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                                                                    EXHIBIT 10.5
CONFIDENTIAL                                                      EXECUTION COPY
                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT entered into and effective as of January 2,
1998, among RUUD LIGHTING, INC., a Wisconsin corporation ("RLI" or "EMPLOYER"),
ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio corporation ("ADLT"), and ALAN J.
RUUD ("EMPLOYEE");

                                   WITNESSETH:

         WHEREAS, RLI and Employee desire to terminate any and all prior
agreements, whether oral or written, between the parties and between Employee
and ADLT relating to Employee's employment; and

         WHEREAS, RLI and Employee desire to enter into an Employment Agreement
as set forth herein below to ensure RLI and ADLT of the services of Employee as
Vice Chairman of ADLT and Chief Executive Officer of RLI, and to set forth the
rights and duties of the parties hereto,

         NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:

1.       TERMINATION OF PRIOR AGREEMENTS. RLI and Employee hereby terminate any
         and all prior agreements, whether oral or written, between the parties
         or ADLT relating to Employee's employment.

2.        EMPLOYMENT.

         (a)      RLI hereby employs Employee, and Employee hereby accepts
                  employment, upon the terms and conditions hereinafter set
                  forth.

         (b)      During the term of this Employment Agreement, (for purposes
                  hereof, all references to the term of this Employment
                  Agreement shall be deemed to include all renewals or
                  extensions hereof, if any), Employee shall devote his full
                  business time to his employment and shall perform diligently
                  such duties as are, or may be, required by the Board of
                  Directors of RLI and the Board of Directors of ADLT or their
                  designee, which duties shall be within the bounds of
                  reasonableness and acceptable business standards and ethics.

         (c)      During the term of this Employment Agreement, Employee shall
                  not, without the prior written consent of RLI, which shall not
                  be unreasonably withheld, directly or indirectly, render
                  services of a business, professional or commercial nature to
                  any other person or firm, whether for compensation or
                  otherwise, other than in the performance of duties naturally
                  inherent in the businesses of RLI or any subsidiary or
                  affiliate of RLI, including but not limited to ADLT; provided,
                  however, that Employee may continue (i) to serve on the board
                  of directors of companies to the extent such service and
                  service on the ADLT Board of Directors is permitted by law,
                  and (ii) to render services to and participate in
                  philanthropic and charitable causes, in each case, in a manner
                  and to the extent consistent with his past practice.


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3.   TERM AND POSITION.

         (a)      Subject to the termination provisions contained herein, the
                  term of this Employment Agreement shall commence as of January
                  1, 1998 and shall continue for a term of three years from such
                  date, subject, however, to the provisions of Section 6.

         (b)      Employee shall serve as Vice Chairman of ADLT and as Chief
                  Executive Officer of RLI, and in such offices or positions
                  with ADLT and RLI as shall be agreed upon by Employee and the
                  Board of Directors of RLI or the Board of Directors of ADLT,
                  as the case may be, without, however, any change in Employee's
                  compensation (but such offices or positions shall be
                  consistent with the office and position stated herein).

         (c)      Employee shall promptly be appointed to a term on the ADLT
                  Board of Directors expiring at the ADLT annual meeting in the
                  year 2000 and be appointed Vice Chairman of ADLT and as a
                  member of the Executive Committee of the ADLT Board of
                  Directors.

         (d)      The principal business office of Employee shall be in Racine,
                  Wisconsin; provided, however, Employee maintains a residence
                  and a business office in Florida, from which the Employee may
                  perform his duties under this Agreement. Employee shall not be
                  required to relocate without Employee's consent. Employee's
                  travel expenses for travel to and from the Wisconsin and
                  Florida offices shall be paid by RLI.

4.   COMPENSATION.

         (a)      Subject to the provisions of this Employment Agreement, for
                  all services which Employee may render to RLI or ADLT during
                  the term of this Employment Agreement, Employee shall receive
                  a salary at the rate of One Hundred Eighty Five Thousand
                  Dollars ($185,000) per annum for the first year of this
                  Agreement, which shall be payable in equal, consecutive
                  biweekly installments.

         (b)      Provided that Employee satisfactorily performs his services
                  under this Employment Agreement, Employee shall be entitled to
                  salary increases from time to time as determined by the
                  Compensation Committee of ADLT.

         (c)      Provided that Employee has satisfactorily performed his
                  services under this Employment Agreement, Employee shall be
                  eligible for bonuses from time to time as determined by the
                  Compensation Committee of ADLT.

5.   OTHER BENEFITS.

         During the term of this Employment Agreement, Employee shall be
entitled to such vacation privileges, life insurance, medical and
hospitalization benefits, and such other benefits as are typically provided to
other executive officers of ADLT and its subsidiaries in comparable positions;
provided, however, that such benefits shall be not less valuable to Employee
than those benefits provided by Employer in the recent past, provided that, on
or after January 1, 1999, any benefit reduction to executive officers of ADLT
may be applied to Employee's non-vacation benefits. 

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6.   TERMINATION AND FURTHER COMPENSATION.

         (a)      The employment of Employee under this Employment Agreement,
                  for the term thereof, may be terminated by the Board of
                  Directors of RLI or ADLT for cause at any time. For purposes
                  hereof, the term "cause" shall mean:

                  (i)      Employee's fraud, dishonesty, willful misconduct or
                           gross negligence in the performance of his duties
                           hereunder; or

                  (ii)     Employee's material breach of this Agreement, in
                           whole or in part.

                  Any termination by reason of the foregoing shall not be in
                  limitation of any other right or remedy RLI may have under
                  this Employment Agreement or otherwise.

         (b)      In the event of (i) termination of the Employment Agreement
                  for any of the reasons set forth in Subparagraph (a) of this
                  Section 6, or (ii) if Employee shall voluntarily terminate his
                  employment hereunder prior to the end of the term of this
                  Employment Agreement, then in either event Employee shall be
                  entitled to no further salary, bonus or other benefits under
                  this Employment Agreement, except as to that portion of any
                  unpaid salary and other benefits accrued and earned by him
                  hereunder up to and including the effective date of such
                  termination. In the event the Employee voluntarily terminates
                  this Agreement, Employee shall provide 30 days' prior written
                  notice to RLI of such voluntary termination.

         (c)      In the event that RLI terminates Employee's employment without
                  "cause" (as defined herein above) or Employee terminates
                  employment with "good reason" (as defined below) prior to the
                  end of the term of this Employment Agreement, then Employee
                  shall be entitled to all salary and medical benefits for the
                  remainder of the term of this Employment Agreement all upon
                  the terms and as set forth herein. At the conclusion of the
                  term of this Employment Agreement, all salary, medical and
                  other benefits as set forth herein shall cease. Employee shall
                  have no other rights and remedies except as set forth in this
                  Section 6. For purposes hereof, the term "good reason" shall
                  mean (i) without the express written consent of Employee, a
                  material reduction of Employee's duties, authority,
                  compensation, benefits or responsibilities or (ii) a material
                  breach of this Agreement by RLI or ADLT.

         (d)      In the event of Employee's death or permanent disability (as
                  defined herein below) occurring during the term of this
                  Employment Agreement, this Employment Agreement shall be
                  deemed terminated for cause and Employee or his estate, as the
                  case may be, shall be entitled to no further salary or other
                  compensation provided for herein except as to that portion of
                  any unpaid salary accrued or earned by Employee hereunder up
                  to and including the date of death or permanent disability,
                  and any benefits under any insurance policies or other plans.

         (e)      "Permanent disability" means the inability of Employee to
                  perform satisfactorily his usual or customary occupation for a
                  period of 120 days in the aggregate out of 150 consecutive
                  days as a result of a physical or mental illness or other
                  disability which in the written opinion of a physician of
                  recognized ability and reputation, is likely to continue for a
                  significant period of time.

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         (f)      In the event this Employment Agreement is terminated with
                  cause, before the end of the term, RLI may, in its sole
                  discretion, notify Employee that RLI intends to continue to
                  pay all compensation, benefits and monies due under the terms
                  of the Employment Agreement for the remainder of the term. In
                  such event, and provided RLI continues to make such payments,
                  Employee shall continue to be bound by the terms of the
                  non-competition provisions in Section 7 hereof.

7.   COVENANTS REGARDING NON-COMPETITION AND CONFIDENTIAL INFORMATION.

         (a)   Non-Competition.

                  (i)      Recognizing that Employee will have been involved as
                           an executive officer of RLI and ADLT and that RLI and
                           its affiliates, including ADLT, are engaged in the
                           supply of products and/or services in every state of
                           the United States and internationally, therefore,
                           upon termination of his employment, for any reason,
                           he agrees that he will not, for a period of three
                           years immediately following such termination, engage,
                           in the United States or in any country where RLI,
                           ADLT or any of their affiliates conducts business,
                           either directly or indirectly on behalf of himself or
                           on behalf of any employee, consultant, principal,
                           substantial shareholder or investor, partner or
                           officer of any corporation, in any business of the
                           type and character or in competition with the
                           business carried on by RLI, ADLT or their affiliates
                           (as conducted on the date Employee ceases to be
                           employed by RLI in any capacity).

                  (ii)     Employee will not, for a period of three years
                           immediately following the termination of his
                           employment, either directly or indirectly or on
                           behalf of another as an employee, agent, principal,
                           partnership or other entity, recruit, hire or
                           otherwise entice any employees of RLI, ADLT or their
                           affiliates to leave the Employer.

                  (iii)    Employee will not disclose, divulge, discuss, copy or
                           otherwise use or suffer to be used in any manner, in
                           competition with, or contrary to the interests of
                           RLI, ADLT or their affiliates, the customer lists,
                           manufacturing methods, product research or
                           engineering data or other trade secrets of RLI, ADLT
                           or any of their affiliates, it being acknowledged by
                           Employee that all such information regarding the
                           business of RLI, ADLT or their affiliates developed,
                           compiled or obtained by or furnished to Employee
                           while Employee shall have been employed by or
                           associated with RLI, ADLT or their affiliates is
                           confidential information and RLI's, ADLT's or their
                           affiliates' exclusive property. Employee's
                           obligations under this Section 7(a)(iii) will not
                           apply to any information which (A) is known to the
                           public other than as a result of Employee's acts or
                           omissions, (B) is approved for release, in writing,
                           by the Company, (C) is disclosed to Employee by a
                           third party without restriction, or (D) Employee is
                           legally required to disclose.

         (b)      Employee expressly agrees and understands that the remedy at
                  law for any breach by him of this Section 7 will be inadequate
                  and that the damages flowing from such breach are not readily
                  susceptible to being measured in monetary terms. Accordingly,
                  it is acknowledged that upon adequate proof of Employee's
                  violation of any legally enforceable provision of 

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                  this Section 7, RLI shall be entitled to immediate injunctive
                  relief and may obtain a temporary order restraining any
                  threatened or further breach. Nothing in this Section 7 shall
                  be deemed to limit RLI's remedies at law or in equity for any
                  breach by Employee of any of the provisions of this Section 7
                  which may be pursued or availed of by RLI or any of its
                  affiliates including but not limited to ADLT.

         (c)      In the event Employee shall violate any legally enforceable
                  provision of this Section 7 as to which there is a specific
                  time period during which he is prohibited from taking certain
                  actions or from engaging in certain activities as set forth in
                  such provision then, in such event, such violation shall toll
                  the running of such time period from the date of such
                  violation until such violation shall cease.

8.   RENEWAL.

         Not later than six (6) months prior to the termination of this
Agreement, Employer shall be entitled to notify Employee whether it desires to
renew this Employment Agreement with Employee for an additional period of three
(3) years, which notice, if given, shall contain the compensation and other
benefits proposed to be paid and provided to Employee by Employer. For a period
of thirty (30) days after receipt of such notice, Employee shall have the option
to accept such offer of renewal or, in the alternative, shall be entitled to
consult with Employer with respect to different compensation and/or benefits to
be paid and provided to Employee by Employer during said renewal period of
employment. If at the end of said thirty (30) day period Employee and Employer
are unable to agree, then this Employment Agreement shall not be renewed at the
end of the term thereof, unless otherwise agreed to by the parties. In the
event, however, that Employer does not, timely notify Employee of its desire to
renew this Employment Agreement, then this Employment Agreement shall not be
renewed at the end of the term thereof, unless otherwise agreed upon by the
parties.

9.   SEVERABLE PROVISIONS.

         The provisions of this Employment Agreement are severable and if any
one or more provisions may be determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions and any partially
unenforceable provision to the extent enforceable in any jurisdiction shall,
nevertheless, be binding and enforceable.

10.   ARBITRATION.

         Any controversy or claim arising out of or relating to this Employment
Agreement, or the breach thereof, shall be settled by arbitration by a single
arbitrator in the City of Racine, State of Wisconsin, in accordance with the
Rules of the American Arbitration Association, and judgment upon the award
rendered by the Arbitrator may be entered in any court having jurisdiction
thereof. The Arbitrator shall be deemed to possess the powers to issue mandatory
orders and restraining orders in connection with such arbitration; provided,
however, that nothing in this Section 10 shall be construed so as to deny RLI
the right and power to seek and obtain injunctive relief in a court of equity
for any breach or threatened breach of Employee of any of his covenants
contained in Section 7 hereof.

11.   NOTICES.

         (a)      Each notice, request, demand or other communication ("NOTICE")
                  by either party to the other party pursuant to this Agreement
                  shall be in writing and shall be personally delivered 


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                  or sent by U.S. certified mail, return receipt requested,
                  postage prepaid, or by nationally recognized overnight
                  commercial courier, charges prepaid, or by facsimile
                  transmission (but each such Notice sent by facsimile
                  transmission shall be confirmed by sending a copy thereof to
                  the other party by U.S. mail or commercial courier as provided
                  herein no later than the following business day), addressed to
                  the address of the receiving party or to such other address as
                  such party shall have communicated to the other party in
                  accordance with this Section. Any Notice hereunder shall be
                  deemed to have been given and received on the date when
                  personally delivered, on the date of sending when sent by
                  facsimile, on the third business day following the date of
                  sending when sent by mail or on the first business day
                  following the date of sending when sent by commercial courier.

         (b)      If a Notice is to RLI, then such Notice shall be addressed to
                  Ruud Lighting, Inc., attention of the Board of Directors.

         (c)      If a Notice is to Employee, then such Notice shall be
                  addressed to Employee at his home address last known on the
                  payroll records of RLI.

12.   WAIVER.

         The failure of either party to enforce any provision or provisions of
this Employment Agreement shall not in any way be construed as a waiver of any
such provision or provisions as to any future violations thereof, nor prevent
that party thereafter from enforcing each and every other provision of this
Employment Agreement. The rights granted the parties herein are cumulative and
the waiver of any single remedy shall not constitute a waiver of such party's
right to assert all other legal remedies available to it under the
circumstances.

13.   MISCELLANEOUS.

         This Employment Agreement supersedes all prior agreements and
understandings between the parties and may not be modified or terminated orally.
No modification, termination or attempted waiver shall be valid unless in
writing and signed by the party against whom the same it is sought to be
enforced.

14.   GOVERNING LAW.

         This Employment Agreement shall be governed by and construed according
to the laws of the State of Wisconsin.


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                  IN WITNESS WHEREOF, the parties have executed this Employment
Agreement on the day and year first set forth above.

WITNESS:                                    RUUD  LIGHTING,  INC.

By:   /s/ Donald Christl                    By:   /s/ Alan J. Ruud
      ----------------------------                ------------------------------
Name:                                       Name:
      ----------------------------                ------------------------------
                                            Its:
                                                  ------------------------------

WITNESS:                                    ADVANCED LIGHTING TECHNOLOGIES, INC.

By:   /s/ James S. Hogg                     By:   /s/ Wayne R. Hellman
      ----------------------------                ------------------------------
Name: James S. Hogg                         Name: Wayne R. Hellman
      ----------------------------                ------------------------------
                                            Its:  CEO
                                                  ------------------------------

WITNESS:

By:   /s/ Donald Christl                          /s/ Alan J. Ruud
      ----------------------------                ------------------------------
Name:                                             ALAN J. RUUD
      ----------------------------


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