SEPARATION AGREEMENT


     THIS SEPARATION  AGREEMENT (the  "Agreement") is made and entered into this
17th day of October,  2001,  by and  between  Roland M.  Thomas  ("Thomas")  and
Innovative Gaming Corporation of America, a Minnesota corporation ("IGCA").

                                   BACKGROUND

     A.   Thomas has resigned from his employment by IGCA.

     B.   The parties have  determined to mutually agree regarding the terms and
          conditions of Thomas' separation from employment.

     C.   For  purposes  of this  Agreement:  (1) IGCA means  Innovative  Gaming
          Corporation  of America and any  company  related to it in the past or
          present,  and  each of  them;  past or  present  officers,  directors,
          agents,  and  employees  of IGCA;  and any other  person  who acted on
          behalf of IGCA or on  instructions  from IGCA;  and (2)  Thomas  means
          Roland M. Thomas, his heirs and assigns.

     NOW,  THEREFORE,  in  consideration  of the  foregoing,  and the  terms and
conditions set forth below, IGCA and Thomas hereby agree as set forth below.

                                    AGREEMENT

     Section 1. Separation From Employment.  Thomas resigned from his employment
with IGCA effective October 17, 2001 (the "Effective  Date"), and from and after
the Effective Date Thomas'  employment  agreement with IGCA,  dated February 16,
2001 (the "Employment Agreement"),  and Thomas' change in control agreement with
IGCA,  dated  June 15,  2001  (the  "Change  in  Control  Agreement"),  shall be
terminated.

     Section  2.  Consideration  Extended  by IGCA.  As  consideration  for this
Agreement,  IGCA hereby agrees and acknowledges  that it will be obligated under
this Agreement as set forth below.

          (a) Severance Payment.  IGCA shall furnish Thomas with an amount equal
     to Ninety Five  Thousand  and No Dollars  ($95,000.00)  (such  amount to be
     referred to as the  "Severance  Payment").  The Severance  Payment shall be
     payable in the ordinary course of payroll.

          (b)  Health  Insurance.  Thomas may elect to  continue  his health and
     dental  benefits  under  COBRA,  and in such event IGCA shall pay all COBRA
     premiums for such continued health-insurance coverage, for a 6-month period
     following the Effective Date.  Thereafter,  Thomas shall be responsible for
     the payment of any premiums.


          (c) Life  Insurance.  For a period  of one  year,  IGCA  shall pay all
     premiums on a one-year term  life-insurance  policy insuring  Thomas' life,
     for the benefit of Thomas or any other person  designated  by Thomas as the
     beneficiary  of  such  policy,   in  the  amount  of  One  Million  Dollars
     ($1,000,000).  Thomas  shall be  entitled  to retain  the cash value of the
     current whole-life policy previously purchased by the IGCA.

          (d) Vested  Options.  Thomas shall be entitled to exercise  options to
     purchase  125,000  shares of IGCA  common  stock  that  have  vested on the
     Effective  Date (the "Vested  Options").  The Vested  Options  shall remain
     exercisable  for a  twenty  four-month  period  immediately  following  the


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     Effective  Date.  All options to purchase  shares of IGCA common stock that
     are unvested on the Effective Date shall expire on the Effective Date.

          (e) Expenses.  IGCA agrees to forgive a maximum of $20,000 of personal
     expenses  of Thomas  charged to and paid by IGCA.  To the  extent  personal
     expenses exceed $20,000, such amount in excess of $20,000 shall be deducted
     from the Severance Payment.

          (f)  Indemnification  for Guarantees.  IGCA hereby agrees to indemnify
     Thomas for the  personal  guarantees  executed  and  delivered by Thomas to
     Crowne Bank and Systran  Financial  Services  Corporation,  as described on
     Exhibit I. To the extent that IGCA can raise additional  capital within the
     next 60 days,  IGCA agrees that it will,  subject to IGCA's  ability to pay
     its obligations in the ordinary course, repay the Crowne Bank obligation in
     full.

          (g) No Bonus or Compensation for Accrued Vacation. Thomas shall not be
     entitled to any bonus under this  Agreement nor any other  agreement by and
     between  Thomas and IGCA,  nor shall Thomas be entitled to any payments for
     or in connection with accrued vacation time.

          (h) Automobile.  IGCA previously agreed to assume Thomas'  obligations
     with  respect  to 2000  Dodge  Van  pursuant  to a letter  agreement  dated
     September 4, 2001. IGCA shall continue to honor that commitment.

     Section 3.  Consideration  Extended by Thomas.  As  consideration  for this
Agreement, Thomas hereby agrees and acknowledges that he will be obligated under
this Agreement as set forth below.

          (a)  Non-Solicitation.  In  consideration  for the  termination of the
     non-solitication  provisions  of the  Employment  Agreement  and  Change in
     Control  Agreement,  Thomas hereby agrees that,  except for those employees
     listed on Schedule A attached  hereto,  he shall not solicit IGCA employees
     for his own benefit or the  benefit of any third party by: (i)  directly or
     indirectly  interfering with the  relationship  between IGCA and any of its
     employees;  (ii) directly or indirectly  soliciting  the  employment of any
     IGCA employee; or (iii) inducing or attempting to induce any person who was
     employed by IGCA during the six-month period immediately preceding the date
     of this Agreement, to leave employment with IGCA.

          (b)  Non-Competition.  In  consideration  for the  termination  of the
     non-competition  provisions  of the  Employment  Agreement,  Thomas  hereby
     agrees that,  except as otherwise  provided in a European  agreement by and
     between IGCA and Xertain, Inc. subsequent to the date hereof, he shall not,
     for a six month period following the Effective Date,  compete with IGCA by:
     (i) directly or  indirectly  providing  services to a competitor  of IGCA's
     Business,  in any  capacity,  including  but not limited to as an employee,
     independent   contractor,   director,  or  consultant;   (ii)  directly  or
     indirectly owning an interest in any commercial activity that competes with
     IGCA's  Business,  within  any state in the  United  States  or within  any
     country in which IGCA directly markets or currently  intends to market,  or
     services products or currently  intends to provide services,  including but
     not limited to an interest as a shareholder,  partner,  joint venturer,  or
     "Affiliate"  of any  competing  entity or  business;  or (iii)  directly or
     indirectly  contacting or soliciting  the business of any client,  business
     prospect, or prospective client of IGCA.

          For purposes of this Agreement, the term "Affiliate" shall mean a role
     in any capacity in which  Thomas (A) has direct or indirect  control of, is
     controlled  by, or is under common control with another person or business,
     (B) is an officer,  director,  partner,  trustee,  member, or manager, of a
     business or other commercial activity described in clause (A) above.

          For purposes of this  Agreement,  the term  "Business"  shall mean the
     design, manufacture, and distribution of gaming machines.




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                  (c) Inventions. Thomas hereby agrees that all "Inventions" (as
         defined below) made by Thomas during his employment with IGCA shall be
         the sole and exclusive property of IGCA, and that he has or will, upon
         IGCA's request, assign any and all rights to any such Inventions.

               As used in this Agreement,  the term "Inventions"  shall mean any
          discoveries,  improvements  or ideas (whether or not put in writing or
          reduced to  practice),  or works of  authorship  (whether  or not such
          works can be patented or copyrighted) that Thomas makes,  authors,  or
          conceives  (either alone or with another  person or entity),  and that
          (i) are reasonably  related to IGCA's Business,  and (ii) Thomas made,
          authored, conceived, or otherwise developed during his employment with
          IGCA.

     Section 4.  Confidentiality.  In  consideration  for the termination of the
confidentiality  provisions contained in the Employment Agreement and the Change
in  Control  Agreement,   the  terms  of  this  Agreement  will  be  treated  as
confidential by Thomas and IGCA and, except as provided in this Agreement,  will
not be  disclosed  by Thomas to anyone  except  that:  (a)  Thomas may make such
disclosures to his attorney and accountant, and as required by law or regulation
or  in  connection  with  a  legal  or  administrative  action,  proceeding,  or
investigation;  and (b) IGCA may make such disclosures to its executive officers
and  directors,  its  accountants,  and  counsel,  and  as  required  by  law or
regulation or in connection with any legal or administrative action, proceeding,
or  investigation.  Any disclosures  permitted by this paragraph will be made on
the condition  that the person to whom such  disclosure is made will agree to in
turn keep the terms of this Agreement confidential.

     Section 5. Mutual Return of Records,  Documents,  and Property.  Thomas has
returned or will return to IGCA all of IGCA's property, records, correspondence,
and  documents  in Thomas'  possession.  IGCA has  returned  or will  return all
personal effects and possessions of Thomas in IGCA's  possession,  and will make
reasonable  efforts to provide  copies of Thomas'  personal data or documents in
IGCA's information systems as requested by Thomas.

     Section 6. Mutual  Non-Disparagement.  Thomas and IGCA agree that they will
not issue any press releases or other  statements  disparaging  each other other
than disclosures required by law.

     Section 7. Cooperation. Thomas agrees to cooperate with IGCA now and in the
future concerning  aspects of IGCA's business,  including but not limited to the
obligation to answer  truthfully  any reasonable  questions  presented to him by
IGCA and shall assist IGCA in the defense of any claim against IGCA.

     Section 8. Non-Admission.  Nothing in this Agreement is intended to be, nor
will it be deemed to be, an  admission  of liability by IGCA or Thomas that they
have violated any state or federal  statute,  local  ordinance,  or principal of
common law, or that IGCA or Thomas has engaged in any wrongdoing.

     Section 9.  Release  of Claims.  In  consideration  of the  benefit of this
Agreement,  Thomas  hereby fully and finally  releases,  waives,  and  otherwise
relinquishes any and all claims that he has or believes he may have against IGCA
through the date of this  Agreement.  Thomas will not bring any lawsuits or make
any other  demands  against IGCA except as necessary to enforce this  Agreement.
The benefits that Thomas will receive under this Agreement  constitute  full and
fair  consideration  for the  release of such  claims.  IGCA does not owe Thomas
anything other than what is set forth in this Agreement. The benefit that Thomas
will receive hereunder constitutes  consideration in excess to anything to which
he is entitled.

     The claims that Thomas is releasing,  waiving, and otherwise  relinquishing
hereunder  include  all of the  rights he has now to any relief of any kind from
IGCA,  including  but not  limited to claims for breach of  contract,  breach of
fiduciary  duty,  fraud or  misrepresentation,  discrimination  claims under the
Nevada  Fair  Employment  Practices  Act,  discrimination  claims  under the Age
Discrimination  in Employment  Act ("ADEA"),  discrimination  claims under other



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federal, state, or local civil-rights laws, defamation, intentional or negligent
infliction  of  emotional   distress,   unlawful  or  wrongful   termination  of
employment, and any other claims for unlawful employment practices.

     Section 10. Rights and Information  Concerning Release. IGCA hereby advises
Thomas to consult with an attorney prior to signing this  Agreement,  and Thomas
hereby  acknowledges  that he has been so advised and given fair  opportunity to
consult with counsel.

     Thomas understands that,  pursuant to the Older Workers Benefits Protection
Act, he has the right to rescind his release of discrimination rights and claims
under the ADEA  within 45  calendar  days of the date upon  which he signs  this
Agreement.  He  understands  that,  if he  desires  to do so,  he  must  put the
rescission in writing and deliver it to IGCA, in care of Loren A. Piel,  General
Counsel,  333 Orville  Wright Court,  Las Vegas,  Nevada 89119,  by hand or mail
within  45  calendar  days of the date of  execution  of this  Agreement.  If he
delivers a rescission relating to the release of IGCA for claims other than ADEA
claims,  it must be: (1) postmarked  within 15 calendar days of the day on which
he signs this Agreement;  (2) addressed to General Counsel at the above address;
and (3) sent by certified mail, return receipt requested.

     Thomas  understands that if he rescinds his waivers as more fully set forth
above, this Agreement is null and void.

     Pursuant to the Older Workers  Benefits  Protection Act, IGCA has furnished
required information on Schedule B.

     Section 11. Entire  Agreement.  This  Agreement  and any exhibits  attached
hereto  constitute the entire agreement  between the parties with respect to the
termination of Thomas' employment  relationship with IGCA, and the parties agree
that  there  were  no  other  inducements  or  representations  leading  to  the
negotiation, drafting, and execution of this Agreement.

Section 12. Severability. If any one or more of the provisions of this Agreement
should be declared by a court of competent jurisdiction to be invalid, illegal,
or unenforceable in any respect, then the validity, legality, and enforceability
of the remaining provisions of this Agreement will not in any way be affected or
impaired.

     Section 13. Amendment and Waiver. This Agreement may be modified or amended
only  pursuant to a writing  signed by both Thomas and IGCA. No failure or delay
by either  party to enforce any  provision  of this  Agreement  or exercise  any
remedy provided hereunder or under the principles of common law or statute shall
constitute  a waiver  of any  provision,  right,  or  remedy  of or  under  this
Agreement.  No single or partial  exercise of any rights or remedies  under this
Agreement shall preclude a party from otherwise or further exercising any rights
or  remedies,  or any rights or  remedies  granted to the  parties  under  other
agreements, law, or equity.

     Section  14.   Voluntary  and  Knowing  Action.   Thomas  and  IGCA  hereby
acknowledge that they have read and understand,  and voluntarily enter into this
Agreement.

     Section 15. Heirs and Successors. This Agreement shall inure to the benefit
of and bind the parties, their heirs, successors, representatives, and assigns.

     Section  16.   Governing  Law.  This  Agreement   shall  be  construed  and
interpreted in accordance with the laws of the State of Nevada without regard to
such state's conflicts-of-law principles.

     Section 17.  Captions.  Headings in this Agreement are provided  solely for
convenience and shall not affect the interpretation of this Agreement.



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     Section 18. Counterparts.  This Agreement may be executed simultaneously in
two or more counterparts,  each of which will be deemed an original,  but all of
which together will constitute one and the same instrument.

     Section  19.  Notices.  Any  notice,  request,   demand,  or  communication
permitted,  required,  or otherwise  given relating to this Agreement  either by
IGCA to Thomas or by Thomas to IGCA shall be in writing  and,  unless  otherwise
required under the terms of a separate agreement or law or regulation,  shall be
deemed to have been given to the other when the  delivering  party deposits such
notice or  communication  in the U.S.  Postal  Service  mail,  postage  prepaid,
certified mail,  return receipt  requested,  properly  addressed to the party to
whom it is directed, as provided below. Either party may, by notice sent in like
manner, designate a different address for notices and communications.


         If Sent to IGCA:       Innovative Gaming Corporation of America
                                c/o General Counsel
                                333 Orville Wright Court
                                Las Vegas, NV  89119

         If Sent to Thomas:     Roland M. Thomas
                                2425 La Casa
                                Henderson, NV 89014-3624



     IN WITNESS WHEREOF,  the parties have caused this Agreement to be signed on
the day and year first above written.


                                INNOVATIVE GAMING CORPORATION OF AMERICA
                                a Minnesota corporation


                                By:                        /s/
                                         -----------------------------------
                                Name:             Tom Foley
                                         -----------------------------------
                                Title:            Chairman & CEO
                                         -----------------------------------





                                                           /s/
                                         -----------------------------------
                                         Roland M. Thomas












                      Separation Agreement - Signature Page


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                                                                      SCHEDULE A


           Employees Exempted from Non-Solicitation under Section 3(a)


            NONE



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                                                                      SCHEDULE B


     The following  information is provided in connection with Section 10 of the
Agreement and the Older Workers Benefits Protection Act.

     A.   Information Regarding Persons Released:

                  Title                                Age
                  -----                                ---
                  Chief Executive Officer              50


     B.   Information Regarding Persons Retained: none.





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                                                                      EXHIBIT II


                         Indemnified Personal Guarantees

     Attached as Exhibit I are those personal  guarantees executed and delivered
by Thomas to Crowne Bank and Systran  Financial  Services  Corporation for which
IGCA has  agreeed,  pursuant  to Section  2(e) of the  Agreement,  to  indemnify
Thomas.






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