,  the  Company  or any of its  subsidiaries,  assets
(including  securities)  on terms and  conditions  less favorable to the Company
than the Company  would be able to obtain in  arm's-length  negotiation  with an
unaffiliated third party;

<PAGE>

                     (v) receive any compensation from the Company or any of the
Company's  subsidiaries  other than  compensation for full-time  employment as a
regular   employee  at  rates  in   accordance   with  the   Company's  (or  its
subsidiaries') past practices; or

                     (vi) receive the benefit,  directly or  indirectly  (except
proportionately as a stockholder) of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax advantage provided by
the Company or any of its subsidiaries;

             or

                 (2) during  such time as there is an  Acquiring  Person,  there
shall be, except in a transaction or transactions  covered by Section 13 hereof,
any  reclassification  of securities  (including  any reverse  stock split),  or
recapitalization  of the Company,  or any merger or consolidation of the Company
with any of its subsidiaries or any other  transaction or series of transactions
(whether or not with or into or otherwise  involving an Acquiring  Person) which
has the  effect,  directly  or  indirectly,  or  increasing  by more than 1% the
proportionate  share of the outstanding  shares of any class of capital stock or
of securities  exercisable for or convertible into any class of capital stock of
the Company or any of its subsidiaries  which is directly or indirectly owned by
any Acquiring Person or any Associate or Affiliate of any Acquiring Person.

         (k)  "Shares  Acquisition  Date"  shall  mean the first  date of public
               -------------------------
announcement (including,  without limitation, a report filed pursuant to Section
13(d)  of the  Exchange  Act) by the  Company  or an  Acquiring  Person  that an
Acquiring Person has become such.

         (l) "Term" shall mean January 1, 2010 to December 31, 2019.
              ----

         (m)  "Triggering  Event" shall mean the occurrence of an event in which
               -----------------
the Company shall at any time after the Effective Date:

                 (1) declare a dividend on the Common  Shares  payable in Common
Shares;

                 (2) subdivide the then outstanding Common Shares;

                 (3) combine the outstanding Common Shares into a smaller number
of Common Shares; or

                 (4) except in a transaction or transactions  covered by Section
13 or a Section  11(a)(ii)  Event,  issue any shares of its  capital  stock in a
reclassification  of the Common Shares (including any such  reclassification  in
connection  with a merger in which the Company is the  continuing  or  surviving
corporation).

         Section 2. Appointment of Rights Agent. The Company hereby appoints the
                    ---------------------------
Rights Agent to act in accordance with the terms and conditions  hereof, and the
Rights Agent hereby accepts such appointment.  The Company may from time to time
appoint such Co-Rights Agents as it may deem necessary or desirable.

<PAGE>

         Section 3. Issue Of Right Certificates.
                    ---------------------------

                 (a) Until the  Distribution  Date (as hereinafter  defined) (x)
each Right will be evidenced (subject to the provisions of paragraph (b) of this
Section 3) by the certificate for the Common Share registered in the name of the
holder  thereof in  respect  of which  such  Right has been  issued and not by a
separate  Right  Certificate,  and (y) each Right will be  transferable  only in
connection with the transfer of such Common Share. The term "Distribution  Date"
                                                             ------------------
shall  mean  such  date  which  is the  earlier  of (i)  the  fifteenth  day (or
twenty-fifth  day if the Board of  Directors  of the Company  shall  within such
fifteen-day  period act by  resolution  to extend such period by ten days) after
the Shares  Acquisition  Date and (ii) the fifteenth day (or twenty-fifth day if
the Board of Directors of the Company shall within such  fifteen-day  period act
by resolution to extend such period by ten days) after the  commencement  by any
Person  (other than an Exempt  Person) of a tender or exchange  offer which,  if
consummated  for the maximum  amount of securities  to which the offer  relates,
would result in such Person, together with all Affiliates and Associates of such
Person,  being the  Beneficial  Owner of 15% or more of the  outstanding  Common
Shares of the Company (including any such date which is after the Effective Date
and prior to the  issuance  of the  Rights).  As soon as  practicable  after the
Distribution  Date, the Rights Agent will send, by first-class,  insured postage
prepaid  mail,  or, if  requested by or on behalf of a holder,  shall  otherwise
deliver,  to each record  holder of Common Shares as of the Close of Business on
the Distribution Date, at the address of such holder shown on the records of the
Company, a Right certificate, in substantially the form of Exhibit A hereto (the
"Right  Certificate"),  evidencing  one  Right  for each  Common  Share so held,
 ------------------
subject to adjustment as provided herein.  On and after the  Distribution  Date,
the Rights will be evidenced solely by such Right Certificates.

                 (b) The Company will file a copy of this Agreement, including a
copy of a Summary of Rights to Purchase Common Shares, in substantially the form
attached  hereto as Exhibit B (the  "Summary  of Rights") in a Form 8-K with the
                                     ------------------
Securities and Exchange  Commission  pursuant to the Securities  Exchange Act of
1934, as amended.  Until the Distribution  Date (or, if earlier,  the Expiration
Date),  the  surrender  for  transfer  of  any  certificate  for  Common  Shares
outstanding on the Record Date,  with or without a copy of the Summary of Rights
attached  thereto,  shall also  constitute the automatic  transfer of the Rights
associated with the Common Shares represented thereby.

                 (c) Rights have been issued with  respect of all Common  Shares
that became  outstanding  after the Record Date,  but on or before the Effective
Date  and  shall be  issued  with  respect  to all  Common  Shares  that  become
outstanding  after the  Effective  Date,  but on or before  the  earlier  of the
Distribution  Date or the  Expiration  Date.  All Rights  issued with respect to
Common Shares  outstanding  prior to the Effective Date shall,  on the Effective
Date,  be  subject  to  this  Agreement   notwithstanding  any  reference  to  a
predecessor  agreement on any certificate  memorializing such outstanding Common
Shares.  Certificates  for Common Shares issued after the Effective Date, but on
or before the earlier of the  Distribution  Date or the Expiration  Date,  shall
have  impressed  on,  printed on,  written on or  otherwise  affixed to them the
following legend:

                  "This  certificate  also  evidences  and  entitles  the holder
                  hereof to certain  Rights as set forth in a Second Amended and
                  Restated

<PAGE>

                  Rights  Agreement  between Espey Mfg. & Electronics  Corp. and
                  Registrar and Transfer  Co., as Rights Agent,  effective as of
                  January 1, 2010 (the "Rights  Agreement"),  the terms of which
                                        -----------------
                  are  hereby  incorporated  herein by  reference  and a copy of
                  which is on file at the principal  executive  offices of Espey
                  Mfg. & Electronics Corp. Under certain  circumstances,  as set
                  forth in the Rights  Agreement,  such Rights will be evidenced
                  by separate  certificates  and will no longer be  evidenced by
                  this certificate.  Espey Mfg. & Electronics Corp. will mail to
                  the holder of this  certificate a copy of the Rights Agreement
                  without  charge after receipt of a written  request  therefor.
                  Under certain circumstances,  Rights issued to or beneficially
                  owned by Acquiring Persons or Affiliates or Associates thereof
                  (as defined in the Rights  Agreement)  or certain  transferees
                  thereof may become null and void."

With respect to such  certificates  containing the foregoing  legend,  until the
Distribution  Date (or, if earlier,  the Expiration Date), the Rights associated
with the Common Shares  represented by such  certificates  shall be evidenced by
such  certificates  alone.  Until the  Distribution  Date (or, if  earlier,  the
Expiration  Date), the surrender for transfer of any such certificate shall also
constitute  the  automatic  transfer  of the Rights  associated  with the Common
Shares represented thereby.

         Section 4. Form of Right Certificates.  The Right Certificates (and the
                    --------------------------
forms of  election  to purchase  shares and of  assignment  to be printed on the
reverse  thereof) shall be substantially in the form of Exhibit A hereto and may
have such marks of identification or designation and such legends,  summaries or
endorsements  printed thereon as the Company may deem  appropriate and which are
not inconsistent with the provisions of this Agreement, or as may be required to
comply  with any  applicable  law or with any rule or  regulation  of any  stock
exchange  on which the Rights may from time to time be listed,  or to conform to
usage.  Subject to the provisions of Section 22 hereof, the Right  Certificates,
whenever  distributed,  shall be dated as of the  Record  Date and on their face
shall set forth the  number of Rights  evidenced  thereby,  the number of Common
Shares which may be purchased  upon exercise  thereof and the purchase price per
share provided for therein (the "Purchase Price"),  provided,  however, that the
number of Rights,  the number of such  shares and the  Purchase  Price  shall be
subject to adjustment as provided herein.

         Section 5.  Countersignature  and Registration.  The Right Certificates
                     ----------------------------------
shall  be  executed  on  behalf  of the  Company  by its  President  or any Vice
President,  either manually or by facsimile signature,  and have affixed thereto
the  Company's  seal or a  facsimile  thereof  which  shall be  attested  by the
Secretary  or an  Assistant  Secretary  of the  Company,  either  manually or by
facsimile signature.  The Right Certificates shall be manually  countersigned by
the  Rights  Agent  and  shall  not  be  valid  for  any   purpose,   unless  so
countersigned.  In case any  officer of the Company who shall have signed any of
the Right  Certificates  shall cease to be such  officer of the  Company  before
countersignature  and  delivery by the Rights  Agent,  such Right  Certificates,
nevertheless,  may be countersigned  and delivered by the Rights Agent, with the
same force and effect as though the person who signed such Right Certificate had
not ceased to be such officer of the Company;  and any Right  Certificate may be
signed on behalf of the  Company by any person  who,  at the actual  date of the
execution of such Right Certificate, shall be a proper officer

<PAGE>

of the  Company  to sign such  Right  Certificate,  although  at the date of the
execution  of this  Rights  Agreement  any such  person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to be kept,
at one of its offices in the United States,  books for registration and transfer
of the Right Certificates issued hereunder.  Such books shall show the names and
addresses of the  respective  holders of the Right  Certificates,  the number of
Rights  evidenced on its face by each of the Right  Certificates and the date of
each of the Right Certificates.

         Section  6.  Transfer,  Split Up,  Combination  and  Exchange  of Right
                      ----------------------------------------------------------
Certificates;  Mutilated, Destroyed, Lost or Stolen Right Certificates.  Subject
----------------------------------------------------------------------
to the provisions of Sections 7(e) and 14 hereof, at any time after the Close of
Business on the  Distribution  Date, and at or prior to the Close of Business on
the  Expiration  Date,  any  Right  Certificate  or  Right  Certificates  may be
transferred,  split up,  combined or exchanged for another Right  Certificate or
Right Certificates, entitling the registered holder to purchase a like number of
Common Shares as the Right  Certificate or Right  Certificates  surrendered then
entitled such holder to purchase. After the Distribution Date and on or prior to
the  Expiration  Date,  any registered  holder  desiring to transfer,  split up,
combine or exchange  any Right  Certificate  shall make such  request in writing
delivered to the Rights  Agent,  and shall  surrender the Right  Certificate  or
Right Certificates to be transferred,  split up, combined or exchanged, with the
form of assignment on the reverse thereof duly executed,  to the Rights Agent at
its principal office. Thereupon, the Company will make and deliver to the Rights
Agent and the Rights Agent shall  countersign and deliver to the person entitled
thereto,  a Right Certificate or Right  Certificates,  as the case may be, as so
requested.  The Company may require payment of a sum sufficient to cover any tax
or  governmental  charge that may be imposed in  connection  with any  transfer,
split up, combination or exchange of Right Certificates.

         Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory  to them of the loss,  theft,  destruction or mutilation of a Right
Certificate,  and,  in case of  loss,  theft or  destruction,  of  indemnity  or
security  reasonably  satisfactory  to  them,  and,  at the  Company's  request,
reimbursement  to the Company and the Rights  Agent of all  reasonable  expenses
incidental  thereto,  and upon surrender to the Rights Agent and cancellation of
the Right  Certificate  if  mutilated,  the Company  will make and deliver a new
Right  Certificate  of like tenor to the Rights Agent for  countersignature  and
delivery  to the  registered  owner in lieu of the  Right  Certificate  so lost,
stolen, destroyed or mutilated.

         Section 7.  Exercise  of Rights;  Purchase  Price;  Expiration  Date of
                     -----------------------------------------------------------
Rights.
------

             (a) The registered holder of any Right Certificate may exercise the
Rights  evidenced  thereby (except as otherwise  provided herein) in whole or in
part at any time  after  the  Distribution  Date  upon  surrender  of the  Right
Certificate,  with the form of election to purchase on the reverse  side thereof
duly executed,  to the Rights Agent at the principal  office of the Rights Agent
in New York,  New York,  together  with payment of the  Purchase  Price for each
Common Share as to which the Rights are exercised, at or prior to the earlier of
(i) the Close of  Business  on  December  31, 2019 or (ii) the time at which the
Rights are  redeemed as provided in Section 23 (such  earlier  time being herein
referred to as the "Expiration Date").
                    ---------------

<PAGE>

             (b) The  Purchase  Price  for each  Common  Share  pursuant  to the
exercise of Rights is $25, shall be subject to adjustment  from time to time, as
provided in Sections 11 and 13 hereof,  and shall be payable in lawful  money of
the United States of America in accordance with paragraph (c) below.

             (c) Upon receipt of a Right  Certificate  representing  exercisable
Rights,  with the form of election to purchase  duly  executed,  accompanied  by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any  applicable  transfer tax in cash,  or by  certified  check or bank draft
payable to the order of the Company,  the Rights Agent shall thereupon  promptly
(i) requisition  from the Company or any transfer agent of the Common Shares (or
make available,  if the Rights Agent is the transfer agent) certificates for the
number of Common  Shares to be purchased  and the Company will comply and hereby
authorizes  its  transfer  agent to  comply  with all such  requests,  (ii) when
appropriate,  requisition  from the Company the amount of cash to be pad in lieu
of issuance of  factional  shares in  accordance  with  Section 14,  (iii) after
receipt  of such  certificates,  cause the same to be  delivered  to or upon the
order of the  registered  holder of such Right  Certificate,  registered in such
name or names as may be  designated  by such  holder and (iv) when  appropriate,
after receipt of such cash,  cause the same to be delivered to or upon the order
of the registered holder of such Right Certificate.

             (d) In case the registered  holder of any Right  Certificate  shall
exercise less than all the Rights evidenced  thereby,  the Company will make and
deliver to the Rights Agent a new Right Certificate evidencing Rights equivalent
to  the  Rights  remaining   unexercised,   which  Right  Certificate  shall  be
countersigned by the Rights Agent and delivered to the registered holder of such
Right Certificate or to his duly authorized  assigns,  subject to the provisions
of Section 14 hereof.

             (e)  Notwithstanding  anything in this  Agreement to the  contrary,
neither the Rights Agent nor the Company  shall be  obligated  to undertake  any
action with respect to a registered  holder upon the occurrence of any purported
exercise as set forth in this Section 7 or any transfer,  split-up,  combination
or exchange  as set forth in Section 6 hereof,  unless  such  registered  holder
shall have (i)  completed  and signed the  certificate  set forth on the reverse
side of the Right Certificate surrendered for such exercise, transfer, split-up,
combination  or exchange,  and (ii)  provided  such  additional  evidence of the
identify of the Beneficial Owner (or former  Beneficial  Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.

         Section 8.  Cancellation  and  Destruction of Right  Certificates.  All
                     -----------------------------------------------------
Right Certificates surrendered for the purpose of exercise,  transfer, split up,
combination  or exchange  shall,  if surrendered to the Company or to any of its
agents,  be delivered to the Rights Agent for  cancellation or in canceled form,
or,  if  surrendered  to the  Rights  Agent,  be  canceled  by it,  and no Right
Certificates shall be issued in lieu thereof,  except as expressly  permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights  Agent for  cancellation  and  retirement,  and the Rights Agent shall so
cancel and retire,  any other  Right  Certificate  purchased  or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company, or shall, at the written request
of the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate evidencing such destruction to the Company.

<PAGE>

         Section 9. Reservation and  Availability of Common Shares.  The Company
                    ----------------------------------------------
covenants and agrees that it will cause to be reserved and kept available out of
its  authorized  but  unissued  Common  Shares or any Common  Shares held in its
treasury,  the number of Common  Shares  that will be  sufficient  to permit the
exercise in full of all outstanding Rights. In the event that there shall at any
time not be sufficient  authorized but unissued Common Shares or treasury shares
to permit the exercise in full of all outstanding Rights, the Company shall take
all such action as may be necessary to authorize  additional  Common  Shares for
issuance upon exercise of all outstanding Rights.

         So long as the Common  Shares  purchasable  upon the exercise of Rights
may be listed on any  national  securities  exchange  or quoted on the  National
Association of Securities  Dealers,  Inc. Automated  Quotation System ("NASDAQ")
                                                                        ------
the Company shall use its best efforts to cause, from and after such time as the
Rights  become  exercisable,  all such  shares to be listed on such  exchange or
quoted on NASDAQ, as the case may be, upon such exercise.

         The Company  covenants  and agrees that it will take all such action as
may be necessary to ensure that all Common  Shares  delivered  upon  exercise of
Rights  shall,  at the time of  delivery  of the  certificates  for such  shares
(subject to payment of the Purchase Price),  be duly and validly  authorized and
issued and fully paid and nonassessable shares.

         The Company further  covenants and agrees that it will pay when due and
payable any and all federal and state  transfer  taxes and charges  which may be
payable in respect of the issuance or delivery of the Right  Certificates  or of
any Common Shares upon the exercise of Rights.  The Company shall not,  however,
be required to pay any transfer tax or governmental  charge which may be payable
in respect of any transfer or delivery of Right  Certificates  to a person other
than the registered  holder thereof or the issuance or delivery of  certificates
for the Common Shares in a name other than that of the registered  holder of the
Right  Certificate  evidencing Rights  surrendered for exercise,  or to issue or
deliver any certificates for Common Shares upon the exercise of any Rights until
any such tax shall have been paid (any such tax and charge being  payable by the
holder of such Right  Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such tax or charge is due.

         The  Company  shall  use  its  best  efforts  to (i)  file,  as soon as
practicable  following the occurrence of a Section 11(a)(ii) Event or as soon as
is  required  by law  following  the  Distribution  Date,  as the case may be, a
registration  statement  under  the  Securities  Act of 1933,  as  amended  (the
"Securities  Act") on an  appropriate  form with  respect to the  Common  Shares
 ---------------
purchasable upon exercise of the Rights, (ii) cause such registration  statement
to become  effective  as soon as  practicable  after such filing and (iii) cause
such registration  statement to remain effective (with a prospectus at all times
meeting the  requirements of the Securities Act) until the Expiration  Date. The
Company will also take such action with respect to such Common  Shares as may be
appropriate  under the securities or "blue sky" laws of the various states.  The
Company may  temporarily  suspend the  exercisability  of the Rights in order to
prepare and file such  registration  statement and cause it to become effective.
Upon any such suspension,  the Company shall issue a public announcement stating
that  the   exercisability  of  the  Rights  has  been  temporarily   suspended.
Notwithstanding  any  provision of this  Agreement to the  contrary,  the Rights
shall not be exercisable in any jurisdiction, unless the requisite qualification
in such jurisdiction shall have been obtained.

<PAGE>

         Section 10. Common  Shares  Record Date.  Each person in whose name any
                     ---------------------------
certificate  for Common  Shares is issued upon the  exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Common  Shares
represented thereby on, and such certificate shall be dated, the date upon which
the Right Certificate evidencing such Rights was duly surrendered and payment of
the  Purchase  Price and any  applicable  transfer  taxes)  was made;  provided,
however, that if the date of such surrender and payment is a date upon which the
Common  Shares  transfer  books of the Company are closed,  such person shall be
deemed to have become the record holder of such shares on, and such  certificate
shall be dated,  the next  succeeding  Business  Day on which the Common  Shares
transfer books of the Company are open.

         Section 11. Adjustment of Purchase Price, Number of Shares or Number of
                     -----------------------------------------------------------
Rights.
------

         The Purchase Price,  the number of shares covered by each Right and the
number of Rights  outstanding  are  subject to  adjustment  from time to time as
provided in this Section 11.

             (a)  (i) If a  Triggering  Event  occurs  at  any  time  after  the
Effective  Date, the Purchase Price in effect at the time of the record date (in
the event of a dividend) or the effective  date (in the event of a  subdivision,
combination or  reclassification)  of such Triggering  Event, and the number and
kind of shares of capital stock  issuable upon exercise of a Right on such date,
shall be  proportionately  adjusted  so that the  holder of any Right  exercised
after such time shall be entitled to receive, upon payment of an amount equal to
the product of:

         (x) the Purchase  Price in effect  immediately  prior to the applicable
         record date or effective date of such Triggering Event, multiplied by

         (y) the  number of  Common  Shares  for which a Right was  exercisable,
         immediately prior to such date,

the aggregate  number and kind of shares of capital  stock which,  if such Right
had  been  exercised  immediately  prior  to such  date  and at a time  when the
transfer books of the Company were open,  such holder would have owned upon such
exercise and been entitled to receive by virtue of such Triggering Event.


                     (ii)  If a  Section  11(a)(ii)  Event  takes  place,  then,
subject to the last sentence of Section  23(a)  hereof,  each holder of a Right,
except as provided below,  shall thereafter have the right to receive,  upon the
exercise  thereof in accordance  with the terms of this Agreement and payment of
an  amount  equal to the  Purchase  Price  in  effect  immediately  prior to the
occurrence of such Section  11(a)(ii)  Event  multiplied by the number of Common
Shares for which a Right was exercisable  immediately  prior to such occurrence,
such number of Common Shares as shall equal:

         (x) the result obtained by multiplying the then current  Purchase Price
         by the  number of  Common  Shares  for  which a Right  was  exercisable
         immediately prior to the occurrence of such Section 11(a)(ii) Event and

<PAGE>

         (y) dividing  such product by 50% of the current per share market price
         of the Common Shares (determined pursuant to Section 11(d)) on the date
         of the occurrence of such Section 11(a)(ii) Event.

Provided,  however,  that the number of Common Shares  adjusted  pursuant to the
------------------
above  calculation  shall be  further  appropriately  adjusted  to  reflect  any
Triggering  Event or any  events  described  in  Sections  11(b)  or (c)  hereof
occurring after the date of the occurrence of such event.

         Notwithstanding  the  foregoing,  from and after the  occurrence of any
Section 11(a)(ii) Event, any Rights beneficially owned by

         (1)  such  Acquiring  Person  or an  Associate  or  Affiliate  of  such
         Acquiring Person;

         (2) a transferee of such Acquiring  Person (or of any such Associate or
         Affiliate) who becomes a transferee  after the Acquiring Person becomes
         such; or

         (3) a transferee of such Acquiring  Person (or of any such Associate or
         Affiliate) who becomes a transferee  prior to or concurrently  with the
         Acquiring  Person  becoming such and receives  such Rights  pursuant to
         either  (x) a transfer  (whether  or not for  consideration)  from such
         Acquiring  Person to  holders  of equity  interests  in such  Acquiring
         Person  or to any  Person  with  whom  such  Acquiring  Person  has any
         continuing  agreement,   arrangement  or  understanding  regarding  the
         transferred  Rights or (y) a transfer  which the Board of  Directors of
         the Company determines is part of a plan,  arrangement or understanding
         which has as a primary  purpose of effect the  avoidance  of all or any
         portion of this section  11(a)(ii),  and subsequent  transferees of any
         such transferees,

shall  become null and void without any further  action,  and any holder of such
Rights shall  thereupon have no rights  whatsoever  with respect to such Rights,
whether under any provisions of this  Agreement or otherwise.  The Company shall
use all  reasonable  efforts  to  ensure  that the  provisions  of this  Section
11(a)(ii) are complied  with, but shall have no liability to any holder of Right
Certificates  or any other  Person as a result of its  making or failure to make
any  determination  with  respect  to any  Acquiring  Person or its  Affiliates,
Associates or transferees hereunder.

                     (iii) In the  event  that  there  shall  not be  sufficient
treasury  shares or  authorized,  but  unissued,  Common  Shares  to permit  the
exercise in full of the Rights in accordance with Section 11(a)(ii), the Company
shall take all such actions as may be necessary to authorize  additional  Common
Shares for issuance upon exercise of the Rights.

             (b) In case the  Company  shall,  at any time  after the  Effective
Date, fix a record date for the issuance of rights or warrants to all holders of
Common Shares entitling them (for a period expiring within  forty-five  calendar
days after such record  date) to  subscribe  for or purchase  Common  Shares (or
securities  exercisable  for or  convertible  into Common Shares) at a price per
Common Share (or having an exercise or conversion  price per Common Share,  if a
security  exercisable  for or  convertible  into  Common  Shares)  less than the
current  per share  market  price of the Common  Shares  (as  defined in Section
11(d)) on such record date, the Purchase Price to be in effect after such record
date shall be determined by multiplying:

<PAGE>

                           (i) the Purchase Price in effect immediately prior to
                  such record date, by

                           (ii) a fraction,  (A) the numerator of which shall be
         the sum of the number of Common Shares outstanding on such record date,
         plus the number of Common Shares which the aggregate  offering price of
         the  total  number  of  Common  Shares  so to be  offered  (and/or  the
         aggregate  initial  exercise of conversion  price of the exercisable or
         convertible securities so to be offered) would purchase at such current
         market price,  and (B) the  denominator of which shall be the number of
         Common  Shares  outstanding  on such  record  date  plus the  number of
         additional  Common Shares so to be offered for subscription or purchase
         (or into  which the  exercisable  or  convertible  securities  so to be
         offered are initially exercisable or convertible).

In case such subscription  price may be paid in a consideration,  part or all of
which shall be in a form other than cash, the value of such consideration  shall
be as determined  in good faith by the Board of Directors of the Company,  whose
determination  shall be  described in a statement  filed with the Rights  Agent.
Common  Shares  owned by or held for the  account  of the  Company  shall not be
deemed  outstanding for the purpose of any such  computation.  Such  adjustments
shall be made  successively  whenever  such a record  date is fixed;  and in the
event that such rights or warrants are not so issued,  the Purchase  Price shall
again be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.

             (c) In case the  Company  shall,  at any time  after the  Effective
Date, fix a record date for the making of a  distribution  to all holders of the
Common  Shares of  evidences  of  indebtedness  or assets  (other than a regular
periodic  cash  dividend  at a rate not in  excess  of 125% of the last  regular
periodic  cash dividend  theretofore  paid) or  subscription  rights or warrants
(excluding those referred to in Section 11(b) hereof),  the Purchase Price to be
in effect after such record date shall be determined by multiplying:

                  (i) the  Purchase  Price in effect  immediately  prior to such
         record date, by

                  (ii) a  fraction,  (A) the  numerator  of  which  shall be the
         current  per share  market  price of the Common  Shares (as  defined in
         Section  11(d))  on such  record  date less the fair  market  value (as
         determined  in good  faith by the Board of  Directors  of the  Company,
         whose  determination  shall be described in a written  statement  filed
         with the Rights Agent and shall be conclusive  for all purposes) of the
         portion of the assets or evidences of indebtedness so to be distributed
         or of such  subscription  rights or warrants  applicable  to one Common
         Share and (B) the  denominator of which shall be such current per share
         market price of the Common Shares.

Such  adjustments  shall be made  successively  whenever  such a record  date is
fixed;  and in the event that such  distribution  is not so made,  the  Purchase
Price shall again be  adjusted to be the  Purchase  Price which would then be in
effect if such record date had not been fixed.

             (d) For the purpose of any computation hereunder,  the "current per
                                                                     -----------
share  market  price" of Common  Shares on any date shall be the  average of the
--------------------
daily closing prices per share of such Common Shares for the thirty  consecutive
Trading Days (as such term is  hereinafter  defined)  immediately  prior to such
date;  provided,  however,  that in the event that the

<PAGE>

current per share market price of Common  Shares is  determined  during a period
following the announcement by the issuer of such Common Shares of (A) a dividend
or  distribution  on such  Common  Shares  payable  in  such  Common  Shares  or
securities  exercisable  for or  convertible  into such Common Shares or (B) any
subdivision, combination or reclassification of such Common Shares, and prior to
the  expiration  of thirty  Trading  Days  after the  ex-dividend  date for such
dividend or distribution,  or the record date for such subdivision,  combination
or  reclassification,  then, and in each such case, the daily closing prices per
share of such Common  Shares prior to such  ex-dividend  date or record date, as
the case may be,  shall be  appropriately  adjusted  to reflect  such  dividend,
distribution, subdivision, combination or reclassification, as the case may be.

The closing price for each day shall be:

         (x) the last  sale  price,  regular  way,  or, in the case no such sale
         takes  place on such day,  the  average  of the  closing  bid and asked
         prices,  regular  way,  in either  case as  reported  in the  principal
         consolidated  transaction  reporting  system with respect to securities
         listed or  admitted  to trading on the New York Stock  Exchange  or, if
         such  Common  Shares are not listed or  admitted  to trading on the New
         York  Stock  Exchange,  as  reported  in  the  principal   consolidated
         transaction  reporting system with respect to securities  listed on the
         principal national  securities exchange on which such Common Shares are
         listed or admitted to trading; or

         (y) if such Common  Shares are not listed or admitted to trading on any
         national  securities  exchange,  the last  quoted  price  or, if not so
         quoted,  the  average  of the  high  bid and low  asked  prices  in the
         over-the-counter  market,  as reported  by NASDAQ or such other  system
         then in use; or

         (z) if on any such date such  Common  Shares are not quoted or reported
         by any such  organization,  the  average of the  closing  bid and asked
         prices as furnished by a  professional  market maker making a market in
         such Common Shares selected by the Board of Directors of the Company.

If on any such date  during  such  30-consecutive  Trade Day period  such Common
Shares are not quoted or  reported by any such  organization  and no such market
maker is making a market in such Common Shares, the closing price of such shares
on such date shall be as  determined  in good faith by the Board of Directors of
the  Company.  The term  "Trading  Day" shall mean a day on which the  principal
national  securities exchange on which such Common Shares are listed or admitted
to trading is open for the transaction of business or, if such Common Shares are
not listed or admitted to trading on any national securities exchange, a Monday,
Tuesday,  Wednesday,  Thursday or Friday on which  banking  institutions  in the
State of New York are not  authorized or obligated by law or executive  order to
close.

             (e) Anything herein to the contrary notwithstanding,  no adjustment
in the Purchase Price shall be required unless such adjustment  would require an
increase or decrease of at least 1% in such price;  provided,  however, that any
adjustments  which by reason of this  Section  11(e) are not required to be made
shall be carried  forward and taken into account in any

<PAGE>

subsequent  adjustment.  All calculations under this Section 11 shall be made to
the nearest cent or to the nearest  ten-thousandth  of a share,  as the case may
be.

             (f) If as a result of an adjustment made pursuant to Section 11(a),
the holder of any Right  thereafter  exercised  shall become entitled to receive
any shares of capital stock of the Company other than Common Shares,  thereafter
the number of such other shares so  receivable  upon exercise of any Right shall
be  subject to  adjustment  from time to time in a manner and on terms as nearly
equivalent as practicable  to the  provisions  with respect to the Common Shares
contained  in Sections  11(a)  through (e),  inclusive,  and the  provisions  of
Sections  7, 9, 10, 13 and 14 hereof  with  respect to the Common  Shares  shall
apply on like terms to any such other shares.

             (g) All Rights originally  issued by the Company  subsequent to any
adjustment  made to the Purchase  Price  hereunder  shall  evidence the right to
purchase,   at  the  adjusted  Purchase  Price,  the  number  of  Common  Shares
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.

             (h) Unless  the  Company  shall  have  exercised  its  election  as
provided in Section  11(i),  upon each  adjustment  of the  Purchase  Price as a
result of the calculations made in Section 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to  purchase  that  number of Common  Shares  (calculated  to the  nearest
ten-thousandth)  obtained by (i) multiplying (x) the number of shares covered by
a Right immediately prior to this adjustment by (y) the Purchase Price in effect
immediately  prior to such  adjustment  of the Purchase  Price and (ii) dividing
such product by the Purchase Price in effect  immediately  after such adjustment
of the Purchase Price.

             (i) The Company may elect,  on or after the date of any  adjustment
of the Purchase Price as a result of the calculations  made in Section 11(b) and
(c), to adjust the number of Rights, in substitution for any adjustment pursuant
to Section 11(h) in the number of Common Shares purchasable upon the exercise of
a Right.  In the event the Company makes such election,  each Right  outstanding
after such  adjustment  of the  number of Rights  shall be  exercisable  for the
number of Common Shares for which a Right was exercisable  immediately  prior to
such  adjustment.  Each Right  held of record  prior to such  adjustment  of the
number of Rights shall become that number of Rights  (calculated  to the nearest
ten-thousandth)   obtained  by  dividing  (x)  the  Purchase   Price  in  effect
immediately  prior to such  adjustment of the Purchase Price by the (y) Purchase
Price in effect  immediately  after such adjustment of the Purchase  Price.  The
Company shall make a public announcement of its election,  if any, to adjust the
number of Rights,  indicating the record date for the adjustment,  and, if known
at the time,  the amount of the adjustment to be made with prompt written notice
thereof  to the  Rights  Agent.  This  record  date may be the date on which the
Purchase  Price is adjusted or any day  thereafter,  but, if Right  Certificates
shall  theretofore  have been  issued,  shall be at least 10 days later than the
date of the public  announcement.  If Right  Certificates shall theretofore have
been  issued,  upon each  adjustment  of the number of Rights  pursuant  to this
Section  11(i),  the Company  shall,  as promptly  as  practicable,  cause to be
distributed  to holders of record of Right  Certificates  on such  record  date,
Right Certificates  evidencing,  subject to Section 14, the additional Rights to
which such holders shall be entitled as a result of such adjustment,  or, at the
option of the Company,  shall cause to be  distributed to such holders of record
in substitution and replacement for the

<PAGE>

Right  Certificates  held by such holders prior to the date of  adjustment,  and
upon  surrender  thereof,  if required by the  Company,  new Right  Certificates
evidencing  all the Rights to which such  holders  shall be entitled  after such
adjustment.  Right  Certificates so to be distributed shall be issued,  executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company,  the adjusted  Purchase  Price) and shall be  registered  in the
names  of the  holders  of  record  of Right  Certificates  on the  record  date
specified in the public announcement.

             (j)  Irrespective of any adjustment or change in the Purchase Price
or the number of Common Shares  purchasable upon the exercise of the Rights, the
Right Certificates theretofore and thereafter issued may continue to express the
Purchase  Price per share and the number of shares  which were  expressed in the
initial Right Certificates issued hereunder.

             (k)  Before  taking  any  action  that  would  cause an  adjustment
reducing  the  Purchase  Price  below the then par value,  if any, of the Common
Shares  purchasable  upon  exercise  of the Rights,  the Company  shall take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may  validly  and  legally  issue fully paid and  nonassessable
Common Shares at such adjusted Purchase Price.

             (l) In any case in which  this  Section  11 shall  require  that an
adjustment in the Purchase  Price be made  effective as of the record date for a
specified  event,  the Company may elect to defer until the  occurrence  of such
event the  issuing to the holder of any Right  exercised  after such record date
the Common Shares and other capital stock or securities of the Company,  if any,
purchasable  upon  such  exercise  over and above the  Common  Shares  and other
capital  stock or  securities  of the  Company,  if any,  purchasable  upon such
exercise on the basis of the Purchase Price in effect prior to such  adjustment;
provided,  however,  that the Company shall deliver to such holder a due bill or
other  appropriate  instrument  evidencing  such holder's  right to receive such
additional shares upon the occurrence of the event requiring such adjustment.

             (m) Anything in this  Section 11 to the  contrary  notwithstanding,
the Company shall be entitled to make such  reductions in the Purchase Price, in
addition to those  adjustment  expressly  required by this Section 11, as and to
the extent that it, in its sole discretion, shall determine such reduction to be
advisable  in order  that any (i)  consolidation  or  subdivision  of the Common
Shares,  (ii) issuance  wholly for cash of Common Shares or securities  which by
their terms are  convertible  into or  exchangeable  for Common  Shares or (iii)
stock  dividends or issuance or rights,  options or warrants  referred to herein
above in this Section 11, hereafter made by the Company to holders of its Common
Shares shall not be taxable to such stockholders.

         Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
                     ----------------------------------------------------------
Whenever an  adjustment  is made as provided in Section 11 or Section 13 hereof,
the  Company  shall  (a)  promptly  prepare a  certificate  setting  forth  such
adjustment,  and a brief statement of the facts  accounting for such adjustment,
(b)  promptly  file with the Rights Agent and with each  transfer  agent for the
Common Shares a copy of such certificate and (c) mail a brief summary thereof to
each holder of a Right Certificate in accordance with Section 25.


<PAGE>

         Section  13.  Consolidation,  Merger or Sale or  Transfer  of Assets or
                       ---------------------------------------------------------
Earning Power.
-------------

             (a) In the event,  directly or indirectly,  at any time on or after
the Shares Acquisition Date:

                           (x) the Company shall consolidate with, or merge with
                           and into, any other Person;

                           (y) any Person shall merge with and into the Company,
                           and the Company shall be the  continuing or surviving
                           corporation  of such merger and, in  connection  with
                           such merger,  all or part of the Common  Shares shall
                           be  changed  into or  exchanged  for  stock  or other
                           equity securities of any other Person; or

                           (z) the Company shall sell or otherwise  transfer (or
                           one  or  more  of  its  subsidiaries  shall  sell  or
                           otherwise  transfer) to any other  Person,  in one or
                           more   transactions,    assets   or   earning   power
                           aggregating  more than 50% of the  assets or  earning
                           power of the Company and its subsidiaries (taken as a
                           whole)  (in the event of more  than one  transaction,
                           measured   as  of  the   date  of  the   first   such
                           transaction),

then, and in such case, proper provision shall be made so that:

                                (i) each holder of a Right shall thereafter have
the right to receive such number of validly issued, fully paid and nonassessable
and freely  tradeable  Common Shares of the other Person,  free and clear of any
liens,  encumbrances,  rights of first refusal or other adverse claims, upon the
exercise  thereof in accordance  with the terms of this Agreement and payment of
an amount equal to (1) the  Purchase  Price in effect  immediately  prior to the
occurrence of such consolidation, merger, sale or transfer multiplied by (2) the
number of Common Shares for which a Right was exercisable  immediately  prior to
such occurrence, as shall equal the result obtained by:

                           (x) multiplying  the then current  Purchase Price, by
                           the  number  of Common  Shares  for which a Right was
                           exercisable  immediately prior to such consolidation,
                           merger, sale or transfer, and

                           (y)  dividing  such product by 50% of the current per
                           share  market price  (determined  pursuant to Section
                           11(d)  hereof)  of the  Common  Shares of such  other
                           Person (as  defined in  Section  1(f)  hereof) on the
                           date of consummation of such  consolidation,  merger,
                           sale or transfer;

                                (ii) the  issuer  of such  Common  Shares  shall
thereafter  be liable for, and shall  assume,  by virtue of such  consolidation,
merger, sale or transfer, all the obligations and duties of the Company pursuant
to this Agreement;

<PAGE>

                                (iii) the term  "Company"  shall  thereafter  be
                                                 -------
deemed to refer to such issuer; and

                                (iv)  such   issuer   shall   take  such   steps
(including,  but not limited to, the  reservation of a sufficient  number of its
Common Shares in accordance with Section 9) in connection with such consummation
as may be necessary to assure that the  provisions  hereof shall  thereafter  be
applicable,  as nearly as  reasonably  may be, in relation to its Common  Shares
thereafter deliverable upon the exercise of the Rights.

             (b) The  Company  shall  not  consummate  any  such  consolidation,
merger,  sale or transfer unless prior thereto the Company and such issuer shall
have  executed and  delivered to the Rights  Agent a  supplemental  agreement so
providing.

             (c) The  provisions  of this  Section 13 shall  similarly  apply to
successive mergers or consolidations or sales or other transfers.

         Section 14. Fractional Rights and Fractional Shares.
                     ---------------------------------------

             (a) The Company shall not be required to issue  fractions of Rights
or to distribute Right Certificates which evidence fractional Rights. In lieu of
such  fractional  Rights,  there shall be paid to the registered  holders of the
Right  Certificates  with regard to which such fractional Rights would otherwise
be issuable,  an amount in cash equal to the same fraction of the current market
value of a whole Right.  For purposes of this Section 14(a), the "current market
                                                                  --------------
value" of a whole  Right on any date shall be,  subject to the second  following
-----
sentence,  the closing price of the Rights for the Trading Day immediately prior
to the date on which such fractional Rights would have been otherwise  issuable.
The closing price for any day shall be the last sale price,  regular way, or, in
case no such sale takes  place on such day,  the  average of the closing bid and
asked  prices,  regular  way,  in  either  case  as  reported  in the  principal
consolidated  transaction  reporting system with respect to securities listed or
admitted  to trading on the New York  Stock  Exchange  or, if the Rights are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal  consolidated  transaction reporting system with respect to securities
listed on the  principal  national  securities  exchange on which the Rights are
listed or  admitted  to trading  or, if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market,  as  reported  by NASDAQ or such other  system then in use or, if on any
such date the Rights are not quoted or  reported by any such  organization,  the
average of the  closing  bid and asked  prices as  furnished  by a  professional
market maker making a market in the Rights selected by the Board of Directors of
the  Company.  If on any such date the Rights are not quoted or  reported by any
such organization and no such market maker is making a market in the Rights, the
"current market value" of the Rights on such date shall be as determined in good
 --------------------
faith by the Board of Directors of the Company.

             (b) The Company shall not be required to issue  fractions of shares
upon  exercise  of the  Rights  or to  distribute  certificates  which  evidence
fractional  shares. In lieu of fractional  shares,  the Company shall pay to the
registered  holders of Right  Certificates at the time such Rights are exercised
as herein  provided an amount in cash equal to the same  fraction of the current
market  value of one Common  Share.  For  purposes of this  Section  14(b),  the

<PAGE>

"current  market value" of a Common Share shall be the closing price of a Common
 ---------------------
Share (as determined  pursuant to the second  sentence of Section 11(d)) for the
Trading Day immediately prior to the date of such exercise.  If on such date the
closing  price of a Common  Share  cannot be  determined  pursuant to the second
sentence of Section 11(d),  the "current market value" of a Common Share on such
                                 --------------------
date  shall be as  determined  in good  faith by the Board of  Directors  of the
Company.

             (c) Every holder of a Right by the acceptance of the same expressly
waives his right to receive any fractional  Rights or any fractional shares upon
exercise of a Right.

         Section 15. Rights of Action. All rights of action with respect to this
                     ----------------
Agreement are vested in the respective  holders of the Right  Certificates (and,
prior to the  Distribution  Date, the registered  holders of the Common Shares);
and  any  registered   holder  of  any  Right  Certificate  (or,  prior  to  the
Distribution  Date,  of the Common  Shares),  without  the consent of the Rights
Agent  or of the  holder  of any  other  Right  Certificate  (or,  prior  to the
Distribution  Date, of any other Common Shares),  may, on his own behalf and for
his own benefit,  enforce,  and may institute  and maintain any suit,  action or
proceeding  against the Company to enforce,  or otherwise act in respect of, his
right to exercise the Rights  evidenced by such Right  Certificate (or, prior to
the  Distribution  Date, the Common Shares) in the manner provided in such Right
Certificate  and in  this  Agreement.  Without  limiting  the  foregoing  or any
remedies available to the holders of the Rights, it is specifically acknowledged
that the holders of the Rights would not have an adequate  remedy at law for any
reach of this  Agreement  and will be entitled to  specific  performance  of the
obligations under, and injunctive relief against actual or threatened violations
of, the obligations of any Person subject to this Agreement.

         Section 16. Agreement of Right Holders. Every holder of a Right, by the
                     --------------------------
acceptance of the same,  expressly  consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:

             (a) prior to the  Distribution  Date, a Right will be  transferable
only in connection  with the transfer of the Common Share in respect of which it
has been issued;

             (b) after the  Distribution  Date, the Right  Certificates  will be
transferable  only on the registry  books of the Rights Agent and if surrendered
at the principal  office of the Rights Agent,  duly endorsed or accompanied by a
proper instrument of transfer; and

             (c) the Company and the Rights  Agent may deem and treat the person
in whose name the Right  Certificate  (or, prior to the  Distribution  Date, the
associated  Common  Shares  certificate)  is  registered  as the absolute  owner
thereof and of the Rights evidenced  thereby  (notwithstanding  any notations or
ownership or writing on the Right  Certificate or the  associated  Common Shares
certificate  made by anyone other than the Company or the Rights  Agent) for all
purposes  whatsoever,  and neither  the  Company  nor the Rights  Agent shall be
affected by any notice to the contrary.

         Section  17.  Right  Certificate  Holder Not Deemed a  Stockholder.  No
                       ----------------------------------------------------
holder,  as such, of any Right  Certificate shall be entitled to vote or receive
dividends  or be deemed for any purpose  the holder of the Common  Shares or any
other  securities  of the Company  which may at

<PAGE>

any time be purchasable on the exercise of the Rights represented  thereby,  nor
shall  anything  contained  herein or in any Right  Certificate  be construed to
confer upon the holder of any Right Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof,  or to give or
withhold  consent to any corporate  action,  or to receive notice of meetings or
other actions affecting  stockholders  (except as provided in Section 24), or to
receive  dividends or  subscription  rights,  or  otherwise,  until the Right or
Rights  evidenced  by such  Right  Certificate  shall  have  been  exercised  in
accordance with the provisions hereof.

         Section 18.  Concerning the Rights Agent.  The Company agrees to pay to
                      ---------------------------
the  Rights  Agent  reasonable  compensation  for all  services  rendered  by it
hereunder and, from time to time, on demand of the Rights Agent,  its reasonable
expenses and  reasonable  counsel fees and other  disbursements  incurred in the
administration  and execution of this Agreement and the exercise and performance
of its duties  hereunder.  The Company also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss,  liability or expense,  incurred
without  negligence,  bad faith or willful  misconduct on the part of the Rights
Agent,  for anything done or omitted by the Rights Agent in connection  with the
acceptance  and  administration  of this  Agreement,  including  the  costs  and
expenses  (including  reasonable counsel fees) of defending against any claim of
liability in the premises.

         The Rights Agent shall be protected and shall incur no liability for or
in respect of any action taken, suffered or omitted by it in connection with its
administration  of this  Agreement  in reliance  upon any Right  Certificate  or
certificate  for the  Common  Shares or for  other  securities  of the  Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice,  direction,  consent,  certificate,  statement or other paper or
document reasonably believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper person or persons.

         Section 19. Merger or  Consolidation or Change of Name of Rights Agent.
                     ----------------------------------------------------------
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated,  or any corporation  resulting from
any merger or  consolidation  to which the Rights Agent or any successor  Rights
Agent shall be a party,  or any  corporation  succeeding to the corporate  trust
business  of the  Rights  Agent  or any  successor  Rights  Agent,  shall be the
successor  to the Rights  Agent under this  Agreement  without the  execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such corporation  would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21 hereof. In case at the time such
successor  Rights Agent shall succeed to the agency  created by this  Agreement,
any of the Right  Certificates  shall have been countersigned but not delivered,
any  such  successor  Rights  Agent  may  adopt  the   countersignature  of  the
predecessor  Rights Agent and deliver such Right  Certificates so countersigned;
and in case at that  time any of the  Right  Certificates  shall  not have  been
countersigned,   any  successor   Rights  Agent  may   countersign   such  Right
Certificates  either in the name of the predecessor  Rights Agent or in the name
of the  successor  Rights Agent;  and in all such cases such Right  Certificates
shall  have  the full  force  provided  in the  Right  Certificates  and in this
Agreement.

         In case at any time the name of the Rights  Agent  shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered,  the Rights Agent may

<PAGE>

adopt  the  countersignature  under  its  prior  name  and  deliver  such  Right
Certificates  so  countersigned;  and in  case  at that  time  any of the  Right
Certificates shall not have been countersigned, the Rights Agent may countersign
such Right Certificates  either in its prior name or in its changed name; and in
all such cases such Right Certificates shall have the full force provided in the
Right Certificates and in this Agreement.

         Section 20. Duties of Rights  Agent.  The Rights Agent  undertakes  the
                     -----------------------
duties and  obligations  imposed by this Agreement upon the following  terms and
conditions,  by all of which the Company and the holders of Right  Certificates,
by their acceptance thereof, shall be bound:

             (a) The Rights  Agent may consult  with legal  counsel  (who may be
legal  counsel for the  Company),  and the opinion of such counsel shall be full
and complete  authorization  and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.

             (b) Whenever in the  performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or  established  by the Company  prior to taking or suffering  any action
hereunder,  such fact or matter  (unless  other  evidence in respect  thereof be
herein  specifically  prescribed)  may be deemed to be  conclusively  proved and
established  by a  certificate  signed  by  any  one of  the  President,  a Vice
President,  the  Treasurer or the  Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be considered full authorization to the
Rights  Agent for any  action  taken or  suffered  in good faith by it under the
provisions of this Agreement in reliance upon such certificate.

             (c) The Rights  Agent  shall be liable  hereunder  only for its own
negligence, bad faith or willful misconduct.

             (d) The Rights Agent shall not be liable for or by reason of any of
the  statements of fact or recitals  contained in this Agreement or in the Right
Certificates  (except as to its  countersignature  thereof)  or be  required  to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.

             (e) The  Rights  Agent  shall  not be under any  responsibility  in
respect of the validity of this  Agreement or the execution and delivery  hereof
(except  the due  execution  hereof by the  Rights  Agent) or in  respect of the
validity or  execution  of any Right  Certificate  (except its  countersignature
thereof);  nor shall it be  responsible  for any  breach by the  Company  of any
covenant or condition  contained in this Agreement or in any Right  Certificate;
nor shall it be responsible for any adjustment  required under the provisions of
Sections 11 or 13 hereof or responsible for the manner,  method or amount of any
such adjustment or the ascertaining of the existence of facts that would require
any such  adjustment  (except with respect to the exercise of Rights evidence by
Right Certificates after actual notice of any such adjustment);  nor shall it by
any act  hereunder  be deemed to make any  representation  or warranty as to the
authorization  or reservation  of any Common Shares to be purchased  pursuant to
this Agreement or any Right Certificate or as to whether any Common Shares will,
when  so  purchased,   be  validly   authorized  and  issued,   fully  paid  and
nonassessable,  nor will it be liable for any federal or state transfer

<PAGE>

taxes or charges  that may be due upon the  issuance  or  transfer of any Common
Share or Right Certificate.

             (f) The Company agrees that it will perform,  execute,  acknowledge
and deliver or cause to be performed,  executed,  acknowledged and delivered all
such further and other acts,  instruments  and  assurances as may  reasonably be
required by the Rights Agent for the carrying  out or  performing  by the Rights
Agent of the provisions of this Agreement.

             (g) The Rights  Agent is hereby  authorized  and directed to accept
instructions  with respect to the  performance of its duties  hereunder from any
one of the President,  a Vice  President,  the Treasurer or the Secretary of the
Company,  and to apply to such officers for advice or instructions in connection
with its duties,  and it shall not be liable for any action taken or suffered to
be  taken  by it in good  faith  in  accordance  with  instructions  of any such
officer.

             (h) The  Rights  Agent and any  stockholder,  director,  officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the  Company  may be  interested,  or  contract  with or lend money to the
Company or otherwise  act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.

         Section 21. Change of Rights  Agent.  The Rights Agent or any successor
                     -----------------------
Rights Agent may resign and be discharged  from its duties under this  Agreement
upon not less than 30 days' notice in writing  mailed to the Company and to each
transfer agent of the Common Shares by registered or certified  mail, and to the
holders of the Right  Certificates  by first-class  mail. The Company may remove
the Rights Agent or any successor  Rights Agent upon 30 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Shares by registered or certified mail, and to
the holders of the Right  Certificates by first-class  mail. If the Rights Agent
shall resign or be removed or shall otherwise  become  incapable of acting,  the
Company shall appoint a successor to the Rights Agent. If the Company shall fail
to make such appointment  within a period of 30 days after giving notice of such
removal  or  after  it has been  notified  in  writing  of such  resignation  or
incapacity by the resigning or incapacitated  Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company),  then the registered holder of any Right Certificate
may apply to a court of  competent  jurisdiction  for the  appointment  of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or by
a court,  shall be a corporation  organized and doing business under the laws of
the United States or any state  therein,  in good  standing,  having a principal
office in a state in the United States,  which is authorized  under such laws to
exercise  corporate trust powers and is subject to supervision or examination by
federal  or state  authority  and  which has at the time of its  appointment  as
Rights  Agent a combined  capital  and  surplus of at least $50  million.  After
appointment,  the  successor  Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent  without  further  act or deed;  but the  predecessor  Rights  Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assistance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment   the  Company  shall  file  notice  thereof  in  writing  with  the
predecessor  Rights Agent

<PAGE>

and each transfer agent of the Common Shares, and mail
a notice thereof in writing to the registered holders of the Right Certificates.

         Section 22. Issuance of New Right Certificates; Legends.
                     -------------------------------------------

             (a)  Notwithstanding  any of the provisions of this Agreement or of
the Rights to the  contrary,  the Company  may,  at its option,  issue new Right
Certificates  evidencing  Rights in such form as may be approved by its Board of
Directors to reflect any  adjustment  or change in the Purchase  Price per share
and the  number  or kind or class of  shares  or other  securities  or  property
purchasable under the Right  Certificates made in accordance with the provisions
of this Agreement.

             (b) Any Right  Certificate  issued pursuant to Section 3 or Section
22 hereof that represents Rights  beneficially  owned by any Acquiring Person or
any Associate or Affiliate of any Acquiring  Person,  and any Right  Certificate
issued  pursuant  to  Section 6 or Section 11 hereof  upon  transfer,  split up,
combination,  exchange, replacement or adjustment of any other Right Certificate
referred  to in this  sentence,  shall  (to the  extent  feasible)  contain  the
following legend:

                  "The Rights  represented by this Right Certificate were issued
                  to a Person who was an Acquiring  Person or an Affiliate or an
                  Associate of an Acquiring Person (as such terms are defined in
                  the Second Amended and Restated Rights Agreement, effective as
                  of January 1, 2010 between Espey Mfg. & Electronics  Corp. and
                  Registrar  and  Transfer  Co.,  as Rights  Agent (the  "Rights
                                                                          ------
                  Agreement")).   This   Right   Certificate   and  the   Rights
                  ---------
                  represented  hereby  will  become  void  in the  circumstances
                  specified in the Rights Agreement."

         Section 23. Redemption.
                     ----------

             (a) The Board of Directors  of the Company  may, at its option,  at
any time prior to the Close of Business on the earlier of the Distribution  Date
or December  31, 2019,  redeem all, but not less than all, the then  outstanding
Rights at a redemption price of $.01 per Right appropriately adjusted to reflect
any stock split, stock dividend or similar transaction  occurring after the date
hereof (such redemption price being  hereinafter  referred to as the "Redemption
                                                                      ----------
Price").  Notwithstanding  anything  contained  in this Rights  Agreement to the
-----
contrary, the Rights shall not be exercisable after an occurrence of any Section
11(a)(ii)  Event  until  such  time as the  right of  redemption  hereunder  has
expired.

             (b)  Immediately  upon the action of the Board of  Directors of the
Company  ordering the  redemption of the Rights,  and without any further action
and without any notice,  the right to exercise the Rights will terminate and the
only right  thereafter  of the  holders of the  Rights  shall be to receive  the
Redemption  Price.  Within 10 days after the action of the Board of Directors of
the Company ordering the redemption of the Rights, the Company shall give notice
of such redemption to the holders of the then outstanding Rights by mailing such
notice to all such  holders  at their last  addresses  as they  appear  upon the
registry  books of the Rights Agent or,

<PAGE>

                  prior to the  Distribution  Date, on the registry books of the
                  transfer agent or transfer  agents for the Common Shares.  Any
                  notice which is mailed in the manner herein  provided shall be
                  deemed given,  whether or not the holder  receives the notice.
                  Each such notice of redemption  will state the method by which
                  the payment of the Redemption Price will be made.

             (c) If,

                   (i) following the occurrence of a Shares Acquisition Date and
         following the expiration of the right of redemption hereunder but prior
         to the  occurrence of any event  described in Section 13 or any Section
         11(a)(ii)  Event,  (A) a Person who is an Acquiring  Person and/or such
         Acquiring  Person's  Affiliates and  Associates  transfers or otherwise
         disposes of a number of Common Shares in one transaction or a series of
         transactions,  to a  Person  other  than  the  Company  or  any  of its
         subsidiaries  and not otherwise  directly or  indirectly  involving the
         Company or any of its subsidiaries, which transfer or other disposition
         does not result in the  occurrence of an event  described in Section 13
         or a Section 11(a)(ii) Event, but does result in such Person,  together
         with such Person's  Affiliates  and  Associates,  thereafter  being the
         Beneficial  Owner of 10% or less of the Common Shares,  (B) at the time
         of and immediately  following such transfer or other  disposition,  the
         directors who were in office prior to such Person becoming an Acquiring
         Person  and  any  director  appointed  or  nominated  to the  Board  of
         Directors  of the Company by such  directors,  constitute a majority of
         the Board of Directors of the Company,  and (C) no Person,  immediately
         following such transfer or other disposition, is an Acquiring Person or
         is making a tender or exchange  offer which meets the  requirements  of
         Section 3(a)(ii) hereof, or

                    (ii)  following  the  commencement  of  a tender or exchange
offer  which  meets the  requirements  of Section  3(a)(ii)  and  following  the
expiration of the right of redemption  hereunder but prior to the  occurrence of
any event described in Section 13 or a Section  11(a)(ii) Event, (A) the offeror
has not  consummated  such  tender  or  exchange  offer  and has  terminated  or
withdrawn  such tender or  exchange  offer,  (B) at the time of and  immediately
following such termination or withdrawal, the directors who were in office prior
to the commencement of such offer and any director appointed or nominated to the
Board of  Directors of the Company by such  directors,  constitute a majority of
the Board of Directors of the Company, and (C) no Person,  immediately following
such termination or withdrawal,  is an Acquiring Person or is making a tender or
exchange offer which meets the requirements of Section  3(a)(ii)  hereof,  then,
and in each  such  case,  the  right  of  redemption  shall  be  reinstated  and
thereafter be subject to the  provisions of this Section 23 until the earlier of
the occurrence of another Distribution Date or December 31, 2019.

         Section 24. Notice of Certain Events. In case the Company shall propose
                     ------------------------
(a) to pay any  dividend  payable in stock of any class to the holders of Common
Shares or to make any other  distribution to the holders of Common Shares (other
than a regular  periodic  cash  dividend  at a rate not in excess of 125% of the
last regular  periodic cash dividend  theretofore  paid), or (b) to offer to the
holders of Common  Shares rights or warrants to subscribe for or to purchase any
additional  Common  Shares or  shares  of stock of any other  class or any other
securities,  rights or  options,  or (c) to effect any  reclassification  of its
Common Shares (other than a  reclassification  involving only the subdivision of
outstanding Common Shares), or (d) to effect any

<PAGE>

consolidation  or  merger,  or (e) to effect any sale or other  transfer  (or so
permit one or more of its subsidiaries to effect any sale or other transfer), in
one or more transactions, of more than 50% of the assets or earning power of the
Company and its subsidiaries  (taken as a whole) to any other Person,  or (f) to
effect the liquidation,  dissolution or winding up of the Company, then, in each
such case,  the  Company  shall give to each holder of a Right  Certificate,  in
accordance  with  Section  25, a notice of such  proposed  action,  which  shall
specify the record date for the purposes of such stock dividend, distribution or
offer or the date on which such reclassification,  consolidation,  merger, sale,
transfer, liquidation,  dissolution, or winding up is to take place and the date
of participation  therein by the holders of the Common Shares,  if any such date
is to be  fixed,  and such  notice  shall be so given in the case of any  action
covered by clause  (a) or (b) above  prior to the  record  date for  determining
holders of the Common Shares for purposes of such action, and in the case of any
such other action,  prior to the date of the taking of such  proposed  action or
the date of participation therein by the holders of the Common Shares, whichever
shall be the earlier.

         In case a Section 11(a)(ii) Event shall occur,  then, in any such case,
the Company  shall as soon as  practicable  thereafter  give to each holder of a
Right Certificate,  in accordance with Section 25, a notice of the occurrence of
such event,  which shall specify the event and the  consequences of the event to
holders of Rights under Section 11(a)(ii) of this Agreement.

         Section 25.  Notices.  Subject to the  provisions of Section 21 hereof,
                      -------
any notice or demand  authorized  by this  Agreement  to be given or made by the
Rights  Agent or by the  holder of any Right  Certificate  to or on the  Company
shall  be  sufficiently  given  or made if sent  by  first-class  mail,  postage
prepaid,  addressed  (until another  address is filed in writing with the Rights
Agent) as follows:

                       Espey Mfg. & Electronics Corp.
                       233 Ballston Avenue
                       Saratoga Springs, New York 12866
                       Attention: President

         Subject  to  the  provisions  of  Section  21,  any  notice  or  demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Right  Certificate to or on the Rights Agent shall be sufficiently  given
or made if sent by first-class mail,  postage prepaid,  addressed (until another
address is filed in writing with the Company) as follows:


                       Registrar and Transfer Co.
                       10 Commerce Drive
                       Cranford, New Jersey 07016
                       Attention: Vice President

         Any notice or demand  authorized by this  Agreement to be given or made
by the Company or the Rights Agent to the holder of any Right  Certificate shall
be  sufficiently  given or made if sent by first-class  mail,  postage  prepaid,
addressed  to such holder at the address of such holder as shown on the registry
books of the Company.

<PAGE>

         Section  26.  Supplements  and  Amendments.  The Company and the Rights
                       ----------------------------
Agent may from time to time  supplement  or amend  this  Agreement  without  the
approval of any holders of Right  Certificates for purposes including curing any
ambiguity,  correcting or supplementing any provision contained herein which may
be defective or  inconsistent  with any other  provision  herein,  or making any
other provisions in regard to matters or questions  arising  hereunder which the
Company and the Rights Agent may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Rights.

         Section  27.  Successors.  All the  covenants  and  provisions  of this
                       ----------
Agreement  by or for the benefit of the  Company or the Rights  Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

         Section  28.  Severability.   If  any  term,  provision,   covenant  or
                       ------------
restriction  of this Agreement is held by a court of competent  jurisdiction  or
other  authority  to be invalid,  void or  unenforceable,  the  remainder of the
terms, provisions,  covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.

         Section 29.  Governing Law. This  Agreement and each Right  Certificate
                      -------------
issued  hereunder  shall be deemed to be a  contract  made under the laws of the
State of New York and for all  purposes  shall be governed by and  construed  in
accordance  with the laws of such State  applicable  to contracts to be made and
performed entirely within such State.

         Section 30. Counterparts.  This Agreement may be executed in any number
                     ------------
of counterparts and each of such  counterparts  shall for all purposes be deemed
to be an original,  and all such counterparts shall together  constitute but one
and the same instrument.

         Section 31. Descriptive  Headings.  Descriptive headings of the several
                     ---------------------
Sections of this  Agreement  are  inserted  for  convenience  only and shall not
control or affect the meaning or construction of any of the provisions hereof.


                            [Signature Page Follows]


<PAGE>



            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.

Attest:                                         ESPEY MFG. & ELECTRONICS CORP.

By:   /s/ Peg Murphy                                   By: /s/ Howard Pinsley
      ---------------------                            -------------------------
         Name: Peg Murphy                              Name: Howard Pinsley
                                                       Title: CEO

Attest:                                         REGISTRAR AND TRANSFER CO.

By:   /s/ Mary Rose Cascaes                            By: /s/ William P. Tatler
      ---------------------                            -------------------------
         Name: Mary Rose Cascaes                       Name: William P. Tatler
                                                       Title: Vice President




<PAGE>

                                                                       Exhibit A
                                                                       ---------

                           [Form of Right Certificate]

Certificate No. R-___________                                 ___________ Rights



                  NOT EXERCISABLE AFTER , DECEMBER 31, 2019 OR EARLIER IF NOTICE
                  OF REDEMPTION  IS GIVEN.  THE RIGHTS ARE SUBJECT TO REDEMPTION
                  AT THE OPTION OF THE  COMPANY,  AT $.01 PER RIGHT ON THE TERMS
                  SET FORTH IN THE RIGHTS AGREEMENT  REFERRED TO HEREIN.  IF THE
                  RIGHTS REPRESENTED BY THIS CERTIFICATE WERE ISSUED TO A PERSON
                  WHO WAS AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN
                  ACQUIRING  PERSON,  THIS  RIGHT  CERTIFICATE  AND  THE  RIGHTS
                  REPRESENTED  HEREBY  MAY  BECOME  VOID  IN  THE  CIRCUMSTANCES
                  SPECIFIED IN SECTION 11(a)(ii) OF THE RIGHTS AGREEMENT.

                                Right Certificate

                         ESPEY MFG. & ELECTRONICS CORP.

         This certifies that _______________________, or its registered assigns,
is the registered  owner of the number of Rights set forth above,  each of which
entitles the owner  thereof,  subject to the tens,  provisions and conditions of
the Second Amended and Restated Rights Agreement,  dated as of December 18, 2009
(the "Rights  Agreement"),  between Espey Mfg. & Electronics  Corp.,  a New York
      -----------------
corporation  (the  "Company") , and  Registrar and Transfer Co., as Rights Agent
                    -------
(the  "Rights  Agent"),  to  purchase  from the  Company  at any time  after the
       -------------
Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 P.M. (New York City time) on December 31, 2019 at the  principal  office of
the Rights Agent,  or its  successors as Rights  Agent,  in New York,  New York,
one-half  fully paid and  non-assessable  share of the Common Stock (the "Common
                                                                          ------
Shares") of the Company,  at a purchase price of $25.00 per share (the "Purchase
------                                                                  --------
Price"), upon presentation and surrender of this Right Certificate with the Form
-----

<PAGE>

of Election to Purchase and Certificate on the reverse hereof duly executed. The
number of Rights  evidenced by this Right  Certificate (and the number of shares
which may be purchased upon exercise  thereof) set forth above, and the Purchase
Price per share set forth above, are the number and Purchase Price as of January
1, 2010 based on the Common Shares as constituted at such date.

         As provided in the Rights Agreement,  the Purchase Price and the number
of  Common  Shares  which  may be  purchased  upon the  exercise  of the  Rights
evidenced by this Right  Certificate are subject to modification  and adjustment
upon the happening of certain events.

         This Right  Certificate is subject to all of the terms,  provisions and
conditions of the Rights Agreement,  which terms,  provisions and conditions are
hereby  incorporated  herein by  reference  and made a part  hereof and to which
Rights Agreement  reference is hereby made for a full description of the rights,
limitations  of rights,  obligations,  duties and  immunities  hereunder  of the
Rights Agent, the Company and the holders of the Right  Certificates.  Copies of
the  Rights  Agreement  are on file at the  principal  executive  office  of the
Company.

         This Right Certificate, with or without other Right Certificates,  upon
surrender at the  principal  office of the Rights  Agent,  may be exchanged  for
another  Right  Certificate  or  Right  Certificates  of  like  tenor  and  date
evidencing  Rights  entitling the holder to purchase a like aggregate  number of
Common  Shares  as the  Rights  evidenced  by the  Right  Certificate  or  Right
Certificates  surrendered  shall have entitled such holder to purchase.  If this
Right  Certificate  shall be exercised in part,  the holder shall be entitled to
receive upon surrender  hereof another Right  Certificate or Right  Certificates
for the number of whole Rights not exercised.

<PAGE>

         Subject to the provisions of the Rights Agreement, the Rights evidenced
by this  Certificate  may be  redeemed  at any time prior to the  earlier of the
Distribution  Date or December  31,  2019 by the  Company,  at its option,  at a
redemption price of $.01 per Right.

         No  fractional  Common  Shares will be issued upon the  exercise of any
Right or Rights  evidenced  hereby,  but in lieu  thereof a cash payment will be
made, as provided in the Rights Agreement.

         No  holder  of this  Right  Certificate  shall be  entitled  to vote or
receive  dividends or be deemed for any purpose the holder of the Common  Shares
or of any other  securities of the Company which may at any time be  purchasable
on the exercise hereof,  nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a  stockholder  of the  Company  or any  right  to vote for the  election  of
directors or upon any matter  submitted to stockholders at any meeting  thereof,
or to give or withhold consent to any corporate  action, or to receive notice of
meetings  or other  actions  affecting  stockholders  (except as provided in the
Rights  Agreement),   or  to  receive  dividends  or  subscriptions  rights,  or
otherwise,  until the Right or Rights evidenced by this Right  Certificate shall
have been exercised, as provided in the Rights Agreement.

         This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.

<PAGE>

         WITNESS the facsimile  signature of the proper  officers of the Company
and its corporate seal. Dated as of __________, 2009.

ATTEST:                                          ESPEY MFG. & ELECTRONICS CORP.
                                                 By:
--------------------------------                    ----------------------------
         Secretary                                        President

Countersigned:
By:
   -----------------------------
     Authorized Signature


<PAGE>


                   [Form of Reverse Side of Right Certificate]

                               FORM OF ASSIGNMENT

                (To be executed by the registered holder if such
               holder desires to transfer this Right Certificate.)

         FOR VALUE RECEIVED ____________________________ hereby sells, assigns
and transfers unto_______________________________________________________

________________________________________________________________________________
(Please print name and address of transferee)

________________________________________________________________________________

this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ____________________ Attorney, to
transfer the within Right Certificate on the books of the within-named  Company,
with full power of substitution.

Dated:____________________________



                                     _______________________
                                     Signature

Signature Guaranteed:

                                     NOTICE
                                     ------

         The signature to the foregoing  Assignment  must correspond to the name
as written upon the face of this Right Certificate in every particular,  without
alteration or enlargement or any change whatsoever.


                                       1
<PAGE>


                          FORM OF ELECTION TO PURCHASE
                          ----------------------------

                      (To be executed if holder desires to
                        exercise this Right Certificate.)

To:      ESPEY MPG. & ELECTRONICS CORP.


         The    undersigned    hereby    irrevocably    elects    to    exercise
____________________  Rights  represented by this Right  Certificate to purchase
the Common  Shares  issuable  upon the exercise of such Rights and requests that
certificates for such shares be issued in the name of:
Please insert social security
or other identifying number:
                            ____________________________________________________

________________________________________________________________________________

________________________________________________________________________________
                         (Please print name and address)


________________________________________________________________________________
         If such number of Rights shall not be all the Rights  evidenced by this
Right  Certificate,  a new Right  Certificate for the balance  remaining of such
Rights shall be registered in the name of and delivered to:

Please insert social security
or other identifying number:____________________________________________________

________________________________________________________________________________
                         (Please print name and address)


________________________________________________________________________________

Dated:______________________




                                    _____________________
                                    Signature

                                       2
<PAGE>

Signature Guaranteed:

                                     NOTICE
                                     ------

         The signature to the foregoing  Election must correspond to the name as
written upon the face of this Right  Certificate  in every  particular,  without
alteration or enlargement or any change whatsoever.

                                   CERTIFICATE
                                   -----------

                  (To be executed if holder desires to exercise
                      or transfer this Right Certificate.)

         The  undersigned  hereby  certifies by checking the  appropriate  boxes
that:

         (1) the Rights evidenced by this Right  Certificate [ ] are [ ] are not
being  exercised  or  transferred  by or on behalf of a Person  who is or was an
Acquiring  Person or an Affiliate or Associate of any such Acquiring  Person (as
such tens are defined pursuant to the Rights Agreement);

         (2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Right  Certificate from
any  Person  who is,  was or  became an  Acquiring  Person  or an  Affiliate  or
Associate of an Acquiring Person.

Dated:_________________________                      ___________________________
                                                              Signature

                                     NOTICE
                                     ------

         The signature to the foregoing  Certificate must correspond to the name
as written upon the face of this Right Certificate in every particular,  without
alteration or enlargement or any change whatsoever.

                                       3
<PAGE>


                                                                       Exhibit B
                                                                       ---------

                          SUMMARY OF RIGHTS TO PURCHASE
                                  COMMON SHARES

         The  Board  of  Directors  of  Espey  Mfg.  &  Electronics  Corp.  (the
"Company")  declared a dividend of one right  ("Right") for each share of common
 -------                                        -----
stock,  $.33  1/3 par  value  per  share,  of the  Company  (a  "Common  Share")
                                                                 -------------
outstanding  as of the close of business on April 14, 1989 (the  "Record  Date")
                                                                  ------------
and  authorized the issuance of one Right with respect to each Common Share that
shall become outstanding (other than Common Shares that are issued in connection
with the  exercise  of the  Rights)  after the Record  Date and on or before the
earlier of the  Distribution  Date (as defined below) or December 31, 2019. Each
Right entitles the registered  holder to purchase from the Company one-half of a
Common Share at a price of $25.00 per share (the "Purchase  Price"),  subject to
                                                  ---------------
adjustment.  The  description  and terms of the Rights are set forth in a Second
Amended  and  Restated  Rights  Agreement,  dated as of  December  18, 2009 (the
"Rights  Agreement"),  between the Company and  Registrar  and Transfer  Co., as
 -----------------
Rights Agent.

         Until the Distribution Date (as hereinafter  defined),  the Rights will
be evidenced,  with respect to any of the Common Share certificates  outstanding
as of April 14, 1989, by such Common Share certificates.  The term "Distribution
                                                                    ------------
Date"  means  such  date  which  is the  earlier  of (i) the  fifteenth  day (or
----
twenty-fifth  day if the Board of  Directors  of the Company  shall  within such
fifteen-day  period  act by  resolution  to  extend  such  period  by ten  days)
following  a public  announcement  that a  person  or  group  of  affiliated  or
associated persons (except for the Company,  any subsidiary of the Company,  any
employee benefit plan or employee stock plan of the Company or of any subsidiary
of the Company,  or any person or entity  organized,  appointed,  established or
holding  Common  Shares  for or  pursuant  to the  terms of any such  plan)  (an
"Acquiring  Person")  acquired,  or obtained  the right to  acquire,  beneficial
 -----------------
ownership  of 15% or more of the  Common  Shares  then  outstanding  or (ii) the
fifteenth  day (or  twenty-fifth  day if the Board of  Directors  of the Company
shall within such fifteen-day  period act by resolution to

                                       4
<PAGE>

extend such period by ten days) after the commencement by an Acquiring Person of
a tender or exchange  offer  which,  if  consummated  for the maximum  amount of
securities  to which the offer  relates,  would result in the person  making the
offer,  together with all affiliates  and  associates of such person,  being the
beneficial owner of 15% or more of the outstanding Common Shares of the Company.
The Rights Agreement provides that, until the Distribution Date, the Rights will
be transferred  with, and only with, the Common Shares.  Until the  Distribution
Date (or earlier  redemption  or  expiration  of the  Rights),  new Common Share
certificates  issued after April 14, 1989,  upon transfer or new issuance of the
Common  Shares will  contain a notation  incorporating  the Rights  Agreement by
reference.  Until the Distribution Date (or earlier  redemption or expiration of
the Rights),  the surrender for transfer of any  certificates  for Common Shares
outstanding as of April 14, 1989,  even without a copy of this Summary of Rights
attached  thereto,  will also  constitute the transfer of the Rights  associated
with the Common Shares represented by such certificates.  As soon as practicable
following the Distribution  Date,  separate  certificates  evidencing the Rights
(the  "Right  Certificates")  will be mailed to  holders of record of the Common
       -------------------
Shares as of the close of business on the Distribution  Date and thereafter such
separate Right Certificates alone will evidence the Rights.

         The Rights are not exercisable until the Distribution  Date. The Rights
will  expire on the  earlier  of the date they are  redeemed  by the  Company as
described below or December 31, 2019.

         The Purchase  Price  payable,  and the number of Common Shares or other
securities or property  purchasable,  upon exercise of the Rights are subject to
adjustment  from time to time to  prevent  dilution  (i) in the event of a stock
dividend on, or a  subdivision,  combination or  reclassification  of the Common
Shares,  (ii) upon the  fixing of a record  date for the grant to holders of the
Common  Shares of certain  rights or warrants to subscribe  for Common Shares or
convertible  securities at less than the then current market price of the Common
Shares  (other than the Rights  evidenced  hereby) or (iii) upon the fixing of a
record date for the distribution to holders of the Common Shares of evidences of
indebtedness or assets (excluding  regular periodic

                                       5
<PAGE>

cash dividends at a rate not in excess of 125% of the last regular periodic cash
dividend  theretofore  paid) or of  subscription  rights or warrants (other than
those referred to above).

         In the  event  that (i) the  Company  is the  surviving  or  continuing
corporation in a merger,  consolidation or other combination transaction with an
Acquiring Person (other than a transaction discussed in the next sentence), (ii)
in one or more  transactions  an Acquiring  Person  transfers  any assets to the
Company or any of its  subsidiaries in exchange (in whole or in part) for Common
Shares or for  securities  exercisable  for or  convertible  into Common Shares,
(iii) an Acquiring Person acquires, or obtains the right to acquire,  beneficial
ownership of 15% or more of the Company's  outstanding voting securities or (iv)
an  Acquiring  Person  engages in one of a number of  self-dealing  transactions
specified in the Rights  Agreement,  proper provision shall be made so that each
holder of a Right,  other than Rights that are or, under certain  circumstances,
were  beneficially  owned by the  Acquiring  Person  (which will be void),  will
thereafter  have the right to  receive,  upon  exercise  thereof at the  current
Purchase Price, that number of Common Shares equal to half of the Purchase Price
divided by half of then current market price.  In the event that (i) the Company
is acquired in a merger or consolidation transaction in which the Company is not
the  surviving  or  continuing  corporation,  (ii) the  Company is acquired in a
merger or  consolidation  transaction in which it is the surviving or continuing
corporation  and the  stockholders  of the  Company  received  assets  or  other
property or stock or other  securities  of any other person or (iii) 50% or more
of the Company's assets or earning power is sold, proper provision shall be made
so that each holder of a Right shall thereafter have the right to receive,  upon
the exercise  thereof in accordance  with the terms of the Rights  Agreement and
payment of an amount equal to (1) the Purchase Price in effect immediately prior
to the occurrence of such consolidation,  merger, sale or transfer multiplied by
(2) the number of Common  Shares for which a Right was  exercisable  immediately
prior to such occurrence.

         No adjustment in the Purchase Price will be repaired  until  cumulative
adjustments  require an  adjustment of at least 1% in such  Purchase  Price.  No
fractional shares will be issued upon

                                       6
<PAGE>

exercise of the Rights and in lieu  thereof an  adjustment  in cash will be made
based on the market price of the Common Shares on the last trading date prior to
the date of exercise.

         At any time prior to the earlier of the  Distribution  Date or December
31, 2019, the Company, at its option, may redeem the Rights in whole, but not in
part, at a price of $.01. per Right (the "Redemption  Price").  Immediately upon
                                          -----------------
the  action of the Board of  Directors  of the  Company  electing  to redeem the
Rights,  the right to exercise the Rights will  terminate  and the only right of
the holders of Rights will be to receive the  Redemption  Price.  Under  certain
circumstances the right of redemption may be reinstated after its expiration.

         Until a Right is exercised,  the holder thereof,  as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.

         A copy of the Rights  Agreement has been filed with the  Securities and
Exchange  Commission (the "Commission") as an Exhibit to the Form 8-K filed with
                           ----------
the  Commission  by the Company on or around  December  18,  2009. A copy of the
Rights  Agreement  is available  free of charge from the  Company.  This summary
description  of the Rights does not purport to be complete  and is  qualified in
its entirety by reference to the Rights Agreement,  which is incorporated herein
by reference.


                                       7