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                                                                    Exhibit 10.1

                               September 17, 1997

                                                                           FINAL

Mr. Alan Ruud
RUUD LIGHTING, INC.
9201 Washington Avenue
Racine, WI 53406

Dear Mr. Ruud:

     This binding letter of intent outlines the basic economic terms of the
agreement by Advanced Lighting Technologies, Inc. ("ADLT") to acquire all of the
outstanding capital stock of Ruud Lighting, Inc. ("RLI").

     Subject to the preparation and execution of final, definitive agreements
and ancillary documents satisfactory in form and substance to the parties and
their counsel, we understand the principal terms of our agreement to include the
following:

     1. STRUCTURE AND PURCHASE PRICE. At the Closing (as defined below), ADLT
        will acquire all of the outstanding shares of RLI capital stock, by
        merger or purchase, for compensation consisting of (a) $35.5 million in
        cash and (b) three million shares of ADLT common stock (collectively,
        the "Purchase Price"). The transaction will be fully taxable at closing.
        Notwithstanding anything contained herein to the contrary, if the per
        share Market Value of the ADLT common stock as of Closing (calculated
        using the average of the closing prices on the Nasdaq National Market as
        of the ten consecutive trading days immediately prior to Closing) equals
        less than $23 per share, ADLT, RLI or the RLI Shareholders holding a
        majority of the outstanding RLI common stock may elect not to proceed
        with the sale described herein.


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     2. SHAREHOLDERS' EQUITY. At Closing, shareholders' equity in RLI, as
        reported by the statement of net worth required below, shall equal
        $15,563,592. The cash portion of the purchase price shall increase by an
        amount equaling the sum, if any, by which shareholders' equity in RLI at
        Closing exceeded $15,563,592; the cash portion of the purchase price
        shall decrease by an amount equaling the sum, if any, by which
        shareholders' equity in RLI at Closing equaled less than $15,563,592. By
        February 15, 1998, RLI shall deliver to ADLT audited financial
        statements as of November 30, 1997 and a statement of net worth as of
        Closing, both prepared in accordance with GAAP except as provided in
        section 19 below. By February 28, 1998, the parties shall pay to each
        other the amount, if any, necessary to effect the cash Purchase Price
        adjustment required by the second sentence of this section 2.

     3. PRE-CLOSING TRANSACTIONS. RLI may make tax-free distributions to the RLI
        shareholders (the "RLI Shareholders") from its accumulated adjustment
        account existing as of the date hereof. RLI may also distribute to the
        RLI Shareholders RLI's earnings during calendar year and fiscal year
        1997 (the "Earnings Distribution"). Such distributions shall not exceed
        the total of (a) an amount which, together with all distributions made
        from December 1, 1996 to the date hereof, does not exceed the net income
        of RLI for the twelve months ended November 30, 1997 (as determined in
        accordance with generally accepted accounting principles ("GAAP")
        consistently applied) and (b) $1.5 million (which is the amount of the
        total of the anticipated rebate adjustment, the anticipated LIFO
        adjustment and the tax on the anticipated RLI income for December 1997).
        The RLI Shareholders shall be responsible for the payment of all taxes
        payable on such earnings. Except as recited in section 2 above, the
        Purchase Price shall not be decreased or otherwise affected by the
        payment of the Earnings Distribution.

     4. CLOSING. Closing of the purchase described herein shall occur on January
        2, 1998 (the "Closing"), with effect as of January 1, 1998, or, if
        later, the earliest practicable date following satisfaction of all
        conditions to closing; provided however, Closing shall occur no later
        than January 20, 1998.


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     5. MANAGEMENT. Upon Closing, RLI will become a direct or indirect
        subsidiary of ADLT. After the Closing and until the ADLT annual
        shareholders' meeting in 2000, Alan Ruud ("Mr. Ruud") shall serve as
        Vice Chairman of ADLT and CEO of RLI and shall be appointed to serve on
        the board of directors of ADLT. He will serve on the executive committee
        of the ADLT's board. Mr. Ruud shall be entitled to nominate an
        additional director of ADLT to serve a term expiring in 1999, such
        nominee shall not be a past or present employee of RLI or ADLT and such
        appointment to the board shall be subject to the approval of the
        existing board of directors of ADLT, which approval the board shall not
        unreasonably withhold.

     6. EMPLOYMENT AGREEMENTS AND AGREEMENTS NOT TO COMPETE. Mr. Ruud, Ted
        Sokoly and Don Wandler will each enter into three-year employment
        agreements with ADLT, reciting the principal terms of his employment
        with ADLT and prohibiting him from competing with ADLT for three years
        following the termination of his employment by ADLT. Susan Ruud,
        Christopher Ruud and Jason Johnson shall each enter into employment
        agreements with ADLT for a minimum term of one year on terms reasonably
        acceptable to the parties.

     7. CONDUCT OF RLI'S BUSINESS. Prior to Closing, RLI shall operate its
        business in the ordinary course, and, without the prior consent of ADLT,
        shall not:

        (a) Except as recited in section 3 hereof, pay any dividends or make any
            distributions to shareholders, except RLI shall be permitted to
            distribute to its shareholders real property which is not used in
            RLI's business, and which is not subject to current development
            plans for RLI's business or it may sell any such real property and
            distribute to its shareholders the net proceeds of such sale;

        (b) Take any action which would cause a material breach of any
            representation or warranty of RLI or its shareholders in the
            definitive agreement;

        (c) Enter into any material agreement with any shareholder of any
            affiliate of RLI or any shareholder of RLI; or


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        (d) Make or commit to any individual capital expenditure in excess of
            $200,000 or enter into any contract outside the ordinary course of
            business.

     8. CONDUCT OF ADLT'S BUSINESS. Prior to Closing, ADLT and its affiliates
        shall operate their businesses in the ordinary course and, without the
        prior consent of RLI, shall not:

        (a) issue any shares of capital stock in ADLT or grant any options to
            purchase such capital stock other than as already existing and
            approved in ADLT's stock option plans (including the 1997 Billion
            Dollar Incentive Award Plan approved by the board for the submission
            to shareholders at the annual meeting);

        (b) pay any dividends or make any distributions to shareholders, other
            than dividends or distributions from a subsidiary to a parent
            corporation;

        (c) sell, transfer or convey, or enter an agreement to sell, transfer or
            convey, all or a material portion of the assets of ADLT or of any
            affiliate except in the ordinary course of business; provided,
            however, that assets relating to fiber optic lighting systems may be
            transferred to ADLT's proposed joint venture with Rohm and Haas
            Company;

        (d) take any action which would cause a material breach of any
            representation or warranty of ADLT in the definitive agreement; or

        (e) enter into any material agreement with any shareholder of any
            affiliate of ADLT or any shareholder of ADLT.

     9. DUE DILIGENCE.

        (a) RLI Obligations. RLI shall grant access to ADLT, its accountants,
            its counsel and its advisors to all of the facilities and books and
            records of RLI in order to conduct a due


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            diligence examination of RLI. Such access shall be subject in all
            respects to our letter dated July 17, 1997 regarding
            confidentiality. In addition, the due diligence process shall be
            conducted to the extent possible during regular business hours and
            with minimal disruption of the business of RLI;

        (b) ADLT Obligations. ADLT shall grant access to RLI, its accountants,
            its counsel and its advisers to all of the facilities and books and
            records of ADLT in order to conduct a due diligence examination of
            ADLT. Such access shall be subject to a confidentiality letter
            similar in all respects to the existing letter dated July 17, 1997
            between ADLT and RLI with such changes as may be necessary to
            reflect the confidentiality obligations relating to a public
            company. In addition, the due diligence process shall be conducted
            to the extent possible during regular business hours and with
            minimum disruption of the business of ADLT.

    10. ENVIRONMENTAL ISSUES. ADLT will conduct a Phase I environmental audit
        of the real property of RLI using a mutually-acceptable environmental
        consultant. RLI and ADLT shall each receive a copy of the preliminary
        report for review and comment. If the results of the final agreed upon
        audit recommend further on-site testing, ADLT may request that such
        tests be performed. RLI may, in its sole discretion, permit or prohibit
        such further tests; provided, however that if RLI prohibits further
        tests, ADLT may terminate this letter of intent and the transaction
        contemplated hereby. ADLT shall bear the costs of all such testing.

    11. REPRESENTATIONS AND WARRANTIES. Each party shall be required to make
        representations and warranties regarding the conduct of its business
        prior to the Closing. These representations and warranties will include,
        without limiting the possible warranties which may be required,
        representations as to (the following shall apply equal to both RLI and
        ADLT unless specifically stated to the contrary below):

        (a) The organization and good standing of the entity and its
            subsidiaries;


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        (b) Authority of the party to enter into the transaction and to conduct
            its business;

        (c) The fact that the shareholders entering the definitive agreement are
            the only shareholders of RLI;

        (d) Compliance of RLI's fiscal 1996 and 1997 audited financial
            statements with GAAP (except as specifically stated herein), and
            shareholders' equity at November 30, 1996 of not less that
            $15,563,592;

        (e) No distributions by RLI after November 30, 1996 in excess of amounts
            described in section 3 above;

        (f) Inventories and receivables (including maintenance of adequate
            inventory and receivable of quality and quantity at not less than
            historical levels) and trade payables (including amounts not in
            excess of historical levels);

        (g) Matters necessary for compliance with securities law, including
            registration and financial reporting requirements;

        (h) Absence of material litigation;

        (i) Transactions with related parties;

        (j) Compliance with laws, including environmental and tax laws;

        (k) Material contracts;

        (l) Intellectual property:

        (m) Employee benefits, and

        (n) Absence of material adverse events.

    12. DEFINITIVE PURCHASE AGREEMENT. Following execution of this letter of
        intent, RLI and ADLT will promptly commence, and use their best efforts
        to complete, the negotiation, preparation and execution


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        of a definitive purchase agreement and ancillary documents on or prior
        to October 31, 1997, and shall diligently commence preparation of all
        ancillary documents and preparation of materials necessary to obtain all
        consents required to complete the transaction.

    13. CONDITIONS TO CLOSING. In addition to the provisions recited in this
        letter of intent, consummation of the acquisition will be subject to
        satisfaction of the following conditions on or before Closing or the
        date indicated below, if earlier:

        (a) Preparation and execution of a definitive agreement and ancillary
            documents reasonably acceptable to the parties;

        (b) Evidence reasonably satisfactory to the party which would be harmed
            thereby that there are no material breaches of any representations
            and warranties of RLI, the RLI shareholders or ADLT, as applicable;

        (c) Evidence reasonably satisfactory to ADLT of completion by RLI and
            its shareholders in all material respects of all covenants required
            to be completed by them prior to the Closing;

        (d) Evidence reasonably satisfactory to ADLT of RLI's receipt of all
            material consents and approvals to the transaction required under
            any of RLI's material contracts;

        (e) Within 45 days of the execution of this letter, ADLT shall have (i)
            obtained approval by its board of directors of the transaction
            described and (ii) received and provided a copy to RLI of any
            required consent of ADLT's existing lender (or in the event ADLT
            refinances its existing loan facilities, or obtains a new loan to
            finance this transaction, consent by ADLT's principal lender or
            lenders) which is required to consummate the transaction;

        (f) Receipt of all necessary governmental approvals or consents,
            including termination of the applicable waiting period under the
            Hart-Scott-Rodino Antitrust Improvements Act of 1976;


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        (g) No injunction, order or decree of any county or governmental
            authority shall have been issued, the effect of which is to prevent
            or materially condition the consummation of the transactions
            contemplated hereby;

        (h) Evidence reasonably satisfactory to RLI of receipt by the RLI
            Shareholders of the Purchase Price;

        (i) Evidence reasonably satisfactory to RLI of completion by ADLT in all
            material respects of all covenants required to be completed by it
            prior to the Closing;

        (j) Evidence reasonably satisfactory to RLI that no material adverse
            change has occurred in the business operations, financial condition
            or prospects of ADLT.

        (k) The results of the "due diligence" investigations performed by RLI
            and ADLT shall have reasonably satisfied such parties.

        (l) Reasonable satisfaction with the results of the "due diligence"
            investigation by each party, provided that, if a party shall have
            failed to provide access and materials as reasonably requested to
            allow completion of such investigation by October 24, 1997, the
            other party may notify the defaulting party of the failure to
            satisfy this condition and, unless satisfied on or before October
            31, 1997, may elect not to close hereunder.

    14. EMPLOYEE BENEFITS. Subject to the ADLT due diligence review, ADLT will
        maintain in force RLI employee benefit plans for a minimum of one year,
        unless ADLT can provide improved benefit plans acceptable to RLI
        management. ADLT will pursue a consolidation of all domestic
        subsidiaries' benefits plans. ADLT intends that this consolidation will
        include RLI as soon as practicable. ADLT believes this consolidated plan
        will provide improved benefits to all ADLT companies, including RLI.

    15. STOCK OPTION PLAN. ADLT shall implement a stock option plan pursuant to
        which current RLI employees and directors shall receive compensatory,
        market value option grants at the time of Closing to


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        purchase approximately 800,000 shares of ADLT common stock. Such options
        will be granted in accordance with the direction of the CEO of RLI and
        be subject to forfeiture consistent with the terms and conditions
        consistent with ADLT's existing stock option plans.

    16. RESTRICTIONS ON ADLT COMMON STOCK TRANSFER. The common stock portion of
        the purchase price will constitute a private sale and will not be
        registered pursuant to the Securities Act of 1933. Each shareholder will
        be required to agree to fulfill all steps reasonably necessary to
        preserve the applicable exemptions from registration. In addition, each
        shareholder will agree not to transfer any shares issued to such
        shareholder as a portion of the Purchase Price for a period of two years
        following the Closing. Notwithstanding the foregoing, the RLI
        Shareholders shall be permitted to make charitable gifts and transfers
        to other permitted transferees (so long as such transfers are in
        compliance with applicable securities laws) after the Closing so long as
        such transferees agree to be bound by the two-year transfer restriction.
        Upon the expiration of two years following Closing (the "restricted
        period"), such shareholders and transferees may transfer such common
        stock in accordance with securities laws. Each common stock certificate
        issued will bear a legend reciting the restrictions on transfer. Upon
        expiration of the restricted period, ADLT shall remove any legend
        reciting any restriction which no longer applies.

    17. REGISTRATION RIGHTS. Any RLI Shareholder, and any transferee of any RLI
        Shareholder (the "Ruud block"), will be entitled to "piggyback"
        registration rights with respect to ADLT common stock received as a
        result of the transaction on all registrations of ADLT shares after the
        Restricted Period. Such "piggyback rights" will entitle the Ruud block
        to sell shares in registered public offerings which include sales by
        ADLT shareholders, participating on a pro rata basis with (a) the other
        affiliated selling shareholders and (b) such other shareholders which
        may then be entitled to participate in such offering. ADLT shall bear
        all expenses (other than underwriters' commissions and discounts)
        arising in connection with such registration.


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    18. ADLT LOANS TO RLI SHAREHOLDERS. ADLT will, in April 1999, make
        nonrecourse loans available to the RLI Shareholders up to an amount
        equal to the excess of (a) the aggregate amount of taxes payable by the
        RLI Shareholders on their 1998 taxable income which could have been
        deferred had the exchange of ADLT stock for RLI stock been structured as
        tax free over (b) $5 million. Such loans shall be secured solely by a
        pledge of a portion of the ADLT stock acquired by such RLI Shareholder
        and shall bear interest at the annual rate of 7%. On or before Closing,
        the parties shall calculate the amount of the tax which will be payable
        by each RLI Shareholder to determine the amount of the loan
        corresponding to each RLI Shareholder.

    19. CLOSING STATEMENT OF NET WORTH. RLI shall, with the assistance of its
        accountants, prepare a statement of closing net worth of RLI (the
        "Statement of Net Worth") prepared as of December 31, 1997. The
        Statement of Net Worth shall be prepared as recited in section 3 above
        (including exceptions permitting inventory stated at its FIFO basis and
        accruing unreceived rebates relating to 1997).

    20. PROCEDURES WITH RESPECT TO TAX ISSUES.

        (a) APPRAISALS. In connection with the use of any discount to value the
            ADLT shares transferred to the RLI Shareholders (whether for book
            accounting or tax purposes), ADLT and RLI shall obtain an appraiser
            reasonably satisfactory to each of the parties to appraise the value
            of the ADLT stock transferred and the reasonableness of the
            discount. Such appraisal shall value the shares for purposes of the
            RLI Shareholder's tax liability and for purposes of valuing the
            goodwill acquired in the transaction. ADLT shall bear all costs and
            expense arising in connection with such appraisal.

            ADLT and RLI shall obtain an appraisal, by an appraiser reasonably
            satisfactory to each, for the value of the assets of RLI, which
            value the parties shall use in the calculation of the tax impact
            upon them (in making an Internal Revenue Code, section 338(h)(10)
            election, etc.). ADLT shall bear all costs and expenses arising in
            connection with such appraisal.


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        (b) Indemnification. ADLT agrees to indemnify RLI and the RLI
            Shareholders from any and all costs, losses and expenses arising in
            any attempt by the Internal Revenue Service or Wisconsin Department
            of Revenue or other taxing authority to tax the proceeds of the
            transaction in an amount greater than the amount of tax calculated
            by ADLT in its presentations to RLI and the RLI Shareholders. Such
            costs and expenses shall include, without limitation, reasonable
            attorneys' fees incurred in defending against a claim by the
            Internal Revenue Service, Department of Revenue or other taxing
            authority (whether or not successful), any losses, penalties or
            interest (but not additional taxes) payable in the event of an
            adverse determination, and any and all other costs and expenses.

    21. LIFE INSURANCE. Prior to January 1, 1998, Mr. Ruud may purchase, and the
        parties agree to permit Mr. Ruud to purchase, at its cash surrender
        value, the $2,000,000 life insurance policy presently owned by RLI on
        the life of Mr. Ruud.

    22. EXPENSES. ADLT shall be responsible for all of its costs and expenses in
        connection with this letter, the agreement and the transaction. RLI
        shall be responsible for all of the costs and expenses of RLI and the
        RLI Shareholders in connection with this letter, the agreement and the
        transaction.

    23  PUBLICITY. RLI recognizes that ADLT is a public company and is required
        by law to announce major corporate developments. ADLT and RLI will issue
        a joint press release announcing the execution of this letter of intent
        (which release will occur no sooner than September 18, 1997) and will
        make such other disclosures as the parties mutually agree subject in all
        cases to ADLT's public disclosure obligations as ADLT and its counsel
        reasonably determine.

    24  EXCLUSIVE NEGOTIATIONS. Until the later of execution of the definitive
        agreement or December 31, 1997, RLI shall not, nor shall it give
        authorization or permission to any of its shareholders to institute,
        continue or otherwise entertain or maintain negotiations or


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        discussions with any other person, firm or corporation with respect to
        the sale of all, or substantially all, the capital stock, business or
        assets of RLI. RLI and the RLI Shareholders understand and agree that
        the definitive agreement will contain a provision substantially similar
        to this paragraph prohibiting negotiations and discussions prior to
        Closing or the termination of the definitive agreement.

     This letter evidences our mutual and respective understanding to negotiate
in good faith and proceed, as quickly as possible, with the preparation of
definitive agreements and ancillary documents within the conceptual frame work
described herein.

     If this letter adequately reflects the intention of RLI and its primary
shareholders, please sign the enclosed copy where indicated below.

     ADLT looks forward to working with RLI and its management to continue to
build the leading innovator in the HID lighting business!

                                        Very truly yours,

                                        ADVANCED LIGHTING TECHNOLOGIES, INC.

                                        By /s/ Wayne R. Hellman
                                           -------------------------------------
                                           Wayne R. Hellman
                                           President

MW2\23438

Accepted and Agreed this 17th day of
September, 1997.

     /s/        Alan Ruud
---------------------------------------
Alan Ruud as President of Ruud Lighting, Inc.
     and as its majority shareholder


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