7.	Stock Awards

Stock Awards

Our Equity Incentive Plan authorizes the issuance of common stock options, restricted stock, restricted stock units, deferred stock units, stock appreciation rights, performance units and awards of interests in our Operating Partnership. Our Equity Incentive Plan is administered by the Compensation Committee of the Board of Directors. We have reserved 7,643,651 shares of common stock for awards under the Equity Incentive Plan and 7,643,651 shares remain available for future stock awards as of December 31, 2013. The Equity Incentive Plan contains a limit of 5,000,000 shares as the maximum number of shares of common stock that may be awarded to an individual in any fiscal year. Awards under the Equity Incentive Plan are subject to forfeiture due to termination of employment prior to vesting. In the event of a change in control, outstanding and unvested options will immediately vest, unless otherwise provided in the participant’s award or employment agreement, and restricted stock, restricted stock units, deferred stock units and other stock-based awards will vest if so provided in the participant’s award agreement. The term of the awards is set by the Compensation Committee, though Incentive Stock Options may not have terms of more than ten years. Forfeited awards are returned to the Equity Incentive Plan and are then available to be re-issued as future awards. For each share of common stock issued by Medical Properties Trust, Inc. pursuant to its Equity Incentive Plan, the Operating Partnership issues a corresponding number of operating partnership units.

The following awards have been granted pursuant to our Equity Incentive Plan (and its predecesor plan):

Stock Options

At December 31, 2013, we had 20,000 options outstanding and exercisable, with a weighted-average exercise price of $10.00 per option. The intrinsic value of options exercisable and outstanding at December 31, 2013, is $-0-. In 2013, 40,000 options were exercised, while 20,000 options were settled for cash in 2011. No options were granted in 2013, 2012, or 2011. The weighted average remaining contractual term of options exercisable and outstanding is 0.3 years.

Restricted Equity Awards

Other stock-based awards are in the form of service-based awards and performance-based awards. The service-based awards vest as the employee provides the required service (typically three to five years). Service based awards are valued at the average price per share of common stock on the date of grant. In 2013, 2012, and 2011, the Compensation Committee granted awards to employees which vest based on us achieving certain total shareholder returns or comparisons of our total shareholder returns to peer total return indices. Generally, dividends are not paid on these performance awards until the award is earned. See below for details of such grants:

2013 performance awards - The 2013 performance awards were granted in three parts:

Approximately 27% of the 2013 performance awards were based on us achieving a simple 8.5% annual total shareholder return over a three year period; however, the award contained both carry forward and carry back provisions through December 31, 2017. None of these shares may be sold for two years after they have vested. The fair value of this award was estimated on the date of grant using a Monte Carlo valuation model that assumed the following: risk free interest rate of 0.72%; expected volatility of 27%; expected dividend yield of 8.0%; and expected service period of 3 years.

Approximately 36% of the 2013 performance awards were based on us achieving a cumulative total shareholder return from January 1, 2013 to December 31, 2015. The minimum total shareholder return needed to earn a portion of this award is 25.5% with 100% of the award earned if our total shareholder return reaches 33.5%. If any shares are earned from this award, the shares will vest in equal annual amounts on December 31, 2015, 2016 and 2017. The fair value of this award was estimated on the date of grant using a Monte Carlo valuation model that assumed the following: risk free interest rate of 0.38%; expected volatility of 28%; expected dividend yield of 8.0%; and expected service period of 5 years.

The remainder of the 2013 performance awards will be earned if our total shareholder return outpaces that of the MSCI U.S. REIT Index (“Index”) over the cumulative period from January 1, 2013 to December 31, 2015. Our total shareholder return must exceed that of the Index to earn the minimum number of shares under this award, while it must exceed the Index by 6% to earn 100% of the award. If any shares are earned from this award, the shares will vest in equal annual amounts on December 31, 2015, 2016 and 2017. The fair value of this award was estimated on the date of grant using a Monte Carlo valuation model that assumed the following: risk free interest rate of 0.38%; expected volatility of 28%; expected dividend yield of 8.0%; and expected service period of 5 years.

There were 68,086 of the 2013 performance awards earned and vested in 2013. At December 31, 2013, we have 686,169 of 2013 performance awards remaining to be earned.

2012 performance awards - The 2012 performance awards were granted in three parts:

Approximately 30% of the 2012 performance awards were based on us achieving a simple 9.0% annual total shareholder return over a three year period; however, the award contains both carry forward and carry back provisions through December 31, 2016. The fair value of this award was estimated on the date of grant using a Monte Carlo valuation model that assumed the following: risk free interest rate of 0.93%; expected volatility of 34%; expected dividend yield of 8.6%; and expected service period of 4 years.

Approximately 35% of the 2012 performance awards were based on us achieving a cumulative total shareholder return from January 1, 2012 to December 31, 2014. The minimum total shareholder return needed to earn a portion of this award is 27% with 100% of the award earned if our total shareholder return reaches 35%. If any shares are earned from this award, the shares will vest in equal annual amounts on January 1, 2015, 2016 and 2017. The fair value of this award was estimated on the date of grant using a Monte Carlo valuation model that assumed the following: risk free interest rate of 0.43%; expected volatility of 35%; expected dividend yield of 8.6%; and expected service period of 5 years.

The remainder of the 2012 performance awards will be earned if our total shareholder return outpaces that of the Index over the cumulative period from January 1, 2012 to December 31, 2014. Our total shareholder return must exceed that of the Index to earn the minimum number of shares under this award, while it must exceed the Index by 6% to earn 100% of the award. If any shares are earned from this award, the shares will vest in equal annual amounts on January 1, 2015, 2016 and 2017. The fair value of this award was estimated on the date of grant using a Monte Carlo valuation model that assumed the following: risk free interest rate of 0.43%; expected volatility of 35%; expected dividend yield of 8.6%; and expected service period of 5 years.

There were 84,188 of the 2012 performance awards earned and vested in 2013 and 2,599 forfeited in 2013. There were 84,188 of the 2012 performance awards earned and vested in 2012 and 5,718 forfeited in 2012. At December 31, 2013, we have 725,666 of 2012 performance awards remaining to be earned.

2011 performance awards - The 2011 performance awards were granted in three parts:

Approximately 30% of the 2011 performance awards were based on us achieving a simple 9.0% annual total shareholder return over a three year period; however, the award contained both carry forward and carry back provisions through December 31, 2015. The fair value of this award was estimated on the date of grant using a Monte Carlo valuation model that assumed the following: risk free interest rate of 2.07%; expected volatility of 33%; expected dividend yield of 8.5%; and expected service period of 4 years.

Approximately 18% of the 2011 performance awards were based on us achieving a cumulative total shareholder return from January 1, 2011 to December 31, 2013. The minimum total shareholder return needed to earn a portion of this award is 27% with 100% of the award earned if our total shareholder return reaches 39%. If any shares are earned from this award, the shares will vest in equal annual amounts on January 1, 2014, 2015 and 2016. The fair value of this award was estimated on the date of grant using a Monte Carlo valuation model that assumed the following: risk free interest rate of 1.07%; expected volatility of 34%; expected dividend yield of 8.5%; and expected service period of 5 years.

The remainder of the 2011 performance awards will be earned if our total shareholder return outpaces that of the Index over the cumulative period from January 1, 2011 to December 31, 2013. Our total shareholder return must exceed that of the Index to earn the minimum number of shares under this award, while it must exceed the Index by 12% to earn 100% of the award. If any shares are earned from this award, the shares will vest in equal annual amounts on January 1, 2014, 2015 and 2016. The fair value of this award was estimated on the date of grant using a Monte Carlo valuation model that assumed the following: risk free interest rate of 1.07%; expected volatility of 34%; expected dividend yield of 8.5%; and expected service period of 5 years.

There were 81,359 and 155,162 of the 2011 performance awards earned and vested in 2013 and 2012, respectively, but none in 2011. In 2013, 8,062 shares were forfeited, while 14,456 shares were forfeited in 2012. At December 31, 2013, we have 587,344 of 2011 performance awards that have been earned but not vested.

The following summarizes restricted equity award activity in 2013 and 2012 (which includes awards granted in 2013, 2012, 2011, and any applicable prior years), respectively:

For the Year Ended December 31, 2013:


	Vesting Based on Service					Vesting Based on Market/Performance Conditions
	Shares			Weighted Average Value at Award Date		Shares			Weighted Average Value at Award Date
Nonvested awards at beginning of the year		466,883		$	10.72		1,879,889		$	6.48
Awarded		240,425		$	12.26		754,255		$	6.13
Vested		(381,309	)	$	11.15		(386,446	)	$	8.27
Forfeited		—		$	—		(248,519	)	$	11.03

Nonvested awards at end of year		325,999		$	11.36		1,999,179		$	5.44

For the Year Ended December 31, 2012:


	Vesting Based on Service					Vesting Based on Market/Performance Conditions
	Shares			Weighted Average Value at Award Date		Shares			Weighted Average Value at Award Date
Nonvested awards at beginning of the year		603,980		$	11.02		1,511,397		$	7.60
Awarded		275,464		$	10.14		902,359		$	5.81
Vested		(410,261	)	$	10.78		(513,693	)	$	8.63
Forfeited		(2,300	)	$	10.24		(20,174	)	$	5.45

Nonvested awards at end of year		466,883		$	10.72		1,879,889		$	6.48

The value of stock-based awards is charged to compensation expense over the vesting periods. In the years ended December 31, 2013, 2012 and 2011, we recorded $8.8 million, $7.6 million, and $7.0 million respectively, of non-cash compensation expense. The remaining unrecognized cost from restricted equity awards at December 31, 2013, is $10.1 million and will be recognized over a weighted average period of 2.5 years. Restricted equity awards which vested in 2013, 2012, and 2011 had a value of $9.2 million, $9.2 million, and $6.1 million, respectively.