and dividend equivalent rights. Awards may be granted to employees and other key persons, including

non-employee

directors. Incentive stock options may be granted to employees at a price at least equal to the fair market value per share of the Common Stock on the date of grant, and

non-qualified

options may be granted to

non-employee

directors at a price at least equal

to 85% of the fair market value of the Common Stock on the date of grant. A total of 10,000,000 shares of Common Stock have been reserved for issuance under the 2000 Plan. The period of time during which an option may be exercised and the vesting periods are determined by the Compensation Committee. The term of each option may not exceed 10

years from the date of grant and have

vesting period of five years.

Vicor Corporation 2017 Employee Stock Purchase Plan (the “Plan” or the “ESPP”)

. Under the ESPP, the Company has reserved 2,000,000 shares of Common Stock for issuance to eligible employees who elect to participate. The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. The ESPP operates in successive periods of approximately six months, each referred to as an “offering period.” Generally, offering periods commence on or around September 1 and March 1 and end on or around the following February 28 or August 31, respectively. Under the ESPP, an option is granted to participating employees on the first day of an offering period to purchase shares of the Company’s Common Stock at the end of that offering period at a purchase price equal to 85% of the lesser of the fair market value of a share of Common Stock on either the first day or the last day of that offering period. The purchase of shares is funded by means of periodic payroll deductions, which may not exceed 15.0% of the employee’s eligible compensation, as defined in the Plan. Among other provisions, the Plan limits the number of shares that can be purchased by a participant during any offering period and cumulatively for any calendar year.

Stock-based compensation expense for the years ended December 31 was as follows (in thousands):


	2022		2021		2020
Cost of revenues	$	1,648	$	1,000	$	934
Selling, general and administrative		5,735		3,873		3,164
Research and development		2,881		2,162		1,785

Total stock-based compensation	$	10,264	$	7,035	$	5,883

Compensation expense by type of award for the years ended December 31 was as follows (in thousands):


	2022		2021		2020
Stock options	$	9,093	$	6,122	$	4,982
ESPP		1,171		913		901

Total stock-based compensation	$	10,264	$	7,035	$	5,883

All time-based (i.e.,

non-performance-based)

options for the purchase of Vicor common stock are granted

with

an exercise price equal to or greater than the market price for Vicor Common Stock at the date of the grant. The fair value for

non-performance-based

stock options awarded under the 2000 Plan for the years shown below was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:


	2022			2021			2020
Risk-free interest rate		2.8	%		0.8	%		0.5	%
Expected dividend yield		—			—			—
Expected volatility		51	%		49	%		48	%
Expected term (years)		4.4			4.9			6.1

Risk-free interest rate:

The Company uses the yield on

zero-coupon

U.S. Treasury “Strip” securities for a period that is commensurate with the expected term assumption for each vesting period.

Expected dividend yield:

The Company determines the expected dividend yield by annualizing the most recent prior cash dividends declared by the Company’s Board of Directors, if any, and dividing that result by the closing stock price on the date of that dividend declaration. Dividends are not paid on options.

Expected volatility:

Vicor uses historical volatility to estimate the grant-date fair value of the options, using the expected term for the period over which to calculate the volatility (see below). The Company does not expect its future volatility to differ from its historical volatility. The computation of the Company’s volatility is based on a simple average calculation of monthly volatilities over the expected term.

Expected term:

The Company uses historical employee exercise and option expiration data to estimate the expected term assumption for the Black-Scholes grant-date valuation. The Company believes this historical data is currently the best estimate of the expected term of options, and all groups of the Company’s employees exhibit similar exercise behavior.

Forfeiture rate:

The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered option. The forfeiture analysis is

re-evaluated

annually and the forfeiture rate is adjusted as necessary. Ultimately, the actual expense recognized over the vesting period will only be for those shares that vest.

Based on an analysis of historical forfeitures, the Company applied an annual forfeiture rate of 5.35% in 2022, estimating approximately 85% of its options would actually vest. For 2021 and 2020, the Company applied an annual forfeiture rate of 4.85% and 5.25%, respectively, estimating approximately 86% and 85%, respectively, of its options would actually

vest.

A summary of the activity under the 2000 Plan as of December 31, 2022 and changes during the year then ended, is presented below (in thousands except for share and weighted-average data):


	Options Outstanding			Weighted- Average Exercise Price		Weighted -Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Outstanding on December 31, 2021		1,677,661		$	33.48
Granted		568,727		$	61.72
Forfeited and expired		(94,807	)	$	59.78
Exercised		(126,917	)	$	12.87

Outstanding on December 31, 2022		2,024,664		$	41.48		4.05	$	42,160

Exercisable on December 31, 2022		1,046,092		$	18.26		2.44	$	40,376

Vested or expected to vest as of December 31, 2022(1)		1,928,480		$	40.20		3.95	$	42,057

(1)	In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. The number of options expected to vest is calculated by applying an estimated forfeiture rate to the unvested options.

As of

December 31, 2021 and 2020, the Company had options exercisable for 776,559 and 924,964 shares respectively, for which the weighted average exercise prices were $11.63 and $9.05, respectively.

During t

years ended December 31, 2022, 2021, and 2020, the total intrinsic value of Vicor options exercised (i.e., the difference between the market price at exercise and the price paid by the employee to exercise the options) was approximately $7,252,000, $56,933,000, and $50,410,000, respectively. The total amount of cash received by the Company from options exercised in 2022, 2021, and 2020, was $1,634,000, $7,616,000, and $9,127,000, respectively. The total grant-date fair value of stock options granted during the years ended December 31, 2022, 2021, and 2020 was approximately $15,087,000, $10,506,000, and $10,847,000, respectively.

As of December

31, 2022, there was approximately $19,144,000 of total unrecognized compensation cost related to unvested awards for Vicor.

That cost

is expected to be recognized over a weighted-average period of

2.1

years for those awards. The expense will be recognized as follows: $

8,860,000

in 2023, $

5,558,000

in 2024, $

3,164,000

in 2025, $

1,323,000

in 2026, and $

239,000

in 2027.

The weighted-average fair value of Vicor options granted was $26.53, $39.27, and $30.63, in 2022, 2021, and 2020, respectively.

401(k) Plan

The Company sponsors a savings plan available to all domestic employees, which qualifies under Section 401(k) of the Code. Employees may contribute to the plan in amounts representing from 1% to 80% of their

pre-tax

salary, subject to statutory limitations. The Company matches employee contributions to the plan at a rate of 50%, up to the first 6% of an employee’s compensation. The Company’s matching contributions currently vest at a rate of 20% per year, based upon years of service. The Company’s contributions to the plan were approximately $2,211,000, $1,593,000, and $1,031,000 in 2022, 2021, and 2020,

respectively.

Stock Bonus Plan

Under the Company’s 1985 Stock Bonus Plan, as amended, shares of Common Stock may be awarded to employees from time to time as determined by the Board of Directors. On December 31, 2022, 109,964 shares were available for further award. All shares awarded to employees under this plan have vested. No further awards are contemplated under this plan at the present time.