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<CONFORMED-NAME>AVATAR HOLDINGS INC
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<FORMER-CONFORMED-NAME>GAC CORP /DE/
<DATE-CHANGED>19801023
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<FORMER-CONFORMED-NAME>GENERAL ACCEPTANCE CORP
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<DESCRIPTION>AVATAR HOLDINGS, INC
<TEXT>

<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

               --------------------------------------------------

              [X] Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                  For the quarterly period ended March 31, 2001

                                       or

                 [ ] Transition Report Pursuant to Section 13 or
                  15(d) of the Securities Exchange Act of 1934
                         For the transition period from
                               _______ to ________

                    ----------------------------------------

                          Commission file number 0-7616

                I.R.S. Employer Identification Number 23-1739078

                              Avatar Holdings Inc.
                            (a Delaware Corporation)
                               201 Alhambra Circle
                           Coral Gables, Florida 33134
                                 (305) 442-7000

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ].

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 8,405,938 shares of Avatar's
common stock ($1.00 par value) were outstanding as of April 30, 2001.


<PAGE>   2

                      AVATAR HOLDINGS INC. AND SUBSIDIARIES

                                      INDEX

                                                                       PAGE
                                                                       ----

PART I. FINANCIAL INFORMATION

     ITEM 1. FINANCIAL STATEMENTS (Unaudited):

       Consolidated Balance Sheets --
         March 31, 2001 and December 31, 2000 ...................       3

       Consolidated Statements of Operations --
            Three months ended March 31, 2001 and 2000 ..........       4

       Consolidated Statements of Cash Flows --
         Three months ended March 31, 2001 and 2000 .............       5

       Notes to Consolidated Financial Statements ...............       6

     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS      13


PART II. OTHER INFORMATION

     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ...................      17













                                       2
<PAGE>   3









PART  I  --  FINANCIAL  INFORMATION

ITEM 1.  FINANCIAL  STATEMENTS

                      AVATAR HOLDINGS INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                                   (Unaudited)
                             (Dollars in thousands)

                                                    MARCH 31,    DECEMBER 31,
                                                      2001           2000
                                                  -----------    -------------
ASSETS
Cash and cash equivalents                          $  37,177       $  49,161
Restricted cash                                          732             869
Investment - marketable securities                    71,560          69,966
Contracts and mortgage notes receivable, net           4,585           5,061
Other receivables, net                                 4,478           6,374
Land and other inventories                           172,032         171,906
Property, plant and equipment, net                    51,834          51,764
Other assets                                          23,882          12,679
Deferred income taxes                                    607           1,412
                                                   ---------       ---------
        Total Assets                               $ 366,887         369,192
                                                   =========       =========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Notes, mortgage notes and other debt:
  Corporate                                        $ 112,367       $ 112,367
  Real estate                                          1,300           2,493
Estimated development liability for sold land         18,488          18,320
Accounts payable                                       1,612           2,414
Accrued and other liabilities                         29,051          30,611
                                                   ---------       ---------
        Total Liabilities                            162,818         166,205

Commitments and Contingencies

STOCKHOLDERS' EQUITY
Common Stock, par value $1 per share
  Authorized:  50,000,000 shares
  Issued:  9,170,102 shares                            9,170           9,170
Additional paid-in capital                           157,237         157,237
Retained earnings                                     50,211          49,129
                                                   ---------       ---------
                                                     216,618         215,536
Treasury stock, at cost, 764,164 shares              (12,549)        (12,549)
                                                   ---------       ---------
  Total Stockholders' Equity                         204,069         202,987
                                                   ---------       ---------
  Total Liabilities and Stockholders' Equity       $ 366,887       $ 369,192
                                                   =========       =========


See notes to consolidated financial statements.




                                       3
<PAGE>   4

                      AVATAR HOLDINGS INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations
               For the Three months ended March 31, 2001 and 2000
                                   (Unaudited)
                  (Dollars in thousands except per share data)

                                           2001          2000
                                         --------      --------
REVENUES
Real estate sales                        $ 32,992      $ 27,463
Deferred gross profit                         394           594
Interest income                             1,529         2,011
Trading account profit (loss)               1,579        (6,379)
Other                                       1,025         1,495
                                         --------      --------
     Total revenues                        37,519        25,184

EXPENSES
Real estate expenses                       31,697        26,767
General and administrative expenses         2,126         2,542
Interest expense                            1,448         1,498
Other                                         475           849
                                         --------      --------
     Total expenses                        35,746        31,656
                                         --------      --------

Income (loss) before income taxes           1,773        (6,472)

Income tax expense (benefit)                  691        (1,631)
                                         --------      --------

Net income (loss)                        $  1,082      ($ 4,841)
                                         ========      ========

BASIC AND DILUTED EPS:
Net income (loss)                        $   0.13      ($  0.58)
                                         ========      ========

See notes to consolidated financial statements.



                                       4
<PAGE>   5


                      AVATAR HOLDINGS INC. AND SUBSIDIARIES
                Consolidated Statements of Cash Flows (Unaudited)
               For the Three months ended March 31, 2001 and 2000
                             (Dollars in Thousands)
<TABLE>
<CAPTION>

                                                                          2001            2000
                                                                       ---------       ---------
<S>                                                                    <C>             <C>
OPERATING ACTIVITIES
Net income (loss)                                                      $   1,082       ($  4,841)
Adjustments to reconcile net income (loss) to
     net cash used in operating activities:
         Depreciation and amortization                                     1,244             777
         Deferred gross profit                                              (394)           (594)
         Unrealized gain on trading account (profit) loss                 (1,579)          6,379
         Deferred income taxes                                               805          (2,049)
         Changes in operating assets and liabilities:
            Restricted cash                                                  137             699
            Principal payments on contracts receivable                     1,141           1,787
            Receivables                                                     (271)           (354)
            Other receivables                                              1,881            (640)
            Inventories                                                       42          (4,004)
            Other assets                                                 (11,555)           (911)
            Accounts payable and accrued and other liabilities            (2,362)        (14,709)
                                                                       ---------       ---------
NET CASH USED IN OPERATING ACTIVITIES                                     (9,829)        (18,460)

INVESTING ACTIVITIES
Investment in property, plant and equipment                                 (962)        (11,868)
Investment in marketable securities                                           --          (3,107)
                                                                       ---------       ---------
NET CASH USED IN INVESTING ACTIVITIES                                       (962)        (14,975)

FINANCING ACTIVITIES
Principal payments on long-term borrowings                                (1,193)         (4,608)
                                                                       ---------       ---------
NET CASH USED IN FINANCING ACTIVITIES                                     (1,193)         (4,608)
                                                                       ---------       ---------
DECREASE IN CASH                                                         (11,984)        (38,043)

Cash and cash equivalents at beginning of period                          49,161         143,259
                                                                       ---------       ---------

CASH AND CASH EQUIVALENTS AT END OF  PERIOD                            $  37,177       $ 105,216
                                                                       =========       =========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid during the period for:                                       2001            2000
                                                                       ---------       ---------
            Interest  - (net of amount capitalized of $732 and
                        $726 in 2001 and 2000, respectively)           $    (407)      $    (366)
                                                                       =========       =========
            Income taxes paid                                          $      --       $   1,700
                                                                       =========       =========

</TABLE>


See notes to consolidated financial statements.


                                       5
<PAGE>   6


                      AVATAR HOLDINGS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                             (DOLLARS IN THOUSANDS)


BASIS OF STATEMENT PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The consolidated balance sheets as of March 31, 2001 and December 31,
2000, and the related consolidated statements of operations for the three months
ended March 31, 2001 and 2000 and the consolidated statements of cash flows for
the three months ended March 31, 2001 and 2000 have been prepared in accordance
with generally accepted accounting principles for interim financial information,
the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statement presentation. In
the opinion of management, all adjustments necessary for a fair presentation of
such financial statements have been included. Such adjustments consisted only of
normal recurring items. Interim results are not necessarily indicative of
results for a full year.

         For a complete description of Avatar's other accounting policies, refer
to Avatar Holdings Inc.'s 2000 Annual Report on Form 10-K and the notes to
Avatar's consolidated financial statements included therein.

RECLASSIFICATIONS

         Certain 2000 financial statement items have been reclassified to
conform to the 2001 presentation.

EARNINGS PER SHARE

         Earnings per share is computed based on the weighted average number of
shares outstanding of 8,405,938 for the three months ended March 31, 2001 and
2000. Basic earnings per share is computed by dividing earnings attributable to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of Avatar. The computation of earnings
per share for the three months ended March 31, 2001 and 2000 did not assume the
conversion of the Notes and employee stock options, as the effect of both is
anti-dilutive. There is no difference between basic and diluted earnings per
share for 2001 and 2000.

REPURCHASE OF COMMON STOCK AND NOTES

         On January 27, 2000, Avatar's Board of Directors authorized the
expenditure of up to $20,000 to purchase, from time to time, shares of its
common stock and/or its 7% Convertible Subordinated Notes (the "Notes") in the
open market, through privately negotiated transactions or otherwise, depending
on market and business conditions and other factors. As of March 31, 2001, none
of these authorized expenditures had been made.




                                       6
<PAGE>   7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

         Avatar considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. Due to the short
maturity period of the cash equivalents, the carrying amount of these
instruments approximates their fair values. Restricted cash includes deposits of
$732 and $869 as of March 31, 2001 and December 31, 2000, respectively. These
balances are comprised primarily of housing deposits from customers that will
become available when the housing contracts close.

STOCK OPTIONS

         Under Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation," companies are allowed to measure
compensation cost, in connection with employee stock compensation plans, using a
fair value based method; or to use an intrinsic value based method in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25). Avatar has elected to follow APB 25 and related
interpretations in accounting for its employee stock options.

USE OF ESTIMATES

         The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results, however, could differ from those estimated.

INVESTMENTS - MARKETABLE SECURITIES

         Investments in marketable securities are accounted for in accordance
with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity."
Avatar's portfolio consists of held-to-maturity securities and trading
securities. Under SFAS No. 115, held-to-maturity securities include debt
securities with the intent and ability to hold to maturity and are measured at
amortized cost. During 2000, Avatar invested in U.S. Government issues, which
mature in one year or less. The amortized cost balance at March 31, 2001 and
December 31, 2000 was $41,983 and $41,968, respectively. Under SFAS No. 115,
trading securities include debt and marketable equity securities held for resale
in anticipation of earning profits from short-term movements in market prices.
Trading account securities are measured at fair market value and both realized
and unrealized gains and losses are included in net trading account profit in
the accompanying consolidated statements of operations. Fair values for actively
traded debt securities and equity securities are based on quoted market prices
on national markets. While the aggregate purchase price of the trading
securities was $19,414, the book basis (including unrealized gains of $6,636 and
$1,948 recorded at December 31, 2000 and 1999, respectively) was $27,998. The
fair value of Avatar's trading investment portfolio at March 31, 2001 and 2000
was $29,577 and $12,275, respectively, resulting in a trading account profit of
$1,579 and loss of $6,379 for the three months ended March 31, 2001 and 2000,
respectively. As of March 31, 2001 and 2000, the portfolio did not include any
forward foreign exchange contracts.



                                       7
<PAGE>   8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued

INVESTMENTS - MARKETABLE SECURITIES - CONTINUED

         During the second quarter of 2001, Avatar sold substantially all of its
trading account securities portfolio for net cash proceeds of $34,806. The
aggregate purchase price of the trading securities sold was $19,393 producing a
total pre-tax gain of $15,413, which includes the $1,579 profit for the first
quarter of 2001 and a $5,250 pre-tax gain for the second quarter of 2001
relative to this transaction.

CONTRACTS AND MORTGAGE NOTES RECEIVABLES

         Contracts and mortgage notes receivables are summarized as follows:

                                                  MARCH 31,       DECEMBER 31,
                                                    2001              2000
                                                 ----------       -------------

Contracts and mortgage notes receivable            $ 9,407            $10,369
                                                   -------            -------
Less:
      Deferred gross profit                          4,224              4,657
      Other                                            598                651
                                                   -------            -------
                                                     4,822              5,308
                                                   -------            -------
                                                   $ 4,585            $ 5,061
                                                   =======            =======

OTHER ASSETS

         Other assets are summarized as follows:

                                                  MARCH 31,       DECEMBER 31,
                                                    2001              2000
                                               ------------      ---------------
Prepaid expenses                                   $ 5,863            $ 1,411
Goodwill                                             3,589              3,941
Deposits                                             8,020                320
Other                                                6,410              7,007
                                                   -------            -------
                                                   $23,882            $12,679
                                                   =======            =======

LAND AND OTHER INVENTORIES

         Inventories consist of the following:

                                                    MARCH 31,     DECEMBER 31,
                                                      2001            2000
                                                  ------------    -------------
Land developed and in process of development        $ 78,016        $ 79,908
Land held for future development or sale              25,508          25,524
Dwelling units completed or under construction
        and community development in process          67,925          65,988
Other                                                    583             486
                                                    --------        --------
                                                    $172,032        $171,906
                                                    ========        ========



                                       8
<PAGE>   9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued

INCOME TAXES

         The components of income tax expense (benefit) from continuing
operations for the three months ended March 31, 2001, and 2000 are as follows:

                                                    MARCH 31,      MARCH 31,
                                                      2001            2000
                                                   ----------      ----------
      Current

            Federal                                 ($   97)        $   357

            State                                       (17)             61
                                                    -------         -------
      Total current                                    (114)            418

      Deferred

            Federal                                     688          (1,752)
            State                                       117            (297)
                                                    -------         -------
      Total deferred                                    805          (2,049)
                                                    -------         -------
            Total income tax expense (benefit)      $   691         ($1,631)
                                                    =======         =======

         Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of Avatar's deferred income tax assets and liabilities as of March
31, 2001 and December 31, 2000 are as follows:

<TABLE>
<CAPTION>

                                                                   MARCH 31,      DECEMBER 31,
                                                                     2001              2000
                                                                   ---------      ------------
<S>                                                                <C>               <C>
Deferred income tax assets
        Tax over book basis of land inventory                      $ 21,000          $ 21,000
        Unrecoverable land development costs                          1,000             1,000
        Tax over book basis of depreciable assets                     4,000             4,000
        Other                                                         5,607             5,412
                                                                   --------          --------
Total deferred income tax assets                                     31,607            31,412

        Valuation allowance for deferred income tax assets          (26,000)          (26,000)
                                                                   --------          --------
Deferred income tax assets after valuation allowance                  5,607             5,412

Deferred income tax liabilities
        Book over tax income recognized on homesite sales            (1,000)           (1,000)
        Unrealized gain on marketable securities                     (4,000)           (3,000)
                                                                   --------          --------
Total deferred income tax liabilities                                (5,000)           (4,000)
                                                                   --------          --------
Net deferred income taxes                                          $    607          $  1,412
                                                                   ========          ========

</TABLE>

                                       9
<PAGE>   10






NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued

INCOME TAXES - continued

         A reconciliation of income tax expense to the expected income tax
expense (credit) at the federal statutory rate of 35% for the three months ended
March 31, 2001 and 2000 is as follows:

<TABLE>
<CAPTION>

                                                                2001            2000
                                                               -------         -------
<S>                                                            <C>             <C>
Income tax expense (credit) computed at statutory rate         $   621         ($2,265)
State income tax (credit), net of federal effect                    64            (231)
Other, net                                                           6            (135)
Change in valuation allowance on deferred tax assets                --           1,000
                                                               -------         -------
Income tax expense (benefit)                                   $   691         ($1,631)
                                                               =======         =======
</TABLE>


CONTINGENCIES

         Avatar is involved in various pending litigation matters primarily
arising in the normal course of its business. Although the outcome of these and
the following matter cannot be determined, management believes that the
resolution of these matters will not have a material effect on Avatar's business
or financial statements.

         In May 1995, a wastewater rate increase was filed for the North Fort
Myers Division of Florida Cities Water Company (FCWC), a utilities subsidiary of
Avatar. In November 1995, the Florida Public Service Commission (FPSC) issued an
order authorizing a rate increase of approximately 18% (an annualized revenue
increase of approximately $378). Following a challenge to the order by the
Office of Public Counsel (the customer advocate) and certain customers, FCWC
requested implementation of the rates granted in the order. After a hearing, the
FPSC issued a new order in September 1996 authorizing final rates, which were
approximately 5% lower than rates in effect prior to the rate increase filing.
FCWC filed an appeal with the District Court of Appeal of Florida, First
District (DCA) and in January 1998, DCA reversed and remanded the September 1996
order. By order dated April 14, 1998, the FPSC ordered the record reopened and
scheduled a hearing in December 1998 to take testimony on one issue remanded by
the DCA. FCWC's challenge of this FPSC action was denied by the DCA on June 17,
1998 and the remand hearing was held on December 8 and 9, 1998. On April 8,
1999, the FPSC rendered its Final order, which did not reflect a material change
in its position on the issue in dispute. On April 15, 1999, FCWC sold the plant
assets, which are the subject of this rate matter, however, this sale did not
jeopardize FCWC's right to appeal the FPSC Final order. On May 10, 1999, FCWC
filed a notice of appeal of the FPSC Final Order to the DCA dated December 6,
1998. The rates implemented in January 1996 were collected by FCWC until April
15, 1999 and approximately $838 plus interest is subject to refund pending
ultimate resolution of this matter. After the sale of the plant assets, which
are the subject of this matter, FCWC recorded a reserve on its balance sheet in
the amount of $838 to cover refunds and recorded interest liability applicable
thereto. Interest in the amount of $181 has been recorded as of March 31, 2001.
FCWC appealed the order, which was affirmed by the DCA by opinion dated December
22, 2000. FCWC is now preparing to effect the refund, which should be completed
by July 31, 2001. Upon the completion of the refund this matter will be
considered closed.



                                       10
<PAGE>   11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) --continued

FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS

         Avatar is primarily engaged in real estate operations in Florida and
Arizona. The principal real estate operations are conducted at Poinciana in
central Florida near Orlando, Harbor Islands on Florida's east coast and Rio
Rico, south of Tucson, Arizona. Avatar owns and develops land, primarily in
various locations in Florida and Arizona. Current and planned real estate
operations include the following segments: the development, sale and management
of active adult communities; the development and sale of residential communities
(including construction of upscale custom and semi-custom homes, mid-priced
single- and multi-family homes); the development, leasing and management of
improved commercial and industrial properties; operation of amenities and
resorts; cable television operations and property management services.

         The following table summarizes Avatar's information for reportable
segments for the three months ended March 31, 2001 and 2000:

                                                    FOR THE THREE MONTHS ENDED
                                                              MARCH 31
                                                    --------------------------
                                                     2001              2000
                                                   --------          --------
REVENUES:
Segment revenues
    Residential development                        $ 22,543          $ 23,353
    Active adult                                      6,384                --
    Resorts                                           1,785             2,125
    Commercial and industrial                           346               438
    Rental, leasing, cable and
       other real estate operations                   1,411             1,085
    All other                                         1,315             1,904
                                                   --------          --------
                                                     33,784            28,905
Unallocated revenues
    Deferred gross profit                               394               594
    Trading account profit (loss)                     1,579            (6,379)
    Interest income                                   1,529             2,011
    Other                                               233                53
                                                   --------          --------
Total revenues                                     $ 37,519          $ 25,184
                                                   ========          ========

OPERATING INCOME (LOSS):
Segment operating income (loss)
     Residential development                       $  4,175          $  2,757
     Active adult                                    (2,718)           (1,779)
     Resorts                                            (79)              105
     Commercial and industrial                          273               385
     Rental, leasing, cable and
        other real estate operations                    349               191
     All other                                          854               659
                                                   --------          --------
                                                      2,854             2,318
     Unallocated income (expenses)
       Deferred gross profit                            394               594
       Interest income                                1,529             2,011
       Trading account profit (loss)                  1,579            (6,379)
       General and administrative expenses           (2,126)           (2,542)
       Interest expense                              (1,448)           (1,498)
       Other                                         (1,009)             (976)
                                                   --------          --------
 Income (loss) before income taxes                 $  1,773          ($ 6,472)
                                                   ========          ========


                                       11
<PAGE>   12


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) -- continued


FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS - continued

                                            MARCH 31,      DECEMBER 31,
                                              2001             2000
                                            ---------      ------------
ASSETS:
Segment assets
     Residential development                $ 52,452         $ 55,976
     Active adult                             87,810           88,763
     Resorts                                   5,353            5,360
     Commercial and industrial                 9,856            9,194
     Rental, leasing, cable and
       other real estate operations            4,600            4,651
     Unallocated assets                      207,500          205,248
                                            --------         --------
Total assets                                $367,571         $369,192
                                            ========         ========


(a)  Avatar's businesses are primarily conducted in the United States.

(b)  Identifiable assets by segment are those assets that are used in the
     operations of each segment.

(c)  No significant part of the business is dependent upon a single customer or
     group of customers.

(d)  Bulk land sales, Arizona utilities, the cost to carry land, and the sale of
     Cape Coral assets do not qualify individually as separate reportable
     segments and are included in "All Other". Also included in "All Other" for
     the three months ended March 31, 2001 and 2000, are results of management
     services and water facility operations, which Avatar retained in Florida.

(e)  There is no interest expense from residential development, active adult
     communities, resorts and rental/leasing, included in segment profit/(loss)
     for the three months ended March 31, 2001 and 2000.

(f)  Included in operating profit/(loss) for the three months ended March 31,
     2001 is depreciation expense of $192, $414, $158, $54 and $73 from
     residential development, active adult communities, resorts, rental/leasing
     and all other, respectively. Included in operating profit/(loss) for the
     three months ended March 31, 2000 is depreciation expense of $55, $0, $154,
     $150 and $44 from residential development, active adult communities,
     resorts, rental/leasing and all other, respectively.



                                       12
<PAGE>   13

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND
        RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

RESULTS OF OPERATIONS

         The following discussion of Avatar's financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and notes thereto included elsewhere in this Form 10-Q.

         Data from residential and active adult communities operations for the
three months ended March 31, 2001 and 2000 is summarized as follows:

                                       FOR THE THREE MONTHS ENDED
                                       ---------------------------
                                          2001            2000
                                        -------         -------
      UNITS CLOSED
        Number of units                     146             125
        Aggregate dollar volume         $28,346         $22,950
        Average price per unit          $   194         $   184

      UNITS SOLD, NET
        Number of units                     240             100
        Aggregate dollar volume         $40,046         $15,580
        Average price per unit          $   167         $   156

                                           AS OF MARCH 31,
                                      -----------------------
                                        2001            2000
                                      -------         -------
     BACKLOG
      Number of units                     487             314
      Aggregate dollar volume         $83,200         $82,951
      Average price per unit          $   171         $   264


         For the three months ended March 31, 2001, 77 contracts were written
with an aggregate sales volume of $12,470 at Solivita, Avatar's active adult
community in Poinciana. Revenues from Solivita homebuilding operations for 2001
totaled $5,851 or 41 units. Backlog as of March 31, 2001 totaled $28,293 or 188
units. Initial sales and closings at Solivita commenced during the second and
third quarters of 2000, respectively.

         Net income (loss) for the three months ended March 31, 2001 and 2000
was $1,082 or $0.13 per share and ($4,841) or ($0.58) per share, respectively.
The increase in net income for the three months ended March 31, 2001, was
primarily attributable to improved real estate operating results and a trading
account profit from investments in marketable securities; as well as a decrease
in general and administrative expenses; partially mitigated by a decrease in
interest income.

         Avatar's real estate revenues for the three months ended March 31, 2001
increased $5,529 or 20.1%, while real estate expenses increased by $4,930 or
18.4% when compared to the same period of 2000. The increase in real estate
revenues and expenses for the three months ended March 31, 2001 is generally the
result of revenues and expenses generated by Solivita operations. The increase
in real estate margins is due to improved residential development operating
income partially offset by an increase in active adult communities operating
losses. For the three months ended March 31, 2001, residential development
operating income increased $1,418 or 51.4%. This increase is primarily due to
the closing of higher priced product and a



                                       13
<PAGE>   14


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND
        RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE
        DATA) - CONTINUED


RESULTS OF OPERATIONS - continued

decrease in project administration expenses at Harbor Islands. For the three
months ended March 31, 2001, active adult operating losses increased $939 or
52.8% which is primarily attributable to the increase in selling, general and
administrative expenses for Solivita. Initial sales and marketing efforts at
Solivita commenced during the second quarter of 2000.

         Interest income for the three months ended March 31, 2001 decreased
$482 or 24.0% when compared to the same period in 2000. This decrease is
attributed to a decrease in cash and cash equivalents, lower interest rates and
lower interest income earned on contracts receivable.

         General and administrative expenses for the three months ended March
31, 2001 decreased $416 or 16.4% as compared to the same period in 2000. The
decrease is primarily due to reductions in salaries and professional fees.

         Trading account profit of $1,579 was recognized during the three months
ended March 31, 2001, as compared to a trading account loss of $6,379 during the
three months ended March 31, 2000. Trading account profits or losses represent
realized and unrealized gains or losses related to the trading investment
portfolio, and include commissions payable to investment brokers.

         Income taxes were provided for at an effective tax rate of 39.0% and
25.2% for the three months ended March 31, 2001 and 2000, respectively. For the
three months ended March 31, 2000, Avatar increased the valuation allowance for
deferred income tax assets by $1,000, which is the primary cause for the
increase in the effective tax rate for March 31, 2001. Reference is made to the
Income Taxes note to the Consolidated Financial Statements included in Item 1 of
Part I of this Report.

LIQUIDITY AND CAPITAL RESOURCES

         Avatar's current real estate business strategy is designed to
capitalize on its distinct competitive advantages and emphasize higher profit
margin businesses by concentrating on the development and management of active
adult communities, upscale custom and semi-custom homes and communities, and
commercial and industrial properties in its existing community developments.
Avatar also seeks to identify additional sites that are suitable for development
consistent with its business strategy and anticipates that it will acquire or
develop them directly or through joint venture or management arrangements.
Avatar's primary business activities are capital intensive in nature.
Significant capital resources are required to finance planned active adult
communities, homebuilding construction in process, community infrastructure,
selling expenses and working capital needs, including funding of debt service
requirements, operating deficits and the carrying cost of land. Avatar expects
to fund its operations and capital requirements through a combination of cash,
operating cash flows, proceeds from the sale of certain non-core assets and
external borrowings.



                                       14
<PAGE>   15
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND
        RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE
        DATA) - CONTINUED


LIQUIDITY AND CAPITAL RESOURCES - continued


         Avatar's portfolio consists of held-to-maturity securities and trading
securities. Held-to-maturity securities include debt securities with the intent
and ability to hold to maturity and are measured at amortized cost. During 2000,
Avatar invested in U.S. Government issues, which mature in one year or less. The
amortized cost balance at March 31, 2001 and December 31, 2000 was $41,983 and
$41,968, respectively. Trading securities include debt and marketable equity
securities held for resale in anticipation of earning profits from short-term
movements in market prices. Trading account securities are measured at fair
market value and both realized and unrealized gains and losses are included in
net trading account profit in the accompanying consolidated statements of
operations. Fair values for actively traded debt securities and equity
securities are based on quoted market prices on national markets. While the
aggregate purchase price of the trading securities was $19,414, the book basis
(including unrealized gains of $6,636 and $1,948 recorded at December 31, 2000
and 1999, respectively) was $27,998. The fair value of Avatar's trading
investment portfolio at March 31, 2001 and 2000 was $29,577 and $12,275,
respectively, resulting in a trading account profit of $1,579 and loss of $6,379
for the three months ended March 31, 2001 and 2000, respectively.

         During the second quarter of 2001, Avatar sold substantially all of its
trading account securities portfolio for net cash proceeds of $34,806. The
aggregate purchase price of the trading securities sold was $19,393 producing a
total pre-tax gain of $15,413, which includes the $1,579 profit for
the first quarter of 2001 and a $5,250 pre-tax gain for the second quarter of
2001 relative to this transaction.

         For the three months ended March 31, 2001, net cash used in operating
activities amounted to $9,829; primarily as a result of an increase in other
assets of $11,555, a decrease in accounts payable and accrued and other
liabilities of $2,362, partially offset by principal payments collected on
contract receivables and other receivables of $1,141 and $1,896, respectively.
Net cash used in investing activities of $962 resulted from investments in
property, plant and equipment. Net cash used in financing activities of $1,193
resulted from the repayment of notes payable.

          For the three months ended March 31, 2000, net cash used in operating
activities amounted to $18,460, primarily as a result of a decrease in accounts
payable and accrued and other liabilities of $14,709, and expenditures on land
development and housing operations of $4,004, partially offset by principal
payments collected on contract receivables of $1,787. Net cash used in investing
activities of $14,975 resulted from investments in property, plant and equipment
of $11,868 and marketable securities of $3,107. Net cash used in financing
activities of $4,608 resulted from the repayment of notes payable.

         On January 27, 2000, Avatar's Board of Directors authorized the
expenditure of up to $20,000 to purchase, from time to time, shares of its
common stock and/or the Notes in the open market, through privately negotiated
transactions or otherwise, depending on market and business conditions and other
factors. As of March 31, 2001, none of these authorized expenditures had been
made.



                                       15
<PAGE>   16
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND
        RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE
        DATA) - CONTINUED


FORWARD-LOOKING STATEMENTS

          Certain of the matters discussed under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this Form 10-Q constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other important factors that could cause the actual results, performance or
achievements of results, to differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such risks, uncertainties and other important factors include, among
others: the successful implementation of Avatar's business strategy; shifts in
demographic trends affecting active adult communities and other real estate
development; the level of immigration and in-migration to Avatar's regional
market areas; national and local economic conditions and events, including
employment levels, interest rates, consumer confidence, the availability of
mortgage financing and demand for new and existing housing; Avatar's access to
future financing; competition; changes in, or the failure or inability to comply
with, government regulations; and such other factors as are described in greater
detail in Avatar's filings with the Securities and Exchange Commission,
including its Annual Report on Form 10-K for the fiscal year ended December 31,
2000.



                                       16
<PAGE>   17


PART II -- OTHER INFORMATION

    ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

   EXHIBITS

    10(a)      Employment agreement dated March 31, 2001 between Avatar Holdings
               Inc. and Dennis J. Getman (filed herewith).

   REPORTS ON FORM 8-K

              No reports on Form 8-K were filed during the quarter ended
              March 31, 2001.



                                       17
<PAGE>   18

                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                              AVATAR HOLDINGS INC.

Date: May 14, 2001             By:   /s/ Charles L. McNairy
      ----------------               -------------------------------------------
                                     Charles L. McNairy
                                     Executive Vice President, Treasurer and
                                     Chief Financial Officer

Date: May 14, 2001             By:   /s/ Michael P. Rama
      ----------------               -------------------------------------------
                                     Michael P. Rama
                                     Chief Accounting Officer




                                       18
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(A)
<SEQUENCE>2
<FILENAME>g69151ex10-a.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT OF DENNIS GETMAN
<TEXT>

<PAGE>   1
                                                                   EXHIBIT 10(a)

                              EMPLOYMENT AGREEMENT

                  EMPLOYMENT AGREEMENT, dated as of March 31, 2001, between
Avatar Holdings Inc., a Delaware corporation (the "Company"), and Dennis J.
Getman (the "Employee").

                              W I T N E S S E T H :

                  WHEREAS, the Company desires to employ the Employee as its
Executive Vice President and General Counsel and the Employee desires to accept
such employment, all on the terms and conditions specified herein; and

                  WHEREAS, the Employee and the Company desire to set forth in
writing all of their respective duties, rights and obligations with respect to
the Employee's employment by the Company; and

                  NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and obligations hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:

1. EMPLOYMENT AND TERM. The Company hereby employs the Employee, and the
Employee hereby accepts employment by the Company, in the capacity and upon the
terms and conditions hereinafter set forth. The term of employment under this
Agreement shall be for the period commencing on the date hereof (the
"Commencement Date") and ending on the second anniversary thereof, unless
earlier terminated as herein provided (the "Term of Employment"). The last day
of the Employee's Term of Employment shall be referred to in this Agreement as
the "Date of Termination."

2. DUTIES. During the Term of Employment, the Employee shall serve as the
Company's Executive Vice President and General Counsel, and shall perform such
duties, functions and responsibilities as are associated with and incident to
the positions of Executive Vice President and General Counsel and as the Company
may, from time to time, require of the Employee, including, but not limited to,
the performance of such functions and duties for the Company's subsidiaries and
affiliates as the Company may require, subject to the direction of the Company's
Board of Directors. The Employee shall serve the Company faithfully,
conscientiously and to the best of the Employee's ability and shall promote the
interests and reputation of the Company. Unless prevented by sickness or
disability, the Employee shall devote all of the Employee's time, attention,
knowledge, energy and skills, during normal working hours, and at such other



<PAGE>   2

times as the Employee's duties may require, to the duties of the Employee's
employment. The principal place of employment of the Employee shall be the
principal executive offices of the Company and/or such other location in the
state of Florida as shall be necessary for the Employee to discharge the
Employee's duties hereunder. The Employee acknowledges that in the course of
employment the Employee may be required, from time to time, to travel on behalf
of the Company.

         3. COMPENSATION AND BENEFITS. As full and complete compensation for the
Employee's execution and delivery of this Agreement and performance of any
services hereunder, the Company shall pay, grant or provide the Employee, and
the Employee agrees to accept, the following compensation and benefits:

         (a) BASE SALARY. The Company shall pay the Employee a base salary at an
annual rate of $250,000 payable at such times and in accordance with the
Company's customary payroll practices as they may be adopted or modified from
time to time. On an annual basis or at such other times as the Company may
determine, the Company may review the Employee's performance and determine
whether, in its sole discretion, the Company will increase (but not decrease)
the Employee's base salary.

         (b) EMPLOYEE BENEFITS. The Company shall afford the Employee the
opportunity to participate during the Term of Employment in any medical, dental,
disability insurance, retirement, savings and any other employee benefits plans,
policies or arrangements which the Company maintains for its senior executives
in accordance with the written terms of such plans, policies or arrangements.
Nothing in this Agreement shall require the Company or its affiliates to
establish, maintain or continue any benefit plan, policy or arrangement or
restrict the right of the Company or any of its affiliates to amend, modify or
terminate any such benefit plan, policy or arrangement.

         (c) EXPENSES. The Employee shall be entitled to reimbursement or
payment of reasonable business expenses (in accordance with the Company's
policies for its senior executives, as the same may be amended from time to time
in the Company's sole discretion), following the Employee's submission of
appropriate receipts and/or vouchers to the Company.

         (d) VACATIONS, HOLIDAYS OR TEMPORARY LEAVE. The Employee shall be
entitled to take four (4) weeks of vacation per year, without loss or diminution
of compensation. Such vacation shall be taken at such time or times, and as a
whole or in increments, as the Employee shall elect, consistent with the
reasonable needs of the Company's business. The Employee shall further be
entitled to the number of paid holidays, and leaves for illness or temporary
disability in accordance with the policies of the Company for its senior
executives (as such policies may be amended from time to time or terminated in
the Company's sole discretion).

         (e) STOCK OPTIONS. In the Company's sole discretion, the Employee also
may be granted options for the purchase of shares of common stock issued by the
Company, in accordance with the written terms and conditions of such stock
option plan as the Company from time to time may adopt; PROVIDED, HOWEVER, that



                                       2
<PAGE>   3

nothing in this Agreement shall require the Company or its affiliates to adopt
or continue any stock option plan or restrict the right of the Company or any of
its affiliates to amend, modify or terminate any such stock option plan.

         4. PROTECTION OF CONFIDENTIAL INFORMATION.

         (a) TRADE SECRETS AND KNOW-HOW.

                  (i) During the Term of Employment and for all time following
the Date of Termination, the Employee shall not, directly or indirectly, use,
furnish or make accessible to any person, firm or corporation or other business
entity, whether or not he, she, or it competes with the business of the Company,
its subsidiaries and/or affiliates (each of the foregoing entities being
referred to herein, collectively and individually, as the "Avatar Entities"),
(x) any trade secret or know-how acquired by the Employee during the Employee's
employment by the Company which relates to the business practices, methods,
processes or other confidential or secret aspects of the business of any of the
Avatar Entities, (y) any information concerning the business and affairs of the
Avatar Entities and (z) any notes, analysis, compilations, studies, summaries
and other material prepared by or for the Company continuing or based, in whole
or in part, on any information included in clause (x) or (y) above, without the
prior written consent of the Company (such information, subject to Section
4(a)(ii) below, being referred to as the "Confidential Information").

                  (ii) Confidential Information shall not include any
information or documents that (A) are or become publicly available without
breach by the Employee of Section 4(a)(i) hereof, (B) the Employee receives from
any third party who, to the best of the Employee's knowledge upon reasonable
inquiry, is not in breach of an obligation of confidence with any of the Avatar
Entities, or (C) is required to be disclosed by law, statute, governmental or
judicial proceeding; PROVIDED, HOWEVER, that in the event that the Employee is
requested by any governmental or judicial authority to disclose any Confidential
Information, the Employee shall give the Company prompt notice of such request,
such that the Company may seek a protective order or other appropriate relief,
and in any such proceeding the Employee shall disclose only so much of the
Confidential Information as is required to be disclosed.

         (b) REMEDIES. The Employee acknowledges that the Employee's position
with the Company places the Employee in a position of confidence and trust with
the clients and employees of the Avatar Entities, and that in connection with
the Employee's services to the Company, the Employee will have access to
confidential information vital to the Avatar Entities' businesses. The Employee
further acknowledges that in view of the nature of the businesses in which the
Avatar Entities are engaged, the foregoing restrictive covenants in this Section
4 hereof are reasonable and necessary in order to protect the legitimate
interests of the Avatar Entities and that violation thereof would result in
irreparable injury to the Avatar Entities. Accordingly, the Employee consents
and agrees that if the Employee violates or threatens to violate any of the
provisions of this Section 4 hereof the Avatar Entities would sustain
irreparable harm and, therefore, one or more of the Avatar Entities shall be
entitled to obtain from any court of competent jurisdiction, without posting any



                                       3
<PAGE>   4

bond or other security, preliminary and permanent injunctive relief as well as
damages 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 any of the Avatar
Entities may be entitled.

         (c) RETURN OF CONFIDENTIAL INFORMATION. Upon termination of the
Employee's employment, the Employee shall promptly return all Confidential
Information in tangible form, and shall not make or retain any copies thereof.

         5. TERMINATION OF EMPLOYMENT.

         (a) The Employee's employment with the Company shall terminate upon the
occurrence of any of the following events:

                  (i) the termination of the Employee's employment upon and at
any time following the Date of Termination and absent the parties having entered
into a written agreement for the renewal of this Agreement;

                  (ii) the death of the Employee during the Term of Employment;

                  (iii) the Disability (as defined below) of the Employee during
the Term of Employment;

                  (iv) at any time upon written notice to the Employee from the
Company of termination of the Employee's employment for Cause (as defined
below);

                  (v) at any time upon written notice to the Employee from the
Company of termination of the Employee's employment Without Cause (as defined
below);

                  (vi) the resignation by the Employee for Good Reason (as
defined below) during the Term of Employment; or

                  (vii) the resignation by the Employee Without Good Reason (as
defined below) during the Term of Employment.

         (b) For purposes of this Agreement, the "Disability" of the Employee
shall mean the Employee's inability, because of mental or physical illness or
incapacity, whether total or partial, to perform one or more of the material
functions of the Employee's employment under this Agreement with or without
reasonable accommodation and which entitles the Employee to receive benefits
under a disability plan, policy or arrangement that is provided to the Employee
by the Company.

         (c) For purposes of this Agreement, the term "Cause" shall mean the
Employee's (i) conviction or entry of a plea of guilty or nolo contendere, with
respect to any felony; (ii) commission of any act of willful misconduct, gross



                                       4
<PAGE>   5

negligence, fraud or dishonesty; or (iii) violation of any material term of this
Agreement or any material written policy of the Company, PROVIDED that the
Company first deliver written notice thereof to the Employee and the Employee
shall not have cured such violation within thirty (30) days after receipt of
such written notice.

         (d) For purposes of this Agreement, "Without Cause" shall mean any
reason other than the reasons described in Sections 5(a)(i), 5(a)(ii),
5(a)(iii), 5(a)(iv) and 5(a)(vi) hereof. The parties expressly agree that a
termination of employment Without Cause pursuant to Section 5(a)(v) hereof may
be for any reason whatsoever, or for no reason, in the sole discretion of the
Company.

         (e) For purposes of this Agreement, "Good Reason" shall mean a material
breach of the provisions of this Agreement by the Company which remains uncured
for a period of at least 30 days after the Employee has provided written notice
to the Company in accordance with Section 15 of the existence of such breach and
the Employee's intention to terminate this Agreement (it being understood that
no such termination shall be effective if such breach is cured during such
period).

         (f) For purposes of this Agreement, "Without Good Reason" shall mean
any reason other than that defined in this Agreement as constituting Good
Reason.

         6. PAYMENTS UPON TERMINATION OF EMPLOYMENT.

         (a) DEATH OR DISABILITY. If the Employee's employment hereunder is
terminated due to the Employee's death or Disability pursuant to Sections
5(a)(ii) or (iii) hereof, the Company shall pay or provide to the Employee, the
Employee's designated beneficiary or to the Employee's estate: (i) all base
salary pursuant to Section 3(a) hereof and any vacation pay pursuant to Section
3(d) hereof, in each case which has been earned but unpaid as of the Date of
Termination; and (ii) any benefits to which the Employee may be entitled under
any employee benefits plan, policy or arrangement pursuant to Section 3(b)
hereof in which the Employee is a participant in accordance with the written
terms of such plan, policy or arrangement up to and including the Date of
Termination. Should the Company wish to purchase insurance to cover the costs
associated with the Employee's termination of employment pursuant to Sections
5(a)(ii) or (iii), the Employee agrees to execute any and all necessary
documents required in connection with such insurance. Upon termination of the
Employee's employment due to the Employee's Disability, the Employee shall
continue to have the obligations provided for in Section 4 hereof.

         (b) TERMINATION FOR CAUSE OR RESIGNATION WITHOUT GOOD REASON. If the
Employee's employment hereunder is terminated by the Company for Cause pursuant
to Section 5(a)(iv) or due to the Employee's resignation Without Good Reason
pursuant to Section 5(a)(vii), the Company shall pay or provide to the Employee:
(i) all base salary pursuant to Section 3(a) hereof and any vacation pay
pursuant to Section 3(d) hereof, in each case which has been earned but unpaid



                                       5
<PAGE>   6

as of the Date of Termination; and (ii) any benefits to which the Employee may
be entitled under any employee benefits plan, policy or arrangement pursuant to
Section 3(b) hereof in which the Employee is a participant in accordance with
the written terms of such plan, policy or arrangement up to and including the
Date of Termination.

         (c) TERMINATION WITHOUT CAUSE; RESIGNATION FOR GOOD REASON.

                  (i) If the Employee's employment hereunder is terminated by
the Company Without Cause pursuant to Section 5(a)(v) or due to the Employee's
resignation for Good Reason pursuant to Section 5(a)(vi), the Company shall
continue to pay to the Employee, in lieu of any other payments or benefits and
on the regular payroll dates of the Company for a period of one (1) year
following the Date of Termination, the Employee's current base salary, at the
rate provided in Section 3(a) hereof. The Company's obligation to make the
payment pursuant to this Section 6(c)(i) shall be subject to the provisions of
Section 6(c)(ii) and conditioned upon the Company's prior receipt of an executed
general release of claims that the Employee may have against the Company, its
affiliates and their respective shareholders, directors, officers, employees and
agents, to the maximum extent permitted by law.

                  (ii) In addition, the Employee agrees to keep the Chief
Executive Officer of the Company or his designee apprised of the Employee's
status during the entire period of time that the Employee shall be entitled to
receive salary continuation pursuant to Section 6(c)(i) above, and, if
requested, to provide appropriate supporting documentation with respect to the
salary, bonuses or other income earned by and benefits made available to the
Employee in respect of any employment or other engagement secured by the
Employee. In the event the Employee secures employment or any other engagement,
the Company shall be entitled to deduct from the amounts payable to the Employee
pursuant to Section 6(c)(i), any salary, bonuses or other income earned by the
Employee in connection with such employment, and the Employee shall promptly
repay to the Company any amounts paid to him by the Company pursuant to Section
6(c)(i) which the Company was entitled to deduct from such amounts pursuant to
this Section 6(c)(ii).

         (d) NO OTHER PAYMENTS. Except as provided in this Section 6, the
Employee shall not be entitled to receive any other payments or benefits from
the Company due to the termination of the Employee's employment, including but
not limited to, any employee benefits under any of the Company's employee
benefits plans or programs (other than at the Employee's expense under the
Consolidated Omnibus Budget Reconciliation Act of 1985 or pursuant to the terms
of any pension benefit plan which the Company may have in effect from time to
time) or any right to be paid severance pay. If the Employee is entitled to any
notice or payment in lieu of any notice of termination required by Federal,
State or local law, including but not limited to the Worker Adjustment and
Retraining Notification Act, the Company's obligation to make payments pursuant
to Section 6(c)(i) shall be reduced by the amount of any such payment in lieu of
notice.



                                       6
<PAGE>   7

         7. NO CONFLICTING AGREEMENTS.

         (a) The Employee hereby represents and warrants that the Employee is
not a party to any agreement, or non-competition or other covenant or
restriction contained in any agreement, commitment, arrangement or understanding
(whether oral or written), which would in any way conflict with or limit the
Employee's ability to commence work on the first day of the Term of Employment
or would otherwise limit the Employee's ability to perform all responsibilities
in accordance with the terms and subject to the conditions of this Agreement.

         (b) The Employee agrees that the compensation provided for in Section 3
represents the sole compensation to be paid to the Employee in respect of the
services performed or to be performed for the Company and/or its affiliates by
such Employee. The Employee further agrees that should there be a determination
that for federal, state, local and/or other tax purposes, the Employee's
compensation for services performed for the Company and its affiliates is
greater than the amounts payable hereunder, the Employee will indemnify and hold
harmless the Company and its affiliates against any and all liabilities, losses
and expenses, including, but not limited to, any additional taxes, penalties and
interest, and attorneys' and accountants' fees arising out of, resulting from or
relating to such determination.

         8. DEDUCTIONS AND WITHHOLDING. The Employee agrees that the Company
shall withhold from any and all compensation required to be paid to the Employee
pursuant to this Agreement all federal, state, local and/or other taxes which
the Company determines are required to be withheld in accordance with applicable
statutes and/or regulations from time to time in effect and all amounts required
to be deducted in respect of the Employee's coverage under applicable employee
benefit plans.

         9. ENTIRE AGREEMENT. This Agreement embodies the entire agreement of
the parties with respect to the Employee's employment and supersedes any other
prior oral or written agreements between the Employee and the Company and its
affiliates. This Agreement may not be changed or terminated orally but only by
an agreement in writing signed by the parties hereto.

         10. WAIVER. The waiver by the Company of a breach of any provision of
this Agreement by the Employee shall not operate or be construed as a waiver of
any subsequent breach by the Employee. The waiver by the Employee of a breach of
any provision of this Agreement by the Company shall not operate or be construed
as a waiver of any subsequent breach by the Company.

         11. 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 the Employee is in fact
required to work.

         12. JURISDICTION. Any legal suit, action or proceeding against any
party hereto arising out of or relating to this Agreement shall be instituted in
a federal or state court in the State of Florida, and each party hereto waives
any objection



                                       7
<PAGE>   8

which it may now or hereafter have to the laying of venue of any such suit,
action or proceeding and each party hereto irrevocably submits to the
jurisdiction of any such court in any suit, action or proceeding.

         13. ASSIGNABILITY. The obligations of the Employee may not be delegated
and, except as expressly provided in Section 6(a) relating to the designation of
beneficiaries, the Employee may not, without the Company's written consent
thereto, assign, transfer, convey, pledge, encumber, hypothecate or otherwise
dispose of this Agreement or any interest therein. Any such attempted delegation
or disposition shall be null and void and without effect. The Company and the
Employee agree that this Agreement and all of 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 the Company or any of its subsidiaries) any other corporation or
other business entity which, by merger, consolidation, purchase of the assets,
or otherwise, acquires all or a material part of the assets of the Company. Any
assignment by the Company of its rights and obligations hereunder to any
affiliate of or successor to the Company shall not be considered a termination
of employment for purposes of this Agreement.

         14. SEVERABILITY. If any provision of this Agreement as applied to
either party or to any circumstances shall be adjudged by a court of competent
jurisdiction to be void or unenforceable, the same shall in no way affect any
other provision of this Agreement or the validity or enforceability of this
Agreement.

         15. NOTICES. All notices to the Employee hereunder shall be in writing
and shall be delivered personally or sent by registered or certified mail,
return receipt requested, to:

                           Dennis J. Getman
                           13471 S.W. 62 Avenue
                           Miami, Florida  33156

All notices to the Company hereunder shall be in writing and shall be delivered
personally or sent by registered or certified mail, return receipt requested,
to:

                           Avatar Holdings Inc.
                           201 Alhambra Circle
                           Coral Gables, Florida 33134
                           Attention:  Chief Executive Officer
                           Facsimile: (305) 441-7876



                                       8
<PAGE>   9

                           with a copy to:

                           Avatar Holdings Inc.
                           201 Alhambra Circle
                           Coral Gables, Florida 33134
                           Attention:  Corporate Secretary
                           Facsimile: (305) 441-7876

Either party may change the address to which notices shall be sent by sending
written notice of such change of address to the other party.

         16. SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

         17. 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
taken together shall constitute one and the same instrument.

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

                           AVATAR HOLDINGS INC.


                           By:  /s/ GERALD D. KELFER
                              -----------------------------------------
                                Name: Gerald D. Kelfer
                                Title: President & Chief Executive Officer

                            /s/ DENNIS J. GETMAN
                           --------------------------------------------
                           Employee
                           Name:  Dennis J. Getman



                                       9
</TEXT>
</DOCUMENT>
</SUBMISSION>
