EMPLOYMENT AGREEMENT
                         ARIZONA INSTRUMENT CORPORATION
                                       AND
                                 JOHN P. HUDNALL


         THIS  EMPLOYMENT  AGREEMENT  ("Agreement")  dated as of June 3, 1996 is
between Arizona  Instrument  Corporation  ("AZI" or the "Company" or "Employer")
and John P. Hudnall ("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 daily operations of the Corporation,  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 for a period of three
years,  beginning  with the  effective  date of this  Agreement and ending three
years  thereafter.  At the conclusion of the three-year  period,  this Agreement
shall be  automatically  renewed  for a one-year  period  unless the Company has
given  Employee  written  notice of  nonrenewal at least six months prior to the
conclusion of the three-year term.

         3.  Full-time   Employment.   Employee  shall  devote  full  employment
energies,  interest,  abilities and time to the  performance of his  obligations
hereunder and shall not,  without the written  consent of the Board of Directors
of AZI, render to others any service of any kind for compensation.

         4. Compensation.  Employer shall pay to employee the sum of $165,542.00
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.  The Board of  Directors  will  consider  merit
increases  on a periodic  basis  commensurate  with the  executive  compensation
practices of the Company.  Additionally,  the base pay will be annually adjusted
based on the cost of living  index for the Greater  Phoenix  area.  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 
<PAGE>
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  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,  wilful failure to
abide by ethical  and good faith  instructions  or  policies  from or set by the
Chairman or the Board,  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. 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 
<PAGE>
with a 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/ Patricia Onderdonk   6/3/96            /s/ John P. Hudnall         6/3/96
---------------------------------          -------------------------------------
Employer                  Date             Employee                     Date