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                                                                    EXHIBIT 10.4

                     SEVERANCE AND NONCOMPETITION AGREEMENT

      THIS SEVERANCE AND NONCOMPETTION AGREEMENT is entered into and effective
as of July 27, 2005, among, ADVANCED LIGHTING TECHNOLOGIES, INC., an Ohio
corporation ("ADLT"), and WAYNE J. VESPOLI ("EMPLOYEE");

                                   WITNESSETH:

      WHEREAS, ADLT and Employee desire to reach agreement on compensation, if
any, which will be due Employee at the time of Employee's termination of service
ADLT or any of its affiliates; and

      WHEREAS, ADLT requires, as a condition of such agreement and Employee's
continued employment by ADLT, an agreement with respect to certain competitive
activities following Employee's termination of service,

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

1.    SEVERANCE PAYMENTS.

      Subject to the provisions of this Agreement, upon Employee's Termination,
      other than a Termination for "cause" or a Termination resulting from
      Employee's resignation without "good reason," each as defined below,
      Employee shall be entitled to receive severance payments equal to
      Employee's then-current base salary for the one-year period commencing on
      the effective date of such Termination, payable in the same amounts and at
      the same intervals as such base salary would have otherwise been paid if
      such Termination had not occurred.

2.    OTHER BENEFITS.

      During the term of any severance payments pursuant to Section 1 of this
      Agreement, Employee shall be entitled to such medical and hospitalization
      benefits, as are provided executive officers of ADLT and its subsidiaries
      and at the same cost, if any, charged to such executive officers.

3.    CERTAIN DEFINITIONS.

      (a)   For purposes hereof, the term "Termination" shall mean the cessation
            of employment of Employee by ADLT or any of its affiliates.

      (b)   For purposes hereof, the term "cause" shall mean:

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            (i)   Employee's committing an act constituting a misdemeanor
                  involving fraud, dishonesty, or theft or a felony;

            (ii)  Employee's engaging in habitual or repeated alcohol or drug
                  abuse;

            (iii) Employee's disregarding the instructions of the Board of
                  Directors of ADLT;

            (iv)  Employee's neglecting duties (other than by reason of
                  disability or death), with five (5) business days notice to
                  cure;

            (v)   Employee shall fail to devote his full business time to his
                  employment and perform diligently such duties as are, or may
                  be, required by the Board of Directors of ADLT or their
                  designee consistent with Employee's duties and authority at
                  the date of this Agreement or such other duties as may be
                  mutually agreed, with five (5) business days notice to cure;
                  provided such duties are within the bounds of reasonableness
                  and acceptable business standards;

            (vi)  Employee shall, without the prior written approval of the
                  Board of Directors of ADLT, 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 ADLT or any subsidiary or
                  affiliate of ADLT, with five (5) business days notice to cure;
                  provided, however, Employee may continue 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;

            (vii) Employee shall fail to comply with all policies and procedures
                  of ADLT, including but not limited to, all terms and
                  conditions set forth in any employee handbook and any other
                  memoranda pertaining to ADLT's policies, procedures, rules and
                  regulations, with five (5) business days notice to cure; or

            (viii) Employee's willful misconduct or gross negligence.

      (c)   For purposes hereof, the term "good reason" shall mean, without the
            express written consent of Employee, a material reduction of
            Employee's duties, authority, compensation, benefits or
            responsibilities.

      (d)   In the event of Employee's death or permanent disability (as defined
            herein below), Employee's service 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 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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4.    COVENANTS REGARDING NON-COMPETITION AND CONFIDENTIAL INFORMATION.

      (a)   Non-Competition.

            (i)   Recognizing that Employee will have been involved as an
                  executive officer of ADLT and that ADLT and its affiliates,
                  are engaged in the supply of products and/or services in every
                  state of the United States and internationally, therefore,
                  upon Termination, whether such Termination is initiated by
                  ADLT or Employee, for any reason, he agrees that he will not,
                  for a period of ONE (1) YEAR immediately following such
                  Termination, engage, in the United States or in any country
                  where ADLT or any of its subsidiaries or affiliates conduct
                  business, either directly or indirectly on behalf of himself
                  or on behalf of an another, as an employee, consultant,
                  director, partner or shareholder (other than with respect to
                  holding up to one percent (1%) of a publicly traded
                  corporation) of any corporation, limited liability company,
                  partnership or other business entity, in any business of the
                  type and character or in competition with the business carried
                  on by ADLT or any of its subsidiaries or affiliates (as
                  conducted on the date of such Termination).

            (ii)  Employee will not, for a period of ONE (1) YEAR immediately
                  following the Termination, whether such Termination is
                  initiated by ADLT or Employee, either directly or indirectly
                  or on behalf of another, as an employee, consultant, director,
                  partner or shareholder (other than with respect to holding up
                  to one percent (1%) of a publicly traded corporation) of any
                  corporation, limited liability company, partnership or other
                  business entity, recruit, hire or otherwise entice any
                  employee(s) of ADLT or its subsidiaries or affiliates, to
                  terminate his or her employment with ADLT or to accept
                  employment with anyone or any entity other than ADLT.

            (iii) Employee will not, for a period of ONE (1) YEAR immediately
                  following the Termination, whether such Termination is
                  initiated by ADLT or Employee, either directly or indirectly
                  or on behalf of another, as an employee, consultant, director,
                  partner or shareholder (other than with respect to holding up
                  to one percent (1%) of a publicly traded corporation) of any
                  corporation, limited liability company, partnership or other
                  business entity, solicit, do business with or employ any
                  current or former employee of ADLT, or any of its subsidiaries
                  or affiliates, or any customer or client of ADLT in connection
                  with any business of the type and character or in competition
                  with the business carried on by ADLT or any of its
                  subsidiaries or affiliates (as conducted on the date of the
                  Termination).

            (iv)  Employee will not, directly or indirectly, disclose, divulge,
                  discuss or copy to or for any person or entity, or otherwise
                  use or suffer to be used in any manner or for any purpose,
                  except for the benefit of ADLT or any of its subsidiaries or
                  affiliates, any ideas, methods, customer lists or other
                  customer

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                  information, business plans, product research or engineering
                  data or other trade secrets, intellectual property, or any
                  other confidential or proprietary information of ADLT or any
                  of its subsidiaries or affiliates, it being acknowledged by
                  Employee that all such information regarding the business of
                  ADLT or its subsidiaries or affiliates conceived, suggested,
                  developed, compiled or obtained by or furnished to Employee
                  while Employee shall have been employed by or associated with
                  ADLT or its subsidiaries or affiliates is confidential
                  information and ADLT's or its subsidiaries' or affiliates'
                  exclusive property. Employee's obligations under this Section
                  4(a)(iv) 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 ADLT,
                  (C) was available, or becomes available, to Employee on a
                  non-confidential basis independent of its disclosure to
                  Employee by ADLT, but only if the source of such information
                  is not bound by the provisions of this Agreement or otherwise
                  prohibited by a contractual, legal or fiduciary obligation
                  from disclosing Confidential Information to Employee or
                  Employee's Representatives or (D) Employee is required, in the
                  opinion of legal counsel, to disclose by law, regulation, or
                  governmental or court order, provided that ADLT is given, to
                  the extent that it is practicable, reasonable advance notice
                  of any court proceeding and an opportunity to contest
                  disclosure or obtain an appropriate protective order, at no
                  cost to Employee but with Employee's reasonable cooperation.
                  The Employee shall have the burden of proof as to whether any
                  of the foregoing exceptions apply to any disclosure or
                  proposed disclosure of Confidential Information.

      (b)   Employee expressly agrees and understands that the remedy at law for
            any breach by him of this Section 4 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 this Section 4, ADLT shall be entitled to
            immediate injunctive relief and may obtain a temporary order
            restraining any threatened or further breach. Nothing in this
            Section 4 shall be deemed to limit ADLT's remedies at law or in
            equity for any breach by Employee of any of the provisions of this
            Section 4 which may be pursued or availed of by ADLT or any of its
            affiliates including but not limited to ADLT. Employee and ADLT have
            carefully read and considered the provisions of this Section 7 and,
            having done so, agree that the restrictions set forth are fair and
            reasonable and are reasonably required for the protection of the
            interests of ADLT. In the event that any provision of this Section 4
            shall be held to be unenforceable because of the duration of such
            provision or area covered thereby, Employee and ADLT expressly agree
            that any court making such determination shall have the power to
            reduce the duration and/or area of such provision and, in its
            reduced form, said provision shall then be enforceable.

      (b)   In the event Employee shall violate any legally enforceable
            provision of this Section 4 as to which there is a specific time
            period during which he is prohibited from taking

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            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.

5.    SEVERABLE PROVISIONS.

      The provisions of this 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.

6.    ARBITRATION.

      Any controversy or claim arising out of or relating to this Agreement, or
      the breach thereof, shall be settled by arbitration by a single arbitrator
      in the City of Solon, State of Ohio, 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 6 shall be construed so as
      to deny ADLT 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 4 hereof.

7.    WAIVER.

      The failure of either party to enforce any provision or provisions of this
      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 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.

8.    MISCELLANEOUS.

      This 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,.

9.    GOVERNING LAW.

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

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

WITNESS:                                        ADVANCED LIGHTING
                                                TECHNOLOGIES, INC.

By: _________________________________           By: /s/ Sabu Krishnan
                                                    ----------------------------
Name: _______________________________           Name: Sabu Krishnan
                                                Its: Chief Operating Officer

By: _________________________________           /s/ Wayne J. Vespoli
                                                --------------------------------
Name: _______________________________           WAYNE J. VESPOLI

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