10. Share-based Compensation

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 (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 date of 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, 2012 approximately 7.9 million fungible units were available under the 2011 Share Plan, which results in approximately 2.3 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. In July 2012, the 2011 Share Plan was amended to provide that annual share grants to our trust managers will vest as determined by the Compensation Committee of our Board of Trust Managers at the date of grant, subject to the provisions of the 2011 Share Plan.

Options. Approximately 0.5 million options were exercised during each of the nine months ended September 30, 2012 and 2011. The options were exercised at prices ranging from $30.06 to $51.37 per option during the nine months ended September 30, 2012, and at prices ranging from $30.06 to $62.32 per option during the nine months ended September 30, 2011. The total intrinsic value of options exercised was approximately $12.0 million and $9.5 million, during the nine months ended September 30, 2012 and 2011, respectively. As of September 30, 2012, there was approximately $0.6 million of total unrecognized compensation cost related to unvested options, which is expected to be amortized over the next two years. At September 30, 2012, outstanding options and exercisable options had a weighted average remaining life of approximately 4.2 years and 3.2 years, respectively.

The following table summarizes outstanding share options and exercisable options at September 30, 2012:



	Outstanding Options (1)			Exercisable Options (1)
Range of Exercise Prices	Number	Weighted Average Price		Number	Weighted Average Price
$30.06-$31.48	210,750	$	30.06	14,943	$	30.12
$41.16-$43.94	258,632	42.72		240,000	42.63
$45.53-$73.32	379,330	49.05		306,221	49.30
Total options	848,712	$	42.41	561,164	$	45.93


(1)	The aggregate intrinsic value of outstanding and exercisable options at September 30, 2012 were $18.9 million and $10.6 million, respectively. The aggregate intrinsic values were calculated as the excess, if any, between our closing share price of $64.49 per share on September 30, 2012 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 options have been granted in 2012.

Share Awards and Vesting. Share awards generally have a vesting period of 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, 2012, the unamortized value of previously issued unvested share awards was approximately $36.9 million, which is expected to be amortized over the next five years. The total fair value of shares vested during the nine months ended September 30, 2012 and 2011 was approximately $13.4 million and $11.0 million, respectively.

Total compensation cost for option and share awards charged against income was approximately $3.6 million and $3.3 million for the three months ended September 30, 2012 and 2011, respectively, and approximately $10.4 million and $9.5 million for the nine months ended September 30, 2012 and 2011, respectively. Total capitalized compensation cost for option and share awards was approximately $0.4 million and $0.3 million for the three months ended September 30, 2012 and 2011, respectively, and approximately $1.1 million and $0.9 million for the nine months ended September 30, 2012 and 2011, respectively.

The following table summarizes activity under our share incentive plans for the nine months ended September 30, 2012:



	Options Outstanding		Weighted Average Exercise Price		Nonvested Share Awards Outstanding		Weighted Average Grant Price
Total options and nonvested share awards outstanding at December 31, 2011	1,339,536		$	42.27	818,754		$	46.88
Granted	—		—		345,180		63.50
Exercised/vested	(458,881	)	40.74		(274,119	)	48.71
Forfeited	(31,943	)	60.56		(13,338	)	51.52
Net activity	(490,824	)			57,723
Total options and nonvested share awards outstanding at September 30, 2012	848,712		$	42.41	876,477		$	52.77