Document:

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                                                                     EXHIBIT 4.2

                                ESCROW AGREEMENT

         THIS ESCROW AGREEMENT (this "Agreement") is made this _____ day of
______________, 2004, by and between Granite Falls Community Ethanol Plant, LLC,
a Minnesota limited liability company ("GFCEP") and Granite Falls Bank as escrow
agent (the "Escrow Agent").

                                   WITNESSETH:

         WHEREAS, GFCEP proposes to offer a minimum of $18.0 million and a
maximum of $30.0 million of its membership units (the "Units") at a price of
$1,000 per Unit, in minimum investment blocks of five Units in an offering in
the State of Minnesota and possibly other states, made pursuant to a
registration under the provisions of the Securities Act of 1933, as amended (the
"Offering");

         WHEREAS, in February 2004, GFCEP filed a registration statement to
register the Units with the Securities and Exchange Commission, the State of
Minnesota and possibly other states;

         WHEREAS, GFCEP will allow investors in the Offering to deliver the
purchase price of the subscribed Units in installments; and

         WHEREAS, GFCEP desires to comply with the requirements of the
Securities Act of 1933 and of the various state regulatory statutes and
regulations, and desires to protect the investors in the Offering by providing,
under the terms and conditions herein set forth, for the return to subscribers
of the money which they may pay on account of purchases of Units in the Offering
if the Minimum Escrow Deposit (hereinafter defined) is not deposited with the
Escrow Agent.

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

1. ACCEPTANCE OF APPOINTMENT. Granite Falls Bank hereby agrees to act as escrow
and impoundment agent under this Agreement. The Escrow Agent shall have no duty
to enforce any provision hereof requiring performance by any other party
hereunder.

2. ESTABLISHMENT OF ESCROW ACCOUNT. An escrow account (the "Escrow Account") is
hereby established with the Escrow Agent for the benefit of the investors in the
Offering. Except as specifically provided in this Agreement, the Escrow Account
shall be created and maintained subject to the customary rules and regulations
of the Escrow Agent pertaining to such accounts.

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3. OWNERSHIP OF ESCROW ACCOUNT. Until such time as the funds deposited in the
Escrow Account (the "Deposited Funds") shall equal the Minimum Escrow Deposit
(as hereinafter defined), all funds deposited in the Escrow Account by GFCEP
shall not become the property of GFCEP or be subject to the debts of GFCEP or
any other person but shall be held by the Escrow Agent solely for the benefit of
the investors who have purchased Units in the Offering.

4. DEPOSIT OF PROCEEDS. All proceeds from sales of Units in the Offering shall
be delivered by GFCEP to the Escrow Agent, within two business days of the
receipt thereof from investors, endorsed (if appropriate) to the order of the
Escrow Agent, together with an appropriate written statement setting forth the
name, address and social security number of each person purchasing Units, the
date of purchase, the number of Units purchased and the amount paid by each such
purchaser. Any such proceeds deposited with the Escrow Agent in the form of
uncollected checks shall be promptly presented by the Escrow Agent for
collection through customary banking and clearing house facilities. As the
proceeds of each sale are deposited with the Escrow Agent, GFCEP shall reserve
the number of Units confirmed to the purchaser thereof in connection with such
sale. All such deposited proceeds are referred to herein as the "Escrow Funds."

5. INVESTMENT OF ESCROW ACCOUNT. The Escrow Funds shall be credited by Escrow
Agent and recorded in the Escrow Account. The Escrow Agent shall be permitted,
and is hereby authorized to deposit, transfer, hold and invest all funds
received under this Agreement, including principal and interest, in an
institutional money market account. Any interest received by Escrow Agent with
respect to the Escrow Funds shall be paid to GFCEP on the termination of the
escrow only in accordance with Section 7D below.

6. TERMINATION OF ESCROW. This Agreement and the Escrow created hereby shall be
terminated on the earlier of (the "Termination Date"):

         A. Satisfaction of the Escrow terms and the release of Escrow Funds to
GFCEP as provided in paragraph 7D below;

         B. The date that GFCEP advises the Escrow Agent and the Commissioner of
Commerce of the State of Minnesota (the "Commissioner") in writing that GFCEP
elects to abandon the Offering;

         C. August 31, 2004 (the "Funding Date"), if by such date (i) the Escrow
Funds do not equal at least the Minimum Escrow Deposit and (ii) GFCEP has not
advised the Escrow Agent in writing that GFCEP's members have agreed to amend
GFCEP's operating agreement into the form attached as Appendix A to GFCEP's
prospectus for the Offering;

         D. September 30, 2004 if by such date (the "Commitment Date"), GFCEP
has not advised the Escrow Agent in writing that GFCEP has received its
requisite written debt financing commitment; or

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         E. October 31, 2004 (the "Final Termination Date").

Despite the foregoing or Section 7 below, the Escrow Agent shall not return any
Escrow Funds to purchasers of the Units until the Escrow Agent or GFCEP notifies
the Commissioner in writing of the planned return of Escrow Funds.

7. DISPOSITION OF ESCROW FUNDS. The Escrow Agent and GFCEP shall have the
following duties and obligations under this Agreement:

         A. The Escrow Agent shall send a written notice to GFCEP acknowledging
the receipt (and specifying the amount) of the Deposited Funds every seven days,
and at such other times as GFCEP reasonably requests.

         B. GFCEP shall give the Escrow Agent prompt written notice of GFCEP's
receipt of any proceeds from a "Qualifying Bridge Loan," defined as a loan of at
least $500,000 received by GFCEP on or prior to the Funding Date from a lender
agreeing in writing that (i) GFCEP will repay the loan only if GFCEP sells more
than $18.0 million of Units in the Offering (without counting the loan funds)
and then will do so only out of debt financing proceeds described in Section
7D(3) below with those lenders' consent and (ii) as to any loan amount that
GFCEP cannot repay on, or prior to, one day before the Funding Date by complying
with the foregoing condition, the lender will automatically convert it one day
before the Funding Date into Units in the Offering at $1,000 per Unit.

         C. The Escrow Agent shall also give GFCEP prompt written notice when
the Deposited Funds equal $1.8 million, less 1/10th of the amount of any
Qualifying Bridge Loan proceeds. Following receipt of such notice, GFCEP will
advise the purchasers of Units to remit to the Escrow Agent the balance of their
purchase price within twenty (20) days. Thereafter, Escrow Agent shall give
GFCEP prompt written notice when the Deposited Funds, less 1/10th of the amount
of any Qualifying Bridge Loan proceeds, total $5.0 million, $10.0 million, $15.0
million and $18.0 million.

         D. At the time (and in the event) that

               (1) the Deposited Funds shall, during the term of this Agreement,
equal $18.0 million in subscription proceeds (exclusive of interest), less the
total amount of any Qualifying Bridge Loan proceeds received by GFCEP as to
which it has notified the Escrow Agent in writing (such resulting amount of
Deposited Funds being the "Minimum Escrow Deposit"),

               (2) GFCEP has advised the Escrow Agent in writing that GFCEP's
members have agreed to amend GFCEP's operating agreement into the form attached
as Appendix A to GFCEP's prospectus for the Offering,

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               (3) the Escrow Agent shall have received written confirmation
from GFCEP that GFCEP has obtained a written debt financing commitment from one
or more lenders for an amount which, when added to the amount that GFCEP
certifies in writing will be the net offering proceeds from the Offering upon
disbursement of the Escrow Funds (inclusive of any Qualifying Bridge Loan
proceeds received by GFCEP), will yield at least $54,775,000,

               (4) GFCEP has affirmatively elected, in writing (by notice to the
Escrow Agent and the Commissioner), to terminate this Agreement and

               (5) after providing a copy of the written debt financing
commitment to the Commissioner, the Escrow Agent has obtained the express
written authorization of the Commissioner,

then this Agreement shall terminate, and, subject to Section 10 below, the
Escrow Agent shall promptly disburse the funds on deposit, including interest,
to GFCEP to be used in accordance with the provisions set out in the
Registration Statement (as may be amended) which will be used in Offering the
Units. GFCEP will deliver a copy of the Registration Statement to the Escrow
Agent upon execution of this Agreement. The Escrow Agent will have no
responsibility to examine the Registration Statement with regard to the Escrow
Account or otherwise. Upon the making of such disbursement, the Escrow Agent
shall be completely discharged and released of any and all further
responsibilities hereunder.

         E. In the event (1) the Deposited Funds do not equal or exceed the
Minimum Escrow Deposit on or before the Funding Date, (2) GFCEP does not advise
the Escrow Agent in writing regarding the debt financing commitment on or before
the Commitment Date, (3) GFCEP abandons the Offering in accordance with
paragraph 6B or (4) Escrow Funds are still being held by Escrow Agent on the
Final Termination Date, the Escrow Agent shall return to each of the purchasers
of the Units in the Offering, as promptly as possible (but, as required by the
Commissioner, not later than 30 days) after such Termination Date and on the
basis of its records pertaining to the Escrow Account: (a) the sum which each
purchaser initially paid in on account of purchases of the Units in the Offering
and (b) each purchaser's portion of the total interest earned on the Escrow
Account as of the Termination Date. Computation of any purchaser's share of the
net interest earned will be a weighted average based on the proportion of such
purchaser's deposit in the Escrow Account from the Offering to all such
purchasers' deposits held by the Escrow Agent and upon the length of time in
days such deposit was held in the Escrow Account as compared to all such
deposits. All computations with respect to each purchaser's allocable share of
net interest shall be made by the Escrow Agent, which determinations shall be
final and conclusive. Any amount paid or payable to a purchaser pursuant to this
paragraph shall be deemed to be the property of such purchaser, free and clear
of any and all claims of GFCEP or its agents or creditors; and the respective
purchases of the Units made and entered into in the Offering shall thereupon be
deemed, in facto, to be cancelled without any further liability of the
purchasers or any of them to pay for the Units purchased. At such time as the
Escrow Agent shall have made all the payments called for in this paragraph, the
Escrow Agent shall be

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<PAGE>

completely discharged and released of any and all further responsibilities
hereunder, and the Units reserved (as provided in paragraph 4) shall be released
from such reservation.

8. AGREEMENT WITH ESCROW AGENT. To induce Escrow Agent to act hereunder, it is
agreed by GFCEP that:

         A. The sole duty of the Escrow Agent, other than as herein specified,
shall be to receive the Escrow Funds and hold them subject to release, in
accordance herewith, and the Escrow Agent shall be under no duty to determine
whether GFCEP is complying with requirements of this Agreement in tendering to
the Escrow Agent said proceeds of the sale of said Units. The Escrow Agent may
conclusively rely upon and shall be protected in acting upon any statement,
certificate, notice, request, consent, order or other document believed by it to
be genuine and to have been signed or presented by the proper party or parties.
The Escrow Agent shall have no duty or liability to verify any such statement,
certificate, notice, request, consent, order or other document, and its sole
responsibility shall be to act only as expressly set forth in this Agreement.
The Escrow Agent shall be under no obligation to institute or defend any action,
suit or proceeding in connection with this Agreement unless first indemnified to
its satisfaction. The Escrow Agent may consult counsel in respect of any
question arising under this Agreement and the Escrow Agent shall not be liable
for any action taken or omitted in good faith upon advice of such counsel.

         B. GFCEP hereby indemnifies and holds harmless the Escrow Agent from
and against any and all loss, liability, cost, damage and expense, including,
without limitation, reasonable counsel fees, which the Escrow Agent may suffer
or incur by reason of any action, claim or proceeding brought against the Escrow
Agent arising out of or relating in any way to this Agreement or any transaction
to which this Agreement relates unless such action, claim or proceeding is the
result of the gross negligence or willful misconduct of the Escrow Agent.

9. RESIGNATION AND REMOVAL OF ESCROW AGENT; SUCCESSORS. The Escrow Agent may
resign upon thirty (30) days advance written notice to GFCEP. If a successor
Escrow Agent is not appointed within the 30-day period following such notice,
Escrow Agent may petition any court of competent jurisdiction to name a
successor Escrow Agent. Any commercial banking institution or trust company with
which Escrow Agent may merge or consolidate, and any commercial banking
institution or trust company to which Escrow Agent transfers all or
substantially all of its corporate trust business shall be the successor Escrow
Agent without further act.

10. FEES AND EXPENSES OF ESCROW AGENT. In the event the Escrow Agent disburses
funds to GFCEP pursuant to Section 7D above, the Escrow Agent shall be entitled
to deduct from the funds so disbursed a fee of Twenty Dollars ($20.00) per
purchaser, which fees shall be paid from interest on the escrow account only and
not from principal. This fee and the continued deposit of said escrow in the
institutional money market account as set forth in Section 5 herein is intended
as full consideration for the Escrow Agent's services as contemplated by this
Agreement; PROVIDED, HOWEVER, that in the event the Escrow Agent renders any

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material service not contemplated in this Agreement or there is any assignment
of interest in the subject matter of this Agreement, or any material
modification hereof; or if any material controversy arises hereunder, or the
Escrow Agent is made a party to any litigation pertaining to this Agreement, or
the subject matter hereof, then the Escrow Agent shall be reasonably compensated
for such extraordinary services and reimbursed for all costs and expenses,
including reasonable attorney's fees, occasioned by any delay, controversy,
litigation or event, and the same shall be recoverable from GFCEP, but not from
the escrow account.

11. CONCERNING THE COMMISSIONER. The parties further agree as follows:

         A. CONSENT OF COMMISSIONER TO RELEASE FUNDS. No funds shall be released
to GFCEP hereunder except upon the express written authorization of the
Commissioner. If the Commissioner finds that any conditions of this Agreement
have not been satisfied, or that any provisions of the Minnesota Securities Laws
or regulations have not been complied with, then the Commissioner may withhold
such authorization for release of funds by the Escrow Agent to GFCEP and may
direct the Escrow Agent to return the funds to the subscribers. In making a
determination hereunder, the Commissioner may require from GFCEP a statement of
all expenses and/or all amounts paid into the escrow, certified by an
independent certified public accountant or an officer of GFCEP and any further
financial or other information as the Commissioner may deem appropriate or
helpful in making such determination.

         B. INSPECTION OF RECORDS. The Commissioner may, at any time, inspect
the records of the Escrow Agent, insofar as they relate to this Escrow
Agreement, for the purpose of determining compliance with and conformance to the
provisions of this Escrow Agreement.

         C. ISSUANCE OF CERTIFICATES. Until the terms of this Agreement have
been met and the funds hereunder released to GFCEP, GFCEP may not issue any
certificates or other evidences of securities, except subscription agreements.

12. NOTICES. All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (a) on
the date of service if served personally on the party to whom notice is to be
given, (b) on the day of transmission if sent by facsimile transmission to the
facsimile number given below, and telephonic confirmation of receipt is obtained
promptly after completion of transmission, (c) on the next day on which such
deliveries are made in Granite Falls, Minnesota, when delivery is to Federal
Express or similar overnight courier or the Express Mail service maintained by
the United States Postal Service, or (d) on the fifth day after mailing, if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, and properly addressed, return receipt
requested, to the party as follows:

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<PAGE>

<Table>
<S>                                                             <C>
         If to Escrow Agent:

         Granite Falls Bank
         702 Prentice Street
         P.O. Box 8
         Granite Falls, Minnesota 56241
         Fax:  (320) 564-2114

         If to GFCEP:                                           with a required copy to:

         Granite Falls Community Ethanol Plant, LLC             Messerli & Kramer P.A.
         Attn: Paul Enstad, Chairman                            150 South Fifth Street, Suite 1800
         P.O. Box 216, 2448-540th Street, Suite 1               Minneapolis, Minnesota  55402
         Granite Falls, Minnesota 56241                         Attention:  Jeffrey C. Robbins, Esq.
         Fax:  (320) 564-3190                                   Fax:  (612) 672-3777
</Table>

13. GOVERNING LAW. This Agreement shall be construed, performed, and enforced in
accordance with, and governed by, the internal laws of the State of Minnesota,
without giving effect to the principles of conflict of laws thereof.

14. SUCCESSORS AND ASSIGNS. Except as otherwise provided in this Agreement, no
party hereto shall assign this Agreement or any rights or obligations hereunder
without the prior written consent to the other parties hereto and any such
attempted assignment without such prior written consent shall be void and of no
force and effect. This Agreement shall inure to the benefit of and shall be
binding upon the successors and permitted assigns of the parties hereto.

15. SEVERABILITY. In the event that any part of this Agreement is declared by
any court or other judicial or administrative body to be null, void, or
unenforceable, said provision shall survive to the extent it is not so declared,
and all of the other provisions of this Agreement shall remain in full force and
effect.

16. FURTHER ASSURANCES. Each of the parties shall execute such documents and
other papers and take such further actions, as may be reasonably required or
desirable to carry out the provisions hereof and the transactions contemplated
hereby.

17. AMENDMENTS. This Agreement may be amended or modified, and any of the terms,
covenants, representations, warranties, or conditions hereof may be waived, only
by a written instrument executed by the parties hereto, or in the case of a
waiver, by the party waiving compliance. Any waiver by any party of any
condition, or of the breach of any provision, term, covenant, representation, or
warranty contained in the Agreement, in any one or more instances, shall not be
deemed to be nor construed as further or continuing waiver of any such
conditions, or of the breach of any other provision, term, covenant,
representation, or warranty of this Agreement.

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<PAGE>

18. ENTIRE AGREEMENT. This Agreement contains the entire understanding among the
parties hereto with respect to the escrow contemplated hereby and supersedes and
replaces all prior and contemporaneous agreements and understandings, oral or
written, with regard to such escrow.

19. SECTION HEADINGS. The section headings in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.

20. COUNTERPARTS. This 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.

         IN WITNESS WHEREOF, the parties hereto have hereunto affixed their
signatures as of the day and year first written above.

GFCEP:                                ESCROW AGENT:

GRANITE FALLS COMMUNITY               GRANITE FALLS BANK
    ETHANOL PLANT, LLC

By                                    By
  --------------------------------         ----------------------------------
  Paul Enstad, Chairman                    Steve Lindholm, President

Accepted for filing:

----------------------------------
Minnesota Commissioner of Commerce

                                      -8-<PAGE>

                              EMPLOYMENT AGREEMENT

         EMPLOYMENT AGREEMENT, dated as of October 1, 2003, between AMERICAN
TECHNICAL CERAMICS CORP., a Delaware corporation having its principal place of
business at One Norden Lane, Huntington Station, New York 11746 (the "Company"),
and RICHARD MONSORNO, who resides at 8954 Regina Road, Jacksonville, Florida
32217 ("Employee").

                              W I T N E S S E T H :

         WHEREAS, Employee is currently employed as the Senior Vice President -
Technology of the Company;

         WHEREAS, the Company desires to provide for Employee's continued
performance of services for the Company and any present or future parent,
subsidiary, or affiliate of the Company, and Employee desires to continue to
perform such services, on the terms and conditions hereinafter set forth;

         NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt, adequacy, and
sufficiency of which are hereby acknowledged, the Company and Employee hereby
agree as follows:

         1. Term. The Company agrees to employ Employee, and Employee agrees to
serve as Senior Vice President - Technology of the Company, upon the terms and
conditions hereinafter set forth, for a period commencing on October 1, 2003 and
ending on September 30, 2006, or for such shorter period as may be provided for
under Section 6. The period during which Employee is employed hereunder is
hereinafter referred to as the "Employment Period."

<PAGE>

         2. Duties. Employee agrees to use his best efforts, skills, and
abilities to perform faithfully all duties consistent with his position (or any
other position of a similar nature) assigned to him from time to time by the
Company in accordance with all Company policies and procedures, and shall not to
become involved in any personal investment or business matters which may
adversely affect the Company or any present or future parent, subsidiary, or
affiliate of the Company. In the performance of his duties, Employee shall be
subject to the direction of the Board of Directors and the Chief Executive
Officer of the Company.

         3. Place of Performance. In connection with his employment by the
Company, Employee shall be based at the Company's offices in Jacksonville,
Florida. Employee shall be available to travel at such times and to such places
as may be necessary in connection with the performance of his duties hereunder.

         4. Annual Compensation.

              (a) Salary. During the Employment Period, Employee shall receive a
base salary at the annual rate of $208,428 commencing on the date hereof, plus
such other amounts, if any, as the Board of Directors, in its sole discretion,
may from time to time determine. Employee's salary shall be payable in weekly
installments or at such other frequency as the Company may from time to time
determine (but not less frequently than monthly).

              (b) Bonus. During the Employment Period, Employee shall also be
entitled to participate in the Company's Officers' Profit Bonus Plan (the
"Plan"). Employee hereby acknowledges that bonuses under the Plan are awarded in
the sole discretion of the Board of Directors of the Company and are generally
paid on a quarterly basis, if at all. Nothing contained herein shall require the
Company to maintain the Plan.

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<PAGE>

              (c) Deductions. The Company shall deduct from all amounts payable
to Employee all taxes and other amounts which the Company is now or may
hereafter become obligated to deduct under any applicable law.

         5. Benefits.

              (a) Employee shall be entitled to participate in such employee
benefit plans established by the Company from time to time and generally made
available to employees at levels similar to Employee's for which he meets the
eligibility requirements. Nothing contained herein shall require the Company to
establish or maintain any employee benefit plan.

              (b) During the Employment Period, the Company shall provide
Employee with the use of an automobile and shall pay the expenses associated
with the maintenance and operation thereof.

         6. Termination.

              (a) Notwithstanding anything herein contained to the contrary, if
on or after the date hereof and prior to the end of the Employment Period,
either (i) Employee shall be convicted of a felony or other crime of moral
turpitude, (ii) Employee shall commit any act or omit to take any action in bad
faith to the detriment of the Company or any present or future parent,
subsidiary, or affiliate of the Company, (iii) Employee shall willfully fail or
refuse to perform any duties consistent with his position (or any other position
of a similar nature) assigned to him from time to time, or (iv) Employee shall
breach any other term of this Agreement and fail to correct such breach within
10 days after receiving notice of the same, or if such breach is not capable of
correction within such 10 day period, Employee shall fail to take substantial
steps necessary to correct such breach within such 10 day period, then, and in
each such case, the Company shall have the right to give notice of termination
of Employee's

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<PAGE>

services hereunder as of a date to be specified in such notice, and this
Agreement shall terminate on the date so specified.

              (b) If this Agreement is terminated by the Company for any of the
reasons set forth in Paragraph 6(a) hereof, Employee shall be entitled to
receive only his salary at the rate provided in Paragraph 4(a) hereof through
and including the date upon which termination shall take effect.

              (c) If Employee's employment by the Company pursuant to this
Agreement is terminated for any reason other than any of the reasons set forth
in Paragraph 6(a), or for no reason, or if the Employee's employment with the
Company is terminated due to his physical or mental incapacity or disability, or
if Employee shall die, then (i) the Company shall continue to pay to Employee or
to his estate, as the case may be, his base salary at the rate provided in
Section 4(a) hereof for a period of 15 months from the date upon which
termination shall take effect (less, in the case of incapacity, disability or
death, any amount paid or payable to Employee or his estate pursuant to any
disability insurance or life insurance policy provided or paid for by the
Company), (ii) the Company shall continue to provide Employee and his family
with medical insurance coverage of the nature and in the amount of the coverage
provided at the time of termination for a period equal to the greater of 18
months and the remainder of the Employment Period (as if Employee's employment
had not been terminated), and (iii) the Employee or his estate shall be entitled
to exercise all stock options which have vested on or prior to the date of
termination for a period of one year after such termination, subject to the
terms of the plan pursuant to which such options were granted and the stock
option agreements evidencing same.

                                       4
<PAGE>

              (d) If Employee terminates his employment on or after the date
hereof and prior to the end of the Employment Period, or upon expiration of the
Employment Period (other than under circumstances covered by Section 6(a), 6(b)
or 6(c)), in consideration for Employee's compliance with Paragraph 9(a) hereof,
(i) the Company shall pay Employee his salary at the rate provided in Paragraph
4(a) hereof for a period of 15 months from the date upon which termination shall
take effect, (ii) the Company shall continue to provide Employee and his family
with medical insurance coverage of the nature and in the amount of the coverage
provided at the time of termination for a period of 18 months, and (iii) the
Employee shall be entitled to exercise all stock options which have vested on or
prior to the date of termination for a period of one year after such
termination, subject to the terms of the plan pursuant to which such options
were granted and the stock option agreements evidencing same.

         7. Confidentiality.

              (a) Employee acknowledges and agrees that he has been and, during
the Employment Period, will continue to be privy to confidential proprietary and
secret information relating to the Company, its present or future parents,
subsidiaries and affiliates and their respective customers, clients and
suppliers. Employee hereby agrees that, beginning on the date hereof, and at any
time hereafter, Employee shall treat as strictly confidential any proprietary,
confidential or secret information relating to the business or interests of the
Company or any present or future parent, subsidiary or affiliate of the Company,
or any customer, client or supplier of any of them, including, but without
limitation, the organizational structure, operations, business plans or projects
of the Company or any present or future parent, subsidiary or affiliate of the
Company, or any customer, client or supplier of any of them, and any research
datum or result, invention, trade secret, customer list or customer information,

                                       5
<PAGE>

process or other work product developed by or for the Company or any present or
future parent, subsidiary or affiliate of the Company, or any customer, client
or supplier of any of them, whether on the premises of the Company or elsewhere
("Confidential Information"). Employee hereby agrees that, beginning on the date
hereof, and at any time hereafter, the Employee shall not disclose to any person
or entity, utilize for his own purposes or for the benefit of any other person
or entity or make accessible to any person or entity, in any manner or in any
form, any Confidential Information other than in connection with performing the
services required of him under this Agreement, without the prior written consent
of the Company.

              (b) Employee agrees that the provisions of this Paragraph 7 shall
survive the termination of his employment and of this Agreement.

         8. Assignment of Intellectual Property Rights.

              (a) If at any time or times during his employment by the Company
and during the six month period following his termination for any reason (or for
no reason) Employee shall (either alone or with others) make, conceive, discover
or reduce to practice any Intellectual Property (as hereinafter defined)
whatsoever or any interest therein ("Intellectual Property Rights"), whether or
not patentable or registrable under copyright or similar statutes or subject to
analogous protection (herein called "Developments"), that (i) relates to the
business of the Company or any present or future parent, subsidiary or affiliate
of the Company or any of their respective customers, clients or suppliers or any
of the products or services being developed, manufactured, sold or provided by
any of them which may be used in connection therewith, (ii) results from tasks
assigned to Employee by the Company or any present or future parent, subsidiary
or affiliate of the Company, or (iii) results from the use of premises or
personal property (whether tangible or intangible) owned, leased or contracted
for by the

                                       6
<PAGE>

Company or any present or future parent, subsidiary or affiliate of the Company,
such Developments and the benefits thereof shall immediately become the sole and
absolute property of the Company and its assigns, and Employee shall promptly
disclose to the Company (or any persons designated by it) each such Development
and hereby assigns any rights Employee may have or acquire in the Developments
and benefits and/or rights resulting therefrom to the Company and its assigns
without further compensation and shall communicate, without cost or delay, and
without publishing the same, all available information relating thereto (with
all necessary plans and models) to the Company. As used herein, the term
"Intellectual Property" shall mean all industrial and intellectual property,
including, without limitation, patents, patent applications, patent rights,
trademarks, trademark applications, trade names, service marks, service mark
applications, copyrights, copyright applications or registrations, databases,
algorithms, computer programs and other software, know-how, trade secrets,
proprietary processes and formulae, inventions, trade dress, logos, design and
all documentation and media constituting, describing or relating to the above.

              (b) Upon disclosure of each Development to the Company, Employee
will, during his employment and at any time thereafter, at the request and cost
of the Company, sign, execute, make and do all such deeds, documents, acts and
things as the Company and its duly authorized agents may reasonably require to
(i) apply for, obtain and vest in the name of the Company alone (unless the
Company otherwise directs) letters, patents, copyrights or other analogous
protection in any country throughout the world and when so obtained or vested to
renew and restore the same, (ii) defend any actions or opposition proceedings in
respect of such applications and any opposition proceedings or petitions or
applications for revocation of such

                                       7
<PAGE>

letters, patents, copyrights or other analogous protection, and (iii) bring any
action to enforce any rights in any Developments.

              (c) Employee hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as the Employee's agent and
attorney-in-fact, to act for and in the Employee's behalf and stead to execute
and file any such application or applications and to do all other lawfully
permitted acts to further the prosecution and issuance of any such letters,
patents, copyrights and other analogous protection thereon with the same legal
force and effect as if executed by Employee.

              (d) In the event of the termination of Employee's employment for
any reason (or no reason), Employee agrees to deliver to the Company all
documents, notes, drawings, blueprints, formulae, specifications, computer
programs, data and other materials of any nature pertaining to any proprietary
information or Intellectual Property of the Company or to Employee's work with
the Company, and the Employee will not take any of the foregoing or any
reproduction of any of the foregoing that is embodied in a tangible medium of
expression.

              (e) The obligations of Employee pursuant to this Paragraph 8 shall
survive termination of his employment and of this Agreement.

         9.       Non-Competition.

              (a) Employee acknowledges and agrees that the retention of
Confidential Information is essential to the continued existence of the Company,
and that such information constitutes trade secrets, disclosure of which would
irreparably harm the business of the Company. Employee further acknowledges that
the Company would find it extremely difficult to replace Employee. Accordingly,
Employee agrees that he will not during the period he is employed by the Company
or any present or future parent, subsidiary or affiliate of the

                                       8
<PAGE>

Company, under this Agreement or otherwise, and for a period of 15 months
thereafter (i) engage in, or otherwise directly or indirectly be employed by, or
act as a consultant, advisor or lender to, or be a director, officer, employee,
stockholder, owner, or partner of, any other Competitive Business (as
hereinafter defined), (ii) assist others in engaging in any Competitive
Business, (iii) induce any employee of the Company or any present or future
parent, subsidiary or affiliate of this Company to terminate his employment with
the Company or such parent, subsidiary or affiliate, or engage in any
Competitive Business, within a period of one year after such person is no longer
employed by the Company or any present or future parent, subsidiary or affiliate
of the Company, or (iv) induce any entity or person with which the Company or
any of present or future parent, subsidiary or affiliate has a business
relationship to terminate or alter such business relationship. As used herein
"Competitive Business" means and includes the business of designing, developing,
manufacturing and marketing RF/Microwave/Millimeter/ Wave ceramic capacitors,
thin film products and other passive components and any other business that
provides services and/or products which are comparable to the services and/or
products provided or contemplated to be provided by the Company or any present
or future parent, subsidiary or affiliate of the Company. Notwithstanding
anything contained herein to the contrary, the provisions of this Paragraph 9
will not be deemed breached merely because Employee owns not more than 1% of the
outstanding common stock of a corporation, if, at the time of its acquisition by
Employee, such stock is listed on a national securities exchange, is reported on
NASDAQ, or is regularly traded in the over-the-counter market by a member of a
national securities exchange.

              (b) Employee understands that the foregoing restrictions may limit
his ability to earn a livelihood in a business similar to that of the Company or
any present or future parent,

                                       9
<PAGE>

subsidiary or affiliate of the Company, but he nevertheless believes that he has
received and will receive sufficient consideration and other benefits as an
employee of the Company and as otherwise provided hereunder to justify such
restrictions which, in any event (given his education, skills and ability),
Employee does not believe would prevent him from earning a livelihood.

              (c) The obligations of Employee pursuant to this Paragraph 9 shall
survive the termination of his employment and of this Agreement.

         10. Scope of Agreement. Employee acknowledges that the restrictions
contained in Paragraphs 7, 8 and 9 are a condition of his employment by the
Company. Employee further acknowledges that such restrictions are reasonable in
view of the nature of the business in which the Company is engaged and his
knowledge of the Company's business, and that any breach of his obligations
under Paragraphs 7, 8 and 9 hereof will cause the Company irreparable harm for
which the Company will have no adequate remedy at law. As a result, the Company
shall be entitled to the issuance by a court of competent jurisdiction of an
injunction, restraining order or other equitable relief in favor of itself
restraining Employee from committing or continuing any such violation. Any right
to obtain an injunction, restraining order or other equitable relief hereunder
will not be deemed a waiver of any right to assert any other remedy the Company
may have under this Agreement or otherwise at law or in equity.

         11. Representations and Warranties. Employee represents and warrants
that the execution and delivery of this Agreement and the performance of all the
terms of this Agreement do not and will not breach any agreement to which he is
a party, including, without limitation, any agreement to keep in confidence
proprietary information acquired by Employee in confidence or trust. Employee
has not entered into and shall not enter into any agreement,

                                       10
<PAGE>

either written or oral, in conflict with this Agreement. Employee further
represents and warrants that he has not brought and will not bring with him to
the Company or use at the Company any materials or documents of an employer or a
former employer that are not generally available to the public, unless express
written authorization from such employer for their possession and use has been
obtained. Employee further understands that he is not to breach any obligation
of confidentiality that he has to any employer or former employer and agrees to
fulfill all such obligations during the period of his affiliation with the
Company.

         12. Assignment. Under no circumstances shall Employee assign, pledge or
otherwise dispose of any of his rights or obligations under this Agreement, and
any such attempted assignment, pledge, or disposition shall be void and shall
relieve the Company of all its obligations under this Agreement. The Company may
assign any of its rights or obligations under this Agreement to any present or
future parent, subsidiary, affiliate, or successor.

         13. Entire Agreement. This Agreement is the entire agreement between
the Company and Employee with respect to the subject matter hereof and
supersedes all other agreements, written or oral, concerning the subject matter
hereof. Without limiting the foregoing, the parties acknowledge that the
Employment Agreement, dated as of September 1, 2000, between the Company and
Employee has terminated and is of no further force or effect.

         14. Waivers and Further Agreements Any waiver of any breach of any
terms or conditions of this Agreement shall not operate as a waiver of any other
breach of such terms or conditions or any other term or condition, nor shall any
failure to enforce any provision hereof on any one occasion operate as a waiver
of such provision or of any other provision hereof or a waiver of the right to
enforce such provision or any other provision on any subsequent occasion.

                                       11
<PAGE>

         15. Amendments. This Agreement may not be amended, nor shall any
waiver, change, modification, consent, or discharge be effected, except by an
instrument in writing executed by or on behalf of the party against whom
enforcement of any such amendment, waiver, change, modification, consent, or
discharge is sought.

         16. Severability

              (a) If any provision of this Agreement shall be held or deemed to
be invalid, inoperative, or unenforceable as written, it shall be construed, to
the greatest extent possible, in a manner which shall render it valid and
enforceable, and any limitation on the scope or duration of any such provision
necessary to make it valid and enforceable shall be deemed to be part thereof.

              (b) If any provision of this Agreement shall be held or deemed to
be invalid, inoperative, or unenforceable as applied to any particular case in
any jurisdiction or jurisdictions, or in all jurisdictions or in all cases,
because of the conflict or any provision with any constitution or statute or
rule of public policy or for any other reason, such circumstance shall not have
the effect of rendering the provision or provisions in question invalid,
inoperative, or unenforceable in any other jurisdiction or in any other case or
circumstance or of rendering any other provision or provisions herein contained
invalid, inoperative, or unenforceable to the extent that such other provisions
are not themselves actually in conflict with such constitution, statute, or rule
of public policy, but this Agreement shall be reformed and construed in any such
jurisdiction or case as if such invalid, inoperative, or unenforceable provision
had never been contained herein, and such provision reformed so that it would be
valid, operative, and enforceable to the maximum extent permitted in such
jurisdiction or in such case.

                                       12
<PAGE>

         17. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
giving effect to rules governing conflicts of law.

         18. Courts. Any action to enforce any of the provisions of this
Agreement shall be brought in the courts of the State of New York. The parties
hereby consent to the jurisdiction of the courts of the State of New York.

         19. Notices. Any notices required or permitted by this Agreement shall
be in writing and personally delivered or mailed by certified or registered
mail, return receipt requested, addressed to the parties at their addresses set
forth above, or to such other addresses as one party may specify to the other
party, from time to time, in writing. Any notice personally delivered shall be
deemed given at the time of receipt thereof, and any notice given by certified
or registered mail shall be deemed given at the time of certification or
registration thereof.

         20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

                                       13
<PAGE>

         IN WITNESS WHEREOF, the parties have executed this 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/RICHARD MONSORNO
                                       -----------------------------------------
                                       Richard Monsorno

                                       14

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