LOAN MODIFICATION AGREEMENT



     This Loan Modification Agreement is entered into as of November 7, 1995, by
and between Arizona  Instrument  Corporation  ("Borrower') whose address is 4114
East Wood Road,  Phoenix,  AZ, 85040,  and Silicon  Valley Bank  ("Bank")  whose
address is 3003 Tasman Drive, Santa Clara, CA 95054.

1. DESCRIPTION OF EXISTING  INDEBTEDNESS:  Among other indebtedness which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents,  an Amended and Restated Loan and Security Agreement (Domestic Loan )
(the  "Domestic  Loan  Agreement")  and a Second  Amended and Restated  Loan and
Security  Agreement  (Export Loan ) (the "Export  Loan  Agreement"),  both dated
March  15,  1995,  as  such  agreements  may  be  amended  from  time  to  time,
(collectively,  the "Loan Agreement"). The Domestic Loan Agreement provided for,
among other  things,  a revolving  line of credit in the original  amount of One
Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) (the "Committed
Line").  The Export Loan Agreement provided for, among other things, a revolving
line of credit in the principal amount of One Million Two Hundred Fifty Thousand
and 00/100 Dollars  ($1,250,000.00) (the "Export Committed Line").  Concurrently
herewith,  Borrower shall execute a Promissory  Note, in the original  principal
amount  of  One  Million  Two  Hundred   Fifty   Thousand  and  00/100   Dollars
($1,250,000.00) (the "Term Loan").  Defined terms used but not otherwise defined
shall have the same meaning as in the Loan Agreement.

Hereinafter,  all indebtedness owing by Borrower to Bank shall be referred to as
the Indebtedness."

2.  DESCRIPTION OF COLLATERAL AND GUARANTIES:  Repayment of the  Indebtedness is
secured by the  Collateral  as described in the Loan  Agreement and a Collateral
Assignment, Patent Mortgage and Security Agreement.  Additionally,  repayment of
the Export ~Committed Line is guaranteed by the Export-Import Bank of the United
States (the "Guarantor') pursuant to a Guarantee Agreement (the "Guaranty").

Hereinafter,  the  above-described  security documents and guaranties,  together
with all other documents  securing payment of the Indebtedness shall be referred
to as the "Security Documents."  Hereinafter,  the Security Documents,  together
with all other  documents  evidencing  or  securing  the  Indebtedness  shall be
referred to as the "Existing Loan Documents."
<PAGE>
3.  DESCRIPTION OF CHANGE IN TERMS:

     A.     Modification(s) to the Loan Agreement.

         1. Section 6.9 entitled  "Debt-Net Worth Ratio" is hereby  amended,  in
     its entirety, to read as follows:

          Debt-Net Worth Ratio.  Borrower shall maintain,  on a quarterly basis,
         beginning as of the quarter ending  December 31, 1995, a ratio of Total
         Liabilities  less   Subordinated   Debt  to  Tangible  Net  Worth  plus
         Subordinated Debt of not more than 2.00 to 1.00.

         2. Section 6.10 entitled "Tangible Net Worth" is hereby amended, in its
     entirety, to read as follows:

         Tangible Net Worth.  Borrower  shall  maintain,  on a quarterly  basis,
         beginning  with the quarter  ending  December  31, 1995, a Tangible Net
         Worth of not less than Two Million  Five  Hundred  Thousand  and 00/100
         Dollars ($2,500,000.00).

         3. The Section 6.11 entitled  "Profitability" is hereby amended, in its
     entirety, to read as follows:

         Profitability.   Borrower  shall  be  profitable,  after  taxes,  on  a
         quarterly basis, beginning with the quarter ending December 31, 1995.

         4.  The  following  Section  is  hereby   incorporated  into  the  Loan
     Agreement:

         6.14 Debt  Service.  Borrower  shall  maintain,  on a rolling  12 month
         basis,  a Debt Service ratio of 1.40 to 1.00, to be tested by Bank on a
         quarterly basis.

         5.The following definition is hereby added into the Loan Agreement:

          "Debt Service" means earnings for the previous 12 months before income
         taxes,  depreciation and amortization  divided by current maturities of
         long term debt.

         6.The first  sentence of the section 2.1 entitled  "Advances" in hereby
     amended to read as follows:

         Subject to the terms and conditions of the Loan Agreement,  Bank agrees
         to make  Advances to Borrower in an aggregate  amount not to exceed the
         lesser of  Committed  Line or the  Borrowing  Base  minus an  aggregate
         reserve  amount of at least  $400,000.00  under the Committed  Line and
         Export Committed Line  ("Reserve").  Such Reserve shall be only for the
         duration of the Term Loan.
<PAGE>
         B. Modification to Export Loan Agreement.

         1.  The  second  paragraph  of  the  Section  6.3  entitled  "Financial
          Statements,  Reports, Certificates" is hereby amended in parts to read
          within  ten (10) days after the last day of each  month  (rather  each
          quarter).



4.  CONSISTENT  CHANGES.  The Existing Loan  Documents  are amended  wherever to
reflect the above-described changes.



5. NO DEFENSES OF BORROWER.  Borrower (and each  guarantor  and pledgor  signing
below) agrees that it has no defenses against the obligations to pay any amounts
under the Indebtedness.



6. CONTINUING VALIDITY. Borrower (and each guarantor and ~pledgor signing below)
understands  and agrees that in  modifying  the existing  Indebtedness,  Bank is
relying upon Borrower's  representations,  warranties,  and  agreements,  as set
forth in the Existing Loan Documents.  Except as expressly  modified pursuant to
this Loan  Modification  Agreement,  the terms of the  Existing  Loan  Documents
remain   unchanged  and  in  full  force  and  effect.   ~Bank's   agreement  to
modifications to the existing  Indebtedness  pursuant to this Loan  Modification
Agreement in no way shall obligate Bank to make any future  modifications to the
Indebtedness.  Nothing in this Loan  Modification  Agreement shall  constitute a
satisfaction  of the  Indebtedness.  It is the intention of Bank and Borrower to
retain as liable  parties all makers and endorsers of Existing  Loan  Documents,
unless the party is expressly released by Bank in writing.  No maker,  endorser,
or guarantor will be released by virtue of this Loan Modification Agreement. The
terms of this Paragraph apply not only to this Loan Modification Agreement,  but
also to all subsequent loan modification agreements.
<PAGE>


7.  CONDITIONS.  The  effectiveness  of  this  Loan  Modification  Agreement  is
conditioned upon Borrowers agreement to:



         1 .Execute a Warrant to Purchase Stock  ("Warrant") in favor of Bank to
         purchase shares of Borrowers  Common Stock equal to five percent (5.0%)
         of total  commitment  divided by an exercise price equal to the average
         market  price of the common stock for the thirty (30) days prior to the
         Warrant  issue date.  Such  Warrant  shall expire in five (5) years and
         shall be subject to  Registration  Right and  Antidilution  provisions.
         Such Warrant shall be in form and substance acceptable to Bank.



         This Loan  Modification  Agreement  is  executed  as of the date  first
written above.



BORROWER:



ARIZONA INSTRUMENT CORPORATION                SILICON VALLEY BANK

By:_______________________________            By:____________________________
Name:____________________________             Name:_________________________
Title:_____________________________           Title:__________________________