10. Share-Based Compensation and Non-Qualified Deferred Compensation Plan

Incentive Compensation. Our Board of Trust Managers adopted in February 2018, and our shareholders approved on May 17, 2018, the Camden Property Trust 2018 Share Incentive Plan (the "2018 Share Plan") which supersedes our 2011 Share Incentive Plan (the "2011 Share Plan"). Under the 2018 Share Plan, we may issue up to a total of approximately 9.7 million common shares (the "Share Limit"). The Share Limit is comprised of 7.6 million new common shares, approximately 0.6 million common shares available for issuance under our 2011 Share Plan, as well as approximately 0.4 million common shares subject to restricted share and restricted share unit awards outstanding under the 2011 plan (subject to a 3.45 multiplier) and 0.1 million common shares subject to options granted under the 2011 Share Plan. The shares reserved for issuance under the 2011 Plan for these restricted share and option awards will become available for grant under the 2018 Share Plan if they are forfeited, terminated, cancelled or otherwise reacquired without being exercised or vested. Different types of awards are counted differently against the Share Limit, as follows:


•	Each share issued or to be issued in connection with a full value award, other than an option or share appreciation right which does not deliver the full value at grant of the underlying shares, will be counted against the Share Limit as 3.45 common shares; and


•	Options and share appreciation rights which do not deliver the full value at grant of the underlying shares will be counted against the Share Limit as one common share.

Excluding the 0.5 million common shares subject to 2011 Share Plan awards which may in the future become available under the 2018 Share Plan as discussed above, there were approximately 8.2 million common shares available under the 2018 Share Plan at June 30, 2018. This results in approximately 2.4 million shares which may be granted pursuant to full value awards based on the 3.45 to 1.0 common share to full value award conversion ratio.

The other types of awards which may be granted under the 2018 Share Plan include, without limitation, share bonuses, restricted shares, performance shares, share units, restricted share units, deferred shares, phantom stock (which are contractual rights to receive common shares, or cash based on the fair market value of a common share), dividend equivalents (which represent the right to receive a payment based on the dividends paid on a common share over a stated period of time), similar rights to purchase or acquire shares, and cash awards. Persons eligible to receive awards under the 2018 Share Plan include officers and employees of the Company or any of its subsidiaries, Trust Managers of the Company, and certain consultants and advisors to the Company or any of its subsidiaries. The 2018 Share Plan will expire on February 15, 2028.

Options. Effective May 17, 2018, new options are exercisable subject to the terms and conditions of the 2018 Share Plan. Outstanding options granted prior to May 17, 2018 were awarded subject to the terms and conditions of the 2011 Share Plan. Stock options granted generally provide they become exercisable in increments ranging from 20% to 33.3% per year on each of the anniversaries of the date of grant, other than reload options which are vested at grant. Approximately 26 thousand and 39 thousand options were exercised during the six months ended June 30, 2018 and 2017, respectively. The total intrinsic value of options exercised was approximately $1.3 million and $2.0 million during the six months ended June 30, 2018 and 2017, respectively. At June 30, 2018, there was no unrecognized compensation cost related to unvested options, and all options outstanding were exercisable with a weighted average remaining life of approximately seven months.

The following table summarizes outstanding share options, all of which were exercisable, at June 30, 2018:



	Options Outstanding and Exercisable (1)
Range of Exercise Prices	Number	Weighted Average Price
$75.17	15,388	$	75.17
$78.55	9,994	78.55
$80.89 - $85.05	27,476	82.84
Total options	52,858	$	79.79


(1)	The aggregate intrinsic value of options outstanding and exercisable at June 30, 2018 was $0.6 million. The aggregate intrinsic value was calculated as the excess, if any, between our closing share price of $91.13 per share on June 30, 2018 and the strike price of the underlying award.

Options Granted and Valuation Assumptions. In March 2018, we granted approximately 10 thousand 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 six months ended June 30, 2018 vested immediately and approximately $37 thousand was expensed on the reload date. As of June 30, 2018, no stock options remain outstanding with reload rights. 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 six months ended June 30, 2018:



	Six Months Ended June 30, 2018
Weighted average fair value of options granted	4.11
Expected volatility	15.1%
Risk-free interest rate	2.0%
Expected dividend yield	3.3%
Expected life	1 year

Our computation of expected volatility for 2018 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, and 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 generally based on the market value of the shares on the date of grant and is amortized over the vesting period. In the event the holder of the share awards will reach both the retirement eligibility age of 65 years and the service requirements as defined in the 2018 Share Plan before the term in which the awards are scheduled to vest, the value of the share awards is amortized from the date of grant to the individual's retirement eligibility date. We utilize actual forfeitures rather than estimating forfeitures at the time share-based awards were granted. At June 30, 2018, the unamortized value of previously issued unvested share awards was approximately $24.6 million, which is expected to be amortized over the next three years. The total fair value of shares vested during the six months ended June 30, 2018 and 2017 was approximately $23.9 million and $23.0 million, respectively.

Total compensation costs for option and share awards charged against income was approximately $4.3 million and $4.7 million for the three months ended June 30, 2018 and 2017, respectively, and approximately $8.8 million and $9.5 million for the six months ended June 30, 2018 and 2017, respectively. Total capitalized compensation costs for option and share awards was approximately $0.8 million and $0.9 million for the three months ended June 30, 2018 and 2017, respectively, and approximately $1.6 million and $1.9 million for the six months ended June 30, 2018 and 2017, respectively.

The following table summarizes activity under our share incentive plans for the six months ended June 30, 2018:



	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, 2017	68,978		$	61.15	499,898		$	75.80
Granted	9,994		78.55		230,353		82.73
Exercised/Vested	(26,114	)	30.06		(315,789	)	75.65
Forfeited	—		—		(13,478	)	79.26
Total options and nonvested share awards outstanding at June 30, 2018	52,858		$	79.79	400,984		$	79.77

Employee Share Purchase Plan (“ESPP”). Our Board of Trust Managers adopted in February 2018, and our shareholders approved on May 17, 2018, the Camden Property Trust 2018 Employee Share Purchase Plan (the "2018 ESPP") which amends and restates our 1999 Employee Share Purchase Plan (the "1999 ESPP") effective with the offering period commencing in June 2018. Under the 2018 ESPP, we may issue up to a total of approximately 500,000 common shares. We have established the 2018 ESPP for all active employees and officers who have completed three months of continuous service. Participants may elect to purchase our common shares through payroll deductions and/or through semi-annual lump-sum 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 calendar year.

Non-Qualified Deferred Compensation Share Awards. Balances within temporary equity in our condensed consolidated balance sheets relate to fully vested awards and the proportionate share of nonvested awards of participants within our Non-Qualified Deferred Compensation Plan who are permitted to diversify their shares into other equity securities subject to a six month holding period. The following table summarizes the eligible share award activity for the six months ended June 30, 2018:



(in thousands)	Six Months Ended June 30, 2018
Temporary equity:
Balance at December 31, 2017	$	77,230
Change in classification	10,635
Change in redemption value	(976		)
Diversification of share awards	(951		)
Balance at June 30, 2018	$	85,938