SETTLEMENT AGREEMENT


         THIS SETTLEMENT AGREEMENT ("SETTLEMENT AGREEMENT") is entered into this
9th  day  of  December,  1997,  between  HORIZON  ACQUISITION  CO.,  an  Arizona
Corporation  ("HAC"),  ARIZONA INSTRUMENT  CORPORATION,  a Delaware  Corporation
("AZI"),   HORIZON  ENGINEERING  AND  TESTING,   INC.,  an  Arizona  Corporation
("Horizon") and Quinn Johnson, an individual ("Johnson").

                                 R E C I T A L S

         A. AZI, HAC,  Horizon and Johnson are parties to an Agreement of Merger
and an Escrow Agreement, each of which are dated September 30, 1992; and HAC and
Johnson are parties to an Employment  Agreement of the same date  (collectively,
the "Acquisition Agreements").

         B.  Pursuant to the  Agreement of Merger and Escrow  Agreement,  49,030
(Forty-Nine  Thousand and Thirty)  shares of AZI's  common stock in  certificate
number AZI 7642 were placed into escrow (the "Escrowed  Shares") with Charles E.
Davis (the "Escrow Agent").

         C. AZI, HAC,  Horizon and Johnson have agreed to settle,  discharge and
release all claims and causes of action  which they may have  against each other
as hereinafter identified.

         D. AZI,  HAC,  Horizon  and Johnson  have also  agreed to disburse  the
Escrowed Shares as described herein.

         E. HAC is a wholly-owned subsidiary of AZI.

         NOW,  THEREFORE,  for valuable  consideration,  it is acknowledged  and
agreed as follows:

         1. Tax  Treatment.  The  parties  agree  that the  disbursement  of the
Escrowed  Shares,  as described in  Paragraph  7, does not  constitute  wages or
compensation for services.  To the parties'  knowledge,  the disbursement of the
Escrowed Shares does not constitute a taxable transaction for any party hereto.

         2. Horizon and Johnson Release of HAC and AZI. In  consideration of the
Escrowed  Shares being disbursed as described in Paragraph 1, and for other good
and valuable  considera tion, the receipt,  validity and sufficiency of which is
hereby acknowledged,  Horizon and Johnson on their own behalf, respectively, and
on behalf of their respective  officers,  directors,  shareholders,  principals,
heirs,  successors  and  assigns,  do hereby  release and  discharge,  fully and
without any limitation  whatsoever,  HAC and AZI and their respective  insurers,
subsidiaries,   divisions,  affiliates,   partners,  partnerships,   principals,
directors, officers, agents, representatives,
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employees, shareholders, successors and assigns (the "AZI Released Parties"), of
and from all  liabilities,  claims  and of and from all  manner of  actions  and
causes of action of every kind and nature whatsoever,  both legal and equitable,
which  Horizon or Johnson has, ever had or may  hereafter  have,  both known and
unknown, arising out of or in any way pertaining to the Acquisition Agreements.

         3. AZI release of Horizon and Johnson. In consideration of the Escrowed
Shares  being  disbursed  as  described  in  Paragraph 1, and for other good and
valuable consideration, the receipt, validity and sufficiency of which is hereby
acknowledged,  AZI, on its own behalf and on behalf of its officers,  directors,
successors and assigns, and on behalf of HAC, does hereby release and discharge,
fully  and  without  any  limitation  whatsoever,   Horizon  and  its  insurers,
subsidiaries,   divisions,  affiliates,   partners,  partnerships,   principals,
directors,   officers,   agents,   representatives,   employees,   shareholders,
successors and assigns (the "Horizon  Released  Parties"),  and Johnson,  of and
from all liabilities, claims and of and from all manner of actions and causes of
action of every kind and nature whatsoever,  both legal and equitable, which AZI
has, ever had or may hereafter have,  both known and unknown,  arising out of or
in any way pertaining to the Acquisition Agreements.

         4.  Limitation  on AZI and HAC  Actions.  Except  with  respect  to any
breaches of this  SETTLEMENT  AGREEMENT  or any default  hereunder,  AZI and HAC
further  covenant  and  agree to not file any  complaint  or claim  against  the
Horizon  Released Parties and/or Johnson arising out of or in any way pertaining
to the Acquisition  Agreements,  and to indemnify the Horizon  Released  Parties
and/or  Johnson  from any and all  loss,  harm,  damages  and  costs,  including
attorneys'  fees, that the Horizon  Released Parties and/or Johnson may incur in
consequence  of any  complaint  or claim  filed by or on behalf of AZI or HAC in
contravention of this SETTLEMENT AGREEMENT.

         5. Limitation of Horizon  Actions.  Except with respect to any breaches
of this SETTLEMENT  AGREEMENT or any default  hereunder,  Horizon  covenants and
agrees to not file any  complaint  or claim  against  the AZI  Released  Parties
arising out of or in any way pertaining to the  Acquisition  Agreements,  and to
indemnify  the AZI  Released  Parties from any and all loss,  harm,  damages and
costs,  including  attorneys'  fees, that the AZI Released  Parties may incur in
consequence of any complaint or claim filed by or on behalf of Horizon in contra
vention of this SETTLEMENT AGREEMENT.

         6. Limitation on Johnson  Actions.  Except with respect to any breaches
of this SETTLEMENT  AGREEMENT or any default  hereunder,  Johnson  covenants and
agrees to not file any  complaint  or claim  against  the AZI  Released  Parties
arising out of or in any way pertaining to the  Acquisition  Agreements,  and to
indemnify  the AZI  Released  Parties from any and all loss,  harm,  damages and
costs,  including  attorneys'  fees, that the AZI Released  Parties may incur in
consequence  of any  complaint  or claim  filed by or on  behalf of  Johnson  in
contraven tion of this SETTLEMENT AGREEMENT.
                                        2
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         7.  Concurrent  Signing of Escrow  Instructions.  The  parties  further
covenant and agree to sign escrow  instructions  concurrent  with executing this
SETTLEMENT  AGREEMENT,  instructing  the Escrow  Agent to  disburse  immediately
12,331 (Twelve thousand, three hundred and thirty-one) of the Escrowed Shares to
AZI, and the remaining  Escrowed Shares to Johnson as agent for the shareholders
of Horizon. AZI further agrees at its full cost and expense to cause any legends
which would restrict or inhibit the trading or sale of the Escrowed Shares to be
removed  from the Escrowed  Shares,  provided  that Johnson  provides AZI with a
certificate  indicating that any sale of such shares by Johnson will comply with
the applicable federal and state laws and regulations, including but not limited
to Rule 144.

         8. Scope of this SETTLEMENT AGREEMENT. The execution of this SETTLEMENT
AGREEMENT is not an admission of any kind by the parties  hereto,  or any one of
them,  but rather  represents a compromise  and  settlement of disputed  claims,
liability  for  which  is  expressly  denied  by the  parties  hereto.  With the
exception  of the  Acquisition  Agreements  described  herein,  this  SETTLEMENT
AGREEMENT does not impact the rights and  obligations of the parties with regard
to  any  agreements  between  any  of  them,  including  but  not  limited  to a
Confidentiality  Agreement and a  Non-Competition  Agreement between Johnson and
HAC, each dated September 30, 1992.

         9. Authorized Signers. Each signatory warrants that he is authorized by
his principal to sign this SETTLEMENT AGREEMENT on that principal's behalf.

         10.  Severability.  If any  provision of this  SETTLEMENT  AGREEMENT is
found to be  unenforceable  by a court of competent  jurisdiction,  such finding
shall not affect the enforce ability of any other provision(s).

         11.  Governing Law. This  SETTLEMENT  AGREEMENT shall be interpreted in
accordance with the laws of the State of Arizona.

         12.  Consideration.  It is  expressly  understood  and agreed that this
document sets forth the entire consideration for this SETTLEMENT AGREEMENT,  and
that said  consideration for this SETTLEMENT  AGREEMENT is contractual and not a
mere recital.

         13. Entire Agreement.  This SETTLEMENT  AGREEMENT embodies,  merges and
integrates all prior and current  agreements and  understandings  of the parties
hereto,  and may not be  modified,  clarified,  changed  or  amended,  except in
writing  signed  by each  and  every  one of the  signatories  hereto,  or their
authorized representatives. There are no oral agreements between the parties.

         14.  Construction.  This SETTLEMENT AGREEMENT is a negotiated agreement
and any documents delivered pursuant hereto shall be construed without regard to
the identity of the persons who drafted the various  provisions  thereof.  Every
provision of this SETTLEMENT
                                        3
<PAGE>
AGREEMENT and such other  settlement  documents shall be construed as though all
parties  participated  equally  in the  drafting  thereof.  Any  legal  rule  of
construction that a document is to be construed against the drafting party shall
not be applicable and is expressly waived.

         15.  Contractual  Terms.  The terms of this  SETTLEMENT  AGREEMENT  are
contractual and not mere recitals.

         16.  Captions.  The  captions  used in this  SETTLEMENT  AGREEMENT  are
inserted for  convenience  only and shall not affect the meaning or construction
of this SETTLEMENT AGREEMENT.

         17.  Counterparts.  This SETTLEMENT AGREEMENT may be executed in one or
more counterparts,  each of which shall be deemed an original,  but all of which
together shall constitute one and the same document.

         DATED as of the date first written above.


ARIZONA INSTRUMENTS CORPORATION


By: /s/ George G. Hays
   ------------------------------

Title: President
      ---------------------------

Printed Name:  George G. Hays
             --------------------

HORIZON ACQUISITION CO.


By: /s/ George G. Hays
   ------------------------------

Title: President
      ---------------------------

Printed Name:  George G. Hays
             --------------------
                                        4
<PAGE>
HORIZON ENGINEERING AND TESTING, INC.


By: George G. Hays
   ------------------------------

Title: President
      ---------------------------

Printed Name: George G. Hays
             --------------------

QUINN JOHNSON


 /s/ Quinn Johnson
-----------------------
QUINN JOHNSON


SPOUSE:

 /s/ Margaret Johnson
-----------------------
MARGARET JOHNSON
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