<PAGE>

                               SEVERANCE AGREEMENT



         THIS SEVERANCE AGREEMENT is made and entered into effective as of the
first day of November, 2003 by and between AMERICAN TECHNICAL CERAMICS CORP., a
Delaware corporation (the "Company"), and KATHLEEN M. KELLY, residing at 60 Ruth
Street, Smithtown, NY 11787 ("Employee").

         WHEREAS, Employee has been and is currently employed by the Company as
an executive officer; and

         WHEREAS, to induce Employee to remain in the Company's employ, the
Company has agreed to provide Employee with certain benefits in the event of the
termination of Employee's employment with the Company under certain
circumstances;

         NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:

         1. Definitions. For purposes of this Severance Agreement, the following
terms shall have the following meanings:

         "Cause" shall mean (a) Employee's conviction of a felony or other crime
of moral turpitude, (b) Employee's commission of any act or omission to take any
action in bad faith to the material detriment of the Company or any present of
future parent, subsidiary or affiliate of the Company, or (c) Employee's willful
failure or refusal to perform any duties consistent with her position assigned
from time to time which failure or refusal continues for a period of 10 days or
more after Employee has received notice of same from the Company.

         "Change of Control" shall mean the occurrence of any person (as defined
in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended ("the
Exchange Act")) or group (as defined in Section 13(d)(3) and 14(d)(2) of the
Exchange Act of persons, other than Victor Insetta, acquiring more than 50% of
the voting power of the Company, including by way of merger, consolidation or
otherwise.

         "Good Reason" shall mean after a Change of Control, (a) the assignment
to Employee of duties materially and adversely inconsistent with Employee's
status and position or a material and adverse alteration in the nature of
Employee's duties and/or responsibilities, reporting obligations, titles or
authority, (b) a reduction by the Company in Employee's aggregate compensation
or a failure by the Company to pay any such amounts when due; or (c) the
Company's failure to substantially provide any material employee benefits due to
be provided to Employee; or (d) the relocation of Employee to a location other
than the Company's facilities in Huntington Station, New York, without
Employee's consent.

         2. Severance. If Employee's employment with the Company is terminated
by the Company for any reason other than for Cause or if Employee's employment
with the Company is terminated by Employee for Good Reason, then:

<PAGE>

              (a) the Company shall continue to pay Employee her base salary at
her then current rate for the number of months equal to the sum of the number of
years Employee has been an officer of the Company, plus three, up to a maximum
of 15 months (such period, the "Severance Period");

              (b) during the Severance Period, the Company shall continue to
provide Employee and Employee's family with medical insurance coverage of the
nature and in the amount of the coverage provided at the time of termination;
and

              (c) Employee shall be entitled to exercise all stock options which
have vested on or prior to the effective date of termination until the earlier
of the expiration of the Severance Period and the period during which such
options would have been exercisable but for the termination of employment.

         For purposes of the foregoing, the number of years Employee has been an
officer of the Company will be calculated by reference to the date on which she
was first elected to office by the Company's board of directors (i.e., September
12, 1989) and by rounding up for any partial year served over five months. By
way of example only, if Employee served the Company as an officer for three
years and four months, the number of years for which Employee would be given
credit in subparagraph (a) above is three, but if Employee served the Company as
an officer for three years, five months and one day, the number of years for
which Employee would be given credit in subparagraph (a) above is four.

         3. Miscellaneous.

              (a) Successors and Assigns. This Severance Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, heirs, personal representatives, legal representatives, and assigns;
provided, that no rights or obligations of the Company under this Severance
Agreement may be assigned or transferred except that, without limiting
Employee's rights under this Severance Agreement, upon a Change of Control, the
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Severance Agreement in the same manner and to the same extent that the Company
would be required to perform it if no such succession had taken place.

              (b) Usage. As used in this Severance Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets (by merger, purchase or otherwise) provided for in Section 3(a) or
which otherwise becomes bound by all the terms and provisions of this Severance
Agreement by operation of law.

              (c) Tax Withholding and Deductions. Payments to Employee of all
compensation contemplated under this Severance Agreement shall be subject to all
applicable legal requirements of federal, state, local and foreign taxing
authorities with respect to the withholding of taxes. Notwithstanding any
amounts withheld pursuant to the foregoing, Employee shall be responsible for
the payment of all applicable income tax and other tax liability, if any, on all
compensation paid to her under the terms of this Severance Agreement, other than
the Company's share of social security and similar taxes.


                                       2
<PAGE>

              (d) Amendment; Waiver. This Severance Agreement may not be
modified, amended or waived in any manner except by an instrument in writing
signed by the parties hereto. The waiver by either party of compliance with any
provision of this Severance Agreement by the other party shall not operate or be
construed as a waiver of any other provision of this Severance Agreement, or of
any subsequent breach by such party of a provision of this Severance Agreement.

              (e) Severability. The provisions of this Severance Agreement shall
be deemed severable, and the invalidity or unenforceability of any one or more
of the provisions hereof shall not affect the validity and enforceability of the
other provisions hereof.

              (f) Notices. Any notice required to be given hereunder shall be
sufficient if in writing, and shall be deemed duly given (a) when delivered
personally, (b) one business day after being deposited with a nationally
recognized overnight courier service (with proof of service), and (iii) three
days after being mailed by certified or registered mail (return receipt
requested and first-class postage prepaid), in the case of Employee, to her
residence (as set forth on the first page of this Severance Agreement), and, in
the case of the Company, to its principal office to the attention of the
President, or in each case, at such other address as either party may notify to
the other in writing.

              (g) Governing Law. This Severance Agreement shall be construed and
enforced in accordance with the laws of the State of New York. The courts of
such state shall have exclusive jurisdiction over all controversies arising out
of or in connection with this Severance Agreement. The parties consent to
personal jurisdiction in the courts of Suffolk County, New York and agree that
process may be served upon them in any such action by registered mail or
personally within or without such state.

              (h) Entire Agreement. This Severance Agreement constitutes the
entire agreement of the parties and embodies all the representations and
warranties which have been made between them with respect to the subject matter
hereof. All previous agreements or understandings between the parties hereto,
whether in writing or oral, are merged into this Severance Agreement. This
Severance Agreement may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.

              (i) Headings. The section headings in this Severance Agreement are
for convenience only and shall not be used to interpret or construe its
provisions.

              (j) Counterparts. This Severance Agreement may be executed in two
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. This Severance Agreement
may be delivered by facsimile, and facsimile signatures shall be treated as
originals for all applicable purposes.

         {The remainder of this page is left intentionally blank. Signature
page(s) to follow.}


                                       3
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Severance
Agreement as of the date and year first above written.



                                       AMERICAN TECHNICAL CERAMICS CORP.


                                       By: /S/VICTOR INSETTA
                                           -------------------------------------
                                           Victor Insetta, President and
                                           Chief Executive Officer









                                       /S/KATHLEEN M. KELLY
                                       -----------------------------------------
                                       Kathleen M. Kelly


                                       4