Document:

EX-10.5

EXHIBIT 10.5

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is made as of December
22, 2008, by and between Avatar Holdings Inc., a Delaware corporation (the “Company”) and
Gerald D. Kelfer (“Employee”) and amends and restates in its entirety, the amended and
restated employment agreement dated as of April 15, 2005 between the Company and Employee and as
further amended as of December 26, 2006 (the “Original Agreement”).

W I T N E S S E T H

WHEREAS, Employee is currently employed by the Company;

WHEREAS, the Company desires to amend the Original Agreement to comply with Section 409A of
the Internal Revenue Code of 1986, as amended (the “Code”) as permitted under the guidance
promulgated thereunder (collectively “Section 409A”); and

WHEREAS, such Agreement shall supersede the Original Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth,
the parties hereto agree as follows:

1. Employment. The Company agrees to employ Employee and Employee agrees to be
employed by the Company commencing as of the date hereof and ending on June 30, 2011 (unless sooner
terminated as hereinafter provided), on the terms and subject to the conditions set forth in this
Agreement.

2. Duties. (a) Employee shall continue to be nominated as a director of the Company
and, subject to Employee’s election thereto by the Board of Directors or the stockholders of the
Company, Employee shall be employed as the President and Chief Executive Officer of the Company.
In such capacities, Employee shall serve as the senior executive officer of the Company and shall
have the duties and responsibilities prescribed for such positions by the By-Laws of the Company,
and shall have such other duties and responsibilities as may from time to time be prescribed by the
Board of Directors of the Company or the Executive Committee of the Board of Directors, provided
that such duties and responsibilities are consistent with Employee’s position as the senior
executive officer. In the event that during the term of Employee’s employment hereunder Employee’s
duties and responsibilities are expanded or Employee’s title is changed (without reduction in
status), then in either or both events the rights and obligations under this Agreement shall not be
affected. In the performance of Employee’s duties, Employee shall be subject to the supervision
and direction of the Board of Directors of the Company and the Executive Committee of the Board of
Directors.

(b) Subject to the term of Employee’s employment hereunder, Employee shall devote Employee’s
full working time and effort to the proper performance of Employee’s duties and responsibilities as
President and Chief Executive Officer. Employee hereby represents and warrants to the Company that
Employee has no obligations under any existing employment or service agreement other than the
Original Agreement and that Employee’s performance of the services required of Employee hereunder
will not conflict with any other existing obligations or commitments. Nothing in this Agreement
shall preclude Employee from engaging, consistent with Employee’s duties and responsibilities
hereunder, in charitable and community affairs.

(c) Employee shall perform the services contemplated hereunder at the principal executive
office of the Company and at such other locations as may be reasonably necessary to the performance
of such services.

3. Compensation.

(a) Base Salary. During the term of Employee’s employment hereunder, the Company
shall pay Employee, and Employee shall accept from the Company for Employee’s services, a salary at
the rate of $500,000 per year (“Base Salary”). Such Base Salary shall be payable in
accordance with the Company’s policy with respect to the compensation of executives.

(b) Annual Bonus. During the term of Employee’s employment hereunder, the Company
shall pay Employee, and Employee shall accept from the Company for Employee’s services, in addition
to Employee’s Base Salary, a calendar year annual cash bonus of $500,000 (“Annual Bonus”).
Such Annual Bonus shall be payable on the last business day of the calendar year to which the
Annual Bonus relates.

(c) Expenses. During Employee’s employment, Employee will be entitled to receive
prompt reimbursement for all reasonable expenses incurred by Employee in performing Employee’s
services hereunder, provided that Employee properly accounts therefor in accordance with Company
policy. Notwithstanding anything in this Agreement to the contrary, expense reimbursements shall be
made by the Company no later than the end of the calendar year following the calendar year in which
the expense is incurred.

4. Vacations. During Employee’s employment, Employee shall be entitled to take such
amount of vacation per year as is permitted pursuant to and in accordance with the Company’s
policies for its senior executives (as such policies may be amended from time to time or terminated
in Avatar’s sole discretion), without loss or diminution of compensation. Employee shall also be
entitled to all paid holidays given by the Company to its senior executives.

5. Participation in Benefit Plans. Employee shall be entitled to participate in and
to receive benefits under all the Company’s employee benefit plans and arrangements in effect on
the date hereof, and Employee shall also be entitled to participate in or receive benefits under
any pension or retirement plan, savings plan, or health-and-accident plan made available by the
Company in the future to its senior executives and other key management employees, subject to and
on a basis consistent with the terms, conditions and overall administration of such plans and
arrangements and provided that Employee meets the eligibility requirements thereof.

6. Other Offices. Employee further agrees to serve without additional compensation,
if elected or appointed thereto, as an officer or director of any of the Company’s subsidiaries or
affiliates or as any other officer of the Company.

7. Termination.

(a) Death. Employee’s employment hereunder shall terminate upon Employee’s death.

(b) Disability. In the event of Employee’s Disability (as defined below) during the
term of Employee’s employment hereunder, the Company shall have the right, upon written notice to
Employee, to terminate Employee’s employment hereunder, effective upon the giving of such notice.
For the purposes hereof, “Disability” shall be defined as any physical or mental disability
or incapacity which renders Employee incapable of fully performing the services required of
Employee in accordance with Employee’s obligations hereunder for a period of 120 consecutive days
or for shorter periods aggregating 120 days during any period of twelve (12) consecutive months.

(c) Cause. The Company may terminate Employee’s employment hereunder for “Cause”.
For the purposes hereof, termination for “Cause” shall mean termination after:

(i) Employee’s commission of a material act of fraud against the Company or its
affiliates;

(ii) Employee’s conviction of (or pleading by Employee of nolo contendere to)
any crime which constitutes a felony that the Board of Directors of the Company
determines in good faith is or may become materially harmful to the Company, any of
its subsidiaries and/or affiliates (the foregoing entities being referred to herein
collectively as the “Avatar Entities” and each as an “Avatar
Entity”), either financially or with respect to such Avatar Entity’s business
reputation; or

(iii) the willful, repeated and demonstrable failure by Employee substantially
to perform Employee’s duties over a period of not less than 30 days, other than any
such failure resulting from Employee’s incapacity due to physical or mental illness,
or material breach of any of Employee’s obligations under this Agreement, and
Employee’s failure to cure such failure or breach within 30 days after receipt of
written notice from the Chairman of the Board of Directors of the Company.

(d) Termination by Employee for Good Reason. Employee may terminate Employee’s
employment hereunder for Good Reason. For purposes of this Agreement, “Good Reason” shall
mean (A) the failure of the Board of Directors to continue to recommend or elect, or the
stockholders of the Company to continue to elect, Employee as a director of the Company throughout
the term of Employee’s employment hereunder, or the failure of the Board of Directors to elect
Employee or continue to elect Employee to the Executive Committee of the Board, provided
that if Employee is not so continued, the Company shall be entitled to cure such failure within
thirty (30) days after Employee ceases to serve as a director or a member of the Executive
Committee, as the case may be, (B) any assignment to Employee of any material duties other than
those contemplated by, or any limitation of Employee’s powers or in any respect not contemplated
by, paragraph 2 hereof, provided that Employee first deliver written notice thereof to the
Chairman of the Board of Directors of the Company and the Company shall have failed to cure such
non-permitted assignment or limitation within thirty (30) days after receipt of such written
notice, (C) a material reduction in Employee’s rate of compensation, or a material reduction in
Employee’s fringe benefits (other than a material reduction in fringe benefits generally applicable
to senior executives of the Company) or any other material failure by the Company to perform any of
its material obligations hereunder, provided that Employee first deliver written notice
thereof to the Chairman of the Board of the Company and the Company shall not have cured such
reduction or failure within thirty (30) days after receipt of such written notice, or (D) the
Company relocates its principal place of business to a place whose distance is further than a (i)
75-mile radius from Coral Gables, Florida or (ii) 75-mile radius from New York, New York.

(e) Termination by Employee Following a Change in Control. Employee may terminate
Employee’s employment hereunder at any time during the period beginning on the date of the
consummation of a Change in Control (the “Change in Control Date”) and ending on the first
Anniversary of the Change in Control Date. For purposes of this Agreement, a “Change of
Control” shall mean any of the following events:

(1) a person or entity or group of persons or entities, acting in concert, become the
direct or indirect beneficial owner (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of securities of the Company representing ninety percent
(90%) or more of the combined voting power of the issued and outstanding Common Stock; or

(2) the Board approves any merger, consolidation or like business combination or
reorganization of Avatar, the consummation of which would result in the occurrence of the
event described in clause (1) above, and such transaction shall have been consummated.

(f) Any termination by the Company pursuant to paragraphs (b) or (c) above or by Employee
pursuant to paragraph (d) or (e) above shall be communicated by written Notice of Termination to
the other party hereto. For the purposes hereof, a “Notice of Termination” shall mean a
notice which shall indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee’s employment under the provision so indicated.

(g) “Date of Termination” shall mean (i) if Employee’s employment is terminated by
Employee’s death, the date of Employee’s death, (ii) if Employee’s employment is terminated for any
other reason, the date on which a Notice of Termination is given, or (iii) absent a termination
pursuant to clause (i) or (ii) above, June 30, 2011.

(h) With respect to any date referred to in this Agreement, the term “Anniversary”
shall mean the annual recurrence of such date.

8. Compensation Upon Termination or During Disability; Excise Taxes Upon Change in
Control.

(a) Death. If Employee’s employment shall be terminated by reason of Employee’s death,
the Company shall pay, to such person as Employee shall designate in a notice filed with the
Company, or, if no such person shall be designated, to Employee’s estate as a death benefit within
thirty (30) days of the Date of Termination, a lump sum payment equal to any accrued but unpaid
Base Salary and a prorated Annual Bonus at the time of Employee’s death. This amount shall be
exclusive of and in addition to any payments that Employee’s widow, beneficiaries or estate may be
entitled to receive pursuant to any pension or employee benefit plan maintained by the Company.
Employee’s designated beneficiary or the executor of Employee’s estate, as the case may be, shall
accept the payment provided for in this paragraph 8 in full discharge and release of the Company of
and from any further obligations under this Agreement, subject to payments, if any, provided for in
paragraph 8(f) below.

(b) Disability. During any period that Employee fails to perform Employee’s duties
hereunder as a result of incapacity due to physical or mental illness, Employee shall continue to
receive Employee’s full Base Salary payable in accordance with normal payroll practices and a
prorated Annual Bonus payable in accordance with paragraph 3(b), until, if applicable, Employee’s
employment is terminated pursuant to paragraph 7(b) hereof. If Employee’s employment is terminated
by the Company pursuant to paragraph 7(b), the Company shall be discharged and released of and from
any further obligations under this Agreement, subject to payments, if any, provided for in
paragraph 8(f) below. During any such period and thereafter Employee shall continue to bear the
obligations provided for in paragraph 9 below in accordance with the terms of such paragraph 9.

(c) Termination for Cause or Resignation Without Good Reason. If Employee’s employment
shall be terminated for Cause or Employee shall terminate Employee’s employment other than for Good
Reason, the Company shall pay Employee Employee’s (i) in a lump sum payment within thirty (30) days
following the Date of Termination, all Base Salary which has been earned but has not been paid as
of the Date of Termination and (ii) a prorated Annual Bonus through the Date of Termination payable
in a lump sum payment in accordance with paragraph 3(b). The Company shall be discharged and
released of and from any further obligations under this Agreement. Thereafter, Employee shall
continue to have the obligations provided for in paragraph 9 below. Nothing contained herein shall
be deemed to be a waiver by the Company of any rights that it may have against Employee in respect
of Employee’s actions which gave rise to the termination of Employee’s employment for Cause.

(d) Termination Without Cause or Resignation For Good Reason. If the Company shall
terminate Employee’s employment other than pursuant to paragraph 7(b) or 7(c) hereof or if Employee
shall terminate Employee’s employment for Good Reason, then:

(i) The Company shall continue to pay Employee his full Base Salary in
accordance with normal payroll practices and without interest through the earlier of
(x) June 30, 2011 and (y) the second Anniversary of the Date of Termination at the
rate in effect at the time Notice of Termination is given in accordance with
paragraph 7(f) hereof;

(ii) The Company shall continue to pay Employee his Annual Bonus payable in a
lump sum payment in accordance with paragraph 3(b) and without interest through the
earlier of (x) June 30, 2011 and (y) the second Anniversary of the Date of
Termination;

(iii) The Company shall pay Employee the severance payments described in
paragraph 8(f) below; and

(iv) The Company shall maintain in full force and effect, for Employee’s
continued benefit, all employee benefit plans and programs to the extent applicable
to other senior executives of the Company (provided that Employee’s continued
participation is permissible under the general terms and provisions of such plans
and programs) through the earlier of (x) June 30, 2011 and (y) the second
Anniversary of the Date of Termination. In the event that Employee’s participation
in any such plan or program is not permitted, Employee shall be entitled to receive
an amount equal to the annual contributions, payments, credits or allocations made
by the Company to Employee’s account or on Employee’s behalf under such plans and
programs.

(e) Termination by Employee Following a Change in Control. If Employee shall
terminate Employee’s employment hereunder pursuant to paragraph 7(e) hereof, then Employee shall
continue to receive Employee’s Base Salary in accordance with normal payroll practices and Annual
Bonus in accordance with paragraph 3(b) through the earlier of (i) the first Anniversary of the
Date of Termination or (ii) June 30, 2011.

(f) Severance Payments. If Employee’s employment terminates on June 30, 2011 pursuant
to paragraph 1 of this Agreement, Employee terminates his employment for Good Reason or Employee is
terminated by the Company without Cause, the Company shall pay or provide to Employee beginning in
the calendar year following the Date of Termination an annual payment of $250,000 for four (4)
years, payable within thirty (30) days following the beginning of each such calendar year. If
Employee’s employment with the Company is terminated by Employee’s death or Disability prior to
June 30, 2011 or Employee terminates his employment pursuant to paragraph 7(e) hereof, Employee (or
the executor or administrator of the deceased Employee’s estate or the person or persons to whom
the deceased Employee’s rights shall pass by will or the laws of descent or distribution, as
applicable) shall be entitled to receive, beginning in the calendar year following the Date of
Termination, an annual payment for four (4) years, payable within thirty (30) days following the
beginning of each such calendar year, equal to the product of (x) a fraction (which in no event
shall exceed one (1)) the numerator of which is the number of completed whole months elapsed from
November 30, 2000 to the date of death, Disability or termination of employment, as the case may be
(whichever is earliest), and the denominator of which is ninety-seven (97) and (y) $250,000.

(g) If the Company shall terminate Employee’s employment hereunder other than pursuant to
paragraphs 7(b) or 7(c) hereof, or if Employee shall terminate Employee’s employment pursuant to
paragraph 7(d) hereof, Employee agrees, during the entire period of time that Employee is entitled
to receive any benefits pursuant to paragraph 8(d) above, to make known Employee’s availability for
employment involving services of a nature substantially similar and of a comparable stature to
those performed by Employee on behalf of the Company in a manner customary for executives holding
positions substantially similar and of a comparable stature to Employee’s position with the
Company. Employee agrees to keep the Chairman of the Board of the Company (or his designee)
apprised of Employee’s employment status during such period and, if requested, Employee will
provide appropriate supporting documentation with respect to the salary, bonuses or other
compensation earned by and benefits made available to Employee in respect of such employment. In
the event Employee secures employment as described in this paragraph 8(g), the Company shall be
entitled to (i) deduct from the amounts payable to Employee pursuant to paragraphs 8(d)(i) and
8(d)(ii) above (excluding any accrued but unpaid Annual Bonus through the Date of Termination) any
salary, bonuses or other compensation paid to Employee in connection with such employment and
(ii) terminate Employee’s participation in (and shall not be required to pay Employee any sums in
respect of) any employee benefit plans and programs described in paragraph 8(d)(iii) that are
substantially similar to any employee benefit plans and programs in which Employee participates in
connection with such new or existing employment. Employee agrees promptly to repay to the Company
any amounts paid to Employee by the Company pursuant to paragraphs 8(d)(i) and 8(d)(ii) which the
Company was entitled to deduct from such amounts pursuant to this paragraph 8(g).

(h) If Employee becomes entitled to any payment, benefit or distribution (or combination
thereof) by the Company or any other Avatar Entity, whether paid or payable pursuant to this
Agreement or any other plan, arrangement, or agreement with the Company or any other Avatar Entity
(the “Payments”), which are or become subject to the excise tax imposed by Section 4999 of
the Code, or any interest or penalties are incurred by Employee with respect to such excise tax
(such excise tax, together with any such interest and penalties, hereinafter collectively referred
to as the “Excise Tax”), the Payments shall be reduced by an amount not to exceed $250,000
until no portion of such Payments would be subject to Excise Tax. The reduction of the Payments, if
applicable, shall be made by reducing the cash portion of the Payments under the following
paragraphs in the following order: (A) paragraph 8(e), and (B) paragraph 8(f). Notwithstanding the
foregoing, if the reduction in the Payments required so that no portion of the Payments are subject
to the Excise Tax would be greater than $250,000, then Employee in his sole discretion may elect
whether or not to reduce the Payments to avoid the Excise Tax. In such case, if Employee elects
not to reduce the Payments then Employee shall be responsible for the payment of the Excise Tax.

9. Non-Competition and Protection of Confidential Information.

(a) Restrictive Covenants. Employee agrees, as a condition to the performance by the
Company of its obligations hereunder, particularly its obligations under paragraph 3 hereof, that
during the term of Employee’s employment hereunder and through the first Anniversary of the Date of
Termination, Employee shall not, without the prior written approval of the Board of Directors of
the Company, directly or indirectly through any other person, firm or corporation:

(i) Engage, participate, own or make any financial investments in, or become
employed by or render (whether or not for compensation) any consulting, advisory or
other services to or for the benefit of, any person, firm or corporation, that
directly or indirectly, engages primarily in, the development of adult retirement
communities and/or active adult communities; provided, however, that
it shall not be a violation of this Agreement for Employee (i) to have beneficial
ownership of less than 1% of the outstanding amount of any class of securities of
any enterprise (but without otherwise participating in the activities of such
enterprise) if such securities are registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) or quoted on an
inter-dealer quotation system or (ii) to have beneficial ownership of less than 20%
of the outstanding amount of any class of securities of any enterprise (but without
otherwise participating in the activities or otherwise having influence or control
of such enterprise) if such securities are not registered under Section 12 of the
Exchange Act or quoted on an inter-dealer quotation system;

(ii) Solicit, raid, entice or induce any person, firm or corporation that
presently is or at any time during the term of Employee’s employment hereunder a
customer of any of the Avatar Entities to become a customer of any other person,
firm or corporation, and Employee shall not approach any such person, firm or
corporation for such purpose or authorize or knowingly approve the taking of such
actions by any other person; or

(iii) Solicit, raid, entice or induce any person that presently is or at any
time during the term of Employee’s employment hereunder an employee of any of the
Avatar Entities to become employed by any person, firm or corporation, and Employee
shall not approach any such employee for such purpose or authorize or knowingly
approve the taking of such actions by any other person.

(b) Confidential Information. Recognizing that the knowledge, information and
relationship with customers, suppliers, and agents, and the knowledge of the Avatar Entities’
business methods, systems, plans and policies which Employee shall hereafter establish, receive or
obtain as an employee of the Company or any other Avatar Entity, are valuable and unique assets of
the respective businesses of the Avatar Entities, Employee agrees that, during and after the term
of Employee’s employment hereunder, Employee shall not (other than pursuant to Employee’s duties
hereunder) disclose, without the prior written approval of the Board of Directors of the Company,
any such knowledge or information pertaining to any of the Avatar Entities, their business,
personnel or policies, to any person, firm, corporation or other entity, for any reason or purpose
whatsoever. The provisions of this paragraph 9 shall not apply to information (i) that is or shall
become generally known to the public or the trade (except by reason of Employee’s breach of
Employee’s obligations hereunder), (ii) that is or shall become available in trade or other
publications, (iii) that is known to Employee prior to entering the employ of the Company, and (iv)
that Employee is required to disclose by order of a court of competent jurisdiction (provided that
prior to Employee’s disclosure of any such information Employee shall provide the Company with
reasonable notice and a reasonable opportunity to seek a protective order to prevent such
disclosure).

(c) Geographic Scope. The provisions of this paragraph 9 (other than paragraphs
9(a)(ii) and (iii) and 9(b), which shall be in full force and effect without regard to the
geographic limitations set forth in this paragraph 9(d)) shall be in full force and effect within a
100-mile radius of a site for which any Avatar Entity is preparing to develop, has commenced
development of, or has a binding commitment or option to purchase, real estate. Employee and the
Company expressly agree that the prohibitions set forth in paragraph 9(a)(i) shall be in full force
and effect with respect to any services or business activity which competes in the above mentioned
geographic area with the business operations or activities of any of the Avatar Entities,
regardless of the geographic location of Employee in rendering such services or engaging in such
business activity.

(d) Survival. The provisions of this paragraph 9 shall survive the termination of
Employee’s employment hereunder, irrespective of the reason therefor.

(e) Remedies. Employee acknowledges that his services are of a special, unique and
extraordinary character and, his position with the Avatar Entities places him in a substantial
relationship and a position of confidence and trust with specific prospective or existing
customers, suppliers and employees of the Avatar Entities, and that in connection with his services
to the Company, Employee will have access to confidential business or professional information
vital to the Avatar Entities’ businesses. Employee further acknowledges that in view of the nature
of the business in which the Avatar Entities are engaged, the foregoing restrictive covenants in
this paragraph 9 hereof are reasonable and necessary in order to protect the legitimate business
interests of the Avatar Entities and that violation thereof would result in irreparable injury to
the Avatar Entities. Accordingly, Employee consents and agrees that if Employee violates or
threatens to violate any of the provisions of this paragraph 9 hereof the Avatar Entities would
sustain irreparable harm and, therefore, the Avatar Entities shall be entitled to obtain from any
court of competent jurisdiction, temporary, preliminary and/or permanent injunctive relief as well
as damages, attorneys fees and costs, and an equitable accounting of all earnings, profits and
other benefits arising from such violation, which rights shall be cumulative and in addition to any
other rights or remedies in law or equity to which the Avatar Entities may be entitled.

10. Section 409A of the Code.

(a) If any payment, compensation or other benefit provided to Employee in connection with his
employment termination is determined, in whole or in part, to constitute “nonqualified deferred
compensation” within the meaning of Section 409A and Employee is a specified employee as defined in
Section 409A(a)(2)(B)(i), no part of such payments shall be paid before the day that is six (6)
months plus one (1) day after the date of termination or earlier death (the “New Payment
Date”). The aggregate of any payments that otherwise would have been paid to Employee during
the period between the date of termination and the New Payment Date shall be paid to Employee in a
lump sum on such New Payment Date. Thereafter, any payments that remain outstanding as of the day
immediately following the New Payment Date shall be paid without delay over the time period
originally scheduled, in accordance with the terms of this Agreement. Notwithstanding the
foregoing, to the extent that the foregoing applies to the provision of any ongoing welfare
benefits to Employee that would not be required to be delayed if the premiums therefor were paid by
Employee, Employee shall pay the full cost of premiums for such welfare benefits during the
six-month period and the Company shall pay Employee an amount equal to the amount of such premiums
paid by Employee during such six-month period promptly after its conclusion. A termination of
employment shall not be deemed to have occurred for purposes of any provision of this Agreement
providing for the payment of any amounts or benefits subject to Section 409A upon or following a
termination of employment unless such termination is also a “separation from service” within the
meaning of Section 409A, and for purposes of any such provision of this Agreement, references to a
“resignation,” “termination,” “terminate,” “termination of employment” or like terms shall mean
separation from service.

(b) All reimbursements for costs and expenses under this Agreement shall be paid in no event
later than the end of the calendar year following the calendar year in which Employee incurs such
expense. With regard to any provision herein that provides for reimbursement of costs and expenses
or in-kind benefits, except as permitted by Section 409A, (i) the right to reimbursement or in-kind
benefits shall not be subject to liquidation or exchange for another benefit, and (ii) the amount
of expenses eligible for reimbursements or in-kind benefits provided during any taxable year shall
not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other
taxable year, provided, however, that the foregoing clause (ii) shall not be violated with regard
to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because
such expenses are subject to a limit related to the period the arrangement is in effect.

(c) The parties acknowledge and agree that the interpretation of Section 409A and its
application to the terms of this Agreement is uncertain and may be subject to change as additional
guidance and interpretations become available. Anything to the contrary herein notwithstanding,
all benefits or payments provided by the Company to Employee that would be deemed to constitute
“nonqualified deferred compensation” within the meaning of Section 409A are intended to comply with
Section 409A. If, however, any such benefit or payment is deemed to not comply with Section 409A,
the Company and Employee agree to renegotiate in good faith any such benefit or payment (including,
without limitation, as to the timing of any severance payments payable hereof) so that either (i)
Section 409A will not apply or (ii) compliance with Section 409A will be achieved; provided,
however, that any resulting renegotiated terms shall provide to Employee the after-tax economic
equivalent of what otherwise has been provided to Employee pursuant to the terms of this Agreement,
and provided further, that any deferral of payments or other benefits shall be only for such time
period as may be required to comply with Section 409A.

(d) If under this Agreement, an amount is paid in two or more installments, for purposes of
Section 409A, each installment shall be treated as a separate payment.

11. Deductions and Withholdings. The Company shall be entitled to withhold any
amounts payable under this Agreement on account of payroll taxes and similar matters as are
required by applicable law, rule or regulation of appropriate governmental authorities.

12. Successors; Binding Agreement.

(a) The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance reasonably satisfactory to Employee, to expressly
assume and agree to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle Employee to compensation from the Company in the same
amount and on the same terms as Employee would be entitled to hereunder if Employee terminated
Employee’s employment for Good Reason, except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, “Company” shall include any successor to the Company’s business
and/or assets as aforesaid which executes and delivers the agreement provided for in this paragraph
12 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation
of law. Except as set forth above, the Company may not assign this Agreement or any of its rights
or obligations hereunder, without Employee’s prior written consent.

(b) This Agreement and all Employee’s rights hereunder shall inure to the benefit of and be
enforceable by Employee’s personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If Employee should die while any amounts would still
be payable to Employee hereunder if Employee had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this Agreement to
Employee’s devisee, legatee, or other designee or, if there be no such designee, to Employee’s
estate. Employee’s obligations hereunder may not be delegated and except as otherwise provided
herein relating to the designation of a devisee, legatee or other designee, Employee may not
assign, transfer, pledge, encumber, hypothecate or otherwise dispose of this Agreement or any of
Employee’s rights hereunder, and any such attempted delegation or disposition shall be null and
void and without effect.

(c) This Agreement has been duly authorized by the Company, and constitutes the legal, valid
and binding obligation of the Company, enforceable against it in accordance with its terms.
Employee agrees that this Agreement constitutes Employee’s legal, valid and binding obligation and
is enforceable against Employee in accordance with its terms.

13. Notice. For the purposes of this Agreement, notices and all other communications
provided for shall be in writing and shall be deemed to have been duly given when delivered or
mailed by United States registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

If to Employee:

Mr. Gerald D. Kelfer

7426 S.W. 49th Place

Miami, Florida 33143

If to the Company:

Avatar Holdings Inc.

201 Alhambra Circle, 12th Floor

Coral Gables, Florida 33134

Attention: Chairman of the Board

Facsimile: (305) 441-7876

and with a copy to:

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Attention: R. Todd Lang, Esq.

Facsimile: (212) 310-8007

or to such other address as any party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon receipt.

14. Miscellaneous. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing signed by Employee
and by the Company. No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time.

15. Entire Agreement. This Agreement and the letter agreement dated as of May 20,
2005 between the Company and Employee, constitute the complete understanding between the parties
with respect to Employee’s employment and supersedes any other prior oral or written agreements
between Employee and any Avatar Entity (including the Original Agreement).

16. Governing Law. This Agreement shall be subject to, and governed by, the laws of
the State of Florida applicable to contracts made and to be performed in the State of Florida,
regardless of where Employee is in fact required to work.

17. Validity. The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.

18. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will constitute one and the same
instrument.

(signature page follows)

1

IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first written above.

AVATAR HOLDINGS INC.

By: /s/ Juanita I. Kerrigan

Name: Juanita Kerrigan

Title: Vice President

/s/ Gerald D. Kelfer

	 	 	Gerald D. Kelfer

2EX-10.6

EXHIBIT 10.6

AMENDED AND RESTATED 2008-2010 EARNINGS PARTICIPATION AWARD AGREEMENT

This AMENDED AND RESTATED 2008-2010 EARNINGS PARTICIPATION AWARD AGREEMENT, dated December 22,
2008 (the “Agreement”), is made by and between Avatar Holdings Inc., a Delaware corporation
(the “Company”) and Gerald D. Kelfer (the “Participant”), and amends and restates
in its entirety the 2008-2010 Earnings Participation Award Agreement, by and between the Company
and the Participant, dated April 15, 2005 (the “Original Agreement”).

The Company and the Participant wish to provide for certain modifications to the Original
Agreement to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”) and wish to amend, restate and supersede the Original Agreement, all upon the terms
and conditions set forth herein.

The Cash Awards (as defined in the Original Agreement) granted to the Participant pursuant to
the Original Agreement remain in effect as amended and restated in this Agreement.

1. AWARD. Pursuant to the provisions of the Avatar Holdings Inc. 2005 Executive Incentive
Compensation Plan, as the same may be amended, restated, modified and supplemented from time to
time (the “Executive Plan”) the Committee (as defined in the Executive Plan) hereby awards
to the Participant, on the date hereof, subject to the terms and conditions of the Executive Plan
and subject further to the terms and conditions and other provisions herein set forth, the Cash
Awards if, as of an applicable Performance Goal Test Date (as defined below), the Performance Goal
(as defined below) applicable to such Cash Award is satisfied.

2. CERTAIN DEFINITIONS.

(a) Capitalized terms used but not defined herein shall have the meanings assigned to them in
the Plans.

(b) Each reference contained in this Agreement to:

“Anniversary” shall mean, with respect to any date, the annual recurrence of
such date.

“Actual Gross Profit Amount” shall mean the Company’s cumulative Gross Profit
during the Performance Period.

“Annual Cash Award” shall mean, with respect to each fiscal year during the
Performance Period ending on a Performance Goal Test Date, a cash payment equal to two and
one-quarter percent (2.25%) of the excess, if any, of (x) the Gross Profit earned by the
Company for such fiscal year, over (y) the Minimum Gross Profit Level for such
fiscal year.

“Business Plan” shall mean the Company’s business plan for the period
commencing on January 1, 2005 and ending on December 31, 2010, as submitted to the
Compensation Committee at a meeting held on March 3, 2005.

“Cash Awards” shall mean, collectively, the Annual Cash Award and the
Cumulative Cash Award, and “Cash Award” shall mean each of the Annual Cash Award
and the Cumulative Cash Award.

“Common Stock” shall mean common stock, par value $1.00 per share, of the
Company.

“Cumulative Cash Award” shall mean a cash payment equal to one and one-half
percent (1.5%) of the excess, if any, of (x) the Actual Gross Profit Amount over (y) the
Target Gross Profit Amount.

“Excluded Amounts” shall mean, with respect to a fiscal year of the Company,
as at any date of determination, an amount equal to the dollar amount of any Gross Profit
attributable to Harbor Islands and the Rio Rico Excluded Properties for such fiscal year.

“Gross Profit” shall mean, with respect to a fiscal year of the Company, the
excess, if any, of (x) the sum of (i) the amount set forth in the Company’s audited
Consolidated Statements of Operations as set forth in the Company’s annual report on Form
10-K (the “Income Statement”) for such fiscal year with respect to the line item “Net
income (loss)” plus (ii) the amount reflected in the Company’s Income Statement for
such fiscal year as compensation expense relating to the 2008-2010 Earnings Participation
Award Agreements, dated the date hereof, between the Company and each of Gerald Kelfer,
Jonathan Fels and Michael Levy, as amended from time to time, plus (iii) the
amount, if any, set forth in the Company’s Income Statement for such fiscal year with
respect to the line item “Income tax expense (benefit)”, to the extent that there is
“Income tax expense” less (iv) the amount, if any, set forth in the Company’s
Income Statement for such fiscal year with respect to the line item “Income tax expense
(benefit)”, to the extent that there is “Income tax (benefit)” plus (v) the
amount(s), if any, set forth in the Company’s Income Statement for such fiscal year
relating to any income tax expense included in any income or (loss) attributable to the
discontinued operations and/or extraordinary items set forth in the Income Statement
less (vi) the amount(s), if any, set forth in the Company’s Income Statement for
such fiscal year relating to any income tax (benefit) included in any income or (loss)
attributable to such discontinued operations and/or extraordinary items set forth in the
Income Statement plus (vii) for purposes of determining the Annual Cash Award, the
Gross Profit Carry Forward Amount, if any, with respect to the Company’s prior fiscal year,
over (y) the Excluded Amounts for such fiscal year.

“Gross Profit Carry Forward Amount” shall mean an amount equal to (x) the
excess of the amount of the Annual Cash Award that would otherwise be payable to the
Participant but for the Annual Cap, over the amount of the Annual Cap, divided by (y)
2.25%; provided, that in no event shall the Gross Profit Carry Forward Amount
exceed $20,000,000.

“Harbor Islands” shall mean the development and/or sale of the Company’s
property in Hollywood, Florida, generally known by the Company as parcels 1, 8 and 9 at
“Harbor Islands.”

“Minimum Cumulative Gross Profit Level” shall mean that, as of Performance
Goal Test Date applicable to the Cumulative Cash Award, (x) the Actual Gross Profit Amount
is greater than (y) the Target Gross Profit Amount.

“Minimum Gross Profit Level” shall mean the Gross Profit set forth opposite
each fiscal year ending on the dates set forth below:

	 	 	 
	Fiscal Year End	 	Gross Profit
	December 31, 2008

December 31, 2009

December 31, 2010

	 	$40,000,000

$50,000,000

$60,000,000

“Payment Date” shall have the meaning ascribed to such term in Section 3(c).

“Performance Goal” shall mean (i) in the case of the Annual Cash Award, the
achievement of the Minimum Gross Profit Level in any fiscal year, ending on December 31,
during the Performance Period and (ii) in the case of the Cumulative Cash Award, the
achievement of the Minimum Cumulative Gross Profit Level for the entire Performance Period.

“Performance Goal Test Date” shall mean with respect to the Annual Cash Award,
December 31 of each year within the Performance Period and with respect to the Cumulative
Cash Award, the earlier of (i) a Change in Control Date and (ii) the Last Day of the
Performance Period.

“Performance Period” shall mean the period commencing January 1, 2008 and
ending on December 31, 2010 (December 31, 2010, being the “Last Day of the Performance
Period”).

“Rio Rico Excluded Properties” shall mean those parcels of land not suitable
for development in accordance with the Company’s current Business Plan due to environmental
factors located in the Company’s property in Rio Rico, Arizona, generally known by the
Company as “Rio Rico”.

“Target Gross Profit Amount” shall mean $390,000,000.

(c) For purposes of this Agreement, the terms “Cause”, “Change in Control”,
“Change in Control Date”, “Good Reason” and “Disability” shall have the
meanings ascribed to such terms in the Participant’s amended and restated employment agreement with
the Company, dated as of the date hereof, as amended or restated from time to time;
provided, however, if the Participant is no longer employed pursuant to such
employment agreement, each such term shall have the meaning ascribed to it in the employment
agreement last in effect which contains such defined term.

3. TERMS AND CONDITIONS. The Cash Awards evidenced by this Agreement are subject to the following
terms and conditions:

(a) The payment of performance-based compensation described herein is contingent upon the
achievement of the Performance Goal applicable to each Cash Award.

(b) Subject to Section 4 hereof (i) the Participant shall be entitled to receive a payment on
the related Payment Date pursuant to the Annual Cash Award if the applicable Performance Goal is
satisfied on the applicable Performance Goal Test Date and (ii) the Participant shall be entitled
to receive the Cumulative Cash Award on the related Payment Date if the applicable Performance Goal
is satisfied on the applicable Performance Goal Test Date.

(c) The Committee shall determine whether a Performance Goal has been met as of the applicable
Performance Goal Test Date and, (i) if it has, shall so certify in writing and ascertain the amount
of cash to be paid, if any, to the Participant and (ii) if it has not, shall so certify in writing
with a brief explanation as to the methodology and calculation of the Committee in determining that
such Performance Goal has not been met. Payments of cash in a lump sum, if any, pursuant to the
Cash Awards shall be made to the Participant, in each case in the fiscal year following the year
during which the applicable Performance Goal Test Date occurs, within thirty (30) days following
the filing with the Securities and Exchange Commission of an annual report on Form 10-K (which
contains audited financial statements) for such fiscal year but in no event later than April 1st of
the fiscal year following the year during which the applicable Performance Goal Test Date occurs
(each such date being a “Payment Date”).

(d) Notwithstanding anything to the contrary contained in this Agreement, in the event a
Change in Control Date occurs during the Performance Period, the Participant shall be entitled to
receive (i) a pro rata portion of the Annual Cash Award (as of the Change in Control Date) for the
fiscal year in which such Change in Control Date occurs and (ii) any cash payment pursuant to the
Cumulative Cash Award. The Committee shall determine the basis, methodology and calculation for,
and any estimates used in, determining the prorated Actual Gross Profit Amount and prorated Minimum
Gross Profit Level for the portion of the fiscal year preceding the Change in Control Date. The
determination of the Committee as to any such partial award shall be final and binding on all
parties, including the Participant and the Company. Such Cash Awards shall be paid in a lump sum
cash payment within thirty (30) days following the Change in Control Date.

4. LIMITATIONS ON AWARDS. Notwithstanding anything to the contrary herein:

(a) The maximum cash amount that may be paid to the Participant pursuant to the Annual Cash
Award (the “Annual Cap”) shall be $1,800,000 for each fiscal year during the Performance
Period; provided, however, that in the event that the Annual Cash Award is less
than $1,800,000 with respect to either or both of the first two (2) fiscal years of the Performance
Period (the amount by which such Annual Cash Awards are less than $1,800,000, in the aggregate, is
referred to herein as the “Shortfall Amount”), the Annual Cap with respect to the third
fiscal year of the Performance Period shall equal the sum of (x) $1,800,000 plus (y) the Shortfall
Amount; provided, further, that in no event shall the Shortfall Amount exceed
$400,000.

(b) The maximum cash amount that may be paid to the Participant pursuant to the Cumulative
Cash Award shall be $1,200,000.

(c) The maximum payment of cash pursuant to the Cash Awards shall be subject to the
limitations in the Executive Plan and the Participant’s employment agreement with the Company or a
subsidiary or affiliate thereof (the foregoing entities being referred to herein collectively as
the “Avatar Entities” and each as an “Avatar Entity”), each as may be amended,
restated, modified or supplemented from time to time.

5. TERMINATION OF EMPLOYMENT.

(a) If the Participant’s employment with Avatar Properties is terminated by Avatar Properties
for Cause or by the Participant Without Good Reason, in addition to any other consequences of such
termination provided for in this Agreement or any other agreement, notwithstanding Section 3
hereof, Participant shall forfeit any right to cash payments that would otherwise accrue pursuant
to this Agreement on or after the date of such termination.

(b) If the Participant’s employment with the Company is terminated by the Company other than
for Cause or by the Participant for Good Reason, the Participant shall be entitled to continue to
receive such cash payments as would otherwise be made pursuant to this Agreement as though the
Participant’s employment had not been terminated.

(c) If the Participant’s employment with the Company is terminated due to the Participant’s
death or Disability, subject to Section 3(d) hereof:

(i) the Participant shall be entitled to receive in a lump sum only that portion of any cash
payments otherwise payable pursuant to Section 3(c) hereof following such termination in accordance
with Section 3(c), equal to the product of (x) a fraction (which in no event shall exceed one (1))
the numerator of which is the number of completed whole months elapsed after the first day of the
Performance Period to the date of death or Disability, as the case may be, and the denominator of
which is the number of whole months from the first day of the Performance Period until the
applicable Performance Goal Test Date and (y) the amount of any cash payments that would have been
payable pursuant to Section 3(c) hereof if the Participant remained an employee of the Company
through and including the Last Day of the Performance Period; provided, however,
that with respect to cash payments pursuant to the Annual Cash Award, the Participant shall only be
eligible to receive a cash payment for the fiscal year in which the Participant’s employment was
terminated for death or Disability, as the case may be, and the Participant shall not be eligible
for any additional cash payments; and

(ii) the Participant will have no right to any other payments hereunder.

Any payments to the Participant (or the executor or administrator of the deceased
Participant’s estate or the person or persons to whom the deceased Participant’s rights shall pass
by will or the laws of descent or distribution, as applicable) pursuant to this Section 5(c) shall
be made no later than the relevant Payment Date.

6. FORFEITURE UPON BREACH OF RESTRICTIVE COVENANTS. Notwithstanding anything to the contrary set
forth in this Agreement, if the Participant breaches any provision relating to the Participant’s
covenant to keep information confidential, not to compete, not to solicit or similar restrictive
covenant contained in the Participant’s employment or other agreement with any of the Avatar
Entities (after the expiration of any notice and cure period), then in addition to any other rights
or remedies arising from or relating to such breach the Participant shall forfeit any right to any
cash payments pursuant to this Agreement from and after the date of such breach.

7. CLAWBACK; ADDITIONAL PAYMENTS; NO OFFSET BY PARTICIPANT; COMPANY OFFSET.

(a) In the event that the Company’s financial statements with respect to any fiscal year (or
portion thereof) within the Performance Period are restated within eighteen (18) months following
the payment to the Participant of cash pursuant to a Cash Award such that Gross Profit is less than
previously reported, the Participant shall pay to the Company upon demand by the Company following
the filing of such restated financial statements with the Securities and Exchange Commission, an
amount equal to the sum of (i) the excess of (A) the Excess Bonus Payments (as defined below) over
(B) the hypothetical income tax liability attributable to such Excess Bonus Payments (as determined
by the Committee by applying the highest marginal United States federal, state and local individual
income tax rates applicable to an individual resident of Coral Gables, Florida for the relevant
taxable period, taking into account the deductibility of state and local income taxes for federal
income tax purposes), and (ii) as determined by the Committee, the present value of any tax
benefits accruing to the Participant as a result of making any payments pursuant to this Section
7(a) to the Company. For purposes of the preceding sentence, “Excess Bonus Payments” shall
mean an amount equal to the difference between (x) the amount of the cash payment pursuant to the
Cash Award paid to the Participant and (y) the amount that cash payment pursuant to the Cash Award
would have been if the Company had used the restated financial statements to determine the amount
of the Company’s Gross Profit for the Performance Goal Test Date.

(b) In the event that the Company’s financial statements with respect to any fiscal year (or
portion thereof) within the Performance Period are restated within eighteen (18) months following
the payment to the Participant of cash pursuant to a Cash Award such that Gross Profit is greater
than previously reported, the Company shall pay in a lump sum cash payment to the Participant
within thirty (30) days following the filing of such restated financial statements with the
Securities and Exchange Commission, an amount equal to the difference between (x) the amount that
the cash payment pursuant to the Cash Award would have been if the Company had used the restated
financial statements to determine the amount of the Company’s Gross Profit for the Performance Goal
Test Date less (y) the amount of the cash payment pursuant to the Cash Award paid to the
Participant.

(c) The Participant shall be obligated to pay to the Company any amount due pursuant to this
Section 7 regardless of whether the Participant has or claims to have any claim against any of the
Avatar Entities, and the Participant shall have no right to offset any amount due or claimed to be
due from any of the Avatar Entities. The Company shall be obligated to pay to the Participant any
amount due pursuant to this Section 7 regardless of whether the Company has or claims to have any
claim against the Participant, and the Company shall have no right to offset any amount due or
claimed to be due from the Participant or any of its affiliates.

(d) In the event that the Participant has failed to repay any amount required pursuant to
Section 7(a) above, the Company shall be entitled to offset such amount against any amounts due
from the Company to the Participant.

(e) The foregoing provisions of this Section 7 shall not be applicable to any restatement,
after the consummation of a Change in Control, of the Company’s financial statements with respect
to any fiscal year (or portion thereof) within the Performance Period.

8. TAXES. Any cash payment pursuant to a Cash Award shall be net of any amounts required to be
withheld pursuant to applicable federal, state, local and foreign tax withholding requirements.
The Company shall have the right to withhold the amount of such taxes from any other sums due or to
become due from the Company to the Participant as the Committee shall prescribe.

9. NO RIGHT TO CONTINUED EMPLOYMENT. This Agreement does not confer upon the Participant any right
to continued employment by any of the Avatar Entities, nor shall it interfere in any way with the
right of the Participant’s employer to terminate the Participant’s employment at any time for any
reason or no reason.

10. NO OBLIGATION TO PURSUE PROJECTS. This Agreement shall in no way obligate the Company to
pursue any projects, developments or sales of any assets, and the Company may limit, abandon or
change any projects, developments or sales of any assets at any time in its sole discretion and the
Company shall have no obligation to take any action or provide any financing with respect to any
projects, developments or sales of any assets.

11. UNSECURED CREDITOR STATUS; NO PARTNERSHIP. The Participant shall rely solely upon the
unsecured promise of the Company, as set forth herein, for payment hereunder, and nothing herein
contained shall be construed to give to or vest in the Participant or any other person now or at
any time in the future, any right, title, interest, or claim in or to any specific asset, fund,
reserve, account, insurance or annuity policy or contract, or other property of any kind whatsoever
owned by the Company, or in which the Company may have any right, title, or interest, nor at any
time in the future. This Agreement is an agreement to pay compensation for services provided by
the Participant and is not a partnership or joint venture and is not intended to create a
partnership or joint venture between the Company and the Participant or any other person. The
Participant shall take no position inconsistent with this characterization.

12. ASSIGNMENT; SUCCESSORS.

(a) The Cash Awards and any interest of the Participant in any such awards may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of. Any attempt to transfer any
such Cash Awards in contravention of this Section 12(a) is void ab initio. The Cash Awards
shall not be subject to execution, attachment or other process.

(b) The Company’s rights and obligations hereunder may be assigned or transferred by the
Company to and may be assumed by and become binding upon and may inure to the benefit of any
affiliate of or successor to the Company. The term “successor” shall mean, with respect to any
Avatar Entity, any other corporation or other business entity which, by merger, consolidation,
purchase of assets, or otherwise, acquires all or a material part of the assets of such Avatar
Entity.

(c) In the event of the Participant’s death, the Participant’s rights and obligations
hereunder shall be binding upon and inure to the benefit of the Participant’s heirs and legal
representatives.

13. CONSTRUCTION. The Plans and this Agreement will be construed by and administered under the
supervision of the applicable Committee in such Committee’s sole and absolute discretion, and all
determinations of such Committee will be final and binding on the Participant.

14. NOTICES. Any notice required or permitted under this Agreement shall be deemed given when
delivered personally, or when deposited in a United States Post Office, postage prepaid, addressed,
as appropriate, (i) to the Participant at the last address specified in the Participant’s
employment records, or such other address as the Participant may designate in writing to the
Company, or (ii) to the Company, Avatar Holdings Inc., 201 Alhambra Circle, Coral Gables, Florida
33134, Attention: Chairman of the Board, with a copy to the Company’s Corporate Secretary, or such
other address as the Company may designate in writing to the Participant.

15. FAILURE TO ENFORCE NOT A WAIVER. The failure of either party hereto to enforce at any time any
provision of this Agreement shall in no way be construed to be a waiver of such provision or of any
other provision hereof.

16. SECTION 409A OF THE CODE. If any payment or entitlement provided to the Participant hereunder
in connection with the Participant’s termination of employment, is determined, in whole or in part,
to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code
(“Section 409A”) and the Participant is a specified employee as defined in Section
409A(a)(2)(B)(i), no part of such payments shall be paid before the day that is six (6) months plus
one (1) day after the date of termination or earlier death (the “New Payment Date”). The
aggregate of any payments that otherwise would have been paid to the Participant during the period
between the date of termination and the New Payment Date shall be paid to the Participant in a lump
sum on such New Payment Date. Thereafter, any payments that remain outstanding as of the day
immediately following the New Payment Date shall be paid without delay over the time period
originally scheduled, in accordance with the terms of this Agreement. A termination of employment
shall not be deemed to have occurred for purposes of any provision of this Agreement providing for
the payment of any amounts or benefits subject to Section 409A upon or following a termination of
employment unless such termination is also a “separation from service” within the meaning of
Section 409A, and for purposes of any such provision of this Agreement, references to a
“resignation,” “termination,” “terminate,” “termination of employment” or like terms shall mean
separation from service. The parties acknowledge and agree that the interpretation of Section 409A
and its application to the terms of this Agreement is uncertain and may be subject to change as
additional guidance and interpretations become available. Anything to the contrary herein
notwithstanding, all benefits or payments provided by the Company to the Participant that would be
deemed to constitute “nonqualified deferred compensation” within the meaning of Section 409A are
intended to comply with Section 409A. If, however, any such benefit or payment is deemed to not
comply with Section 409A, the Company and the Participant agree to renegotiate in good faith any
such benefit or payment (including, without limitation, as to the timing of any severance payments
payable hereof) so that either (i) Section 409A will not apply or (ii) compliance with Section 409A
will be achieved; provided, however, that any resulting renegotiated terms shall provide to the
Participant the after-tax economic equivalent of what otherwise has been provided to the
Participant pursuant to the terms of this Agreement, and provided further, that any deferral of
payments or other benefits shall be only for such time period as may be required to comply with
Section 409A.

17. GOVERNING LAW. This Agreement shall be governed by and construed according to the laws of the
State of Delaware, without regard to the conflicts of laws provisions thereof.

18. INCORPORATION OF EXECUTIVE PLAN. The Executive Plan is hereby incorporated by reference and
made a part of this Agreement, and this Agreement shall be subject to the terms of the Executive
Plan, as the Executive Plan may be amended from time to time.

19. ATTORNEYS’ FEES. In the event that either party hereto commences litigation against the other
to enforce such party’s rights hereunder, the prevailing party shall be entitled to recover all
costs, expenses and fees, including reasonable attorneys’ fees (including in-house counsel),
paralegals’ fees, and legal assistants’ fees through all appeals.

20. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall
be an original but all of which together shall represent one and the same agreement.

21. MISCELLANEOUS. This Agreement cannot be modified or terminated orally. This Agreement, the
Executive Plan, and the letter agreement dated as of May 20, 2005, between the Company and the
Participant, contain the entire agreement between the parties relating to the subject matter
hereof. This Agreement supersedes the Original Agreement. The section headings herein are
intended for reference only and shall not affect the interpretation hereof.

(signature page follows)

1

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first
written above.

	 	 	 
	AVATAR HOLDINGS INC.

	By:

	 	/s/ Juanita I. Kerrigan
	
 
	 	 

	 	 	Name: Juanita I. Kerrigan

Title: Vice President

	 	 	 	/s/ Gerald D. Kelfer

	 	 	Gerald D. Kelfer

2

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