SHARE BASED COMPENSATION, 401(k) PLAN AND DEFERRED COMPENSATION

Stock Options

At December 31, 2013, options exercisable for 2,983,569 common shares were outstanding under the Parent Company's shareholder approved equity incentive plan. There were 184,429 options unvested as of December 31, 2013 and $0.1 million of unrecognized compensation expense associated with these options to be recognized over a weighted average of 0.2 years. During the years ended December 31, 2013, 2012 and 2011 the Company recognized compensation expense related to unvested options of $0.7 million, $1.6 million, and $1.4 million, respectively. During the years ended December 31, 2013, 2012 and 2011, the Company also capitalized a $0.1 million, $0.5 million and $0.4 million, respectively, of compensation expense as part of the Company’s review of employee salaries eligible for capitalization.

Option activity as of December 31, 2013 and changes during the year-ended December 31, 2013 were as follows:



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2013	3,337,549		$	14.85	5.95	$	—
Exercised	(236,318	)	$	9.86
Forfeited/Expired	(117,662	)	$	18.61
Outstanding at December 31, 2013	2,983,569		$	15.50	5.15	$	—
Vested/Exercisable at December 31, 2013	2,799,140		$	15.74	5.05	$	—

401(k) Plan

The Company sponsors a 401(k) defined contribution plan for its employees. Each employee may contribute up to 100% of annual compensation, subject to specific limitations under the Internal Revenue Code. At its discretion, the Company can make matching contributions equal to a percentage of the employee’s elective contribution and profit sharing contributions. Employees automatically vest in employer contributions. The Company contributions were $0.4 million in each of 2013, 2012 and 2011.

Restricted Share Awards

As of December 31, 2013, 563,713 restricted shares were outstanding under the 1997 Plan and vest over three to seven years from the initial grant date. The remaining compensation expense to be recognized at December 31, 2013 was approximately $1.9 million, and is expected to be recognized over a weighted average remaining vesting period of 1.1 years. During 2013 the Company recognized compensation expense related to outstanding restricted shares of $3.2 million, of which $0.6 million was capitalized as part of the Company’s review of employee salaries eligible for capitalization. For the years ended December 31, 2012 and 2011, the Company recognized $3.4 million (of which $0.9 million was capitalized) and $3.2 million (of which $0.7 million was capitalized), respectively, of compensation expense included in general and administrative expense in the respective periods related to outstanding restricted shares.

The following table summarizes the Company’s restricted share activity during the year-ended December 31, 2013:



	Shares		Weighted Average Grant Date Fair value
Non-vested at January 1, 2013	597,708		$	12.57
Granted	182,576		13.13
Vested	(208,306	)	13.13
Forfeited	(8,265	)	11.41
Non-vested at December 31, 2013	563,713		$	12.56

On February 25, 2013, the Compensation Committee of the Company’s Board of Trustees awarded 157,208 restricted shares to the Company’s executives. The restricted shares will cliff vest after three years from the grant date. The vesting of the restricted shares is also subject to acceleration upon a change in control or if the recipient of the award were to die, become disabled, or be terminated without cause or retire in a qualifying retirement. Qualifying retirement means the recipient’s voluntary termination of employment after reaching at least age 57 and accumulating at least 15 years of service with the Company. In accordance with the accounting standard for stock-based compensation, the Company amortizes stock-based compensation costs through the qualifying retirement dates for those executives who meet the conditions for qualifying retirement during the scheduled vesting period.

Restricted Performance Share Units Plan

On each of February 25, 2013, March 1, 2012 and March 2, 2011, the Compensation Committee of the Parent Company’s Board of Trustees awarded an aggregate of 231,093, 242,122, and 113,256 share-based awards, respectively, to its executives. These awards are referred to as Restricted Performance Share Units, or RPSUs. The RPSUs represent the right to earn common shares. The number of common shares, if any, deliverable to award recipients depends on the Company’s performance based on its total return to shareholders during the three years measurement period that commenced on January 1, 2013 (in the case of the February 25, 2013 awards), January 1, 2012 (in the case of the March 1, 2012 awards), and January 1, 2011 (in the case of the March 2, 2011 awards), and that ends on December 31, 2015, December 31, 2014 or December 31, 2013 (as applicable) or, if earlier, the date of a change of control. In the case of the awards made on February 25, 2013 and March 1, 2012, the Company's performance is compared to the shareholder return of REITs within an index over the measurement period for 50% of the RPSUs awarded on that date, with the remaining 50% being compared to the total shareholder return of REITs within the Company's proxy peer group over such period. In the case of the awards made on March 2, 2011, the Company's performance is compared to the total shareholder return of REITs within an index over the performance period. The vesting of RPSUs is contingent upon the continued employment of the participants through the performance periods (with exceptions for death, disability and qualifying retirement). Dividends are deemed credited to the performance units accounts and are applied to “acquire” additional RPSUs for the account of the unit holder at the price per common share on the dividend payment date. If earned, RPSUs will be settled in common shares in an amount that reflects both the number of RPSUs in the holder’s account at the end of the applicable measurement period and the Company’s total return to shareholders during the applicable three year measurement period relative to the total shareholder returns of the REITs within the index or peer group, as applicable.

On the date of each grant, the RPSUs were valued using a Monte Carlo simulation. The fair values of the 2013, 2012 and 2011 awards on the grant dates were $4.1 million, $4.1 million and $2.0 million, respectively. The fair values of each award are being amortized over the three year cliff vesting period. The vesting of RPSUs is subject to acceleration upon a change in control or if the recipient of the award were to die, become disabled or retire in a qualifying retirement prior to the vesting date. In the case of two of the Company's executives who have employment agreements with the Company, the vesting of the restricted shares is also subject to acceleration if either executive were to be terminated without cause or resign for good reason. Qualifying retirement means the recipient’s voluntary termination of employment after reaching age 57 years and accumulating at least 15 years of service with the Company. In accordance with the accounting standard for stock-based compensation, the Company amortizes stock-based compensation costs through the qualifying retirement date for those executives who meet the conditions for qualifying retirement during the schedule vesting period.

For the year-ended December 31, 2013, the Company recognized total compensation expense for the 2013, 2012 and 2011 RPSU awards of $4.4 million of which $0.8 million was capitalized consistent with the Company’s policies for capitalizing eligible portions of employee compensation. For the year-ended December 31, 2012, the Company recognized total compensation expense for the 2012, 2011 and 2010 awards of $3.5 million related to this plan, of which $1.2 million was capitalized consistent with the Company’s policies for capitalizing eligible portions of employee compensation. During the year ended December 31, 2011, the Company recognized total compensation expense for the 2011, 2010, and 2009 awards of $1.7 million related to this plan, of which $0.5 million was capitalized as part of the Company’s policies for capitalizing eligible portions of employee compensation.

A total of 64,678 common shares vested on December 31, 2012 (the end of the three-year measurement period for the linked RPSUs) and were delivered to holders of the RPSUs on March 1, 2013 in settlement of the RPSUs. Holders of these RPSUs also received cash dividend equivalents to the cash dividends paid on common shares on February 8, 2013.

Employee Share Purchase Plan

The Parent Company’s shareholders approved the 2007 Non-Qualified Employee Share Purchase Plan (the “ESPP”), which is intended to provide eligible employees with a convenient means to purchase common shares of the Parent Company through payroll deductions and voluntary cash purchases at an amount equal to 85% of the average closing price per share for a specified period. Under the plan document, the maximum participant contribution for the 2013 plan year is limited to the lesser of 20% of compensation or $50,000. The ESPP allows the Parent Company to make open market purchases, which reflects all purchases made under the plan to date. In addition, the number of shares separately reserved for issuance under the ESPP is 1.25 million. During the year-ended December 31, 2013, employees made purchases under the ESPP of $0.3 million and the Company recognized $0.1 million of compensation expense related to the ESPP. During the years-ended December 31, 2012 and 2011, employees made purchases of $0.4 million under the ESPP, and the Company recognized $0.1 million of compensation expense related to the ESPP. Compensation expense represents the 15% discount on the purchase price. The Board of Trustees of the Parent Company may terminate the ESPP at its sole discretion at any time.

Deferred Compensation

In January 2005, the Parent Company adopted a Deferred Compensation Plan (the “Plan”) that allows trustees and certain key employees to voluntarily defer compensation. Compensation expense is recorded for the deferred compensation and a related liability is recognized. Participants may elect designated benchmark investment options for the notional investment of their deferred compensation. The deferred compensation obligation is adjusted for deemed income or loss related to the investments selected. At the time the participants defer compensation, the Company records a liability, which is included in the Company’s consolidated balance sheet. The liability is adjusted for changes in the market value of the participant-selected investments at the end of each accounting period, and the impact of adjusting the liability is recorded as an increase or decrease to compensation cost.

The Company has purchased mutual funds which can be utilized as a funding source for the Company’s obligations under the Plan. Participants in the Plan have no interest in any assets set aside by the Company to meet its obligations under the Plan. For the years-ended December 31, 2013, 2012 and 2011 the Company recorded net increases in compensation costs of $0.2 million, $0.3 million and $0.1 million, respectively, net of investments in the company-owned policies and mutual funds.

Participants in the Plan may elect to have all or a portion of their deferred compensation invested in the Company’s common shares. The Company holds these shares in a rabbi trust, which is subject to the claims of the Company’s creditors in the event of the Company’s bankruptcy or insolvency. The Plan does not permit diversification of a participant’s deferral allocated to the Company common shares and deferrals allocated to Company common shares can only be settled with a fixed number of shares. In accordance with the accounting standard for deferred compensation arrangements where amounts earned are held in a rabbi trust and invested, the deferred compensation obligation associated with the Company’s common shares is classified as a component of shareholder’s equity and the related shares are treated as shares to be issued and are included in total shares outstanding. At December 31, 2013 and 2012, 0.3 million of such shares were included in total shares outstanding. Subsequent changes in the fair value of the common shares are not reflected in operations or shareholders’ equity of the Company.