<PAGE>   1
                                                                   EXHIBIT 10.70

                             SEPARATION AGREEMENT


      THIS SEPARATION AGREEMENT is made and entered into as of this 5th day of
November, 1996, by and between STEVE GREATHOUSE, residing at 7140 Darby Avenue,
Las Vegas, Nevada 89117 (the "Executive"), and ALLIANCE GAMING CORPORATION, a
Nevada corporation, having its principal offices at 6601 South Bermuda Road, Las
Vegas, Nevada 89119 (the "Corporation").

                              W I T N E S S T H:

      WHEREAS, the Executive has been employed by the Corporation as its
President and Chief Executive Officer and in other capacities; and

      WHEREAS, the Executive and the Corporation desire to settle fully and
finally all matters between them to date, including without limitation, any
issues that might arise out of the Executive's employment or the termination of
his employment;

      NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, intending to be legally bound hereby,
agree as follows:

      1. EMPLOYMENT STATUS. The Executive and the Corporation agree that on the
earlier to occur of (a) December 31, 1996, (b) the date on which a successor
chief executive officer is named by the Corporation, or (c) a date otherwise
determined by the Board of Directors of the Corporation in its discretion (in
each case, the "Termination Date"), the Executive shall cease to be the
President and Chief Executive Officer of the Corporation, and shall cease all
other officer and employee positions with the Corporation and its subsidiaries
and affiliates. The Executive also hereby agrees to resign, effective on the
Termination Date, his membership on the Board of Directors (and all Board of
Director committees) of the Corporation and its subsidiaries and affiliates.

      2. SEVERANCE BENEFITS.

            (a) CASH REMUNERATION. The Corporation shall (i) continue to pay to
the Executive his base salary in the amount of $400,000 per annum up to and
including the Termination Date, (ii) pay the Executive, within five days after
the Termination Date, an additional amount equal to $500,000 less the aggregate
amount paid to the Executive under clause (i) above for the period commencing on
the date of this Agreement and ending on the Termination Date, and (iii) pay any
expense reimbursement amounts accrued through



                                      1

<PAGE>   2

the Termination Date, in the case of clauses (i) and (iii) above, at the time
such payments would otherwise have been due and payable under the Employment
Agreement, dated as of August 15, 1994 with the Corporation (the "Employment
Agreement").

            (b) The Corporation also shall provide to Executive the following
additional severance benefits, the costs of which are not deducted from or
offset against any amounts otherwise payable to Executive as severance benefits
hereunder.

                  (i) HEALTH INSURANCE COVERAGE. The Corporation at its cost
      shall provide Executive and his family with the health insurance benefits
      and coverage (including medical, dental and vision) that Executive and his
      family enjoyed as of the Termination Date, until August 14, 1997, at which
      time Executive and his family shall be entitled to elect COBRA if they are
      eligible under COBRA.

                  (ii) VACATION. Executive is entitled to and may take before
      December 31, 1996 six weeks of accumulated paid vacation. If Executive
      elects not to take six weeks of accumulated paid vacation before December
      15, 1996, the Corporation shall pay him for his accumulated vacation in
      cash on December 31, 1996.

                  (iii) LIFE INSURANCE. The Corporation shall continue the
      payment of the premiums on the life insurance policy covering Executive's
      life as it has during his employment, until August 14, 1997, and
      thereafter fully cooperate with Executive if Executive elects to transfer
      ownership of the policy to him or his designee.

                  (iv) STOCK OPTIONS. Notwithstanding any contrary provision in
      the August 15, 1994 Employment Agreement or in any other stock option plan
      of the Corporation, including the 1991 Incentive Stock Option Plan, all
      Executive's unvested Employment Options (as defined in the Employment
      Agreement) shall vest and become exercisable as of the Termination Date.
      In addition, such Employment Options shall remain exercisable until August
      29, 2001.

                  (v) INCENTIVE WARRANTS. Executive remains entitled to the
      Incentive Warrants under Section 4(c) of the Employment Agreement and
      nothing in this Agreement is intended to limit or reduce Executive's
      rights thereto.

                  (vi) EXECUTIVE SECRETARY SEPARATION ALLOWANCE. If the
      employment of Executive's secretary terminates between December 31, 1996
      and June 15, 1997, the Corporation at its cost will pay and/or provide as
      severance



                                      2

<PAGE>   3

      benefits to Executive's secretary: continuation of her current salary and
      health care coverage for 15 weeks after her termination, after which she
      will be entitled to COBRA if eligible.

            (c) Neither party shall have any further liability or obligation to
the other, except as provided in this Agreement or letter agreement, of even
date herewith, between the Executive and the Corporation. The Executive and the
Corporation each agree that the covenants in Section 10 of the Employment
Agreement shall be of no further force and effect following the Termination
Date.

      3. COOPERATION/CONSULTING. The Executive agrees to make himself available
during the first week of work performed by any succeeding chief executive
officer to answer questions, introduce staff and provide a general overview of
the gaming industry. The Corporation shall retain the Executive as a consultant
for one year after the Termination Date and shall pay the Executive a consulting
fee equal to $225,000 (payable within five days after the Termination Date and
in addition to any Severance Benefits under Section 2 hereof). The Executive or
the Corporation shall have the right to terminate the consulting arrangement at
any time for any reason.

      4.    CONFIDENTIAL INFORMATION AND NON-DISPARAGEMENT.

            (a) In accordance with NRS 600A.010 et seq. (the so-called Uniform
Trade Secrets Act), the Executive shall hold in a fiduciary capacity for the
benefit of the Corporation and its stockholders all secret, confidential or
proprietary information, knowledge or data relating to the Corporation (and any
of its subsidiaries or affiliates), which shall have been obtained by the
Executive during or by reason of his employment by the Corporation. During and
after the Executive's employment with the Corporation, the Executive shall not,
without the prior written consent of the Corporation, communicate or divulge any
such information, knowledge or data to any person or entity other than the
Corporation (or such applicable subsidiaries or affiliates) and those designated
by them which would result in any misappropriation under and as defined in such
Act, except that, while employed by the Corporation or acting as a consultant to
it, in furtherance of the business and for the benefit of the Corporation, the
Executive may provide confidential information as appropriate to attorneys,
accountants, financial institutions or other persons or entities engaged in
business with the Corporation from time to time.

            (b) Each of the parties hereto agrees that from and after the date
of this Agreement, neither shall, publicly or privately, disparage or make any
statements (written or oral) that would impugn the integrity, acumen (business
or otherwise), ethics or business practices, of the other and/or the directors,
officers, employees, shareholders 



                                      3

<PAGE>   4

and/or affiliates of the other, except, in each case, to the extent (but solely
to the extent) necessary (i) in any judicial or arbitral action to enforce the
provisions of this Agreement, or (ii) in connection with any judicial,
regulatory or administrative proceeding to the extent required by applicable
law. For purposes of this Section 4(b), parties include officers and directors
of the Corporation as of the date of this Agreement and thereafter.

      5. INDEMNIFICATION. To the fullest extent provided by applicable law, the
Corporation shall indemnify and hold the Executive harmless against any and all
expenses, liabilities and losses, including without limitation, reasonable
attorneys' fees and costs, incurred or suffered by him in connection with his
service as officer, director, employee or consultant of the Corporation. This
indemnification and hold harmless by the Corporation, to the fullest extent
provided by applicable law, covers all acts or omissions of Executive to and
including the Termination Date and, thereafter, Executive's acts and omissions
as consultant under Section 3 hereof, except in any case to the extent of the
Executive's willful misconduct.

      6. ANNOUNCEMENT. The parties agree that neither will make any public
announcement or issue any press release concerning Executive's termination from
the Corporation, except the announcement attached hereto as Exhibit A which has
been reviewed and approved by the parties, and except as otherwise required by
law or compelled by any governmental or regulatory body having jurisdiction.

      7. AGREEMENT CONFIDENTIAL. The Executive represents and agrees that,
unless required by any gaming regulatory authority, legal process, or in order
to comply with applicable legal requirements, or as is reasonably necessary in
connection with any adversarial process between the Corporation and the
Executive, he will keep the terms of this Agreement completely confidential, and
that he will not hereafter disclose any information concerning this Agreement to
anyone except his financial, legal or tax advisor(s), his accountants, and his
immediate family; provided that these individuals agree to keep said information
confidential and not disclose it to others; provided, further, the fact that the
parties have entered into a separation agreement is not deemed confidential, nor
is the disclosure that the parties have entered into a separation agreement a
breach of this Section 7. The Corporation represents and agrees that, unless
required by any gaming regulatory authority, legal process or in order to comply
with applicable legal requirements, or as is reasonably necessary in connection
with any adversarial process between the Corporation and the Executive, it will
keep the terms of this Agreement completely confidential, and that it will not
hereafter disclose any information concerning this Agreement to anyone except
its financial, legal or tax advisor(s), its accountants, its directors, and
those employees of the Corporation who have a need to know about its terms;
provided that these individuals agree to keep said information confidential and
not 


                                       4
<PAGE>   5

disclose it to others and the fact that the parties have entered into a
separation agreement is not deemed confidential, nor is the disclosure that the
parties have entered into a separation agreement a breach of this Section 7; and
provided further that the Executive shall have the opportunity to review any
proposed public disclosure pursuant to applicable legal requirements with
respect to any of the terms of this Agreement.

      8. STANDSTILL RESTRICTIONS. For a period of one year from the Termination
Date (Restricted Period), except as specifically requested in writing by the
Corporation, the Executive, singly or with any other person or directly or
indirectly, shall not propose, enter into, or agree to enter into, or encourage
any other person to propose, enter into, or agree to enter into (i) any form of
business combination, acquisition or other transaction relating to the
Corporation or (ii) any form of restructuring, recapitalization or similar
transaction with respect to the Corporation. Furthermore, during the Restricted
Period, except as specifically requested in writing by the Corporation, the
Executive shall not, singly or with any other person or directly or indirectly,
(1) acquire, or offer, propose or agree to acquire, by tender offer, purchase or
otherwise, any voting securities of the Corporation except through the exercise
of stock options or incentive warrants held or acquired during his employment,
(2) make, or in any way participate in, any solicitation of proxies or written
consents with respect to voting securities of the Corporation (it being
understood that the mere execution of a proxy or written shareholder consent
relating to the shares owned by the Executive shall not be treated as
constituting participation in such a solicitation), (3) become a participant in
any election contest with respect to the Corporation, (4) seek to influence any
person with respect to the voting or disposition of any voting securities of the
Corporation, (5) demand a copy of the Corporation's list of stockholders or its
other books and records, (6) participate in or encourage the formation of any
partnership, syndicate or other group that owns or seeks or offers to acquire
beneficial ownership of any voting securities of the Corporation or that seeks
to affect control of the Corporation or for the purpose of circumventing any
provision of this Agreement, (7) propose or support any director or slate of
directors for nomination, appointment or election to the Board of Directors of
the Corporation (it being understood that the mere execution of a proxy or
written shareholder consent relating to the shares owned by the Executive shall
not be treated as constituting such support), or (8) otherwise act to seek or to
offer to control or influence, in any manner, the management, Board of Directors
or policies of the Corporation. Furthermore, during the Restricted Period, the
Executive shall not directly or indirectly (i) solicit for employment any of the
current directors, officers or managers of the Corporation or (ii) induce any
such directors, officers or managers to terminate his or her employment with the
Corporation, except that immediately preceding clauses (i) and (ii) do not apply
to Executive's secretary or to the Senior Vice President/General Counsel of the
Corporation.



                                       5
<PAGE>   6

      9.    RELEASES.

            (a) In consideration of the payments and benefits to the Executive
under this Agreement and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by the Executive, the Executive
knowingly, voluntarily and unconditionally hereby forever waives, releases and
discharges, and covenants never to sue on, any and all claims, liabilities,
causes of actions, judgments, orders, assessments, penalties, fines, expenses
and costs (including without limitation attorneys' fees) and/or suits of any
kind arising out of any actions, events or circumstances before the date of
execution of this Agreement ("Claims") which the Executive has, ever had or may
have, or which the Executive's heirs, executors, administrators and assigns, or
any of them hereafter can, shall or may have, including, without limitation, any
Claims arising in whole or in part from the Executive's employment or the
termination of the Executive's employment with the Corporation or the manner of
said termination; provided, however, that this Section 9 shall not apply to any
of the obligations of the Corporation (including the parties under Section 4(b)
hereof), specifically provided for in this Agreement. This Agreement is intended
as a full and final settlement and compromise of each, every and all Claims of
every kind and nature, whether known or unknown, which have been or could be
asserted against the Corporation and/or any of its parent corporations,
subsidiaries, shareholders, officers, directors, agents, affiliates, and
employees, past or present, and their respective heirs, successors and assigns
(collectively, the "Releasees"), including, without limitation --

                  (1) any Claims arising out of any employment agreement or
      other contract (including, without limitation, the Employment Agreement),
      side-letter, resolution, promise or understanding of any kind, whether
      written or oral or express or implied; and

                  (2) any Claims arising under any federal, state, or local
      civil rights, human rights, anti-discrimination, labor, employment,
      contract or tort law, rule, regulation, order or decision, including,
      without limitation, the Family and Medical Leave Act, the Employee
      Retirement Income Security Act of 1974, the Americans with Disabilities
      Act of 1990, 42 U.S.C. Sections 12101 et seq., and Title VII of the
      Civil Rights Act of 1964, 42 U.S.C. Sections 2000 et seq., and as
      each of these laws have been or will be amended,

except that to the extent that any governmental authority or other third party,
i.e., other than one of the Releasees, files a charge or institutes an
investigation, lawsuit or any proceeding against the Executive based on any
event, occurrence or omission during the period of the Executive's employment or
consulting relationship with the Corporation, in 



                                       6
<PAGE>   7

which case the Executive will be permitted to implead or bring a court action
against the Corporation and/or any of the Releasees for indemnification as
provided under this Agreement, to the extent provided by applicable law.

            (b) In consideration of the obligations of the Executive under this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Corporation, the Corporation
knowingly, voluntarily and unconditionally hereby forever waives, releases and
discharges, and covenants never to sue on, any and all Claims which the
Corporation has, ever had or may have, including, without limitation, any Claims
arising in whole or in part from the Executive's employment or the termination
of the Executive's employment with the Corporation or the manner of said
termination; provided, however, that this Section 9 shall not apply to any of
the obligations of the Executive specifically provided for in this Agreement.
This Agreement is intended as a full and final settlement and compromise of
each, every and all Claims of every kind and nature, whether known or unknown,
which have been or could be asserted against the Executive and his respective
heirs, successors and assigns.

            (c) Notwithstanding anything to the contrary in this Section 9, the
Executive does not release any claim he may have under any employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended, in
which he was a participant during his employment with the Corporation for the
payment of a benefit thereunder to which he would be entitled upon his
termination of employment on the Termination Date in accordance with the terms
of such plan.

            (d) The Executive understands that this Agreement affects
significant rights and represents and agrees that he has carefully read and
fully understands all of the provisions of this Agreement, that he is
voluntarily entering into this Agreement, and that he has been advised to
consult with and has in fact consulted with legal counsel before entering into
this Agreement.

            (e) This Agreement does not constitute any admission of wrongdoing,
or evidence thereof, on the part of any of the parties hereto or the Releasees.
Except as required by court order, any gaming regulatory authority, or to
enforce the terms of this Agreement, this Agreement may not be used in any court
or administrative proceeding.

      10. LEGAL FEES. The Executive shall be reimbursed for all reasonable legal
fees incurred by the Executive in connection with his representation relating
hereto and the review and preparation hereof, in all cases, up to and including
the date of this Agreement.



                                       7
<PAGE>   8

      11. SCOPE OF AGREEMENT; ENFORCEABILITY. This Agreement constitutes the
entire understanding and agreement between the Corporation and the Executive
with regard to all matters herein and supersedes all prior oral and written
agreements and understandings of the parties with respect to such matters,
whether express or implied, including the Employment Agreement. This Agreement
shall inure to the benefit of, be binding upon and be enforceable by the
Executive's heirs, beneficiaries and/or legal representatives. This Agreement
shall inure to the benefit of, be binding upon and be enforceable by the
Corporation and its respective successors and assigns. If any term or
provision of this Agreement, or the application thereof to any person or
circumstances, will to any extent be invalid or unenforceable, the remainder of
this Agreement, or the application of such terms to persons or circumstances
other than those as to which it is invalid or unenforceable, will not be
affected thereby, and each term of this Agreement will be valid and enforceable
to the fullest extent permitted by law.

      12. MATERIAL INDUCEMENTS.

            (a) The provisions of Sections 4(a), 4(b), 6, 7 and 8 above are
material inducements to the Corporation entering into and performing this
Agreement. The Executive acknowledges and agrees that the Corporation will have
no adequate remedy at law, and would be irreparably harmed, if the Executive
breaches or threatens to breach any of the provisions of Sections 4(a), 4(b), 6,
7 and/or 8 of this Agreement. The Executive further agrees that the Corporation
shall be entitled to injunctive relief to prevent any breach or threatened
breach of Sections 4(a), 4(b), 6, 7 and/or 8 of this Agreement, and to specific
performance of each of the terms of such sections in addition to any other legal
or equitable remedies that the Corporation may have. The Executive also agrees
that he shall not, in any equity proceeding relating to the enforcement of the
terms of Sections 4(a), 4(b), 6, 7 and/or 8 of this Agreement, raise the defense
that the Corporation has an adequate remedy at law.

            (b) The provisions of Sections 4(b) and 6 above are material
inducements to the Executive entering into and performing this Agreement. The
Corporation acknowledges and agrees that the Executive will have no adequate
remedy at law, and would be irreparably harmed, if the Corporation breaches or
threatens to breach any of the provisions of Sections 4(b) or 6 of this
Agreement. The Corporation further agrees that the Executive shall be entitled
to injunctive relief to prevent any breach or threatened breach of Sections 4(b)
or 6 of this Agreement, and to specific performance of each of the terms of such
sections in addition to any other legal or equitable remedies that the Executive
may have. The Corporation also agrees that it shall not, in any equity
proceeding relating to the enforcement of the terms of Sections 4(b) or 6 of
this Agreement, raise the defense that the Executive has an adequate remedy at
law.



                                       8
<PAGE>   9

            (c) The parties acknowledge and agree that the provisions of
Paragraph 13(b) of the Employment Agreement, entitled Material Inducements, are
of no further force and effect and are replaced by this Section 12.

      13. AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or
modified otherwise than by a written agreement executed by the parties to this
Agreement or their respective successors and legal representatives. No waiver by
any party to this Agreement of any breach of any term, provision or condition of
this Agreement by the other party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same time, or any prior or subsequent
time.

      14. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given when received by hand-delivery to the other
party, by facsimile transmission, by overnight courier, or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:

            If to the Executive:    Mr. Steve Greathouse
                                    7140 Darby Avenue
                                    Las Vegas, Nevada 89117

            with a copy to:         Andrew S. Brignone, Esq.
                                    Morris, Brignone & Pickering
                                    300 S. Fourth Street, #1203
                                    Las Vegas, Nevada  89101

            If to the Corporation:  Alliance Gaming Corporation
                                    6601 South Bermuda Road
                                    Las Vegas, Nevada 89119
                                    Attn: General Counsel

            with a copy to:         Michael L. Hirschfeld, Esq.
                                    Milbank, Tweed, Hadley & McCloy
                                    1 Chase Manhattan Plaza
                                    New York, New York 10005

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.



                                       9
<PAGE>   10

      15. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement (other than one seeking injunctive or other equitable relief
under Sections 4(a), 4(b), 6, 7 and/or 8 of this Agreement) shall be settled
exclusively by arbitration, conducted in Las Vegas, Nevada in accordance with
the rules of the American Arbitration Association. The prevailing party is also
entitled to an award of reasonable attorneys fees and costs. Judgment may be
entered thereon. As to disputes or controversies for which injunctive or other
equitable relief is sought under Sections 4(a), 4(b), 6, 7 or 8 of this
Agreement, the action shall be commenced and conducted exclusively in a court of
competent jurisdiction in Las Vegas, Nevada.

      16. NEUTRAL CONSTRUCTION. Each party to this Agreement and their attorneys
have reviewed and participated in the drafting of this Agreement, and,
accordingly, the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting parties will not be employed or used in
any interpretation of this Agreement.

      17. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Nevada without reference to its choice
of law provisions and shall be binding upon the parties and their respective
heirs, executors, successors and assigns.

      18. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.

      IN WITNESS WHEREOF, the Corporation and the Executive have caused this
Agreement to be executed as of the date first above written.

                              ALLIANCE GAMING CORPORATION

                              By:   
                                    --------------------------------------------
                                    Name:  
                                           -------------------------------------
                                    Title:
                                           -------------------------------------

                              --------------------------------------------------
                              STEVE GREATHOUSE


                                       10