SECOND AMENDMENT TO THE 2005 AMENDED AND RESTATED EMPLOYMENT AGREEMENT

EXHIBIT 10.6

SECOND AMENDED AND RESTATED EARNINGS
PARTICIPATION AWARD AGREEMENT

THIS SECOND AMENDED AND RESTATED EARNINGS PARTICIPATION AWARD AGREEMENT, dated December 26, 2006 (this “ Agreement ”), is made by and between Avatar Holdings Inc., a Delaware corporation (the “ Company ”), and Michael F. Levy (the “ Participant ”) and amends and restates in its entirety the Earnings Participation Award Agreement, by and between the Company and the Participant, dated March 6, 2003 (the “ Award Date ”), as amended and restated on April 15, 2005 (the “ Original Agreement ”).

The Company and the Employee wish to provide for certain modifications to the Original Agreement and wish to amend, restate and supersede the Original Agreement, all upon the terms and conditions set forth herein.

The Cash Award and the Stock Award (each 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 (i) Avatar Holdings Inc. 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, as of the Award Date, subject to the terms and conditions of the Executive Plan and subject further to the other provisions herein set forth, the Cash Award and (ii) Avatar Holdings Inc. Amended and Restated 1997 Incentive and Capital Accumulation Plan, as the same may be amended, restated, modified and supplemented from time to time (the “ 1997 Plan ” and together with the Executive Plan, collectively the “ Plans ”) the Committee (as defined in the 1997 Plan) hereby awards to the Participant, as of the Award Date, subject to the terms and conditions of the 1997 Plan and subject further to the terms and conditions and other provisions herein set forth, the Stock Award if, as of an applicable Performance Goal Test Date (as defined below), the Performance Goal (as defined below) applicable to a Cash Award or the Stock Award, as the case may be, 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:

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

“ Business Plan ” shall mean the Company’s business plan for the period commencing on January 1, 2003 and ending on December 31, 2007, as submitted to the Compensation Committee on or prior to the Award Date.

“ 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 percent (2%) 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.

“ Change in Control ” shall mean any of the following events: (a) a person or entity or group of persons or entities, acting in concert, becomes 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; (b) the Board of Directors of the Company approves any merger, consolidation or like business combination or reorganization of the Company, the consummation of which would result in the occurrence of the event described in clause (a) above, and such transaction shall have been consummated; or (c) the Company ceases to be engaged, directly or indirectly, and does not intend to be engaged at any time in the foreseeable future, in any real estate business. The date on which a Change in Control is consummated, with respect to clauses (a) and (b), or occurs, with respect to clause (c), is herein referred to as the “ Change in Control Date .”

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

“ 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.

“ Fair Market Value ” shall mean the average of the closing prices of the Common Stock for the fifteen trading days ending with and including the measuring date if the Common Stock is readily tradeable on a national securities exchange, the National Association of Securities Dealers Automated Quotation System or other national market system, provided, however, if such exchange or system is not open for business on any day during such period or the Common Stock was not traded on any day during such period, the Fair Market Value shall be determined as of the most recent fifteen trading days ending with and including the measuring date on which such exchange or system shall have been open for business and the Common Stock was traded, and if the Common Stock is not readily tradeable as set forth above, Fair Market Value shall mean the amount determined in good faith by the Committee as the fair market value of the Common Stock of the Company.

“ 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 Income Statement for such fiscal year (or portion thereof) with respect to the line item “Net income (loss)” plus (ii) the amount, if any, set forth in the Company’s Income Statement for such fiscal year (or portion thereof) with respect to the line item “Income tax expense (benefit)”, to the extent that there is “Income tax expense” less (iii) the amount, if any, set forth in the Company’s Income Statement for such fiscal year (or portion thereof) with respect to the line item “Income tax expense (benefit)”, to the extent that there is “Income tax (benefit)” plus (iv) the amount(s), if any, set forth in the Company’s Income Statement for such fiscal year (or portion thereof) 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 (v) the amount(s), if any, set forth in the Company’s Income Statement for such fiscal year (or portion thereof) 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, over (y) the Excluded Amounts for such fiscal year (or portion thereof).

“ 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.”

“ Income Statement ” shall mean (i) with respect to any completed fiscal year during the Performance Period, the Company’s audited Consolidated Statements of Operations as set forth in the Company’s annual report on Form 10-K and, (ii) for purposes of determining the First Tranche of the Stock Award, with respect to any portion of a fiscal year that has not been completed as of the applicable Performance Goal Test Date, the Company’s unaudited Consolidated Statements of Operations as set forth in the Company’s quarterly reports on Form 10-Q for any completed fiscal quarters during such fiscal year.

“ Minimum Cumulative Gross Profit Level ” shall mean that with respect to the Stock Award, as of the applicable Performance Goal Test Date, (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:

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

“ Performance Goal ” shall mean (i) in the case of the 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 Stock 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 Cash Award, December 31 of each year within the Performance Period and with respect to the Stock Award, each of (i) September 30, 2007 and (ii) the Last Day of the Performance Period.

“ Performance Period ” shall mean the period commencing January 1, 2003 and ending on December 31, 2007 (December 31, 2007, 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”.

“ Stock Award ” shall mean a grant of a number of shares of Common Stock having a Fair Market Value on the Payment Date equal to two percent (2%) of the excess, if any, of (x) the Actual Gross Profit Amount over (y) the Target Gross Profit Amount.

“ Target Gross Profit Amount ” shall mean $186,956,000.

3. TERMS AND CONDITIONS. The Cash Award and the Stock Award (together, the “ 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 a Cash Award or the Stock Award, as the case may be.

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

(c) Subject to Section 4 hereof:

(i) if the Performance Goal applicable to the Stock Award is satisfied as of September 30, 2007, the Participant shall be entitled to receive on the related Payment Date the Stock Award (the “ First Tranche ”); provided that the First Tranche shall be reduced by the amount required by Section 162(m) of the Code (as determined by the applicable Committee) in order to reflect the time value of the Employee receiving the First Tranche prior to the Last Day of the Performance Period; and

(ii) if the Performance Goal applicable to the Stock Award is satisfied as of the Last Day of the Performance Period, the Participant shall be entitled to receive on the related Payment Date an additional Stock Award (the “ Second Tranche ”) equal to the Stock Award as of the Last Day of the Performance Period less the Fair Market Value of the First Tranche (if any) as of the related Payment Date of the First Tranche. For the avoidance of doubt, if the Stock Award as of December 31, 2007 is greater than the Stock Award as of September 30, 2007, the Participant shall be entitled to receive Common Stock pursuant to the Second Tranche having a Fair Market Value as of the related Payment Date of the Second Tranche equal to such excess; provided , however , that if the Stock Award as of September 30, 2007 is greater than the Stock Award as of December 31, 2007, the Participant shall be required, upon written request of the Company, to promptly pay the Company an amount in cash equal to such excess.

(d) The applicable 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, or Common Stock to be issued, 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, if any, or the issuance of Common Stock, if any, pursuant to the Awards shall be made to the Participant, (x) in the case of the First Tranche, on or before December 31, 2007 and, (y) in the case of the Second Tranche, within thirty (30) days following the filing with the Securities and Exchange Commission of