8. Share-based Compensation and Non-Qualified Deferred Compensation Plan

Incentive Compensation. During the second quarter of 2011, our Board of Trust Managers adopted, and on May 11, 2011 our shareholders approved, the 2011 Share Incentive Plan of Camden Property Trust (as amended, the “2011 Share Plan”). Under the 2011 Share Plan, we may issue up to a total of approximately 9.1 million fungible units (the “Fungible Pool Limit”), which is comprised of approximately 5.8 million new fungible units plus approximately 3.3 million fungible units previously available for issuance under our 2002 share incentive plan based on a 3.45 to 1.0 fungible unit to full value award conversion ratio. Fungible units represent the baseline for the number of shares available for issuance under the 2011 Share Plan. Different types of awards are counted differently against the Fungible Pool Limit, as follows:


•	Each share issued or to be issued in connection with an award, other than an option, right or other award which does not deliver the full value at grant of the underlying shares, will be counted against the Fungible Pool Limit as 3.45 fungible pool units;


•	Options and other awards which do not deliver the full value at grant of the underlying shares and which expire more than five years from date of grant will be counted against the Fungible Pool Limit as one fungible pool unit; and


•	Options, rights and other awards which do not deliver the full value at grant and expire five years or less from the date of grant will be counted against the Fungible Pool Limit as 0.83 of a fungible pool unit.

At September 30, 2013, approximately 6.7 million fungible units were available under the 2011 Share Plan, which results in approximately 1.9 million common shares which may be granted pursuant to full value awards based on the 3.45 to 1.0 fungible unit-to-full value award conversion ratio.

Awards which may be granted under the 2011 Share Plan include incentive share options, non-qualified share options (which may be granted separately or in connection with an option), share awards, dividends and dividend equivalents and other equity based awards. Persons eligible to receive awards under the 2011 Share Plan are trust managers, directors of our affiliates, executive and other officers, key employees, and consultants, as determined by the Compensation Committee of our Board of Trust Managers. The 2011 Share Plan will expire on May 11, 2021.

Options. Approximately 0.2 million and 0.5 million options were exercised during the nine months ended September 30, 2013 and 2012, respectively. The options were exercised at prices ranging from $30.06 to $62.32 per option during the nine months ended September 30, 2013, and at prices ranging from $30.06 to $51.37 per option during the nine months ended September 30, 2012. The total intrinsic value of options exercised was approximately $5.2 million and $12.0 million during the nine months ended September 30, 2013 and 2012, respectively. At September 30, 2013, there was approximately $0.1 million of total unrecognized compensation cost related to unvested options, which is expected to be amortized over the next year. At September 30, 2013, outstanding options and exercisable options had a weighted average remaining life of approximately 3.5 years and 3.1 years, respectively.

The following table summarizes outstanding share options and exercisable options at September 30, 2013:



	Outstanding Options (1)			Exercisable Options (1)
Range of Exercise Prices	Number	Weighted Average Price		Number	Weighted Average Price
$30.06-$41.16	228,012	$	33.14	130,107	$	35.46
$42.90-$43.94	108,947	43.43		108,947	43.43
$45.53-$62.32	298,609	47.39		298,609	47.39
Total options	635,568	$	41.60	537,663	$	43.70


(1)	The aggregate intrinsic value of outstanding and exercisable options at September 30, 2013 was $12.6 million and $9.6 million, respectively. The aggregate intrinsic values were calculated as the excess, if any, between our closing share price of $61.44 per share on September 30, 2013 and the strike price of the underlying award.

Valuation Assumptions. Options generally have a vesting period of three to five years. We estimate the fair values of each option award on the date of grant using the Black-Scholes option pricing model. No new options have been granted in 2013.

Share Awards and Vesting. Share awards generally have a vesting period of three to five years. The compensation cost for share awards is based on the market value of the shares on the date of grant and is amortized over the vesting period. To estimate forfeitures, we use actual forfeiture history. At September 30, 2013, the unamortized value of previously issued unvested share awards was approximately $40.1 million, which is expected to be amortized over the next four years. The total fair value of shares vested during the nine months ended September 30, 2013 and 2012 was approximately $14.9 million and $13.4 million, respectively.

Total compensation cost for option and share awards charged against income was approximately $3.9 million and $3.6 million for the three months ended September 30, 2013 and 2012, respectively, and approximately $11.3 million and $10.4 million for the nine months ended September 30, 2013 and 2012, respectively. Total capitalized compensation cost for option and share awards was approximately $0.5 million and $0.4 million for the three months ended September 30, 2013 and 2012, respectively, and approximately $1.6 million and $1.1 million for the nine months ended September 30, 2013 and 2012, respectively.

The following table summarizes activity under our share incentive plans for the nine months ended September 30, 2013:



	Options Outstanding		Weighted Average Exercise Price		Nonvested Share Awards Outstanding		Weighted Average Grant Price
Total options and nonvested share awards outstanding at December 31, 2012	838,754		$	42.36	862,253		$	52.64
Granted	—		—		349,565		69.59
Exercised/vested	(182,664	)	41.52		(296,373	)	50.43
Forfeited	(20,522	)	73.32		(65,076	)	57.90
Total options and nonvested share awards outstanding at September 30, 2013	635,568		$	41.60	850,369		$	59.98

Non-Qualified Deferred Compensation Plan. In July 2013, we entered into an Amended and Restated Camden Property Trust Non-Qualified Deferred Compensation Plan (the "Plan") to permit diversification of fully vested share awards into other equity securities subject to a six month holding period. As a result of these modifications, the fully vested awards and the proportionate share of nonvested awards eligible for diversification were reclassified from additional paid in capital to temporary equity in our Condensed Consolidated Balance Sheets. The share awards are adjusted to their redemption value at each reporting period. Changes in value from period to period are charged to distributions in excess of net income attributable to common shareholders in our Condensed Consolidated Statements of Equity and Perpetual Preferred Units.

The following table summarizes the share award activity since the effective date of the amended and restated Plan through September 30, 2013:



(in thousands)
Balance at December 31, 2012	$	—
Change in classification	34,517
Change in redemption value	12,928
Diversification of share awards	(353		)
Balance at September 30, 2013	$	47,092