**EMPLOYMENT AGREEMENT**     This **EMPLOYMENT AGREEMENT**(“Agreement”), is made and entered into on the 8th day ofJune, 2006, effective as of June 1, 2006 (“Effective Date”) by and between **TIMCO AVIATION SERVICES,INC.**, a Delaware corporation (the “Company”), and **GENE HOUSE**(the “Employee”).     In consideration of the mutual representations, warranties, covenants and agreements containedin this Agreement and other good and valuable consideration the receipt and sufficiency of which ishereby acknowledged, the parties agree as follows:     **1. ****Employment**.          (a) Retention. The Company agrees to employ Employee as its Executive Vice Presidentand Chief Marketing Officer, and Employee agrees to accept such employment, subject to the termsand conditions of this Agreement. This Agreement supersedes and replaces that certain ConsultingAgreement between Company and Employee dated August 1, 2005, which consulting agreement is herebycancelled.          (b) Employment Period. The period during which the Employee shall serve as anemployee of the Company under this Agreement shall commence as of the Effective Date, and unlessearlier terminated pursuant to this Agreement or extended through agreement of the parties, shallexpire on May 31, 2008. Thereafter, this Agreement shall automatically renew for consecutive oneyear periods unless terminated by either party by six months written notice prior to the expirationof the initial term or any renewal term. For purposes of this Agreement, the initial employmentterm and any renewal term thereof are collectively referred to herein as the “Employment Period.”          (c) Duties and Responsibilities. During the Employment Period, the Employee shallserve as Executive Vince President and Chief Marketing Officer of the Company. In such role,Employee shall have such authority and responsibility and perform such duties as may be assigned tohim from time to time by the Chief Executive Officer, and in the absence of such assignment, suchduties as are customary to Employee’s office and as are necessary or appropriate to the businessand operations of the Company. During the Employment Period, the Employee’s employment shall befull time, and services provided by Employee hereunder shall primarily either be provided at theCompany’s headquarters or at the offices of the Company’s customers. Employee shall perform hisduties honestly, diligently, in good faith and in the best interests of the Company, and Employeeshall use his best efforts to promote the interests of the Company.          (d) Other Activities. Except upon the prior written consent of the Company, theEmployee, during the Employment Period, will not accept any other employment. The Employee shallbe permitted to serve in ventures such as passive real estate investments, serving on charitableand civic boards and organizations, and similar activities, so long as such activities do notmaterially interfere with or detract from the performance of Employee’s duties or constitute abreach of any of the provisions contained in this Agreement.
 

 
     **2. ****Compensation**.          (a) Base Salary. In consideration for the Employee’s services hereunder and therestrictive covenants contained herein, the Employee shall be paid an annual base salary (“Salary”)of $260,000 per annum from the Effective Date until the end of the Employment Period. Paymentshereunder shall be made in accordance with the Company’s customary payroll practices.Notwithstanding the foregoing, Employee’s annual Salary may be increased at anytime and from timeto time to levels greater than the level set forth in the preceding sentence at the discretion ofthe Compensation Committee (the “Committee”) of the Board of Directors (“Board”) of the Company toreflect merit or other increases.          (b) Bonus. In addition to the Salary, the Employee shall be eligible to receive anannual bonus (“Bonus”) equal to 100% of the Employee’s Salary. The Bonus shall be based on theachievement of corporate goals and objectives as established by the Committee or the Board. Theachievement of said goals and objectives shall be determined by the Committee or the Board. Withrespect to any Fiscal Year during which the Employee is employed by the Company for less than theentire Fiscal Year, the Bonus shall be prorated for the period during which the Employee was soemployed. Except as set forth above, all amounts of Bonus earned by Employee shall be payablewithin thirty (30) days after completion of the audited financial statements for the previousFiscal Year. The term “Fiscal Year” as used herein shall mean each period of twelve (12) calendarmonths commencing on January 1st of each calendar year during the Employment Period and expiring onDecember 31st of such year.          (c) Merit and Other Bonuses. Employee shall be entitled to such other bonuses,payments and benefits as may be determined by the Committee or the Board, in their sole discretion.          (d) Equity Incentives. Employee shall be eligible to receive grants of stock options,restricted stock or other equity incentives, all at the discretion of the Committee or the Board.          (e) Other Compensation Programs. The Employee shall be entitled to participate inCompany’s incentive and deferred compensation programs and such other programs as are establishedand maintained generally for the benefit of Company’s employees or executive officers, subject tothe provisions of such plans or programs.          (f) Vacations. The Employee shall be entitled to three weeks of vacation on an annualbasis. Employee shall be entitled to be reimbursed for any accrued and unused vacation time as ofthe date he is no longer an employee of Company.          (g) Other Benefits. During the term of this Agreement, the Employee shall also beentitled to participate in any other health insurance programs, life insurance programs, disabilityprograms, stock option plans, bonus plans, pension plans and other fringe benefit plans andprograms as are from time to time established and maintained for the benefit of Company’s employeesor executive officers, subject to the provisions of such plans and programs.          (h) Expenses. The Employee shall be reimbursed for all out-of-pocket expensesreasonably incurred by him on behalf of or in connection with the business of the
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Company, pursuant to the normal standards and guidelines followed from time to time by theCompany.          (i) Housing Allowance; Air Travel. The Company shall provide, at its expense, housingin which the Employee may live while he is working in Greensboro, as well as a vehicle fortransportation when Employee is in Greensboro. Such housing and automobile shall be selected by theCompany and shall be reasonably acceptable to the Employee. In addition, the Company will paytravel expenses for the Employee and the Employee’s spouse to travel to and from Greensboro fromtheir permanent residence in California. The total of all payments by the Company under thisSection 2(i) shall not exceed $42,000 in any calendar year.          (j) Withholding. All payments made to the Employee hereunder shall be made net of anyapplicable withholding for income taxes and the Employee’s share of FICA, FUTA or other taxes. TheCompany shall withhold such amounts from such payments to the extent required by applicable law andremit such amounts to the applicable governmental authorities in accordance with applicable law.     **3. ****Termination**.          (a) For Cause. The Company shall have the right to terminate this Agreement and todischarge the Employee for Cause (as defined below), at any time during the term of this Agreement.Termination for Cause shall mean, during the term of this Agreement, (i) Employee’s breach of thisAgreement; (ii) Employee’s failure or refusal to perform the duties and responsibilities of hisposition as assigned to him by the Company’s Chief Executive Officer; (iii) Employee’s grossnegligence or willful misconduct in the performance of his duties hereunder; (iv) Employee’scommission of an act of dishonesty affecting the Company or the commission of an act constitutingcommon law fraud or a felony; (v) Employee’s commission of an act (other than the good faithexercise of his business judgment in the performance of his duties) resulting in harm to theCompany or the Company’s reputation; or (vi) Employee’s willful violation of the Company’s policiesor procedures involving discrimination, harassment, alcohol or substance abuse, or work placeviolence. Any termination for Cause pursuant to this Section shall be given to the Employee inwriting and shall set forth in detail all acts or omissions upon which the Company is relying toterminate the Employee for Cause.     Upon any determination by the Company that Cause exists to terminate the Employee, the Companyshall cause a special meeting of the Board of Directors to be called and held at a time mutuallyconvenient to the Board of Directors and Employee, but in no event later than ten (10) businessdays after Employee’s receipt of the notice that the Company intends to terminate the Employee forCause. Employee shall have the right to appear before such special meeting of the Board ofDirectors with legal counsel of his choosing to refute such allegations. A majority of the membersof the Board of Directors must affirm that Cause exists to terminate the Employee. No finding bythe Board of Directors will prevent the Employee from contesting such determination throughappropriate legal proceedings provided that the Employee’s sole remedy shall be to sue for damages,not reinstatement, and damages shall be limited to those that would be paid to the Employee if hehad been terminated without Cause. In the event the Company terminates the Employee for Cause, theCompany shall only be obligated to continue to pay in the ordinary and normal course of itsbusiness to the Employee his Salary plus accrued
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but unused vacation time through the termination date and the Company shall have no furtherobligations to Employee from and after the date of termination.          (b) Resignation by Employee. If the Employee shall resign or otherwise terminate hisemployment with the Company at anytime during the term of this Agreement, the Employee shall onlybe entitled to receive his accrued and unpaid Salary and vacation pay through the termination date,and the Company shall have no further obligations under this Agreement from and after the date ofresignation.          (c) Termination by Company Without Cause. At any time during the term of thisAgreement the Company shall have the right to terminate this Agreement and to discharge theEmployee without Cause effective upon delivery of written notice to the Employee. Upon any suchtermination by the Company without Cause, or upon the Company’s failure to renew this Agreement,the Company shall pay to the Employee all of the Employee’s accrued but unpaid Salary and vacationpay through the date of termination, and thereafter, the Company: (i) shall continue to pay to theEmployee his Salary payable in accordance with Section 2(a) for a period of one (1) year, and (ii)shall continue Employee’s health benefits under the Company’s then health insurance program(s) fora period of one (1) year (or until Employee’s death or the date on which Employee becomes coveredby the health plan of a subsequent employer, to the extent that either of these events occursearlier). All payments made to the Employee pursuant to this Section 2(c) are collectively,referred to herein as the “Severance Payment.” Other than the Severance Payment, the Companyshall have no further obligation to the Employee except for the obligations set forth in Section 13of this Agreement after the date of such termination; *provided, however*, that the Employee shallonly be entitled to continuation of the Severance Payments as long as he is in compliance with theprovisions of Sections 6 and 7 of this Agreement. Notwithstanding the foregoing, in no event shallEmployee receive less than an aggregate of two years of Salary under this Agreement.          (d) Disability of the Employee. This Agreement may be terminated by the Company uponthe Disability of the Employee. “Disability” shall mean any mental or physical illness, condition,disability or incapacity which prevents the Employee from reasonably discharging his duties andresponsibilities under this Agreement for a period of 180 consecutive days. In the event that anydisagreement or dispute shall arise between the Company and the Employee as to whether the Employeesuffers from any Disability, then, in such event, the Employee shall submit to the physical ormental examination of a physician licensed under the laws of the State of North Carolina, who ismutually agreeable to the Company and the Employee, and such physician shall determine whether theEmployee suffers from any Disability. In the absence of fraud or bad faith, the determination ofsuch physician shall be final and binding upon the Company and the Employee. The entire cost ofsuch examination shall be paid for solely by the Company. In the event the Company has purchasedDisability insurance for Employee, the Employee shall be deemed disabled if he is completely(fully) disabled as defined by the terms of the Disability policy. In the event that at any timeduring the term of this Agreement the Employee shall suffer a Disability and the Company terminatesthe Employee’s employment for such Disability, the Company shall continue to pay to the Employeehis Salary, payable in accordance with Section 1(a) for three (3) months from the date of thetermination, when and as the same would have been due and payable hereunder but for suchtermination, except that payment of the Salary in accordance with said paragraph shall be mitigatedto the
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extent payments are made to the Employee pursuant to disability insurance programs maintainedby the Company.          (e) Death of the Employee. In the event of the death of Employee, the employment ofthe Employee by the Company shall automatically terminate on the date of the Employee’s death andthe Company shall only be obligated to pay Employee’s estate Employee’s accrued and unpaid Salarythrough the termination date plus accrued but unused vacation time through the termination date andthe Company shall have no further obligations to Employee from and after the date of termination.     **4. ****Termination of Employment by Employee for Change of Control**.          (a) Termination Rights. Notwithstanding the provisions of Section 3 of thisAgreement, in the event that there shall occur a Change of Control (as defined below) of theCompany and within two years after such Change of Control the Employee’s employment hereunder isterminated by the Company without Cause, then the Company shall be required to pay to the Employeeall accrued but unpaid Salary and vacation pay through the date of termination, plus the product oftwo (2) multiplied by the Employee’s then current Salary (collectively, the foregoing considerationpayable to the Employee shall be referred to herein as the “Change in Control Payment”). TheChange in Control Payment shall be made no later than 10 days after the Employee’s terminationpursuant to this Section 4. To the extent that payments are owed by the Company to the Employeepursuant to this Section 4, they shall be made in lieu of payments pursuant to Section 3, and in noevent shall the Company be required to make payments or provide benefits to the Employee under bothSection 3 and Section 4. Additionally, Employee shall be entitled to receive the Change of ControlPayment set forth above in the event that within six months after the term of this Agreement, aChange of Control shall occur.          (b) Change of Control of the Company Defined. For purposes of this Section 4, a“Change of Control of the Company” shall be deemed to have occurred if:               (i) Any “person” (as such term is defined in Sections 13(d)(3) and Section 14(d)(3) of theExchange Act), other than the Company, any majority owned subsidiary of the Company, anycompensation plan of the Company, any majority owned subsidiary of the Company or Lacy J. Harberand his affiliates and/or heirs, becomes the “beneficial owner” (as such term is defined in Rule13d 3 of the Exchange Act), directly or indirectly, of securities of the Company representing morethan 50% of the combined voting power of the Company; or               (ii) Any “person” (as such term is defined in Sections 13(d)(3) and Section 14(d)(3) of theExchange Act), other than the Company, any majority owned subsidiary of the Company, anycompensation plan of the Company, any majority owned subsidiary of the Company or Lacy J. Harberand his affiliates and/or heirs), becomes the “beneficial owner” (as such term is defined in Rule13d 3 of the Exchange Act), directly or indirectly, of securities of the Company representing morethan 35% of the combined voting power of the Company provided: (A) such person or person are notacting as a “group” (as such term is defined in Rule 13(d) under the Exchange Act) with respect tothe Company’s voting securities with Lacy J. Harber and his affiliates and/or heirs and (B) suchperson or persons own Company securities with more of the combined voting power of the Company thanthose held by Lacy J. Harber and his affiliates and/or heirs; or
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               (iii) The shareholders of the Company approve (1) a reorganization, merger, or consolidationwith respect to which persons who were the shareholders of the Company immediately prior to suchreorganization, merger, or consolidation do not immediately thereafter own more than 50% of thecombined voting power entitled to vote generally in the election of the directors of thereorganized, merged or consolidated entity; (2) a liquidation or dissolution of the Company; or (3)the sale of all or substantially all of the assets of the Company or of a subsidiary of the Companythat accounts for more than 66 2/3% of the consolidated revenues of the Company, but not includinga reorganization, merger or consolidation of the Company; or               (iv) John R. Cawthron is removed from his position as Chief Executive Officer of the Company.     **5. ****Successor To Company**. The Company shall require any successor, whether direct orindirect, to all or substantially all of the business, properties and assets of the Company whetherby purchase, merger, consolidation or otherwise, prior to or simultaneously with such purchase,merger, consolidation or other acquisition to execute and to deliver to the Employee a writteninstrument in form and in substance reasonably satisfactory to the Employee pursuant to which anysuch successor shall agree to assume and to timely perform or to cause to be timely performed allof the Company’s covenants, agreements and obligations set forth in this Agreement (a “SuccessorAgreement”). The failure of the Company to cause any such successor to execute and deliver aSuccessor Agreement to the Employee shall constitute a material breach of the provisions of thisAgreement by the Company.     **6. ****Restrictive Covenants****.**In consideration of his employment and the other benefitsarising under this Agreement, the Employee agrees that during the Employment Period and for aperiod of twelve (12) months following the Employment Period, the Employee shall not directly orindirectly:          (a) alone or as a partner, joint venturer, officer, director, member, employee, consultant,agent, independent contractor or stockholder of, or lender to, any company or business, engage inany business which competes, directly or indirectly, with any business of the Company; *provided,however,*that the beneficial ownership of less than one percent (1%) of the shares of stock of anycorporation having a class of equity securities actively traded on a national securities exchangeor over-the-counter market shall not be deemed, in and of itself, to violate the prohibitions ofthis Section; or          (b) for any reason, (i) induce any customer of the Company or any of its subsidiaries oraffiliates to patronize any business directly or indirectly in competition with the businessesconducted by the Company or any of its subsidiaries or affiliates in any market in which theCompany or any of its subsidiaries or affiliates does business; (ii) canvass, solicit or acceptfrom any customer of the Company or any of its subsidiaries or affiliates any such competitivebusiness; or (iii) request or advise any customer or vendor of the Company or any of itssubsidiaries or affiliates to withdraw, curtail or cancel any such customer’s or vendor’s businesswith the Company or any of its subsidiaries or affiliates; or          (c) for any reason, employ, or knowingly permit any company or business directly or indirectlycontrolled by him, to employ, any person who was employed by the
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Company or any of its subsidiaries or affiliates at or within the prior six months, or in anymanner seek to induce any such person to leave his or her employment.The provisions of this Section 6 shall apply to Employee whether or not Employee’s employment withthe Company has been terminated for Cause or without Cause and whether or not the Company isrequired to pay Employee severance benefits under Section 3 of this Agreement. Notwithstanding theforegoing, if this Agreement expires by its terms at the end of the Employment Period, then theprovisions of this Section 6 shall only apply to Employee if the Company provides Employee with allof the severance benefits which it would be obligated to provide to him under Section 3(c) of thisAgreement as if the Employee had been terminated from his employment with the Company withoutCause.     **7. ****Confidentiality****.**The Employee agrees that at all times during the term of thisAgreement and after the termination of employment for as long as such information remainsnon-public information, the Employee shall (i) hold in confidence and refrain from disclosing toany other party all information, whether written or oral, tangible or intangible, of a private,secret, proprietary or confidential nature, of or concerning the Company or any of its subsidiariesor affiliates and their business and operations, and all files, letters, memoranda, reports,records, computer disks or other computer storage medium, data, models or any photographic or othertangible materials containing such information (“Confidential Information”), including withoutlimitation, any sales, promotional or marketing plans, programs, techniques, practices orstrategies, any expansion plans (including existing and entry into new geographic and/or productmarkets), and any customer lists, (ii) use the Confidential Information solely in connection withhis employment with the Company or any of its subsidiaries or affiliates and for no other purpose,(iii) take all precautions necessary to ensure that the Confidential Information shall not be, orbe permitted to be, shown, copied or disclosed to third parties, without the prior written consentof the Company or any of its subsidiaries or affiliates, and (iv) observe all security policiesimplemented by the Company or any of its subsidiaries or affiliates from time to time with respectto the Confidential Information. In the event that the Employee is ordered to disclose anyConfidential Information, whether in a legal or regulatory proceeding or otherwise, the Employeeshall provide the Company or any of its subsidiaries or affiliates with prompt notice of suchrequest or order so that the Company or any of its subsidiaries or affiliates may seek to preventdisclosure. In addition to the foregoing the Employee shall not at any time libel, defame, ridiculeor otherwise disparage the Company.     **8. ****Specific Performance; Injunction****.**The parties agree and acknowledge that therestrictions contained in Sections 6 and 7 are reasonable in scope and duration and are necessaryto protect the Company or any of its subsidiaries or affiliates. If any provision of Section 6 or7 as applied to any party or to any circumstance is adjudged by a court to be invalid orunenforceable, the same shall in no way affect any other circumstance or the validity orenforceability of any other provision of this Agreement. If any such provision, or any partthereof, is held to be unenforceable because of the duration of such provision or the area coveredthereby, the parties agree that the court making such determination shall have the power to reducethe duration and/or area of such provision, and/or to delete specific words or phrases, and in itsreduced form, such provision shall then be enforceable and shall be enforced. The Employee agreesand acknowledges that the breach of Section 6 or 7 will cause irreparable injury to the Company orany of its subsidiaries or affiliates and upon breach of any provision of such Sections, theCompany or any of its subsidiaries or affiliates shall be entitled to injunctive
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relief, specific performance or other equitable relief, without being required to post a bond;*provided, however,*that, this shall in no way limit any other remedies which the Company or any ofits subsidiaries or affiliates may have (including, without limitation, the right to seek monetarydamages).     **9. ****Notices****.**All notices, requests, demands, claims and other communications hereundershall be in writing and shall be deemed given if delivered by hand delivery, by certified orregistered mail (first class postage pre-paid), guaranteed overnight delivery or facsimiletransmission if such transmission is confirmed by delivery by certified or registered mail (firstclass postage pre-paid) or guaranteed overnight delivery to, the following addresses and telecopynumbers (or to such other addresses or telecopy numbers which such party shall designate in writingto the other parties): (a) if to the Company, at its principal executive offices, addressed to theChief Executive Officer, with a copy to Philip B. Schwartz, Esq., Akerman, Senterfitt & Eidson,P.A., One Southeast Third Avenue, Miami, Florida 33156; and (b) if to the Employee, at the addresslisted on the signature page hereto.     **10. ****Amendment; Waiver****.**This Agreement may not be modified, amended, or supplemented,except by written instrument executed by all parties. No failure to exercise, and no delay inexercising, any right, power or privilege under this Agreement shall operate as a waiver, nor shallany single or partial exercise of any right, power or privilege hereunder preclude the exercise ofany other right, power or privilege. No waiver of any breach of any provision shall be deemed tobe a waiver of any preceding or succeeding breach of the same or any other provision, nor shall anywaiver be implied from any course of dealing between the parties. No extension of time forperformance of any obligations or other acts hereunder or under any other agreement shall be deemedto be an extension of the time for performance of any other obligations or any other acts. Therights and remedies of the parties under this Agreement are in addition to all other rights andremedies, at law or equity, that they may have against each other.     **11. ****Assignment; Third Party Beneficiary****.**This Agreement, and the Employee’s rightsand obligations hereunder, may not be assigned or delegated by him. The Company may assign itsrights, and delegate its obligations, hereunder to any affiliate of the Company, or any successorto the Company or its aviation services business, specifically including the restrictive covenantsset forth in Section 6 hereof. The rights and obligations of the Company under this Agreementshall inure to the benefit of and be binding upon its respective successors and assigns.     **12. ****Severability; Survival****.**In the event that any provision of this Agreement isfound to be void and unenforceable by a court of competent jurisdiction, then such unenforceableprovision shall be deemed modified so as to be enforceable (or if not subject to modification theneliminated herefrom) to the extent necessary to permit the remaining provisions to be enforced inaccordance with the parties intention. The provisions of Sections 6, 7 and 8 will survive thetermination for any reason of the Employee’s relationship with the Company.     **13. ****Indemnification****.**The Company agrees to indemnify the Employee during the term andafter termination of this Agreement in accordance with the provisions of the Company’s certificateof incorporation and bylaws and the Delaware General Corporation Law.
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     **14. ****Counterparts****.**This Agreement may be signed in any number of counterparts, each ofwhich shall be an original but all of which together shall constitute one and the same instrument.     **15. ****Governing Law****.**This Agreement shall be construed in accordance with and governedfor all purposes by the laws of the State of North Carolina applicable to contracts executed and tobe wholly performed within such State.     **16. ****Entire Agreement****.**This Agreement contains the entire understanding of the partiesin respect of its subject matter and supersedes all prior agreements and understandings (oral orwritten) between or among the parties with respect to such subject matter.     **17. ****Headings****.**The headings of Paragraphs and Sections are for convenience ofreference and are not part of this Agreement and shall not affect the interpretation of any of itsterms.     **18. ****Construction****.**This Agreement shall be construed as a whole according to its fairmeaning and not strictly for or against any party. The parties acknowledge that each of them hasreviewed this Agreement and has had the opportunity to have it reviewed by their respectiveattorneys and that any rule of construction to the effect that ambiguities are to be resolvedagainst the drafting party shall not apply in the interpretation of this Agreement.     **19. ****Resolution of Disputes****.**Any disputes arising under or in connection with thisAgreement shall be resolved by third party mediation of the dispute and, failing that, by bindingarbitration to be held in Greensboro, North Carolina in accordance with the rules and procedures ofthe American Arbitration Association. Judgment upon the award rendered by the arbitrator(s) may beentered in any court having jurisdiction thereof.**[Signatures on Next Page]**
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**IN WITNESS WHEREOF,**the parties have executed this Agreement effective as of the date first abovewritten.      **TIMCO AVIATION SERVICES, INC.,**