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

Incentive Compensation. Under the 2011 Share Incentive Plan of Camden Property Trust (as amended, 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 March 31, 2014, approximately 5.6 million fungible units were available under the 2011 Share Plan, which results in approximately 1.6 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.

Options. Approximately 0.2 million and 0.1 million options were exercised during the three months ended March 31, 2014 and 2013, respectively. The total intrinsic value of options exercised was approximately $3.6 million and $4.1 million during the three months ended March 31, 2014 and 2013, respectively. At March 31, 2014, there was no unrecognized compensation cost related to unvested options. Options generally have a vesting period of three to five years. At March 31, 2014, options outstanding and exercisable had a weighted average remaining life of approximately 3.5 years.

The following table summarizes outstanding share options and exercisable options at March 31, 2014:



	Options Outstanding and Exercisable (1) (2)
Range of Exercise Prices	Number	Weighted Average Price
$30.06-$41.16	207,036	$	33.46
$43.90-$45.53	151,837	44.94
$48.02-$64.75	158,086	56.96
Total options	516,959	$	44.02


(1)	As of March 31, 2014, all options outstanding are also exercisable.


(2)	The aggregate intrinsic value of options outstanding and exercisable at March 31, 2014 was $12.1 million. The aggregate intrinsic values were calculated as the excess, if any, between our closing share price of $67.34 per share on March 31, 2014 and the strike price of the underlying award.

Options Granted and Valuation Assumptions. During the three months ended March 31, 2014, we granted approximately 0.1 million reload options. Reload options are granted for the number of shares tendered as payment for the exercise price upon the exercise of an option with a reload provision. The reload options granted have an exercise price equal to the fair market value of a common share on the date of grant and expire on the same date as the original options which were exercised. The reload options granted during the three months ended March 31, 2014 vested immediately and approximately $0.3 million was expensed on the reload date. We estimate the fair values of each option award including reloads on the date of grant using the Black-Scholes option pricing model. The following assumptions were used for the reload options granted during the three months ended March 31, 2014:



	Three Months Ended March 31,
	2014
Weighted average fair value of options granted	$3.55 - $8.17
Expected volatility	22.6% - 23.2%
Risk-free interest rate	0.1% - 1.1%
Expected dividend yield	3.5%
Expected life	6 months - 4 years

Our computation of expected volatility for 2014 is based on the historical volatility of our common shares over a time period equal to the expected life of the option and ending on the grant date. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield on our common shares is based on the historical dividend yield over the expected term of the options granted. Our computation of expected life is based upon historical experience of similar awards, giving consideration to the contractual terms of the share-based awards.

Share Awards and Vesting. Share awards for employees 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 March 31, 2014, the unamortized value of previously issued unvested share awards was approximately $49.2 million, which is expected to be amortized over the next five years. The total fair value of shares vested during the three months ended March 31, 2014 and 2013 was approximately $15.5 million and $14.1 million, respectively.

Total compensation cost for option and share awards charged against income was approximately $3.8 million and $3.4 million for the three months ended March 31, 2014 and 2013, respectively. Total capitalized compensation cost for option and share awards was approximately $0.6 million and $0.5 million for the three months ended March 31, 2014 and 2013, respectively.

The following table summarizes activity under our share incentive plans for the three months ended March 31, 2014:



	Options Outstanding		Weighted Average Exercise Price		Nonvested Share Awards Outstanding		Weighted Average Grant Price
Total options and nonvested share awards outstanding at December 31, 2013	634,361		$	41.59	831,298		$	59.77
Granted	84,452		64.75		286,484		65.22
Exercised/vested	(180,168	)	42.98		(281,828	)	55.11
Forfeited	(21,686	)	62.32		(2,847	)	64.03
Total options and nonvested share awards outstanding at March 31, 2014	516,959		$	44.02	833,107		$	63.20

Non-Qualified Deferred Compensation Plan. In February 2014, we adopted the Second Amended and Restated Camden Property Trust Non-Qualified Deferred Compensation Plan (the "Plan") to clarify certain terms in the original plan relating to the deferral of performance based compensation. The Plan permits diversification of fully vested share awards into other equity securities subject to a six month holding period, which results in the fully vested awards and the proportionate share of nonvested awards eligible for diversification being 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, with the redemption value based on the market value of the shares at the end of the 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.

The following table summarizes the eligible share award activity as recorded in temporary equity for the three months ended March 31, 2014:



(in thousands)
Balance at December 31, 2013	$	47,180
Change in classification	(606		)
Change in redemption value	11,352
Diversification of share awards	(2,428		)
Balance at March 31, 2014	$	55,498