EMPLOYMENT AGREEMENT
                         ARIZONA INSTRUMENT CORPORATION
                                       AND
                                 George G. Hays


         THIS EMPLOYMENT AGREEMENT ("Agreement") effective as of January 1, 1998
is between Arizona Instrument Corporation ("AZI" or the "Company" or "Employer")
and George G. Hays ("Employee").

         1. Employment  Duties.  Employer  hereby employs  Employee and Employee
hereby accepts employment on the terms and conditions set forth herein. Employee
shall serve in the  position of  President  and Chief  Executive  Officer,  with
responsibility for overseeing the operations of the Company,  and will have such
other powers and duties  consistent  with such position as may from time to time
be prescribed by the Board of Directors.

         2. Term.  Employee's  employment shall continue from the effective date
of this Agreement  through March 31, 2000. This Agreement shall be automatically
renewed for a one-year  period  unless the Company  has given  Employee  written
notice of nonrenewal by September 30, 1999.

         3. Full-time  Employment.  Employee shall devote  substantially all his
employment  energies,  interest,  abilities and time to the  performance  of his
obligations hereunder.

         4. Compensation.  Employer shall pay to Employee the sum of $165,000.00
per year during the term hereof,  to be paid in accordance  with the  Employer's
normal  payroll  practice,  but in no  event  shall  such  salary  be paid  less
frequently than twice a month. Employee shall participate in an annual incentive
bonus  plan  administered  by the  Board of  Directors  equal to at least 30% of
annual  salary.  The Board of  Directors  will  consider  merit  increases  on a
periodic basis  commensurate  with the executive  compensation  practices of the
Company.  Employer may deduct from the  compensation to Employee social security
taxes and all federal,  state and  municipal  taxes and charges as may now be in
effect or which may  hereafter  be enacted or  required.  Employer  shall pay or
reimburse Employee for reasonable travel and other expenses incurred by Employee
in furtherance of or in connection with the performance of his duties hereunder,
consistent with Employer policies regarding such expenses.

         5.  Participation in Employee  Benefits.  Employee shall be entitled to
and shall receive all other  benefits and  conditions  of  employment  available
generally  to  executives  of AZI  pursuant  to  Employer  plans  and  programs,
including  group health  insurance  benefits,  life  insurance  benefits and the
opportunity  to  participate  in any stock option,  profit sharing or retirement
income plan;  provided,  however,  that  Employee  may request  leave of absence
without pay during the term hereof,  and Employer  agrees to grant such leave if
it determines that the leave would not be materially injurious to the operations
of  Employer;  and  provided,  further,  that  Employee  shall be  entitled to a
vacation  of four  weeks in each  twelve-month  period  during  the term of this
Agreement,  during which time his compensation shall be paid in full. The manner
of
<PAGE>
implementation  of such benefits  with respect to such items as  procedures  and
amounts is discretionary with the Company.

         6. Termination.

                  A) For Cause.  The Company may  terminate  this  Agreement for
cause upon written notice to the Employee  stating the facts  constituting  such
cause,  provided that Employee  shall have 10 days following such notice to cure
any conduct or act, if curable,  alleged to provide  grounds for termination for
cause  hereunder.  In the event of termination  for cause,  the Company shall be
obligated to pay the  Employee  only the base salary due him through the date of
termination.  Cause shall include material neglect of duties, willful failure to
abide by ethical  and good faith  instructions  or  policies  from or set by the
Board of  Directors,  commission of a felony or serious  misdemeanor  offense or
pleading guilty or nolo contendere to same, the commission by Employee of an act
of dishonesty or moral  turpitude  involving  the Company,  Employee's  material
breach of this  Agreement,  the filing of bankruptcy  proceedings  by or against
Employee, or breach by Employee of any other material obligation to the Company.

                  B) Without Cause.  The Company may terminate this Agreement at
any time immediately,  without cause, by giving written notice to Employee. Upon
termination  under this  Section  6(B),  the Company  shall be  obligated to pay
Employee the base salary  payable  hereunder  for the balance of the  employment
term set forth in Section 2. The  amount of base  salary to be paid to  Employee
after  termination  under  this  Section  6(B) may be  reduced  by any  wages or
consulting  fees  earned  by  Employee  from  third  parties  from  the  date of
termination  of this  Agreement  through  the  term of  this  Agreement.  At the
Company's  election,  such  payment can be made in a lump sum or pursuant to the
Company's  normal  payroll  practices  over the balance of the term. The Company
shall also maintain  Employee's  participation  in the employee benefit programs
referred to in Section 5 hereof for the  remainder  of the  employment  term set
forth in Section 2 and to the extent  contemplated  in Section 5 hereof,  except
that the Company shall have no obligation to Employee  under any profit  sharing
or  retirement  plan other than amounts due through the date of  termination  of
employment.  If continued  coverage or participation in any such benefit program
is prohibited  by the terms  thereof,  the Company will provide a  substantially
similar  benefit during such period.  The  obligations  provided in this Section
6(B) shall be the Company's sole obligations upon termination under this Section
6(B).

                  C) Disability. If during the term of this Agreement,  Employee
fails to perform his duties hereunder because of illness or other incapacity for
a period of two  consecutive  months,  or for 90 days during any 150-day period,
the Company shall have the right to terminate  this  Agreement  without  further
obligation hereunder except for any amounts payable pursuant to
disability plans generally applicable to executive employees.

                  D) Death.  If Employee dies during the term of this Agreement,
this Agreement shall terminate immediately, and Employee's legal representatives
shall be entitled to receive the base salary due  Employee  through the last day
of the calendar month in which his death shall have occurred and any other death
benefits generally applicable to executive employees.
<PAGE>
                  E) Employee Termination. Employee may terminate this Agreement
at any time upon written notice to the Company.

         7. Cooperation with Employer After Termination of Employment. Following
any  termination of employment  hereunder,  Employee shall fully  cooperate with
Employer in all matters relating to the winding up of his pending work on behalf
of Employer and the orderly transfer of any such pending work to other employees
of Employer as may be designated by Employer. Employer shall be entitled to such
full time or part time services of Employee as Employer may  reasonably  require
during all or any part of the 30-day period following any termination hereunder,
and shall  compensate  Employee  for such  services on a basis  consistent  with
Employee's compensation pursuant to Section 4 hereof.

         8.  Non-Competition.  The parties  acknowledge  that the Employee  will
acquire much  knowledge and  information  concerning the business of the Company
and  its  affiliates  as the  result  of his  employment.  The  parties  further
acknowledge that the scope of business in which the Company is engaged as of the
date of execution of this Agreement is world-wide and very  competitive  and one
in which few companies can successfully compete. Competition by Employee in that
business after this Agreement is terminated  would severely  injure the Company.
Accordingly, for a period of one year after this Agreement is terminated for any
reason (except termination by the Company without cause), Employee agrees not to
become an  employee,  consultant,  advisor,  principal,  partner or  substantial
shareholder of any firm or business that in any way competes with the Company or
its affiliates in any of their presently  existing or then existing products and
markets.

         9.  Specific  Performance.  The parties  agree that the  provisions  in
Sections 3 and 8 are of a special,  unique and  extraordinary  character,  which
gives  them a  peculiar  value,  the loss of which  could not be  reasonably  or
adequately  compensated  in damages  in any action at law,  and that a breach by
Employee will cause Employer great and irreparable  injury and damage.  Employee
hereby  expressly  agrees that  Employer  shall be  entitled to the  remedies of
injunction,  specific performance and other equitable relief to prevent a breach
by Employee.  This provision shall not, however, be construed as a waiver of any
of the rights which Employer may have for damages.

         10. Miscellaneous Provisions.

                  10.1 Decisions by Employer. For all purposes herein,  Employee
may not make any decisions or take any action with respect to this  Agreement as
an agent of Employer.  Actions of Employer hereunder shall be taken by its Board
of Directors.

                  10.2 Governing Law. This Agreement is governed by Arizona law.

                  10.3 Entire  Agreement.  This  Agreement  supersedes all prior
agreements  between the parties  concerning  the subject  matter hereof and this
Agreement  constitutes  the entire  agreement  between the parties  with respect
hereto. This Agreement may be modified only with a
<PAGE>
written  instrument  duly  executed  by each of the  parties.  No person has any
authority to make any  representation  or promise not set forth herein on behalf
of any of the parties and this  Agreement has not been executed in reliance upon
any representation or promise except those contained
herein.

                  10.4   Notices.   Any   notice,   request,   demand  or  other
communication  hereunder  shall be in  writing  and shall be deemed  given  when
personally  delivered  to AZI or to  Employee,  as the  case  may  be,  or  when
delivered by certified mail, return receipt requested.

                  To the Company:           4114 East Wood Street
                                            Phoenix, AZ 85040

                  To the Employee:          4114 East Wood Street
                                            Phoenix, AZ 85040

                  10.5 Waiver of Breach.  The failure of either party to require
the  performance  of any term or  condition of the  Agreement,  or the waiver by
either  party of any breach of this  Agreement  shall not  prevent a  subsequent
enforcement of any such term or any other term nor be
deemed to be a waiver of any subsequent breach.

                  10.6  Severability.  The provisions of this Agreement shall be
deemed severable. If any part of this Agreement shall be held unenforceable, the
remainder  shall  remain  in full  force  and  effect,  and  such  unenforceable
provisions shall be reformed so as to give maximum legal effect to the intent of
the parties as expressed herein.

         11.  Any  controversy  or  claim  arising  out of or  relating  to this
Agreement  or the  breach  thereof  shall  be  settled  by  binding  arbitration
conducted  in  Phoenix,  Arizona  in  accordance  with the laws of the  State of
Arizona  conducted  in  accordance  with the rules of the  American  Arbitration
Association. Judgement upon the award rendered by the arbitration may be entered
in any court having jurisdiction thereof.



/s/ Walfred R. Rausamen   1/14/98             /s/ George G. Hays      1/13/98
---------------------------------             ----------------------------------
Employer                   Date               Employee                   Date