EMPLOYMENT AGREEMENT

     This Agreement is made as of January 1, 2001 (the "Effective Date") between
Interlott Technologies,  Inc., a Delaware corporation  ("Employer") and David F.
Nichols ("Employee").

         Employer and Employee agree as follows:

1.   Employment. By this Agreement, Employer and Employee set forth the terms of
     Employer's employment of Employee on and after the Effective Date.

2.   Term of  Agreement.  The  term of this  Agreement  initially  shall  be the
     five-year   period   commencing  on  the  Effective  Date.  On  the  fourth
     anniversary of the Effective Date and on each subsequent anniversary of the
     Effective Date, the term of this Agreement  automatically shall be extended
     a period of one additional year,  unless Employer or Employee gives written
     notice of termination prior to such anniversary date.  Notwithstanding  the
     foregoing, the term of this Agreement is subject to termination as provided
     in Section 7.

3.   Duties.

     A.   Employee will serve as President and Chief  Executive  Officer ("CEO")
          of Employer.

     B.   Employee  shall  furnish  such   managerial,   executive,   financial,
          technical,  and other  skills,  advice,  and  assistance  in operating
          Employer as Employer may reasonably request.

     C.   Employee shall devote Employee's entire time, attention,  and energies
          to the business of Employer.  The words "entire time,  attention,  and
          energies" are intended to mean that Employee  shall devote  Employee's
          full  effort  during  reasonable  working  hours  to the  business  of
          Employer  and shall  devote at least 40 hours per week to the business
          of Employer.

4.   Compensation.

     A.   Employee  shall receive a base salary (the "Base  Salary") of at least
          $220,000 per year, payable not less frequently than monthly,  for each
          year during the term of this  Agreement,  subject to proration for any
          partial year.  Such Base Salary,  and all other amounts  payable under
          this Agreement, shall be subject to withholding as required by law.

     B.   In addition to the Base Salary,  Employee shall be entitled to receive
          an  annual  bonus  (the  "Bonus")  for each  calendar  year for  which
          services are performed under this Agreement. Employee's Bonus shall be
          an amount  equal to two and one half  percent  (2 1/2%) of  Employer's

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          annual net after tax income as  reflected  in the  Employer's  audited
          annual financial  statements for each year, plus an additional  amount
          equal to 5% of Employer's calendar year over year after tax net income
          growth  commencing  with  the year  2001.  The  Bonus  will be due and
          payable  within  ninety  (90)  days of the end of each  calendar  year
          commencing with the year 2001.

     C.   Employee  shall receive a one time bonus in recognition of his efforts
          during 2000 ("2000 Bonus") of $100,000.00, to be paid within two weeks
          of the Effective Date.

     D.   As of the  Effective  Date,  Employee  shall  also  receive  under the
          Company's  incentive stock option plan,  options for 200,000 shares of
          the Company's stock ("Option  Grant") with a strike price equal to the
          closing price of the Company's stock on the date of grant, with 25% of
          the options being vested upon grant and an  additional  25% to vest at
          the beginning of each calendar year thereafter until 100% vested.  The
          Option  Grant  shall be in addition  to any other  options  awarded to
          Employee  on an annual or other basis  under the  Company's  incentive
          stock option plan.

     E.   On at least an  annual  basis,  Employee  shall  receive  Base  Salary
          increases reflecting changes in the cost of living as reflected in the
          Consumer Price Index for All Urban Consumers (CPI-U) and shall receive
          a performance review and be considered for performance based increases
          as well.

     F.   Employee  shall be granted a car expense  allowance  of Seven  Hundred
          Fifty Dollars ($750) each month.

5.   Expenses. All reasonable and necessary expenses incurred by Employee in the
     course  of the  performance  of  Employee's  duties  to  Employer  shall be
     reimbursable  in accordance with Employer's then current travel and expense
     policies.

6.   Benefits.

     A.   While  Employee  remains in the employ of Employer,  Employee shall be
          entitled to participate in all of the various  employee  benefit plans
          and  programs,  or  equivalent  plans  and  programs,  which  are made
          available  to  similarly  situated  officers  of  Employer,  including
          benefits set forth in Attachment A.

     B.   Notwithstanding  anything  contained herein to the contrary,  the Base
          Salary and Bonuses  otherwise  payable to Employee shall be reduced by
          any benefits paid to Employee by Employer under any  disability  plans
          made available to Employee by Employer.

     C.   In Each year of this Agreement, Employee will be granted stock options
          as  determined by the Company's  Board of Directors  under  Employer's
          incentive stock option plan.


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<PAGE>

7.   Termination.

     A.   (i) Employer or Employee may terminate this Agreement upon  Employee's
          failure  or  inability  to perform  the  services  required  hereunder
          because  of any  physical  or  mental  infirmity  for  which  Employee
          receives  disability  benefits under any disability  benefit plan made
          available to Employee by Employer  (the  "Disability  Plans"),  over a
          period of one  hundred  twenty  consecutive  working  days  during any
          twelve consecutive month period (a "Terminating Disability").

          (ii) If Employer or Employee elects to terminate this Agreement in the
          event of a Terminating Disability, such termination shall be effective
          immediately upon the giving of written notice by the terminating party
          to the other.

          (iii) Upon  termination  of this  Agreement on account of  Terminating
          Disability,   Employer   shall   pay   Employee   Employee's   accrued
          compensation  hereunder,  whether  Base  Salary,  Bonus  or  otherwise
          (subject to offset for any amounts received pursuant to the Disability
          Plans),  to the date of termination.  For as long as such  Terminating
          Disability  may exist,  Employee  shall  continue to be an employee of
          Employer for all other  purposes and Employer  shall provide  Employee
          with  disability  benefits  and all other  benefits  according  to the
          provisions of the  Disability  Plans and any other  Employer  plans in
          which Employee is then participating.

          (iv) If the parties  elect not to  terminate  this  Agreement  upon an
          event of a  Terminating  Disability  and  Employee  returns  to active
          employment with Employer prior to such a termination,  or if such paid
          disability exists for less than one hundred twenty consecutive working
          days, the provisions of this Agreement  shall remain in full force and
          effect.

     B.   This Agreement  terminates  immediately and automatically on the death
          of the Employee,  provided,  however, that the Employee's estate shall
          be  paid  Employee's  accrued  compensation  hereunder,  whether  Base
          Salary, Bonus or otherwise, to the date of death.

     C.   Employer may terminate this Agreement immediately, upon written notice
          to Employee, for Cause. For purposes of this Agreement, Employer shall
          have "Cause" to terminate this  Agreement only if Employer's  Board of
          Directors  determines that there has been fraud,  misappropriation  or
          embezzlement on the part of Employee.

     D.   Employer may terminate this Agreement immediately, upon written notice
          to  Employee,  for any reason  other than those set forth in  Sections
          7(A),  (B) and (C);  provided,  however,  that Employer  shall have no
          right to  terminate  under this  Section 7(D) within two years after a
          Change in Control.  In the event of a  termination  by Employer  under
          this  Section  7(D),  Employer  shall,  within  five  days  after  the
          termination,  pay  Employee an amount  equal to the greater of (i) two
          times the sum of the annual  Base Salary rate in effect at the time of


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<PAGE>
          termination plus the amount of the immediately  preceding Bonus earned
          by Employee, or (ii) if the Current Term is longer than two years, the
          sum of the Base Salary for the  remainder  of the Current Term (at the
          rate in effect at the time of termination) plus an amount equal to the
          immediately  preceding Bonus earned by Employee for each calendar year
          commencing or ending during the remainder of the Current Term (subject
          to proration in the case of any calendar year ending after the Current
          Term). For the remainder of the Current Term,  Employer shall continue
          to provide  Employee with medical,  dental,  vision and life insurance
          coverage comparable to the medical,  dental, vision and life insurance
          coverage in effect for Employee  immediately prior to the termination;
          and,  to the extent that  Employee  would have been  eligible  for any
          post-retirement  medical,  dental,  vision or life insurance  benefits
          from Employer if Employee had continued in employment  through the end
          of the Current  Term.  To the extent not  precluded by the  Employer's
          1994 Incentive Stock Option Plan ("Option Plan"),  for purposes of any
          stock option or restricted stock grant  outstanding  immediately prior
          to the termination,  Employee's  employment with Employer shall not be
          deemed  to have  terminated  until  the end of the  Current  Term.  In
          addition,   Employee  shall  be  entitled  to  receive,   as  soon  as
          practicable after  termination,  an amount equal to the sum of (i) any
          forfeitable  benefits  under any  qualified or  nonqualified  pension,
          profit sharing, 401(k) or deferred compensation plan of Employer which
          would have vested prior to the end of the Current  Term if  Employee's
          employment had not terminated  plus (ii) if Employee is  participating
          in a qualified or nonqualified defined benefit plan of Employer at the
          time of  termination,  an  amount  equal to the  present  value of the
          additional vested benefits which would have accrued for Employee under
          such plan if Employee's employment had not terminated prior to the end
          of the Current Term and if Employee's annual Base Salary and Bonus had
          neither increased nor decreased after the termination. For purposes of
          this Section 7(D), "Current Term" means the longer of (i) the two year
          period beginning at the time of termination or (ii) the unexpired term
          of this  Agreement  at the  time  of the  termination,  determined  as
          provided  in  Section  2 but  assuming  that  there  is not  automatic
          extension of the Agreement term after the termination. For purposes of
          this Section 7(D) and Section 7(E), "Change in Control" means a change
          in control as defined in Employer's  1994 Incentive Stock Option Plan,
          excepting that Board of Directors  approval or ratification  shall not
          be considered in determining  whether a Change in Control has occurred
          for purposes of this Agreement.

     E.   This Agreement shall terminate  automatically  in the event that there
          is a Change in Control and either (i) Employee elects to resign within
          90 days after the Change in Control or (ii) Employee's employment with
          Employer is actually or  constructively  terminated by Employer within
          two years after the Change in Control for any reason  other than those
          set forth in Sections  7(A), (B) or (C). For purposes of the preceding
          sentence, a "constructive"  termination of Employee's employment shall
          be deemed to have occurred if, without Employee's consent,  there is a
          material reduction in Employee's  authority or  responsibilities or if
          there is a reduction in  Employee's  Base Salary or Bonus formula from
          the amount in effect  immediately prior to the Change in Control or if
          Employee is  required  by  Employer  to  relocate  from the city where
          Employee is residing  immediately  prior to the Change in Control.  In
          the event of a termination under this Section 7(E), Employer shall pay

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<PAGE>

          Employee  an  amount  equal to two times  the sum of the  annual  Base
          Salary rate in effect at the time of termination  plus an amount equal
          to the amount of the  immediately  preceding bonus earned by Employee,
          to the extent not precluded by the Option Plan all stock options shall
          become  immediately  exercisable  (and Employee  shall be afforded the
          opportunity to exercise them), and the restrictions  applicable to all
          restricted  stock shall lapse.  For the remainder of the Current Term,
          Employer  shall  continue to provide  Employee with  medical,  dental,
          vision and life insurance coverage in effect for Employee  immediately
          prior to the termination;  and, to the extent that Employee would have
          been eligible for any post-retirement  medical, dental, vision or life
          insurance   benefits  from  Employer  if  Employee  had  continued  in
          employment through the end of the Current Term, Employer shall provide
          such post-retirement benefits to Employee after the end of the Current
          Term.  Employee's  accrued benefit under any  nonqualified  pension or
          deferred  compensation  plan  maintained  by Employer or any Affiliate
          shall  become  immediately  vested  and  nonforfeitable,  as  well  as
          benefits under any qualified  pension or profit sharing or 401(k) plan
          maintained  by  Employer  or any  Affiliate  plus (ii) if  Employee is
          participating  in a qualified or nonqualified  defined benefit plan of
          Employer or any Affiliate at the time of termination,  an amount equal
          to the  present  value of the  additional  benefits  which  would have
          accrued for Employee under such plan if Employee's  employment had not
          terminated  prior to the end of the  Current  Term  and if  Employee's
          annual  Base  Salary  and  Bonus  target  had  neither  increased  nor
          decreased after the termination.  Finally, to the extent that Employee
          is deemed to have  received an excess  parachute  payment by reason of
          the Change in Control,  Employer  shall pay Employee an additional sum
          sufficient to pay (i) any taxes imposed under section 4999 of the Code
          plus (ii) any federal,  state and local taxes  applicable to any taxes
          imposed under  section 4999 of the Code.  For purposes of this Section
          7(E),  "Current  Term"  means the  longer  of (i) the two year  period
          beginning at the time of  termination  or (ii) the  unexpired  term of
          this Agreement at the time of the termination,  determined as provided
          in Section 2 but assuming that there is no automatic  extension of the
          Agreement term after the termination.

     F.   Employee may resign upon 60 days' written  notice to Employer.  In the
          event of a resignation  under this Section 7(F),  this Agreement shall
          terminate and Employee  shall be entitled to receive  Employee's  Base
          Salary through the date of termination,  any Bonus earned but not paid
          at the  time of  termination  and any  other  vested  compensation  or
          benefits  called  for  under  any  compensation  plan  or  program  of
          Employer.

     G.   Upon  termination  of  this  Agreement  as a  result  of an  event  of
          termination  described  in this  Section 7 and except  for  Employer's
          payment of the required  payments  under this Section 7 (including any
          Base Salary accrued through the date of termination,  any Bonus earned
          for the year  preceding the year in which the  termination  occurs and
          any  nonforfeitable  amounts  payable  under any employee  plan),  all
          further compensation under this Agreement shall terminate.

8.   Assignment.  As this is an  agreement  for  personal  services  involving a
     relation of  confidence  and a trust  between  Employer and  Employee,  all
     rights  and  duties of  Employee  arising  under  this  Agreement,  and the
     Agreement itself, are non-assignable by Employee.


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<PAGE>

9.   Notices.  Any notice required or permitted to be given under this Agreement
     shall be  sufficient,  if in writing,  and if  delivered  personally  or by
     certified  mail to  Employee  at  Employee's  place  of  residence  as then
     recorded on the books of Employer or to Employer at its principal office.

10.  Waiver.  No waiver or modification of this Agreement or the terms contained
     herein shall be valid  unless in writing and duly  executed by the party to
     be charged  therewith.  The  waiver by any party  hereto of a breach of any
     provision  of this  Agreement  by the other  party  shall not operate or be
     construed as a waiver of any subsequent breach by such party.

11.  Governing Law. This agreement shall be governed by the laws of the State of
     Ohio.

12.  Entire  Agreement.  This  Agreement  contains  the entire  agreement of the
     parties with respect to  Employee's  employment  by Employer.  There are no
     other  contracts,  agreements or  understandings,  whether oral or written,
     existing between them except as contained or referred to in this Agreement.

13.  Severability.  In case any one or more of the  provisions of this Agreement
     is held to be invalid,  illegal,  or  unenforceable  in any  respect,  such
     invalidity,  illegality, or other enforceability shall not affect any other
     provisions  hereof,  and  this  Agreement  shall  be  construed  as if such
     invalid,  illegal,  or  unenforceable  provisions have never been contained
     herein.

14.  Successors and Assigns.  Subject to the  requirements  of Section 7, above,
     this  Agreement  shall be binding upon  Employee,  Employer and  Employer's
     successors and assigns.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.

                                        INTERLOTT TECHNOLOGIES, INC.



                                        By:  ________________________________



                                        EMPLOYEE



                                        ________________________________
                                        David F. Nichols



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<PAGE>


                                                                   Attachment A

                                EMPLOYEE BENEFITS

Automobile Allowance                                 750
Group Accident Life                                  $500,000 Employee
Long Term Disability Insurance                       Yes
Short Term Disability Supplement                     Yes































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