11. Share-based Compensation and Benefit Plans

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.

As of December 31, 2013, approximately 6.7 million fungible units were available under the 2011 Share Plan, which results in approximately 1.9 million common shares which could 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. New options are exercisable, subject to the terms and conditions of the plan, in increments ranging from 20% to 33.33% per year on each of the anniversaries of the date of grant. The plan provides that the exercise price of an option will be determined by the Compensation Committee of the Board of Trust Managers on the day of grant, and to date all options have been granted at an exercise price that equals the fair market value on the date of grant. Approximately 0.2 million and 0.5 million options were exercised during the years ended December 31, 2013 and 2012, respectively. Options were exercised at prices ranging from $30.06 to $62.32 per option during the year ended December 31, 2013 and at prices ranging from $30.06 to $51.37 per option during the year ended December 31, 2012.

The total intrinsic value of options exercised was approximately $5.3 million, $12.2 million, and $9.6 million during the years ended December 31, 2013, 2012 and 2011, respectively. At December 31, 2013, there was no unrecognized compensation cost related to remaining unvested options which vest in January, 2014. At December 31, 2013, outstanding options and exercisable options had a weighted average remaining life of approximately 3.2 years and 2.9 years, respectively.

The following table summarizes outstanding share options and exercisable options at December 31, 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	297,402	47.39		297,402	47.39
Total options	634,361	$	41.59	536,456	$	43.69


(1)	The aggregate intrinsic value of outstanding and exercisable options at December 31, 2013 was approximately $9.8 million and $7.2 million, respectively. The aggregate intrinsic values were calculated as the excess, if any, between our closing share price of $56.88 per share on December 31, 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 were granted in 2013, 2012 or 2011.

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 December 31, 2013, the unamortized value of previously issued unvested share awards was approximately $35.7 million which is expected to be amortized over the next four years. The total fair value of shares vested during the years ended December 31, 2013, 2012 and 2011 was approximately $15.9 million, $13.9 million, and $11.5 million, respectively.

Total compensation cost for option and share awards charged against income was approximately $14.7 million, $13.7 million, and $12.3 million for 2013, 2012 and 2011, respectively. Total capitalized compensation cost for option and share awards was approximately $2.2 million, $1.4 million, and $0.9 million for 2013, 2012 and 2011, respectively.

The following table summarizes activity under our share incentive plans for the three years ended December 31:



	Options Outstanding		Weighted Average Exercise / Grant Price		Nonvested Share Awards Outstanding		Weighted Average Exercise / Grant Price
Options and nonvested share awards outstanding at December 31, 2010	1,847,136		$	42.37	741,505		$	42.16
Granted	—		—		347,084		57.00
Exercised/Vested	(504,838	)	42.59		(243,874	)	47.19
Forfeited	(2,762	)	48.02		(25,961	)	44.51
Balance at December 31, 2011	1,339,536		$	42.27	818,754		$	46.88
Granted	—		—		346,330		63.51
Exercised/Vested	(468,839	)	40.86		(282,552	)	49.28
Forfeited	(31,943	)	60.56		(20,279	)	52.05
Balance at December 31, 2012	838,754		$	42.36	862,253		$	52.64
Granted	—		—		350,615		69.56
Exercised/Vested	(183,871	)	41.56		(309,396	)	51.41
Forfeited	(20,522	)	73.32		(72,174	)	58.08
Total options and nonvested share awards outstanding at December 31, 2013	634,361		$	41.59	831,298		$	59.77

Employee Share Purchase Plan (“ESPP”). We have established an ESPP for all active employees and officers who have completed one year of continuous service. Participants may elect to purchase our common shares through payroll deductions and /or through semi-annual contributions. At the end of each six-month offering period, each participant’s account balance is applied to acquire common shares at 85% of the market value, as defined, on the first or last day of the offering period, whichever price is lower. We currently use treasury shares to satisfy ESPP share requirements. Each participant must hold the shares purchased for nine months in order to receive the discount, and a participant may not purchase more than $25,000 in value of shares during any plan year, as defined. The following table presents information related to our ESPP:



	2013		2012		2011
Shares purchased	17,171		20,137		19,914
Weighted average fair value of shares purchased	$	62.59	$	67.80	$	63.29
Expense recorded (in millions)	$	0.2	$	0.3	$	0.3

In January 2014, approximately 9,167 shares were purchased under the ESPP related to the 2013 plan year.

Rabbi Trust. We established a rabbi trust for a select group of participants in which share awards granted under the share incentive plan and salary and other cash amounts earned may be deposited. The rabbi trust is only in use for deferrals made prior to 2005, including bonuses related to service in 2004 but paid in 2005. The rabbi trust is an irrevocable trust and no portion of the trust fund may be used for any purpose other than the delivery of those assets to the participants. The assets held in the rabbi trust are subject to the claims of our general creditors in the event of bankruptcy or insolvency.

The value of the assets of the rabbi trust is consolidated into our financial statements. Granted share awards held by the rabbi trust are classified in equity in a manner similar to the manner in which treasury stock is accounted. Subsequent changes in the fair value of the shares are not recognized. The deferred compensation obligation is classified as an equity instrument and changes in the fair value of the amount owed to the participant are not recognized. At December 31, 2013 and 2012, approximately 1.9 million share awards were held in the rabbi trust. Additionally, as of December 31, 2013 and 2012, the rabbi trust held trading securities totaling approximately $41.3 million and $35.7 million, respectively, which represents cash deferrals made by plan participants. Market value fluctuations on these trading securities are recognized in income in accordance with GAAP and the liability due to participants is adjusted accordingly.

At December 31, 2013 and 2012, approximately $25.4 million and $25.7 million, respectively, was required to be paid to us by plan participants upon the withdrawal of any assets from the rabbi trust, and is included in “Accounts receivable-affiliates” in our consolidated financial statements.

Non-Qualified Deferred Compensation Plan. In 2004, we established a Non-Qualified Deferred Compensation Plan (the “Plan”) which is an unfunded arrangement established and maintained primarily for the benefit of a select group of participants. Eligible participants commence participation in the Plan on the date the deferral election first becomes effective. We credit to the participant’s account an amount equal to the amount designated as the participant’s deferral for the plan year as indicated in the participant’s deferral election(s). Any modification to or termination of the Plan will not reduce a participant’s right to any vested amounts already credited to his or her account. At December 31, 2013 and 2012, approximately 1.2 million and 1.0 million share awards, respectively, were held in the Plan. Additionally, as of December 31, 2013 and 2012, the Plan held trading securities totaling approximately $18.1 million and $15.2 million, respectively, which represents cash deferrals made by plan participants. Market value fluctuations on these trading securities are recognized in income in accordance with GAAP and the liability due to participants is adjusted accordingly.

In July 2013, we amended and restated the Plan to permit diversification of fully vested share awards into other equity securities subject to a six month holding period, which resulted 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 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 consolidated statements of equity and perpetual preferred units. The following table summarizes the eligible share award activity as recorded in temporary equity from July 31, 2013, the effective date of the amended and restated Plan, through December 31, 2013:



(in thousands)
Temporary equity:
Effective date of amended and restated plan at July 31, 2013	$	—
Change in classification of share awards	37,958
Change in redemption value of share awards	9,575
Diversification of share awards	(353		)
Non-qualified deferred compensation share awards at December 31, 2013	$	47,180

401(k) Savings Plan. We have a 401(k) savings plan, which is a voluntary defined contribution plan. Under the savings plan, every employee is eligible to participate, beginning on the date the employee has completed six months of continuous service with us. Each participant may make contributions to the savings plan by means of a pre-tax salary deferral, which may not be less than 1% or more than 60% of the participant’s compensation. The federal tax code limits the annual amount of salary deferrals which may be made by any participant. We may make matching contributions on the participant’s behalf up to a predetermined limit. The matching contribution made for the years ended December 31, 2013, 2012 and 2011 was approximately $2.2 million, $2.2 million and $1.8 million, respectively. A participant’s salary deferral contribution is 100% vested and nonforfeitable. A participant will become vested in our matching contributions 33% after one year of service, 67% after two years of service and 100% after three years of service. Administrative expenses under the savings plan were paid by us and were not significant for all periods presented.