EQUITY RESIDENTIAL (EQR)

Item 1.01  Entry into a Material Definitive Agreement

Amended and Restated Employment Agreement

On March 28, 2005, Equity Residential (the “Company”) and Bruce W. Duncan, the Company’s President and Chief Executive Officer, entered into an Amended and Restated Employment Agreement (the “Amendment”) to reflect changes required in view of Mr. Duncan’s planned retirement as President, Chief Executive Officer and trustee to be effective as of January 2, 2006 (as further described below in Item 5.02(b) – (c)). A copy of the Amendment is being filed as Exhibit 10.1 to this Current Report on Form 8-K.

The Company had previously entered into an Employment Agreement with Mr. Duncan in January 2003 in connection with Mr. Duncan’s appointment as Chief Executive Officer as of January 1, 2003.  The term of the agreement was four years, from January 1, 2003 until December 31, 2006.  Under the agreement, Mr. Duncan’s target annual compensation is $6,330,000, comprised of a base annual salary of $750,000, a target cash bonus of $1,080,000 and a long-term incentive grant of options, restricted shares and performance shares valued at $4,500,000.

The Amendment provides that Mr. Duncan will receive target compensation for services provided during 2005 of $6,330,000 (comprised of $750,000 salary and January 2006 grants of cash bonus and long-term incentive grants as discussed below), unless his employment is terminated by the Company for cause or he resigns without good reason.  In the event of Mr. Duncan’s death or disability prior to January 2, 2006, his cash bonus and long-term incentive grant would be prorated based on the number of days served in the calendar year.

The Amendment further provides that upon Mr. Duncan’s termination of employment on January 2, 2006 (unless his employment is terminated by the Company for cause or he resigns without good reason), he will receive the following benefits:

•                                          A $1,080,000 cash bonus and $4,500,000 of options, restricted shares and performance shares for services provided during 2005, each to be received on January 2, 2006.

•                                          All his options, restricted shares and performance shares, including the grants made in January 2006, vest in full, with the performance shares vesting at the greater of the 100% level or the performance level achieved through December 31, 2006, with the exception of Mr. Duncan’s 2003 performance share grant, which will be valued at December 31, 2005 pursuant to its terms, which provide no minimum guarantee.  Mr. Duncan has the balance of the 10-year option period to exercise any vested options.

•                                          A cash payment of $30,000 and a grant of 17,239 vested common shares and 42,614 vested stock options, each made on January 2, 2006.

•                                          The Company will pay for Mr. Duncan’s medical and dental coverage through December 31, 2006.

•                                          Any benefits due Mr. Duncan are subject to his execution of a general release agreement with a two and one-half (2 ½) year non-competition and employee non-solicitation clause.

The $4,500,000 long-term incentive grant will be allocated between options, restricted shares and performance shares in the same ratio as approved by the Board in late 2005 for the annual long-term incentive grants to the Company’s executive officers.  Typically, an amount equal to ten percent of the total annual compensation is allocated to performance shares with the balance being allocated 75% to restricted shares and 25% to options.  The number of options granted is determined by dividing the dollar amount allocated to options by the fair market value of each option using the same valuation criteria utilized by the Company’s Compensation Committee in its annual employee option grants.  The options are granted for a period of ten years at the fair market value of the Company’s common shares at the date of grant. The number of shares granted is determined by dividing the dollar amount allocated to shares by the closing price of common shares of the Company on the grant date.

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